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2015 (8) TMI 912 - ITAT PATNA

2015 (8) TMI 912 - ITAT PATNA - TMI - Denial of registration u/s.12AA - membership of the assessee’s society is open only for members of a religious community, i.e., Muslims, or the followers of the Islam faith - Held that:- As explained in A. P. Christian Medical Association vs. State of Andhra Pradesh [1986 (4) TMI 343 - SUPREME COURT] it is important and imperative that there must exist some real positive index to enable the institution to be identified as an educational institution of the mi .....

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an hardly countenance or subscribe to a proposition which, despite there being nothing either in its memorandum of association (object clause) or its conduct, sanctions a presumption that it is established for the benefit of the minority (Muslim) community, solely on the basis of it being granted the status of minority educational institution – the only restriction in its charter being toward its membership extending only to the members of the said community. If the institution has, by admitting .....

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community cannot be a matter of presumption and rendered de hors any material on record.

Notwithstanding, therefore, a minority status being accorded to its educational institutions, we are, both on the facts and in law, unable to regard it as being established for the benefit of a particular religious community. Even though the relevant provision (sec. 13(1)(b)) provides for exclusion of ss. 11 and 12 of the Act, the same could well be taken into consideration for the purpose of gra .....

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the excluded/ specified persons.Finally, a bare reading of this order would disclose several differences between the case as made out before us and that before the tribunal (SMC Bench) in the assessee’s case relied upon by the Revenue – which order we have perused, even as the same is not binding on us. We, therefore, decide the issue of registration as a charitable institution under the Act to the assessee-society in its favour.

Validity of reopening of assessment - Held that:- The A .....

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on the jurisdictional issue, i.e., the absence of jurisdiction to frame the assessment u/s.143(3)/144 r/w s. 147. There was no adjudication qua the reasons recorded or the merits of the assessment and, accordingly, no merger qua the assessment on its merits or qua the reasons recorded as to the escapement of income. The same, thus, survive, and the A.O., as the assessing authority, was fully competent to initiate fresh proceedings u/s.147, observing of course the due process of law, and which h .....

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A. Nos.72 & 99/Pat/2011&12, I.T.A. No.119/Pat/2011, C.O.No.01/Pat/2012 - Dated:- 20-7-2015 - SHRI A.D. JAIN AND SHRI SANJAY ARORA, JJ. For The Appellant : Shri N. K. Lal, Adv. For The Respondent : Smt. Archana Sinha, Sr.S.C. ORDER Per Bench: This is a set of three Appeals, i.e., two by the Assessee, directed against the denial of registration u/s.12AA of the Income Tax Act, 1961 ( the Act hereinafter) by the Commissioner of Income Tax-I, Patna ( CIT for short) vide orders dated 27.03.2012 and 30 .....

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the several grounds in these appeals by the assessee is the maintainability or otherwise in law of the denial of registration u/s.12AA by the ld. CIT vide order/s u/s.12AA(1)(b)(ii) of the Act pursuant to the assessee s application/s for registration there-under. The background facts 3. The background facts leading to the issue under reference in both the appeals is the same, even as the reference to the dates, paragraph/page numbers, etc., which may come about in the narrative, are as arising .....

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or registration as a charitable institution u/s. 12A(1)(aa) on 06.10.2008, which was rejected by the competent authority vide its order dated 18.03.2010. The assessee moved a fresh application on 30.09.2009, upon rejection of which the matter was carried to the Tribunal, which vide its order dated 31.08.2010 (in ITA No. 98/Pat/2010) dismissed its appeal. The impugned order/s is consequent to the assessee s another application/s, moved on 30.09.2011 (and 30.09.2010). The same have met the same fa .....

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by NCMEI, set up under the NCMEI Act, 2004. Section 12B of the said Act gives the said authority the power to decide on the minority status of an educational institution; section 12C thereof giving it power to cancel such status on violation of any condition stipulated therein, and for which purpose it can call for the records of the MEI to verify if it had admitted students belonging to the minority (non-minority) community as per the Rules, i.e., has adhered to the percentage prescribed for ad .....

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seesociety, the arrangement results in augmenting their wealth, both in terms of accretion in the value of the property as well as increase in the rental base, creating, rather, a source of income. The provision of section 13(1)(c) r/w s. 13(3) is therefore attracted. Reliance stands also placed on the decision by the tribunal (single member constitution) in the assessee s own case (in ITA No. 98/Pat/2010 dated 31.08.2010). 4. We have heard the parties, and perused the material on record. 4.1 We .....

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the decisions by the Supreme Court having a bearing in the matter, clarify that the following elements are necessary for the status of a Minority Institution, as discerned by the ld. CIT after analyzing the same, at page 10 of his order: a) that the educational institution was established by a member/members of the minority religion community; b) that the educational institution is established for the benefit of the minority community; and c) that the educational institution is administered by t .....

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efit of a particular religious community, would equally violate its public character, attracting section 13(1)(b) of the Act, which may operate to exclude registration as a charitable institution there-under. The assessee, however, on the basis of the decisions by the Apex Court in the case of T. M. Pai Foundation vs. State of Karnataka [2002] 8 SCC 481 and P. A. Inamdar vs. State of Maharashtra (reported at [2005] 6 SCC 537), i.e., the very same decisions being relied upon by the ld. CIT, expla .....

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namdar (supra) (refer page 8 of his order). In other words, an exception is drawn for unaided MEIs (up to the undergraduate level), as the assessee s two schools. The Revenue states that the same is not acceptable, i.e., for an institution to admit students of other than minority, non-minority (a particular religious) community while at the same time retaining its minority status, which thus become a façade for money making (refer para 9 of the impugned order). How, it does not specify? W .....

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ld against it and made the basis to state that the institution is involved in money making? The charge of commerciality does not stick on merits. It would obtain only where it is shown that Muslim students are charged lower fee than the non-muslims or, for example, the non-muslims teachers (of the same rank) are paid lower than their Muslim counter parts, establishing, thus, discrimination on religious lines, and which is not the case. It is also not the Revenue s case that scholarships by the a .....

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two schools being run by it is affiliated, specifically provides for the affiliate institution to be run on no profit basis. Continuing further, in the facts of the case, 90% of the students and, in fact, even the teachers are non-Muslims, which is itself destructive of the minority character of the institution, both on facts as well as in law, i.e., considering the provisions of NCMEI Act, to some of which (ss.2(g), 12B, 12C) reference stands made by the Revenue (refer para 3 of this order). We .....

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ave received Building Fund and caution money deposit from the students, and which cannot be regarded as voluntary. In this regard, no facts and figures have been specified by the Revenue, i.e., what is the amount of the two deposits taken from each student; the terms and the conditions at which it is, etc. Caution money, as the names suggests, is only to safeguard against any loss or financial injury that the school may be put to on account of any action or non-action by a student, and is refund .....

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u/s.11(1)(d). As explained by the Apex Court in American Hotel & Lodging Association Educational Institute vs. Central Board of Direct Taxes [2008] 301 ITR 86 (SC), the genuineness of the activities of a trust/institution cannot be doubted where it applies its entire income wholly and exclusively to the objects for which it is established. In fact, as it appears, the building fund is refundable, so that it represents a liability and not a receipt (income) of the institution. No specific case .....

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our view, the matter has to be examined and considered in its totality, i.e., whether the arrangement, in its intent and scope, was toward unjust enrichment of, or to benefit, the interested parties, directly or indirectly. The same falls within the ambit of section 13(1)(c) r/w s. 13(3) and, thus, has a bearing on the denial of benefit of sections 11 and 12, as clarified in the case of Chandrika Educational Trust v. CIT [1997] 224 ITR 453 (Ker), relied upon by the Revenue. The same could though .....

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construction of a building/s which is intended to be rented by the assessee as a part of its school premises, space being in constant demand for a growing school. The same, which is though refundable, is thus indirectly applied for the objects of the society in-as-much as it would have presumably facilitated the extension of the loan to the landlord, which is claimed to have been obtained for ₹ 65 lacs, facilitating timely construction and, in any case, incurring lesser interest cost and, .....

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of, and in the regular course of its business by, the Society. Its implication would, in any case, only be limited to as provided u/s.13(1)(c). In Conclusion 5. Without doubt, as explained by the Apex Court in A. P. Christian Medical Association vs. State of Andhra Pradesh AIR 1986 SC 1490, it is important and imperative that there must exist some real positive index to enable the institution to be identified as an educational institution of the minorities. That is, there should be a nexus betw .....

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ion to a reasonable extent, while at the same time ensuring that the minority character of the institution is not annihilated, and the right engrafted under Article 29(2) not subverted. What is, therefore, required is a balance between the two objectives - the preservation of the rights of the minority to admit the students of their community and that of admissions of outsiders without disturbing the minority character. This balance, however, may not be specified in terms of a fixed percentage, .....

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ereto is an important right of a minority institution. However, we do not find the same expressed in the charter of the assessee-society; there being no reference to any percentage or any restriction or mandate in respect thereof in its Aims and Objects . Whatever implication this may have for its status as a minority institution, we can hardly countenance or subscribe to a proposition which, despite there being nothing either in its memorandum of association (object clause) or its conduct, sanc .....

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we have no clue, so be it. And which again does not help the Revenue s case in any manner; rather, only goes against it. Though, therefore, appearing anomalous in-as-much as the minority status implies an inherent right to serve the minority interest, a finding to it being set up or established for the benefit of a particular (Muslim) community cannot be a matter of presumption and rendered de hors any material on record. The answer, as we understand, lies in the complete freedom allowed in the .....

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rimary School vs. The Principal Secretary, Government of Orissa in Case No. 1320 of 2009 dated 06.07.2010/APB-I pgs. 103-129). Further, even where reserving such a right, the same may not necessarily translate into a high ratio of minority (muslim) students, for which other practical considerations may be responsible. That no such right stands reserved in the present case only fortifies the assessee s case. Why, yet, it stands granted a minority status, we wonder, which may or may not be the Rev .....

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efore, a minority status being accorded to its educational institutions, we are, both on the facts and in law, unable to regard it as being established for the benefit of a particular religious community. Even though the relevant provision (sec. 13(1)(b)) provides for exclusion of ss. 11 and 12 of the Act, the same could well be taken into consideration for the purpose of grant or otherwise of registration u/s.12AA in-as-much as it impinges on its public character. What, we are unable to compreh .....

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before us and that before the tribunal (SMC Bench) in the assessee s case (supra) relied upon by the Revenue - which order we have perused, even as the same is not binding on us. 6. We, therefore, decide the issue of registration as a charitable institution under the Act to the assessee-society in its favour. It is, in our view, for the reasons aforediscussed, in law and in the facts and circumstances of the case, entitled thereto, and which we accordingly direct to be allowed. We decide accord .....

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il income. Notice u/s.148 was issued on 08.01.2007 and assessment u/s.143(3) r/w s. 147 framed, denying the assessee the benefit of exemption u/s.10(23C), i.e., availing exemption under which provision on its entire income it had returned nil income, as no approval from the prescribed authority u/s. 10(23C)(vi) had been obtained by it. The matter travelled to the tribunal, which quashed the assessment on the ground that notice u/s.143(2), leading to assumption of jurisdiction to frame an assessm .....

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being bad in law (Gd.# 1). The reasons recorded qua escapement of income were substantially the same as that recorded in the first instance, i.e., vide notice u/s.148 dated 08.01.2007. The Revenue cannot be allowed a second innings qua the same set of reasons as to escapement of income required to be recorded u/s. 148(2). The initiation of the assessment proceedings and, consequently, the assessment framed pursuant thereto was quashed by the ld. CIT(A), holding thus, abstaining from deciding th .....

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ings u/s.147 initiated on 16.04.2009 are not sustainable and need to be quashed. 9. We have heard the parties, and perused the material on record. The primary facts are not in dispute. We are in agreement with the ld. CIT(A) that the reasons recorded by the A.O. u/s.148(2) for the issue of notice u/s.148(1) are substantially the same as recorded by him in the first instance, i.e., while issuing notice u/s.148(1) dated 08.01.2007. He, however, completely misleads himself in holding the second ini .....

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sment as framed, which stood upheld by the tribunal, was thus on the jurisdictional issue, i.e., the absence of jurisdiction to frame the assessment u/s.143(3)/144 r/w s. 147. There was no adjudication qua the reasons recorded or the merits of the assessment and, accordingly, no merger qua the assessment on its merits or qua the reasons recorded as to the escapement of income. The same, thus, survive, and the A.O., as the assessing authority, was fully competent to initiate fresh proceedings u/s .....

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