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TMI Blog2012 (5) TMI 664X X X X Extracts X X X X X X X X Extracts X X X X ..... nored the directions given by the Hon'ble Income Tax Appellate Tribunal, Chandigarh vide its order dated 30-07-2010. Hence, the rejection of the appellant's application for the grant of registration u/s 12A of Income Tax Act, 1961 is uncalled for. That any other ground may kindly be allowed to be taken at the time of hearing." 3. The brief facts of the case are that the assessee trust was created on 28.3.2002 but did not file an application for registration till 2007. The application was filed on 31.3.2008, which was rejected by the Commissioner of Income Tax vide order passed 29/30.9.2008. In appeal the Tribunal vide order dated 31.3.2009 held that the Commissioner of Income Tax had not given any finding that the objects of the trust were not of charitable nature and merely doubted the genuineness of its activities and the matter was restored back to the file of the Commissioner of Income Tax. In the second round, the Commissioner of Income Tax vide order dated 19.11.2009 rejected the application for grant of registration under section 12AA of the Act. The Tribunal vide order dated 30.7.2010 in ITA No.1189/Chd/2009 vide para 7 observed as under: "7. We have heard the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is application for charitable purpose". The assessee had further entered in a collaboration for running the school, which in turn established the bonafides of the assessee trust to carry on its object of imparting education. In conclusion, in para 10 the Tribunal held "The assessee is entitled to the claim of registration under section 12A of the Act from the date of filing the application under section 12A of the Act in accordance with law". 6. The other objection of Commissioner of Income Tax in refusing to grant registration to the assessee was addressed by the Tribunal in para 11, which reads as under: "11. The second objection of the CIT in refusing to ground registration was in view of the ratio laid down by Hon'ble Uttarakhand High Court in CIT, Haldwani Vs M/s Queen 's Educational Society, Huldwani (date of decision 24.09.2007). The Hon'ble Punjab & Haryana High Court in Pinegrove International Charitable Trust & Ors Vs Union of India and ors (2010) 37 DTR 105 (P&H) have dissented from the ratio laid down by the Hon 'ble Uttarakhand High Court in CIT, Haldwani Vs M/s Queen 's Educational Society, Haldwani (date of decision 24.09.2007). Respectfully fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Charitable Trust & Ors Vs Union of India and Ors. (supra) 10. The Commissioner of Income Tax in third round of proceedings has observed that the assessee has failed to file the Balance Sheet and Profit & Loss Account for the financial year 2007-08, which is the initial financial year from which the application of the trust was effective. The Commissioner of Income Tax thereafter embarked on the objects of the trust and held that the primary and predominant object of the assessee was to run the school by its own funds. In line thereof, the Commissioner of Income Tax observed, looking at the activities of the assessee trust in the relevant year and subsequent year the trust had nowhere conducted any activity of such kind. The Commissioner of Income Tax further observed that by entering into partnership with third party the assessee had not run any activity of its own and hence it was held that the education activities were not provided by the trust. The Commissioner of Income Tax thereafter applied the ratio laid down in ACIT Vs. Thanthi Trust [247 ITR 785 (SC)] observing that though the above judgment was given in the in the context of section 11 of the Act, the same was applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12A of the Act have been relooked and redecided by the Commissioner of Income Tax by overreaching his jurisdiction in deciding the limited issue reverted back to his file. 13. The Tribunal in ITA No.693/Chandi/2008 in the case of M/s Punjab State Forest Corpn. Ltd. Vs. Addl. CIT, Range, IV, Chandigarh relating to assessment year 2005-06 vide order dated 26.3.2009 had elaborately considered the order of the CIT (Appeals) in not giving due accord and regard to the order of the Tribunal which was brought to his knowledge and deciding the issue overlooking the said order of the Tribunal, which was brought to his notice by the assessee. The Tribunal held that the requirement of judicial discipline to follow the order of the Jurisdictional Tribunal as a binding precedent by the CIT (Appeals) is quite well settled and does not require any emphasis by us. The Tribunal further held as under: "The said principles have been explained by various Courts, including the Hon'ble Supreme Court in the case of Kamalakshi Finance Corporation Ltd. (supra) wherein it is observed as under: "The High Court has, in our view, rightly criticized this conduct of the Asstt. Collectors and the harassme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereby creating a judicial uncertainly in regard to I ha declaration of lam involved in t h i s case. Because of this approach of the latter bench of the Tribunal in this case, a lot of valuable time of the Court is wasted and parties to this case have been put t o consideration hardship." 15 . The aforesaid observations of the Hon'ble Supreme Court are quite eloquent and coming from the highest, Court of the Land, does not need any f u r t h e r emphasis by us. The impression of the CIT(Appeals) that the binding precedent was liable to be disregarded, because as per his interpretation, it did not, deal with a particular aspect of the controversy, cannot be a justifi able reason to disregard the binding nature of t h e order of the higher appellate authority which was required to be followed by him Unreservedly on the principles of judicial discipline. We have observed earlier that the finding of the C IT (Appeals) that the Tribunal's decision is in disregard of the amendment made- by the Pittance A c t, 1988 is m is conceived. In this connection, a reference to the judgment of Hon'ble Delhi High Court in the ease of Sita World Travels (I) Ltd. Vs CIT 193 CTR 83 (Del) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Commissioner of Income Tax-II, Chandigarh is, therefore, unsustainable in the eyes of law. 15. The Tribunal while deciding the appeal against the order of Commissioner of Income Tax passed under section 12AA of the Act dated 19.11.2009 had elaborated upon the facts of the case that the assessee had purchased land for construction of school and the construction of school building had been undertaken by the assessee. Further the assessee had entered into a collaboration with M/s Fountain Head Franchise of Euro Kids as it did not have expertise in the aducation line. References is made to para 7 of the order of the Tribunal dated 30.7.2010. Thereafter in para 8 the Tribunal had given a finding that "Such activities of purchasing the land and constructing the building for setting up the school is application for charitable purpose". The Tribunal in para 10 have perused the objects of the assessee trust which was to run school and under which the assessee had purchased the land and had entered into collaboration for running school and have observed that the same establishes bonafide of the assessee trust to carry on objects of imparting education. The conclusion of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra). In view of the order of the Tribunal dated 30.7.2010, the claim of the assessee that it was a charitable institution engaged in the activity of education and was entitled to the claim of registration under section 12A of the Act from the date of filing the application, in accordance with law, cannot be ignored by the Commissioner of Income Tax. The order passed under section 12AA of the Act dated 21/22.2.2011 is beyond the jurisdiction of giving effect to the order of the Tribunal under section 12A r.w.s. 254 of the Act. 17 Now coming to the aspects of the order of the Tribunal wherein vide para 11 the limited purpose for which it was set aside to the file of the Commissioner of Income Tax was to decide the same in line with the ratio laid down by the Jurisdictional High Court in Pinegrove International Charitable Trust (supra) held as under: "8.13 From the aforesaid discussion, the following principles of law can be summed up:- (1) It is obligatory on the part of the Chief Commissioner of Income Tax or the Director, which are the prescribed authorities, to comply with proviso thirteen (un-numbered). Accordingly, it has to be ascertained whether the educational insti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 1continue to retain their character as such and would be eligible to apply for exemption under Section 10 (23C)(vi) of the Act. [See para 8.7 of the judgment - Aditanar Educational Institution case (supra)] " (5) Where more than 15% of income of an educational institution is accumulated on or after 01.04.2002, the period of accumulation of the amount exceeding 15% is not permissible beyond five years, provided the excess income has been applied or accumulated for application wholly and exclusively for the purpose of education. (6) The judgment of Uttrakhand High Court rendered in the case of M/s Queens Educational Society (supra) and the connected matters, is not applicable to cases fall within the provisions of Section 10(23C)(vi) of the Act. There are various reasons, which have been discussed in para 8.8 of the judgment, and the judgment of Allahabad High Court rendered in the case of City Montessori School (supra) lays down the correct law. 8.14. When the facts of the lead case are examined in the light of above discussion, it is evident that capital assets acquired/constructed by the educational institutions have been treated as income in a blanket manner without recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12A of the Act. The observations of the Commissioner of Income Tax in respect of the contribution received in the earlier year was outside the domain of Commissioner of Income Tax while adjudicating the issue of grant of registration under section 12AA of the Act filed on 31.3.2008 of Income Tax. At page 9, the CIT (Appeals) had observed as under: "Since the applicant trust has applied for registration on 31.03.08, so the relevant period under consideration is with effect from 1.04.07. So any voluntary contributions received by the applicant trust and transferred to corpus fund as well as investment in construction of building for the period prior to 1.04.07 are not within the scope of application of registration hence are not eligible for" registration/exemption. In the absence of application for registration u/s 12AA for the period prior to 1.04.07, any voluntary contributions even in the form of corpus fund are liable to tax as per section 2(24)(i.ia) of the Income-tax Act. Therefore, prior to the F.Y. 2007-08, i.e. Financial Year 2002-03 to 2006-07, the Assessing Officer may in accordance with the law verify the sources of investment as well as the income of the trust, as no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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