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2017 (1) TMI 443 - ITAT DELHI

2017 (1) TMI 443 - ITAT DELHI - TMI - Registration to the assessee society u/s. 12A(a) denied - educational activity - charitable object - commercial institute or not - making profits - Held that:- We are of the considered view that the present case is squarely covered by Coordinate Bench decision in the case of Shree Balaji Educational Trust vs. CIT [2016 (3) TMI 969 - ITAT DELHI] clearly concurred with the submission of the assessee to the effect that ‘education’ is per se a charitable object. .....

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the law, the CIT has grossly erred in denying registration to the assessee society u/s. 12A(a) of the Income Tax Act, 1961. 2. That on the facts and circumstances of the case and in the law, the CIT has grossly erred in failing to appreciate that the asseessee society has been incorporated essentially for the purpose of providing education which is per se a charitable purpose and that the entire income is wholly and exclusively dedicated for the purpose of society without even a single rupee di .....

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pplicant filed an Application for registration u/s. 12A(a) dated NIL on 8.4.2013 before the Ld. CIT, Dehradun. Accordingly, the assessee was served the notice dated 25.4.2013 by the Ld. CIT for furnishing the following information / details on 6.5.2013. 1. Details regarding trust members where PAN is not available, Ward/Designation of the Assessing officer under whose jurisdiction assessee's address falls. 2. Copy of minutes of the last Board meeting of the trust. 3. Updated copy of bank acc .....

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cation. 7. Evidence to substantiate that any charitable work has so far been done by the Society /trust. 8. Minutes book, books of account i.e, cash book, ledger & Voucher of expenses for verification for the last three years. 9. Notes on activities with the quantum of expenditure incurred on different charitable activities . 10. Copy of declaration u/s. 13(1)© & 13(1)(d). 11. Copy of audited accounts/receipt and payment account for the last three years or whichever, is applicable. .....

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he society but since Education itself qualifies for exemption being a charitable activity, the society qualifies for the same. The counsel was asked whether there were some needy students who were being charged less than the normal fee or were being imparted education free of cost. The answer was in the negative. The assertion of the ld. counsel ignores the facts that section 2(15) of the I.T. Act,1961 defines charitable purpose and without any charity being established even the running of an ed .....

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that the society is engaged in expansion and increasing receipts rather than concentrating on the objective of imparting education while correlating it with the spirit behind the Legislation granting exemptions which is bold and clear i.e. 'charity'. The activities of the society are commercial in character and not charitable precisely as concluded by the Hon'ble High Court of Uttarakhand on similar facts in the case of CIT Vs. Queens Education Society reported in 177 Taxman 321. 2. .....

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ntial fees, from the students and making huge' profits. To quote the Hon'ble High Court "The expression 'not involving carrying on of any activity for profit' cannot be read with expression 'education', but that does not make every kind of pure. commercial activity in the name of education a charitable one. Therefore, assessee's case is a clear case of sale of education, and therefore, it could not be considered as a charitable institution u/s 2(15) because the p .....

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ted Accounts for FY 2011-12, FY 2010-11 & FY 2009-10; Submission dated 2.9.2013 before the CIT; Details in Lab Equipments; Details of Fee Structure; Accreditation certificates from Punjab Technical University and Garhwal University Uttarakhand; Submission dated 14.8.2013 before the CIT alongwith the enclosures; Submission dated 23.8.2013 before the CIT alongwith enclosures; Registration Certificate under Societies Registration Act, 1860; Memorandum & Articles of Association of Society; O .....

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ted that following the decision of the ITAT in the case of Balaji Educational Trust (Supra) the issue in dispute may be decided in favor of the assessee and Appeal filed by the Assessee may be allowed. 4.1 At the time of hearing Ld. DR relied upon the orders of the lower authorities and placed reliance upon the decision of the Hon ble Uttarakhand decision in the case of CIT vs. National Institute of Aeronautical Engineering Educational Society (Uttarakhand). 5. We have heard the both parties and .....

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and true copy of aims and objectives of Shree Balaji Educational trust as considered by the Coordinate Bench of ITAT in the case of Shree Balaji Educational Trust vs. CIT vide decision dated 18.3.2016 in ITA No. 877/14 under exactly identical circumstances. For the sake of convenience, we are reproducing Order of ITAT, Delhi in the case of Shree Balaji Trust vs. CIT dated 18.3.2016 in ITA No. 877/14 under exactly identical circumstances, as under:- 3. The Ld Counsel further pointed out that the .....

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ion of environment & monuments and advancement of other object of the general public utility and these independent terms used by the legislation have independent meaning and education per-se is charitable purpose. The Ld Counsel of the assessee has placed reliance on the decision of ITAT Delhi in the case of Shavak Shiksha Simiti Vs CIT 104 TTJ 127 (Delhi) and submitted that there is no dispute that education per-se as a charitable purpose just like relief to poor or medical relief. 4. The L .....

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rposes of profit. The Ld Counsel lastly pointed out that recently the Hon ble Supreme Court in its decision in the case of Queen s Educational Society Vs CIT (2015) 372 ITR 699 (SC) reversing the decision of Uttarakhand High Court in the case of CIT Vs Queens Educational Society and other similar decision as relied by CIT in the impugned order has clearly held that where an educational institution carries on activity of education primarily for educating persons the fact that it does makes a surp .....

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n the case of National Institute of Aeronautical Engineering Educational Society Vs. CIT (2009) 184 Taxman 264 (Uttarakhand) it was observed that charity is the soul of the expression charitable purpose as defined in section 2(15) of the I.T.Act. Mere trade or commerce in the name of education cannot be said to be a charitable. No other argument was submitted by the Ld DR. 6. Placing rejoinder to the above submissions of the revenue the Ld Counsel again placed his reliance on the recent decision .....

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nst the object of the society. 7. On careful consideration of above rival submissions and perusal of the impugned order and relevant record we note that the CIT(E) has not brought out any allegation to show that the receipt/income of the assessee s trust was not used for the educational purposes and the same was used for other purposes beyond the objectives of the applicant trust. It is also pertinent to note that the reasons recorded by the CIT(E) that the education should be given free of cost .....

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ty VS CIT (Supra) wherein their lordship held that when the surpluses of a educational institution has been used for educational purposes then it should be held that the educational institution exists solely for educational purposes. We may pointed out that merely because the applicant trust is increasing its assets and receipts does not ipso- facto established that the applicant trust exists for the purposes of profit and carried out educational activities with a profit motive in the nature of .....

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tration which inter alia provides that on an application filed by assessee, the Commissioner of Income Tax will make certain queries as he may deem necessary in this respect and after getting satisfied about the objects of the society/institution and the genuineness of activities, he shall pass an order in writing registering the institution or on non satisfaction, refusing the registration thereof as the case may be. However, before passing order for refusal of registration, the assessee will b .....

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#39;ble High Court of Uttarakhand as relied upon by Ld. D.R. in the case of CIT VS National Institute of Aeronautics and Education 181 Taxman 205 has held that where the assessee was earning profits by charging hefty fees, the assessee cannot be said to be engaged in charitable activities and was not eligible for registration u/s 12AA of the Act. However, the Hon'ble Supreme Court in the case of Queens' Educational Society Vs CIT 245 CTR 449 has held that mere earning of profit cannot be .....

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to further quote from a portion of the said property tax judgment which was rendered in the context of whether an educational society is supported wholly or in part by voluntary contributions, something which is completely foreign to Section 10(23C) (iiiad). The final conclusion that if a surplus is made by an educational society and ploughed back to construct its own premises would fall foul of section 10(23C) is to ignore the language of the Sec 'on and to ignore the tests laid down in th .....

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reference to Section 10(23C)(iiiad) and not in respect of Section 11 and 12 yet the ratio of decision is that mere earning of profit in the course of carrying out charitable activities cannot be a reason for not granting registration u/s 12AA of the Act. 7. Hon'ble Punjab & Haryana High Court in the case of CIT Bhatinda Vs Baba Deep Singh Educational Society vide order dated 13.10.2011 has held that the jurisdiction of the Commissioner at the stage of processing application u/s 12AA of t .....

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espondent-society applied for registration under Section 12AA of the Income Tax Act, 1961 (hereinafter referred to as "the. Act") on 31.3.2009. The said application was declined by the Commissioner of Income Tax, Bathinda (for short "the CIT") vide order dated 25.9.2009. The CIT came to', the conclusion after examining the income and expenditure and the balance sheet for the period ending on 31.3.2006, 31.03.2007 and 31.3.2008 that the society had received donations and t .....

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to the conclusion that since the society was charging building fund, development fund, sports fund and transportation costs etc., the same could not be termed as charitable activity by any definition. 3. The society preferred an appeal before the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as "the Tribunal") which has allowed the appeal of the society and has set aside the order passed by the CIT and directed that registration applied for by the ap .....

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ts and circumstances of the case the Id. ITAT was right in law in granting registration to the assessee Trust when no work of relief to the poor in the field of education was done as per definition of "Charitable Purposes" provided u/s 2(15) of the Act." 4. The Tribunal while allowing the appeal has noticed at Memorandum of Association and the objects of the society was to do charitable work, projects and activities relating to education which have not been considered while declin .....

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sions of Sections 10(23C) and 12AA of the Act and scope of the said sections and held that it was open to the revenue authorities while processing the return of the income of those assessees to examine their claim under Sections 11 and 13 of the Act and give such treatment to those societies as warranted by the facts of the case. The power of the revenue authorities to cancel registration under Section 12AA (3) of the Act was also taken into consideration on the ground that same can be resorted .....

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satisfaction in respect of the genuineness of the activities of the Trust, which includes the activities which the Trust was undertaking at present and also which it may contemplate to undertake. The insertion of Sub Section 3 to section 12AA of the Act regarding the powers of the Commissioner to cancel the registration if the activities of the trust are not carried out in accordance with such objects was also noticed. 6. The Allahabad High Court in CIT Vs. Red Rose School [2007] 163 Taxman 19 .....

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of above facts and circumstances, it would be clear that respondent-society which was admittedly running a Polytechnic 90llege and the activities were interwoven for furthering the projects and activities pertaining to education, the Tribunal rightly directed that registration should be granted to the respondent- society with the rider that the same could always be cancelled if it came to the notice of the CIT that the society was not carrying on the activities as per its objects. The Commissio .....

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igh Court in the case of CIT Vs O.P.Jindal Global University, I.T.A. No. 190/2011 and 285/2012 dated 2.5.2013, under similar circumstances, has held as under: "Therefore, the object of Section 12AA of the Act, is to examine the genuineness of the objects of the Trust, but not the income of the Trust for charitable or religious purposes. The stage for application of income is yet to arrive i.e. when such Trusts or institution files its return. Therefore, we find that the judgement referred t .....

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Ld. D.R. that original constitution needs to be examined with respect to objects clause does not hold much force as A.O. in assessment orders of earlier years (as placed in paper book pages 124-126) has noted that society was running a school. In view of above facts and circumstances and in view of the judgements as noted above, we direct the Commissioner to allow registration u/s 12AA of the Act. The A.O. during assessment proceedings will however be entitled to examine the books of accounts o .....

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able purposes including education activity and it used its funds for the purpose of educational activities and therefore the applicant trust is eligible for registration under section 12A of the Act. 10. It is relevant to mention that grant of registration under section 12A of the Act does not automatically make eligible the applicant for exemption under section 11 and other relevant provisions of the Act. During the assessment proceedings while considering such claim of assessee the AO is fully .....

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ention that the grant of registration under section 12A of the Act merely a pre-qualification for claiming exemption under section 11 and other relevant provisions of the Act, which should be granted by recording satisfaction as required under the said provision. 11. Finally, we hold that the CIT dismissed application for registration without any justified reason and by considering incorrect and irrelevant facts and the ld. CIT(A) has not brought any adverse finding on record to show that he obj .....

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applicant trust. 6. In the result, appeal of the assessee is allowed in the manner as indicated above. 6. After perusing the aforesaid order of the Tribunal in the case of Shree Balaji Educational Trust, copy of the aims and objectives of the assessee society, copy of aims and objectives of Shree Balaji Educational Trust, order of the ld. CIT in the case of the assessee and in the case of Shree Balaji Educational Trust, we note that the assessee is a society registered under the provisions of S .....

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versity and Uttarakhand Open University. It is also noted that the fee structure charged by the assessee is very reasonable i.e. ₹ 2000- 25000 per month for even specialized course such as BBA, BCA, MSC etc. We also note that the ld. CIT has framed two reasons for refusing to grant registration u/s. 12A i.e. first narrated in para no. 2 in his impugned order that the education should be given free of cost to some needy students and the second reason vide para no. 4 that the assessee is exp .....

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