TMI Blog2003 (11) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... ndum of association all parents who send their children to educational institutions established by the society, the staff and those interested in education can become members of the society on payment of Re. 1 and an annual fee of Rs. 3." 3. The assessee had applied for registration under s. 12A of the Act by filing Form No. 10A before the DIT(Exe.) on 1st Jan., 2002, along with a representation dt. 26th Dec., 2000, addressed to the learned CIT, Karnataka-II, Bangalore, seeking for the registration of the assessee's trust under s. 12A of the Act. The assessee had offered certain explanation for filing the application for registration beyond the period of limitation, prescribed under the Act. The learned DIT(Exe.) discarded the explanation offered by the assessee for non-filing of the application under s. 12A in time observing as under: "Except for stating that they were hitherto exempt under s. 10(22) and are approaching now for a notification under s. 10(23C), nothing has been stated as to what prevented the assessee from making an application for registration within the time-limit prescribed under the Act or atleast before 1st April, 1999, the date from which they are now s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the grant of registration under s. 12A of the IT Act. Aggrieved with the same, the assessee is now before us. 5. The learned Authorised Representative for the assessee, Shri S. Venkatesan argued at length. He took us to the memorandum of the society and pointed out the objects of the society. He vehemently contended that the assessee has been meticulously in letter and spirit carried out the objects as enunciated in the memorandum of the assessee's society. The Revenue did not bring in any material to show that the assessee was not carrying out the objects as contemplated in the memorandum of assessee. The society was registered under the Mysore Societies Registration Act, in 1970. The learned Authorised Representative for the assessee, Shri S. Venkatesan, vehemently contended that irrelevant and extraneous matter had been considered by the learned DIT (Exe.), while denying the registration under s. 12A and he declined to condone the delay in filing the s. 12A application. The learned Authorised Representative further pointed out that right from the inception, the assessee was granted exemption under s. 10(22) of the IT Act, as the income earned totally applied for the educatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the CIT, Karnataka, Bangalore, referred to paras 3 and 4. The learned Authorised Representative submitted that during the earlier years exemption under s. 10(22) of the IT Act was granted. In the asst. yr. 1999-2000, s. 10(22) has been deleted. Therefore, the assessee has to seek exemption under s. 10(23C), as the total receipts exceed Rs. 100 crores. In the meantime, by way of abundant caution and to enable the assessee to seek exemption under s. 11 of the IT Act, the assessee had filed the application for registration under s. 12A of the IT Act. This application for registration under s. 12A was not filed earlier, since the income itself was exempted under s. 10(22) for over years. Submitting as above, the learned Authorised Representative stated that the assessee was prevented from filing the application for registration under s. 12A in time, due to the amendments brought into statute book and the assessee in fact was in dilemma as to under what provisions they have to seek remedy. The delay is not mala fide and not intentional. Therefore, the learned DIT (Exe.) ought to have condoned the delay in filing s. 12A application, as there was reasonable cause for such delay. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Departmental Representative further submitted that for the asst. yr. 1999-2000 the assessee had filed a return of income on 21st Dec., 2000, after a delay of more than one year. The assessee had aggregate annual receipts in excess of Rs. 100 crores and excess of income over expenditure of Rs. 77.87 lakhs. It claimed its income as exempt under s. 10(23C). During the course of scrutiny of assessment proceedings the AO found that the assessee has not made any application for approval under s. 10(23C)(vi) nor any such approval has been granted to it. The AO also noticed that the assessee was not registered under s. 12A. He issued a letter on 15th March, 2002, pointing out these facts and informing that it is not eligible for exemption under s. 10(23C) or under s. 11. In response, it filed an application under s. 10(23C)(vi) on 20th March, 2002. The AO denied exemption under s. 10(23C) as there was no approval from the prescribed authority. He did not allow exemption under s. 11 also on account of lack of registration under s. 12A as well as on other grounds. The learned Departmental Representative also took us to para 16 of the order of the learned DIT(Exe.), wherein certain ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve had filed paper book. The learned Departmental Representative objected to the items 6 to 13, as found in the paper book No. 1 as they are not available to the authority. He further objected to the filing of paper book No. 2, as none of the documents was available with the authorities. We have taken note of each and every objections raised by both sides and carefully perused the records. 15. The assessee had filed copy of the memorandum of the society. The objects of the society are as follows: (a) To establish primary teachers training institutions, nursery teachers training institutes, college for education, physical education colleges, dental college, medical college, college of nursing, engineering college or any other educational institutions in the State of Mysore for the benefit of Tamil speaking students, and in addition of others, and also to promote Tamil language and to strive for the development of Tamil culture. (b) To do all acts and deeds for educating and training the students to make them best citizens. (c) The registered office of the society will be housed at No. 116, Shivaji Road, Shivajinagar, Bangalore - 560 001. (d) The secretary is authorise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not maintaining proper accounts for the amounts received by way of donation or by way of various fees. Therefore, according to the Revenue authorities, the assessee is not a charitable institution. In the impugned order at para 2, while narrating the facts of the case, the learned DIT(Exe.) himself had observed as follows: "The assessee is a society registered under the Mysore Registration of Societies Act on 30th Nov., 1970, with the main object of establishing educational institutions in the State of Mysore for the benefit of Tamil speaking students and in addition to others. It has promotion of Tamil language and striving for development of Tamil culture and doing acts and deeds for educating students to make them best citizens also, as its objectives. The society as of now runs teachers, training colleges, engineering, college, nursing college, polytechnic college and medical college". 18. Therefore, there is no quarrel on the issue of the assessee running various educational institutions in the State of Karnataka. However, the Revenue authorities declined to register by saying: (i) The society is not functioning as per the rules contained in the memorandum of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... un an educational institution. Without taking much efforts and without funds, introducing an educational institution is a herculean task. From the facts narrated in para 16, one can visualise the task undertaken by the assessee for inducting educational institutions for various courses years after year, with the approval of appropriate authorities. As on date the assessee is running as many as 9 educational institutions. The objects of the assessee as mentioned in memorandum have been carried out in true letter and spirit as the same is evident from the above facts and discussions. 21. The undisputed fact is that the assessee was granted exemption from the inception under s. 10(22) of the IT Act by the Revenue authorities. But it was omitted from the statute book w.e.f. 1st April, 1999. This is yet another vital aspect which goes in support of the assessee's stand. This fact is not denied by the Revenue. For claiming exemption under the omitted provisions of s. 10(22), a university or other educational institution should solely exist for educational purposes and not for the purposes of profit. Till the year ending 31st March, 1998, exemption was granted to assessee, which means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15,72,883 31-3-2000 13,89,182 31-3-2001 12,96,268 The society has taken unsecured loans from the following persons: Name Amount M.J. Ramani 17,25,000 Nandini Mohan 47,50,000 M.J. Balachander 47,50,000 Vijaya Ramani 27,75,000 Total 1,40,00,000 List of trustees/governing body members and other relevant details are enclosed. So far as investment clause, accounts clause, amendments clause, dissolution clause, beneficiary clause, utilisation clause are concerned, we state that the deed was made in 1973 and there is nothing in the deed against the provisions of the IT Act. Even otherwise, we hereby undertake to abide by all the provisions of the IT Act and abide by your directions for an amendment in this regard. Photocopies of acknowledgements for having filed the return of income for the past 5 years are enclosed herewith. Photocopies of audit reports in Form No. 10B for the years ending 31st March, 1999, 31st March, 2000 and 31st March, 2001, are enclosed herewith. The society premises are occupied in 125, Armstrong Road, Shivajinagar, Bangalore. A l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers to the tuition fees for one year pertaining to the student admitted under the free quota of admissions. Students admitted to the payment quota of admissions will pay Rs. 44,000 towards tuition fees. If a student opts to pay four years of tuition fees on his own will then the total of four years tuition fees will amount to Rs. 1,76,000. This variation is because of the fees structure prescribed by the Government as regards free and payment quota whether the student is admitted by the CET Cell or by the college itself. We are unable to explain how this variation of tuition fees collected will contradict the papers found during the course of survey. 3. The details of students admitted under the NRI quota from whom amounts were collected in dollars are as follows: Sl. No. Name of the student Date US Dollar Amount(Rs.) 1. Shiji Thaikootathil 27-7-2001 3,000 1,40,690 2. Melwin John 29-8-2001 4,000 1,87,480 3. Mrudula Karunakaran 29-8-2001 3,000 1,40,597 4. Philip George 13-9-2001 3,000 1,42,195 5. Smitha Krishnan Kutty 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res from us, among other files and documents inventorised by the Department during the survey. Hence, we are not in a position to provide the names and addresses of these persons to you. Once again, we reiterate that no amounts were paid to them. By no stretch of imagination can the issue of brochures and other information regarding the college be deemed as a commercial activity. 6. The society, since its establishment, has never indulged in activities not connected with education. No bill discounting or money lending activities have ever been undertaken by the assessee. No commercial activities have been taken up by the society for the last 30 years. We request you kindly to clarify us as to what is the basis on which your goodself has made observations that the society was indulging in several activities not connected with education or of any other charitable nature, etc. 7. As regards office expenses for the year 2000-01, your goodself have mentioned that several personal expenses of the office bearers and their relatives have been debited to the accounts. No such expenses have been debited to the accounts which pertain to the office bearers or their relatives' personal ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to provide the following details: Power of attorney in favour of M.J. Balachander. We have already given power to Sri Chandrasekhar, chartered accountant, to appear before your honour and to represent us on the above subject. Since Sri Chandrasekhar is away at Mumbai he was unable to appear before your goodself. Hence, we had requested M.J. Balachander to file the information sought for. The power given in favour of Sri Chandrasekhar may kindly be taken on record for the proceedings. The other details asked for as follows: (a) The date of payment of US $ 2,000 towards balance tuition fees by a student, Shan V. Daniel, as found in the list impounded during survey is 30th Dec., 2001. When was the actual date of receipt? If the receipt is on a different date, why is it so? (b) To give the break-up of amounts in the loose sheet found during survey towards payment to MVJ College of Engineering for payment of tuition fees and towards payment to Dr. MV Jayaraman Charitable Trust for contributions to the donations. (c) Receipt books of Dr. MV Jayaraman Charitable Trust. (d) Receipt books of tuition fees of MVJ College of Engineering to show the four years tuition fees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mounts found in the loose sheet found during survey towards payment to M.V.J. College of Engineering for payment of tuition fees and towards payment to Dr. M.V.J. Jayaraman Charitable Trust for contribution to the donations are enclosed along with this letter. 3. Receipt books of Dr. M.V. Jayaraman Charitable Trust are enclosed herewith. 4. Receipt books of tuition fees of M.V.J. College of Engineering to show the four years tuition fees paid in advance, is enclosed herewith. 5. The names of students who have contributed donations to the charitable trust and whose names are not in the loose sheet found during survey are as follows: (a) Malancha Chakraborty—Rs. 20,000 paid on 29-6-2001 (b) Sandeep Ghosh—Rs. 20,000 paid on 29-6-2001 (c) Karthik K.E.—Rs. 10,000 paid on 29-6-2001 (d) Raghavendra B.—Rs. 15,000 paid on 17-8-2001 (e) Annapoorna—Rs. 25,000 paid on 1-9-2001 (f) Raghavendra—Rs. 10,000 paid on 28-9-2001 (g) Narendra Prasad—Rs. 25,000 paid on 17-10-2001 (h) Arpita—Rs. 5,000 paid on 17-10-2001 (i) Niranjan K.—Rs. 10,000 paid on 17-11-2001 (j) Shah Anki Kumar—Rs. 50,000 paid on 13-12-2001 6. Some of the parents of the students, on coming ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance payments were made by the society since the buildings in which costly lab equipments and computers were installed are very old. These buildings are used entirely by the colleges run by the society. As a safety precaution, insurance cover was obtained to protect the equipments stored inside the buildings. All details required by your honour are being furnished from time to time. We request your honour to grant us recognition under s. 12A and oblige." Thus, from the above, it is seen that at every stage of proceedings before the learned DIT (Exe.), the assessee was giving clarifications and explanations for each and every query raised by the learned DIT (Exe.). The details which are furnished in these replies and explanations are also sent along with the supporting materials. These facts are not denied by the Revenue and the Revenue is also unable to assail the explanations given by the assessee with supporting materials by showing any convincing and cogent materials. 26. In respect of other apprehension relating to the assessee's transactions with M/s Kotak Mahindra Finance Ltd., it is seen that the transactions were in respect of asst. yr. 1996-97. The assessee had a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent quota seats other than tuition fees of Rs. 9,000/44,000 and other fees of Rs. 3,875? If so, please furnish the details. Ans. Apart from the above, we are also collecting examination fees as prescribed by the university and miscellaneous fees/refundable deposits in the college which may run into Rs. 500 approximately. In addition, we are also collecting the hostel fees payable once in 6 months as mentioned above. No separate deposits/refundable deposits are collected for hostel/mess accommodations. Apart from these, we are not collecting any other fees/deposits/donations from the students. Q. Please confirm whether the abovementioned fees structure collected from the students is correct? Also confirm that you are not collecting any extra amount from the students under management quota other than the amounts mentioned above. You may also verify your records and your assistants before answering. Ans. Yes. I confirm that we, as the management of the engineering college or medical college, have not collected any extra amount other than the amounts mentioned above. Q. Please go through the said page once again. These names pertain to the students who are admitted to the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed certain objections in relation to certain documents filed by the assessee in the paper book No. 1, which relate to item Nos. 6 to 13. The objection so raised by the Departmental Representative cannot be sustained in view of the fact that these documents were already with the Revenue. The documents under item Nos. 6 to 10 are the acknowledgements for having filed the return for the asst. yrs. 1991-92 to 1996-97. Item Nos. 11 and 12 are the copy of the intimation under s. 143(1)(a) for the asst. yr. 1997-98 and copy of the order under s. 143(3) dt. 24th Nov., 2000, and intimation under s. 143(1)(a) for the asst. yr. 1988-89. Item No. 13 is nothing but the copy of the order of the block assessment passed under s. 158BC dt. 28th May, 1999. Since these documents were already with the Revenue, we entertain these documents and peruse the contents thereon. 30. The learned Departmental Representative on the decision of the Hon'ble apex Court in the case of CIT vs. Dharmodayam Co. 1977 CTR (SC) 341 : (1977) 109 ITR 527 (SC). In the aforesaid decision, the Hon'ble apex Court held as follows: "That the judgment of the High Court in Dharmodayam Co. vs. CIT (1962) 45 ITR 478 (Ker) did n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test is whether, on an overall view of the matter, the object is to make profit. In evaluating or appraising the above, one should also bear in mind the distinction/difference between the corpus, the objects and the powers of the concerned entity". 32. In yet another decision by the Calcutta (sic—Ahmedabad) Bench of the Tribunal in the case of Stock Exchange, Ahmedabad vs. Asstt. CIT (2000) 68 TTJ (Ahd) 596 : (2000) 74 ITD 1 (Ahd), wherein the Tribunal held as follows: "It was further to be noted that the assessee-association had been notified for exemption under s. 10(23C)(iv) by the CBDT on 9th Sept., 1987, for the asst. yrs. 1985-86 to 1988-89. Obviously, the instrument under which the association had been constituted as well as its rules, bye-laws and regulations had been examined by the Revenue authorities while granting registration under s. 12A as well as exemption under s. 10(23C)(iv). There was no reason why a contrary view was being taken by the Revenue authorities in the context of identical facts and circumstances for the assessment years under appeal. There is no quarrel with the proposition that the doctrine of res judicata is not applicable to income-tax procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (22) of the IT Act for over 16 years till the aforesaid provision was omitted from the statute. Every year the AO has to take an overall view of the matter before granting exemption under s. 10(22) of the IT Act. In this case, as there was exemption granted, the presumption is that all along the assessee has been carrying out of running the charitable institution, as per the object and did not involve in any commercial activity for making profits. The assessee's stand is also supported by the decision of the Hon'ble Karnataka High Court in the case of CIT vs. Academy of General Education, Manipal (1984) 38 CTR (Kar) 239 : (1984) 150 ITR 135 (Kar). The facts of the case are as follows: "The assessee, the Academy of General Education, Manipal, is a society registered under the Societies Registration Act, 1860. Its objective were : (1) to make available technical and commercial education in as many as 47 subjects; (2) to devise ways and means and accord facilities for candidates to specialise in above courses; (3) to give training in technical, commercial or any other form of education, to enable candidates to eke out their livelihood; (4) to establish, support, manage or conduct s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transactions which took place between 1971-72. The provisions of s. 12A had been reintroduced into the statute book w.e.f. 1st April, 1973. However, the dictum laid down by the Hon'ble Karnataka High Court is totally applicable to the facts of the case, though the issues arise there under s. 10(22) of the IT Act. 34. It appears that a search was conducted in the premises of the assessee under s. 132, from 2nd May, 1997 to 27th June, 1997. Subsequently, an order under s. 158BC dt. 28th May, 1999, for the block period from 1st April, 1987 to 2nd May, 1997, had been passed accepting the return filed by the assessee for the block period at Rs. nil. The relevant order is extracted hereunder for better appreciation of the facts of the case: "A search was conducted in the premises of the above assessee on 2nd May, 1997 and other dates during the course of which certain documents were seized. A notice under s. 158BC was issued on 30th June, 1998, and served on the assessee on 6th July, 1998. In response to the same a return of undisclosed income has been filed on 3rd Aug., 1998, disclosing undisclosed income at nil. In response to notice under s. 143(2), Shri Bhanuprakash, ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees/managers. The form further requires a certified copy of the instrument of its creation as well as true copies of the latest accounts of the applicant-trusts or institutions for as far back as three years to accompany each application. The requirement of obtaining the details as also the copies of the past accounts cannot be said to be a ceremonial one. The purpose is to examine the objects of creation as well as empirical study of the past activities of the applicant for three years where the application is made belatedly so that the CIT could come to a conclusion after examination of all the factors that the applicant is really a charitable trust or institution eligible for registration." 37. The Calcutta High Court in Ananda Marga Pracharaka Sangha was dealing with the scope of s. 10(22). According to the Hon'ble Court, merely because there was a surplus earned by the assessee-trust in carrying out its educational activities, it could not be said that the educational institution existed for the profit making alone as long as such profits or suppliers are utilised for educational purposes and not for purposes of private gain of the trustees. 38. The High Court of Kerala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary that the object must be to serve the whole of mankind or all persons living in a country or a province". 40. The Hon'ble apex Court in CIT vs. A.P. State Road Transport Corpn. (1986) 52 CTR (SC) 75 : (1986) 159 ITR 1 (SC) laid down the tests to determine the applicability of its expression "charitable purpose" in relation to a particular institution. According to the apex Court, the test which was required to be applied was whether the "predominant object" of the activity carried on by an assessee was a "charitable purpose" or not. If the predominant object was to carry out a charitable activity, the said purpose would not be lost merely because certain profits result out of such activities. It can be understood from the decision of the apex Court that the aspect of requiring an institution to run in a manner by way of which it would only balance the expenditure and the income thereon was neither practical nor feasible. 41. In other words, a premise which can be drawn from the decision of the apex Court is that merely because certain profits or surpluses arise as a result of an otherwise charitable institution, it could not be said that the assessee is being run for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tself was exempt under s. 10(22). In these circumstances, we pray that the Hon'ble CIT may be pleased to condone the delay in filing of application for registration under 12A and grant registration atleast from 1st April, 1999, so that we can alternatively claim exemption under s. 11 from the asst. yr. 1999-2000, onwards in the event the society is deprived of exemption under s. 10(23C)". From the aforesaid facts, it is clear that the assessee was prevented from filing the application for grant of registration under s. 12A, as the assessee was granted exemption under s. 10(22) right from the asst. yr. 1970 till the provision of s. 10(22), which was omitted from the statute book. Though sought for exemption under s. 10(23C), subsequent to the omission under s. 10(22), the assessee in abundant caution filed the application for the registration under s. 12A in order to avail the benefit under s. 11 of the IT Act. 43. From the aforesaid facts, in our view, there is a reasonable cause for delay in not filing the application for grant of registration in time. Even otherwise, the Hon'ble apex Court in the case of Collector, Land Acquisition vs. Mst. Katiji Ors. (1987) 62 CTR (Syn) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and taken by the assessee. Even otherwise, the ratio laid down by the apex Court is squarely applicable to the facts of this case. Therefore, we find much force in the stand taken by the assessee. The delay in filing the application for registration under s. 12A of the IT Act is condoned as prayed for by the assessee. 45. In overall view, the activities of the assessee, as evidenced by the trust deed and also the various documents and relevant papers filed before us, are genuine and the dominant object of the assessee, i.e., education, falls within the definition of "charitable purpose" in terms of s. 2(15) of the Act. Once having been satisfied with regard to the genuineness of activities of the trust and its objects, we are of the view that the assessee deserves to be registered in terms of s. 12A of the Act. We hold accordingly. 46. Before we part, we may also state that the claim of the assessee with regard to the exemption under ss. 11 and 12 is required to be independently perused and evaluated by the Revenue while dealing with the returns of income in the course of assessment proceedings. Our conclusions and observations in the earlier part of the order presently ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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