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2014 (3) TMI 1012 - AT - Income TaxRegistration u/s.12A - Held that - We hold that the finding given by the Ld.CIT that the assessee was collecting huge donation for admission of students to various institutes run by it in violation of provisions of Maharashtra Educational institutions (Prohibition of Capitation Fee) Act, 1987 for which the activities of the assessee trust are illegal and therefore the activities are not genuine is not correct. Further, the conclusion of the Ld. CIT that the institutes are being run on commercial lines with profit motive due to the substantial surplus created year after year is also not correct since the assessee has accumulated its surplus which is within the permissible limit of 15% u/s.11 and 12. In any case since 2 views are possible on this issue, the view in favour of the assessee has to be adopted in view of the settled proposition of law. In this view of the matter, we hold that the Ld. CIT is not justified in cancelling the registration u/s.12A of the I.T. Act, 1961. We accordingly set-aside the order of the Ld.CIT and direct him to grant registration u/s.12A of the Income Tax Act. - Decided in favour of assessee. Denial of renewal of approval u/s.80G - Held that - While deciding the appeal filed by the assessee for restoring the registration u/s.12A we have already held that the assessee has not violated any of the provisions of section 11 r.w.s. 13(1)(d) and that the assessee is entitled for registration u/s.12A. Since the assessee fulfils the conditions for approval u/s.80G(5)(vi) of the Income Tax Act, therefore, we hold that the assessee is entitled to renewal of approval u/s.80G of the Income Tax Act. We accordingly direct the Ld.CIT to grant renewal of approval u/s.80G. - Decided in favour of assessee.
Issues Involved:
1. Cancellation of registration under Section 12A of the Income Tax Act. 2. Rejection of renewal of approval under Section 80G of the Income Tax Act. Issue-Wise Detailed Analysis: 1. Cancellation of Registration under Section 12A: Facts and Background: The assessee, a society registered under the Bombay Public Trusts Act, 1950, and the Society Registration Act, was granted registration under Section 12A of the Income Tax Act in 1973. The society runs several educational institutions. A search was conducted at the premises of the society, revealing that the society was collecting donations from students for admission, which was deemed illegal under the Maharashtra Educational Institutions (Prohibition of Capitation Fees) Act, 1987. The CIT Central Pune issued a show-cause notice and subsequently canceled the registration under Section 12A, citing that the activities were not genuine and not in accordance with the objects of the society. Arguments by the Assessee: The assessee contended that it is a reputable institution with over 100 years of history, running 52 institutions catering to over 50,000 students. It argued that the CIT has no power to cancel the registration under Section 12AA(3) since the trust was granted registration under Section 12A. The assessee denied allegations of accepting donations for admissions and argued that donations were voluntary and properly accounted for. It also contended that investments in shares of a cooperative bank were made under compulsion for obtaining loans and were not out of surplus funds. Findings and Decision: The Tribunal found that the CIT had the power to cancel registration under the amended sub-section (3) of Section 12AA. However, it held that the collection of donations was not illegal as no complaints were filed under the Maharashtra Educational Institutions (Prohibition of Capitation Fees) Act, 1987. The Tribunal noted that the surplus generated by the society was within the permissible limit of 15% under Section 11 of the Income Tax Act. It also found that the investment in shares of the cooperative bank was made under compulsion for obtaining loans and did not violate Section 11 r.w.s. 13(1)(d). The Tribunal relied on various judicial precedents, including the decisions in the cases of Bharati Vidyapeeth Medical Foundation, Dr. D.Y. Patil Education Society, and Shanti Devi Progressive Education Society, to conclude that the CIT was not justified in canceling the registration under Section 12A. The Tribunal set aside the order of the CIT and directed the restoration of the registration under Section 12A. 2. Rejection of Renewal of Approval under Section 80G: Facts and Background: The assessee applied for the renewal of approval under Section 80G, which was rejected by the CIT on the grounds of violation of Section 11/13(1)(d) by investing in shares of a cooperative society and the cancellation of registration under Section 12A. Arguments by the Assessee: The assessee argued that it had not violated any provisions of Section 11 r.w.s. 13(1)(d) and that it fulfilled the conditions for approval under Section 80G(5)(vi). Findings and Decision: The Tribunal, while deciding the appeal for restoring the registration under Section 12A, held that the assessee had not violated any provisions of Section 11 r.w.s. 13(1)(d). Since the assessee fulfilled the conditions for approval under Section 80G(5)(vi), the Tribunal directed the CIT to grant renewal of approval under Section 80G. Conclusion: The Tribunal allowed both appeals filed by the assessee, setting aside the cancellation of registration under Section 12A and directing the renewal of approval under Section 80G.
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