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2015 (5) TMI 752 - AT - Income TaxApplication for grant of registration under section 12A of the Act - Rejection of application on the ground that it is not established for charitable purpose - Held that - The first objection of the CIT is with regard to the fact that the assessee is not imparting any education, but only giving coaching for EAMCET examination. However, in our view such finding of the CIT is not based on facts on record. As can be seen the assessee has established a Jr. College in the name and style of R.K. Science and Commerce Jr. College which is imparting education in two year intermediate course. This fact is clearly evident from the affiliation granted on 9.4.2012 by the Board of Intermediation, A.P. Therefore, there cannot be any doubt that the assessee is running an educational institution which is as per the objects of the society. The next objection of the CIT is, the assessee is charging fee over and above the fee prescribed by the govt. However, the learned Authorised Representative has demonstrated before us by referring to the relevant G.O issued by the Govt. that fees charged by the assessee is more or less at par with the tuition fees prescribed by the govt. Moreover, whether the assessee is charging fees in excess or what is prescribed can be considered by the Assessing Officer while examining assessee s claim of exemption under section 11. At the time of granting registration, the CIT has to act in accordance with the provisions contained under section 12AA of the Act. As per the said provision at the time of granting of registration, the CIT has to examine the object of the society and the genuineness of its activities. If the objects of the society are charitable and its activities are genuine, then registration cannot be refused to the assessee. The same views are supported by decisions in the case of Kusumba Dhirajlal Parekh & Lila Nautamlal Parekh Foundation 2014 (1) TMI 933 - ITAT HYDERABAD and Lucknow Educational and Social Welfare Society 2011 (2) TMI 1185 - Allahabad High Court - Decided in favour of assessee.
Issues Involved:
1. Whether the assessee's activities qualify as "charitable purpose" under section 2(15) of the Income Tax Act. 2. Whether the assessee is eligible for registration under section 12AA of the Income Tax Act. 3. Whether the assessee's fee structure disqualifies it from being considered a charitable institution. 4. Whether the assessee's lack of property held under trust affects its eligibility for registration. 5. Whether the income of the educational institution should be examined under section 10(23C) instead of section 11 of the Income Tax Act. Issue-wise Analysis: 1. Charitable Purpose under Section 2(15): The CIT rejected the assessee's application for registration under section 12A, arguing that the activities did not qualify as "charitable purpose" under section 2(15) due to the focus on EAMCET coaching, charging fees above the government-prescribed rates, and not providing relief to the poor. The Tribunal, however, clarified that "charitable purpose" includes relief of the poor, education, medical relief, and other public utilities. The Tribunal emphasized that education, as defined under section 2(15), involves training, developing skills, and imparting knowledge, which the assessee was engaged in through its Jr. College. 2. Eligibility for Registration under Section 12AA: The Tribunal noted that the CIT must only examine the objects of the society and the genuineness of its activities when granting registration under section 12AA. The assessee's objects were found to be charitable, and the activity of running a Jr. College was genuine. The Tribunal concluded that the CIT's refusal based on extraneous considerations was not justified. 3. Fee Structure and Charitable Institution Status: The CIT contended that the assessee's fee structure, charging more than the government-prescribed rates, indicated a commercial activity rather than a charitable one. The Tribunal, however, found that the fees charged were at par with government rates, and any additional fees were for specific facilities like computers and laboratories. The Tribunal held that fee structure considerations should be examined by the Assessing Officer when assessing exemption claims under section 11, not at the registration stage. 4. Lack of Property Held Under Trust: The CIT argued that the assessee did not hold any property under trust and thus could not claim relief under section 11. The Tribunal disagreed, stating that the absence of property held under trust does not preclude the assessee from being granted registration under section 12AA, as long as the objects and activities are charitable. 5. Examination of Income under Section 10(23C) vs. Section 11: The CIT posited that the income of the educational institution should be examined under specific provisions of section 10(23C) rather than the general provisions of section 11. The Tribunal clarified that an educational institution could seek exemption under either section 10(23C) or section 11 if the respective conditions are met. The Tribunal emphasized that at the registration stage, the focus should be on the objects and genuineness of activities, not on the specific provisions under which income is examined. Conclusion: The Tribunal concluded that the CIT's refusal to grant registration under section 12AA was not justified. The Tribunal directed the CIT to grant registration to the assessee, affirming that the assessee's activities were charitable in nature and met the requirements of section 12AA. The appeal filed by the assessee was allowed.
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