2016 (10) TMI 985 - AT - Income Tax

Non granting registration u/s 12A - partition of education society without seeking necessary approvals / sanctions from competent authority in terms of societies registration act - DIT (E) observed that the courses run by the trust (the appellant) are neither recognised nor a part of regular curriculum of any university / education programme; and further, that these were just skill development / enhancement courses / programme which cannot be termed as education Held that - Objects of the appellant trust included to establish, maintain, support and run schools, colleges, social service centres, industrial training centres, skill development centres, coaching institutes, boarding houses, day shelters, research and training centres and other institutions of education, having objects similar to those of this trust for imparting elementary and higher education, technical, industrial or commercial knowledge or training amongst public. These objects are clearly in the nature of charitable purposes, and more particularly, are to be regarded as education . We have also already held that the courses and programs actually run by the aforesaid units of the appellant trust are to be regarded as education . Thus, the activities of the appellant trust are genuine. We have also found that Ld. DIT(E) has failed to bring out relevant and adequate materials on the basis of which it can be reasonably held that the activities of the appellant trust were not genuine. Further, we have also noticed that on identical facts the activities of the aforesaid educational units of the appellant trust were treated as education when these units were being run under R.K. Convent School Educational Society before transfer to the appellant trust who was granted registration u/s 12AA on the strength of educational activities since many years including the educational activities of the aforesaid educational units transferred subsequently to the appellant trust. Thus Ld. DIT(E) failed to make out a case for rejection of registration u/s 12AA / 12A of I.T. Act. Therefore, we direct Ld. DIT(E) to grant registration u/s 12AA/12A - Decided in favour of assessee

Issues Involved:
1. Denial of registration under section 12A of the Income-tax Act, 1961.
2. Determination of whether the activities of the Trust fall under the definition of education.
3. Allegation of division of family assets.
4. Legal entitlement of R.K. Convent School Educational Society to part with its assets.
5. Contradictions and lack of evidence in the observations of the Director of Income Tax (Exemptions).

Issue-wise Detailed Analysis:

1. Denial of Registration under Section 12A:
The appellant trust applied for registration under section 12AA/12A of the Income-tax Act, which was denied by the Director of Income Tax (Exemptions) [DIT(E)] on various grounds. The Tribunal noted that the relevant factors for registration are the objects of the trust and the genuineness of its activities. The Tribunal found that the DIT(E) based her decision on irrelevant considerations and exceeded her authority by seeking information on 17 different points, which was beyond the scope of deciding the issue of registration.

2. Definition of Education:
The DIT(E) held that the activities of the Trust do not fall under the definition of education, referencing the Supreme Court's decision in Sole Trustee Lok Shikshana Trust vs. Commissioner of Income Tax. However, the Tribunal observed that the educational units taken over by the appellant trust were previously considered educational activities by R.K. Convent School Educational Society, which was registered under section 12AA. The Tribunal concluded that the activities of the appellant trust, which include providing professional education and training through various courses, fall under the definition of "education" as interpreted widely and liberally by judicial precedents.

3. Allegation of Division of Family Assets:
The DIT(E) alleged that the transfer of activities and assets from R.K. Convent School Educational Society to the appellant trust was in the nature of a division of family assets. The Tribunal found this observation to be ill-founded and lacking comprehensive discussion. The Tribunal emphasized that the transfer of assets was voluntary and there was no evidence to suggest otherwise. The Tribunal rejected the DIT(E)'s view as fanciful and unsupported by adequate facts.

4. Legal Entitlement to Part with Assets:
The DIT(E) held that R.K. Convent School Educational Society was not legally entitled to part with its assets without necessary approvals. The Tribunal noted that the DIT(E) failed to specify what specific approvals were required and under which provisions of section 12AA/12A the registration must be denied based on this consideration. The Tribunal also pointed out that any alleged failure by the society to obtain necessary approvals does not affect the appellant trust's eligibility for registration.

5. Contradictions and Lack of Evidence:
The Tribunal found several contradictions in the DIT(E)'s observations. For instance, the DIT(E) noted that the courses run by the appellant trust were previously run by R.K. Convent School Educational Society, yet she questioned the legality of these courses. The Tribunal emphasized that there is no statutory requirement for educational courses to be affiliated with a university for the purpose of granting registration under section 12AA/12A. The Tribunal also criticized the DIT(E) for her one-sided approach and reliance on irrelevant considerations, concluding that the DIT(E) failed to bring out relevant and adequate materials to reasonably hold that the activities of the appellant trust were not genuine.

Conclusion:
The Tribunal held that the activities of the appellant trust are to be regarded as "education" and that the trust's activities are genuine. The Tribunal directed the DIT(E) to grant registration under section 12AA/12A of the Income-tax Act to the appellant trust. The appeal was allowed, and the order was pronounced in the open court on 26th August 2016.

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