2017 (3) TMI 529 - AT - Income Tax

Withdrawal of the registration granted to the assessee u/s 12A - basis for the withdrawal of the registration u/s 12A as DIT (E) rejected the application for approval u/s 80G - Held that - The registration u/s 80G was rejected on the ground that the assessee is not able to establish that the fees charged by it is in accordance with the rules and regulations of the Govt. of Andhra Pradesh and also the rules and regulations framed by the All India Council for Technical Education (AICTE). It was observed by the DIT (E) that the assessee was given adequate time to establish that the fee charged by the assessee is in accordance with the rules and regulations framed by the competent authority and in the absence of the evidence that the fee paid by the students is in accordance with the rules and regulations, the registration was denied to the assessee. We find that the DIT (E) had, issued a show cause notice u/s 12A(3) of the Act for withdrawal of the registration u/s 12A of the Act. In such circumstances, the duty was cast upon the assessee to furnish all the relevant material before the DIT (E) both during the proceedings u/s 80G and section 12AA(3) of the Act. The assessee has now filed the details before us and on perusal of the said details, we find that they consists of the copy of the letter issued by the AICTE granting registration to the assessee, financial statements for the assessee as on 31.3.2009 and such other documents. We find that these documents are very essential for adjudicating the issue thus we deem it fit and proper to admit the additional evidence and remand the issue to the file of the DIT (E) for reconsideration - Decided in favour of assessee by way of remand.

Summary

Issues:
Withdrawal of registration granted under section 12A of the Income Tax Act - Compliance with guidelines of All India Council for Technical Education (AICTE) - Denial of registration under section 80G - Appeal against withdrawal of registration.

Analysis:
The judgment pertains to the appeal filed by an assessee against the withdrawal of registration granted under section 12A of the Income Tax Act. The assessee, a Trust engaged in educational activities, was running an educational institution for P.G. students in Management at Visakhapatnam. The institution was granted registration under section 12A of the Act by the Director of Income Tax (Exemptions) in 1990. However, subsequent developments led to the withdrawal of this registration. The All India Council for Technical Education (AICTE) had specified conditions regarding fee charging, emphasizing that no capitation fee should be charged from students or their guardians.

The issue arose when the assessee applied for registration under section 80G, which was rejected by the Director of Income Tax (Exemptions) in 2009, citing that the institution was operating on commercial lines. This rejection, coupled with the absence of certain documentation and financial details, led to the decision to withdraw the registration granted under section 12A. The Director observed discrepancies in fee structures, lack of submission of relevant documents, and an excess of income over expenditure, contrary to the claim of operating on a 'no profit, no loss' basis.

During the appeal, the assessee contended that the withdrawal was unjustified as there was no evidence of charging capitation fees or deviating from AICTE guidelines. The assessee submitted additional evidence to support compliance with AICTE norms, seeking consideration of this evidence. The Departmental Representative supported the withdrawal, citing the denial of registration under section 80G as confirmation that the institution was not charitable in nature.

The Tribunal, after considering the arguments and material on record, noted that the withdrawal was primarily based on the rejection under section 80G. Upon reviewing the additional evidence provided by the assessee, including AICTE registration documents and financial statements, the Tribunal deemed it necessary to admit this evidence and remand the issue for reconsideration. The assessee was directed to cooperate with the authorities for a prompt resolution. Consequently, the appeal was treated as allowed for statistical purposes, emphasizing the importance of providing complete and relevant documentation to support compliance with regulatory requirements.