2017 (11) TMI 962 - AT - Income Tax

Rejection of application u/s 12AA - proof of charitable activities - Held that - In the present case the assessee s activities are prima facie educational activities‟. Further it is for the authority granting registration to give prima facie opinion with reasoning that the activities carried on by the assessee is eligible for registration u/s 12A of the Income Tax Act or not. Furthermore, while granting registration u/s 12A of the Act the registration authority is further required to look into the fact that whether the activities of the trust are genuine or not. Merely because assessee received some donation and grants from other entities its activities does not become ingenuine. As these aspects are required to be dealt with about the objects whether it is education or not and activities whether they are genuine or not, the ld CIT(E) has merely relied upon the decision of the Hon ble Supreme Court without considering the several decisions wherein, the above decision of the Hon ble Supreme Court has been considered. Therefore, we direct the ld CIT(E) to consider the application of the assessee by considering the above decisions and in the light of them needs to examine the object of the trust whether they are falling within the meaning of education or not as per section 2(15) of the Act. Appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Whether the assessee's activities qualify as "education" under Section 2(15) of the Income Tax Act.
2. Whether the assessee's application for registration under Section 12AA was rightly rejected.
3. Examination of the genuineness of the assessee's activities.

Detailed Analysis:

1. Qualification of Activities as "Education" under Section 2(15):
The primary issue revolves around whether the assessee's activities, which involve teaching wilderness skills and leadership, fall under the definition of "education" as per Section 2(15) of the Income Tax Act. The assessee argued that their activities are educational, citing their Memorandum of Association, which lists imparting education related to wilderness skills and leadership as their main objective. They contended that wilderness skills training is a form of outdoor education, which involves organized learning in the outdoors, including activities like rock climbing, hiking, and other adventure-based learning.

The assessee referred to various judicial precedents, including the Gujarat High Court's interpretation in the case of Gujarat State Cooperative Union Vs CIT, which clarified that the term "education" is not restricted to traditional classroom settings but includes systematic instruction and training in various fields. The Delhi High Court in the case of Institute of Chartered Accountants and other cases also supported a broader interpretation of "education" to include non-traditional forms of learning.

2. Rejection of Application under Section 12AA:
The CIT(E) rejected the assessee's application for registration under Section 12AA, arguing that the activities did not constitute "education" but fell under the residual category of "general public utility." The CIT(E) relied on the Supreme Court's decision in Lok Shikshana Trust, which defined education as systematic instruction, schooling, or training given to the young in preparation for the work of life.

However, the Tribunal noted that the CIT(E) did not consider subsequent judicial interpretations that expanded the definition of "education." The Tribunal emphasized that the assessee's activities, such as rock climbing, mountaineering, and other outdoor skills training, align with the broader interpretation of education as experiential learning.

3. Examination of Genuineness of Activities:
The Tribunal highlighted that while granting registration under Section 12AA, the authority must assess whether the activities of the trust are genuine and align with its stated objectives. The CIT(E) was directed to re-examine the application, considering the broader judicial interpretations of "education" and verifying the genuineness of the assessee's activities.

The Tribunal instructed the CIT(E) to provide the assessee with a proper opportunity for a hearing and to re-evaluate the application in light of the judicial precedents discussed. The Tribunal emphasized that the mere receipt of donations or grants does not render the activities ingenuine.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, directing the CIT(E) to reconsider the application for registration under Section 12AA, taking into account the broader interpretations of "education" and ensuring the genuineness of the assessee's activities. The Tribunal's decision underscores the importance of a comprehensive evaluation of the nature of activities and adherence to judicial precedents in determining eligibility for registration under the Income Tax Act.