2018 (1) TMI 1236 - AT - Income Tax

Application for registration u/s 12AA rejected - proof of charitable activities - Held that - Admittedly the assessee is an institution carrying on educational activities and therefore, it is a charitable institution. Though it has started its activities in the year 1998, it has filed the application for registration u/s 12AA of the Act only on 27.09.2012. As gone through the approvals of the Educational Officers and we find that in the subject portion referred to the proceedings, the name of the assessee is mentioned as Ken-Crest High School , whereas in the body of the letter, the name is referred to as Ken-Crest Global High School , Karimnagar. Further, in the proceedings dated 17.12.2011, in the subject portion itself, the school is referred to as Ken-Crest International School. Therefore, there is no difference in the schools, which have been approved and the schools run by the assessee. Further, the CCIT, Hyderabad-3, vide order dated 27.09.2013, has granted the assessee; the registration u/s 10(23)(C)(vi) which goes to prove that the Revenue is satisfied about the assessee carrying on the activities exclusively for educational purposes which is a charitable activity. Therefore, the assessee is eligible for registration u/s 12AA and the reasons mentioned by the DIT (E) are not sustainable. As regards the condition that the assessee should apply its income only in India, we find that such a condition is existing only u/s 11 and the AO is required to consider the application of income while allowing the exemption u/s 11 of the Act. Therefore, the rejection of the application for rejection on the said ground also is not sustainable. - Decided in favour of assessee

Summary

Issues:
- Registration u/s 12AA of the Income Tax Act
- Eligibility of the society for registration based on charitable activities
- Compliance with conditions for registration
- Application of income only in India

Analysis:
1. The case involved an appeal against the rejection of the assessee's application for registration u/s 12AA of the Income Tax Act by the Director of Income Tax (Exemptions). The assessee, a society running educational institutions, applied for registration in 2012, but the application was rejected based on certain grounds.

2. The Director observed that the society was running schools under names different from those approved by government authorities, which led to the conclusion that the society violated the recognitions granted. Additionally, the Director noted that the society's expenditure outside India rendered it ineligible for registration u/s 12AA. These observations formed the basis for rejecting the application.

3. The assessee contended that its activities were charitable in nature, as evidenced by the recognition granted by educational officers and the society's compliance with the objects of the society. The assessee argued that the registration should be granted to the society as a whole, not individual schools, and highlighted the acceptance of its activities by the Department under a different section of the Act.

4. The assessee also challenged the rejection based on the application of income only in India, arguing that the payment made to a foreign university was ultimately for the benefit of students in India. The assessee emphasized that the beneficiaries were in India, making it eligible for registration u/s 12AA.

5. Upon review, the Tribunal found that the assessee, being an educational institution, qualified as a charitable institution. The Tribunal noted discrepancies in the names of the schools mentioned in the approvals and those run by the assessee, ultimately concluding that the society was eligible for registration u/s 12AA. The Tribunal also clarified that the condition of income application only in India was relevant under a different section of the Act, not for registration u/s 12AA.

6. Consequently, the Tribunal allowed the assessee's appeal and directed the Director of Income Tax (Exemptions) to grant registration u/s 12AA of the Act. The decision was based on the charitable nature of the assessee's activities and the compliance with registration requirements, overturning the earlier rejection.

This detailed analysis outlines the key issues, arguments presented, and the Tribunal's decision, providing a comprehensive understanding of the legal judgment.