2019 (12) TMI 700 - HC - Income Tax

Exemption u/s 11 - charitable activity u/s 2(15) - ITAT directing the registration to be accorded instead of reverting it back for re-examination - HELD THAT - Tribunal found that even if this anomaly was there in accounting yet this could be easily corrected and that the provision of Section 10(23C)(iiiad) and 12AA of the Act operate in different fields as held by this Court in the case of CIT vs. Appejay Education Society 2015 (4) TMI 303 - PUNJAB HARYANA HIGH COURT The Tribunal further held that the Commissioner had wrongly noticed that the no details of fee being charged have been supplied whereas all the details have been supplied. Tribunal also faulted the Commission for coming to the conclusion that the salary structure which was put in place by the respondent was not as per the salary structure of CBSE and at such low salaries good education could not be given. Tribunal correctly held that this was not the job of the Commissioner to comment on the quality of education and found that in the kind of area where the school was located, and the kind of fee it could generate, and the salaries which were paid, were proportionate. Apart from this anomaly in the accounting of the money, the Commissioner has not held that the respondent was either diverting any money or was generating any cash income (beyond that which has been prescribed in the prospectus) or any other thing which would impinge on its character as a charitable institution. No fault can be found with the findings of the Tribunal.

Issues:
1. Appeal against the order of the Income Tax Appellate Tribunal allowing an application under Section 12AA of the Income Tax Act, 1961.
2. Questions of law raised by the appellant regarding registration, method of showing receipts, change in track by the society, netting method to reduce actual receipts, misuse of income, and evidence on record.
3. Commissioner's findings on the respondent's activities not being genuine based on accounting anomaly.
4. Tribunal's analysis and decision on the Commissioner's findings.
5. Dismissal of the appeal and disposal of pending application.

Issue 1:
The appeal was filed against the Income Tax Appellate Tribunal's order allowing an application under Section 12AA of the Income Tax Act. The appellant raised substantial questions of law regarding the registration process and the Tribunal's decision in this regard.

Issue 2:
The appellant questioned the correctness of the Tribunal's direction to accord registration instead of re-examining the case, citing a judgment of the Allahabad High Court. The method adopted by the assessee in showing receipts under different heads to reduce actual receipts was also challenged. Additionally, the Tribunal's failure to provide a rational for the change in track by the society and its reliance on previous cases were questioned.

Issue 3:
The Commissioner found the respondent's activities not genuine due to an accounting anomaly related to school van charges. However, the Tribunal opined that this anomaly could be corrected and that the activities fell under different sections of the Act, citing a previous court ruling.

Issue 4:
The Tribunal analyzed the Commissioner's findings and concluded that there was no evidence of money diversion or cash income beyond prescribed limits. It found fault with the Commissioner's assessment of the salary structure and quality of education provided by the respondent.

Issue 5:
The High Court dismissed the appeal, upholding the Tribunal's decision. The pending application was also disposed of due to the dismissal of the main case.

In summary, the High Court upheld the Tribunal's decision to allow the application under Section 12AA of the Income Tax Act, dismissing the appellant's appeal and finding no fault with the Tribunal's analysis of the case. The Court emphasized the correction of accounting anomalies and the distinction between different sections of the Act in assessing the respondent's activities as genuine.

← Previous Next →