2020 (6) TMI 131 - AT - Income Tax

Denial of registration u/s 12A - Charitable activity u/s 2(15) - CIT(E) rejected the application on the ground that the appellant trust had been transferring funds to another trust namely Sanjeevani Educational Society out of the receipts received from NSDC - appellant trust had failed to provide various entries and details relating to the cash withdrawals from the bank account AND also failed to prove that the funds were utilized for advancement of the objects of the trust - CIT(E) also observed that the activities of the appellant trust of Skill Development did not qualify as Education - HELD THAT - Activities of the appellant trust would fall under the definition of Education - Assessee has placed reliance on the decision of the Coordinate Bench of the Tribunal in the case of Unique Educational Society, Yamunanagar vs CIT 2019 (10) TMI 652 - ITAT CHANDIGARH wherein, in almost similar facts and circumstances, the similar activity of Vocational Education/Training programme through ITI has been held to fall within the purview and scope of term education . It has been further held that the receipt from the said activity was in the course of carrying out of educational activity of the assessee. Appellant trust had been transferring funds to another society namely Sanjeeni Educational Society - Assessee has invited our attention to the copy of the certificate of Registration in the case of Sanjeevni Educational Society and has submitted that the said society is separately registered and is not a part of the assessee trust. It has been further submitted that the Sanjeevni Educaitonal Society was only a franchise of the assessee trust for implementation of the skill Development program under the Prasadhan Mantri Kaushal Vikas Yogna (PMKVY). That the appellant trust has been providing training through its own institute as well as through Sanjeevni Educational Society for which payments were made to the Sanjeevani Educational Society solely for running the educational programme/skill development course. Since the funds were given to the Sanjeevni Educational Society for running of similar activities on behalf of the appellant trust, hence, in our view, the Ld. CIT(E) was not justified in rejecting the application of the appellant trust on this ground. Submission of the financial statement and application of funds - We do not agree with the above contention of the Ld. Counsel for the assessee that the Ld. CIT(E) can not raise the inquires about the application of the income/genuineness of the activities of the assessee trust at registration stage. Since the assessee trust has already commenced its activities and has applied funds for the advancement of its objects, hence, the Ld. CIT(E), in our view, would be justified to examine the activities and application of funds so as to form a view and to ascertain about the genuineness of the activities of the assessee trust. Impugned order of the CIT(E) is set aside and the matter is restored to the file of the Ld. CIT(E) for the limited purpose of examination of financial statement and application of funds to ascertain about the genuineness of the activities of the appellant trust subject to our observations made above. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
- Denial of registration u/s 12A of the Income Tax Act as a 'charitable institution'
- Transfer of funds to another trust
- Failure to provide financial statements and details of cash withdrawals
- Qualification of activities as 'Education'

Denial of Registration u/s 12A:
The appellant trust appealed against the denial of registration u/s 12A of the Income Tax Act by the CIT(E) on the grounds of fund transfers, lack of financial statements, and failure to prove fund utilization for trust objectives. The CIT(E) contended that the trust's activities did not qualify as 'Education' and were merely an implementing agency of the government. However, the Tribunal referred to a similar case where vocational training was considered educational. It was established that the trust's activities fell within the scope of 'Education' as defined in the Act. The Tribunal concluded that the denial of registration was unjustified, and the appellant trust's main activity was not commercial.

Transfer of Funds to Another Trust:
Regarding the transfer of funds to Sanjeevani Educational Society, the Tribunal noted that the society was a separate entity and acted as a franchise for the appellant trust's skill development programs. Payments to the society were for educational purposes, and thus, the CIT(E)'s rejection on this ground was deemed unjustified.

Failure to Provide Financial Statements:
The appellant trust's failure to provide financial statements and details of cash withdrawals was addressed. The Tribunal disagreed with the contention that such inquiries could not be made at the registration stage. It was deemed essential for the CIT(E) to examine fund application and activities to ensure their genuineness. The matter was remanded to the CIT(E) for further examination on these aspects.

Qualification of Activities as 'Education':
The Tribunal emphasized that the vocational training programs conducted by the trust were systematic and focused on skill development, recognized by both state and central governments. The activities were considered educational, falling within the scope of 'Education' as per the Act. The Tribunal directed the CIT(E) to grant registration to the appellant trust under relevant provisions of the Act.

In conclusion, the Tribunal set aside the CIT(E)'s order, directing a re-examination of financial statements and fund application for the trust's registration under sections 12A and 12AA of the Income Tax Act. The appeal of the appellant trust was treated as allowed for statistical purposes.