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2020 (11) TMI 267 - HC - Income TaxExemption u/s 11 - eligibility for exemption u/s 12A - Recording of satisfaction - whether the activities of the assessee of giving only donation to educational institution can be said to be educational? - cancel registration of charitable Trust retrospectively - HELD THAT - In the case on hand, there is no allegation that the assessee Trust has not carried on its activities in accordance with the objects of the Trust as set out in the Deed of Trust and the Supplementary Deed. Except for stating that the activities are not genuine because of the amendment to the proviso to Section 2(15), there is no other allegation, with regard to the genuineness of the Trust. We have referred to the decisions to show that the amendment to Section 2(15) cannot make activity of a trust not genuine, which was hither to genuine while enjoying the registration under Section 12AA prior to the amendment. Therefore, we are of the view that the DIT(E) failed to record his satisfaction as required to be done under sub-Section (3) of Section 12AA. The satisfaction should be on the activities of the Trust and finding should be rendered as to how such activities are not genuine. The activities of the assessee Trust have not been disputed, nor there is any allegation of non genuine activities. Therefore, by referring to the amendment to the proviso to Section 2(15) and referring to the meaning of the word 'education' as spelt out in certain decisions, cannot be construed to be a satisfaction, which is contemplated under sub-Section (3) of Section 12AA. Retrospective cancellation of the registration of the assessee is wholly without jurisdiction and the assessee cannot be vexed repeatedly on the same issue and reason for invoking the power under sub-Section (3) of Section 12AA is wholly unsustainable, without any basis and suffers from perversity writ large on the face of the order. Tribunal misdirected itself by addressing a wrong question without taking note of the earlier decisions rendered in the assessee's own case. The DIT(E) has not recorded his satisfaction that the activities of the assessee Trust are not genuine, nor he has made any observation that the assessee had carried out activities which are not covered in the Trust Deed or in the judgment and decree in C.S.No.90 of 1961. The decisions relied on by the Revenue, in fact, would go to assist the case of the assessee, rather the Revenue. The DIT(E) committed gross error in restricting the meaning of the word 'education' and did not appreciate the effect of the decision in Loka Shikshana Trust 1975 (8) TMI 1 - SUPREME COURT which was considered in several other subsequent decisions. Above all, the DIT(E) and the Tribunal violated the rule of consistency by showing utter disregard to the judgments of the Hon'ble Supreme Court and this Court in the assessee's own case on the very same subject and the orders of the DIT(E) and the Tribunal have to be termed to be 'utterly perverse'. The Tribunal lost sight of the distinction between a claim for registration under Section 12AA and a claim for exemption under Section 11 of the Act. The DIT(E) failed to adhere to the instructions issued by the CBDT which is binding on the DIT(E). As observed earlier, the recent pandemic has taught very many lessons and one of which is that, mode and method of education cannot be in any manner restricted, but should be given the widest meaning that is possible. - Decided in favour of assessee.
Issues Involved:
1. Whether the Tribunal was right in law in holding that the appellant trust is not eligible for exemption under Section 12A of the Income Tax Act, 1961. 2. Whether the activities of the assessee trust are charitable in nature. 3. Whether the assessee trust's activities fall under the category of "education" as defined under Section 2(15) of the Income Tax Act. 4. Whether the cancellation of the registration granted to the assessee under Section 12A(a) of the Act is valid and if it can be canceled retrospectively with effect from 01.04.2009. Detailed Analysis: Issue 1: Eligibility for Exemption under Section 12A The Tribunal held that the assessee trust is not eligible for exemption under Section 12A of the Income Tax Act, 1961, without considering the merits of the case in a proper manner. The assessee trust was initially granted registration under Section 12A(a) by the Commissioner of Income Tax (CIT) on 30.06.1989. However, the Director of Income Tax (Exemptions) [DIT(E)] initiated proceedings under Section 12A(a)(iii) and subsequently canceled the registration with effect from 01.04.2009, on the grounds that the trust was not engaged in educational activities but was running a newspaper business. Issue 2: Charitable Nature of Activities The DIT(E) and the Tribunal concluded that the activities of the assessee trust were not charitable in nature. They noted that the trust was primarily engaged in the business of publishing a newspaper and job works for printing, and the surplus income was donated to another trust, Aditanar Educational Trust. The DIT(E) held that the activities of the trust could only be for the advancement of general public utility and not for education, as the trust was not running any educational institutions itself. Issue 3: Definition of "Education" under Section 2(15) The DIT(E) referred to various judicial decisions, including Loka Shikshana Trust vs. CIT, to interpret the term "education" under Section 2(15) of the Act. It was held that the word "education" connotes the process of training and developing the knowledge, mind, and character of students by normal schooling. Since the assessee trust was not running any schools or colleges, its activities could not be classified as educational. Issue 4: Validity and Retrospective Cancellation of Registration The DIT(E) canceled the registration of the assessee trust with effect from 01.04.2009, based on the amendment to the proviso to Section 2(15) of the Act. The Tribunal upheld this cancellation. However, the assessee argued that the principle of promissory estoppel should apply, as there was no change in circumstances or law that would warrant the cancellation of registration. The assessee also contended that the Department cannot cancel the registration retrospectively. Court's Findings: Charitable Nature and Education: The Court held that the activities of the assessee trust are charitable in nature. The Court referred to previous judgments in the assessee's own case, which had established that the trust's activities, including running a newspaper, were for charitable purposes, specifically for education and relief of the poor. The Court noted that the judgment and decree in C.S.No.90 of 1961 had validated the objects of the trust, and the surplus income from the newspaper business was to be used for educational purposes. Interpretation of "Education": The Court disagreed with the narrow interpretation of "education" provided by the DIT(E) and the Tribunal. The Court referred to various judicial decisions, including Gujarat State Cooperative Union vs. CIT, which held that the term "education" should not be given a restrictive meaning and should encompass systematic dissemination of knowledge and training in specialized subjects. Principle of Estoppel and Retrospective Cancellation: The Court held that the principle of estoppel applies in this case, as the Department had consistently accepted the charitable nature of the trust's activities in previous years. The Court also held that the retrospective cancellation of registration with effect from 01.04.2009 was not valid, as the amendment to Section 2(15) could not nullify the effect of the previous judgments in the assessee's favor. Conclusion: The Court allowed the appeal, set aside the impugned order of the Tribunal dated 08.05.2018, and answered the substantial question of law in favor of the assessee. The Court held that the assessee trust is eligible for exemption under Section 12A of the Income Tax Act, 1961, and the activities of the trust are charitable in nature, falling under the category of "education" as defined under Section 2(15) of the Act. The cancellation of the registration granted to the assessee under Section 12A(a) of the Act was not valid, and the principle of estoppel prevented the Department from canceling the registration retrospectively.
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