2021 (12) TMI 53 - AT - Income Tax

Exemption u/s 11 - denial of claim on the ground that the assessee was neither registered before the Registrar of Societies nor registered u/s 12A - HELD THAT - The parent body Raebareli Polytechnic Association has been granted the registration u/s 12A of the Act vide order of the CIT, Faizabad - This registration u/s 12A to the society has been given on the direction of the Tribunal and the CIT, Faizabad, while allowing registration to the assessee, has mentioned in the order that the registration granted to the assessee is subject to the outcome of order of the appeal filed by the Revenue in the Allahabad High Court. The society had no other institution other than the present assessee. The society on its own has not claimed any exemption u/s 12A of the Act and in fact had not filed any income tax return separately until it got separate PAN from the assessment year 2015-16. Therefore, the society and the present institution are one and the same and therefore, the assessee is eligible to get benefit u/s 11 of the Act on the basis of registration granted to the society under section 12A - we find that the assessee has been getting exemption u/s 12A from assessment year 2010-11 onwards. The copies of assessment orders, passed u/s 143(3) - Such exemption has been granted to the assessee on the strength of registration granted to the society u/s 12A of the Act. Therefore, keeping in view the fact of consistency also, the assessee is entitled to exemption u/s 11 - Decided in favour of assessee.

Summary

Issues Involved:

1. Denial of exemption under section 11 of the Income Tax Act.
2. Registration status under section 12A of the Income Tax Act.
3. Relationship between the appellant and Raebareli Polytechnic Association.
4. Consistency in granting exemption in previous years.

Issue-wise Detailed Analysis:

1. Denial of Exemption under Section 11 of the Income Tax Act:
The appellant contested the denial of exemption under section 11, arguing that the CIT(A) erred in upholding the addition of ?34,96,460 by denying the claim of exemption. The primary ground was that the appellant was neither registered before the Registrar of Societies nor under section 12A of the Act. The appellant maintained that the exemption should not be denied merely because the registration was in the name of Raebareli Polytechnic Association (RPA), under whose aegis the appellant institution was established and operated.

2. Registration Status under Section 12A of the Income Tax Act:
The appellant argued that the institution was established by RPA, which was duly registered under section 12A of the Act. The appellant institution, Feroze Gandhi Institute of Engineering & Technology (FGIET), was integral to RPA and operated under its objectives. The appellant contended that the registration under section 12A obtained by RPA should extend to FGIET as well, as the latter was an inseparable part of RPA.

3. Relationship between the Appellant and Raebareli Polytechnic Association:
The appellant emphasized that FGIET was established by RPA and was run by it, making the two entities essentially one and the same. The appellant institution had been filing returns and claiming exemptions under section 11 using its own PAN, based on the registration granted to RPA under section 12A. The appellant argued that the denial of exemption due to the technicality of separate PANs was unjustified, as the institution and the society were fundamentally the same entity.

4. Consistency in Granting Exemption in Previous Years:
The appellant highlighted that exemptions under section 11 had been granted in previous assessment years based on the registration of RPA under section 12A. The appellant referred to the Supreme Court judgment in Radhasoami Satsang Vs. CIT, which emphasized consistency in tax treatment in successive years unless there were significant changes in facts. The appellant argued that the CIT(A) erred in distinguishing the facts of the current year from previous years without substantial grounds.

Judgment Analysis:

The tribunal reviewed the arguments and found no dispute that the appellant itself was not registered under section 12A, but RPA was. It was established that the appellant was engaged in providing education, which aligned with the objectives of RPA. The tribunal noted that the only source of income for RPA was from running FGIET, and RPA had not filed separate returns or claimed exemptions independently until it obtained a separate PAN in 2014-15.

The tribunal examined the PAN application documents and found that the PAN for FGIET was obtained using the registration certificate of RPA. This indicated that the department recognized the institution and the society as one entity. The tribunal concluded that the technical breach of filing returns under FGIET's name instead of RPA's should not result in the denial of exemption, as the substantive relationship between the entities was clear.

The tribunal also considered the principle of consistency, noting that exemptions had been granted in previous years based on the same facts. Therefore, the tribunal directed the Assessing Officer to allow the exemption under section 11 for the assessment year in question, aligning with the treatment in previous years.

Conclusion:

The appeal was allowed, and the tribunal directed the Assessing Officer to grant the exemption under section 11 of the Income Tax Act to the appellant, maintaining consistency with previous assessments and recognizing the integral relationship between the appellant institution and Raebareli Polytechnic Association.