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2015 (6) TMI 547 - AT - Income TaxRegistration under s. 12AA cancelled - when the educational institution was run in a commercial manner by the so-called charitable institution, whether such a trust is entitled for registration under s. 12AA of the Act? - Held that - When the assessee trust was collecting capitation fee for admission of the students over and above the prescribed fee, whatever the name it may be called, either as a building fund, development fund, etc. then the element of charity no longer remains. Such an institution cannot be considered to be a charitable institution for the purpose of grant of registration under s. 12AA of the Act. This view of the Tribunal is fortified by the judgment of of T.M.A. Pai Foundation v. State of Karnataka 2002 (10) TMI 739 - SUPREME COURT and in Islamic Academy v. State of Karnataka 2003 (8) TMI 469 - SUPREME COURT . A useful reference can also be made in Mohini Jain v. State of Karnataka 1992 (7) TMI 330 - SUPREME COURT and in P.A. Inamdar v. State of Maharashtra 2005 (8) TMI 614 - SUPREME COURT . The jurisdictional High Court in Dawn Educational Charitable Trust 2014 (3) TMI 149 - KERALA HIGH COURT held that when the school is running on commercial lines under cloud of charitable purpose, the rejection of application for registration is justified. Since the material available on record clearly suggests that the educational institution is being run in a commercial manner, this Tribunal is of the considered opinion that the assessee is not entitled for registration under s. 12AA of the Act. - Decided against assessee.
Issues:
1. Rejection of application for registration under s. 12AA of the Act by the Administrative CIT. 2. Claim of exemption by the assessee as a charitable trust. 3. Allegations of collecting capitation fees by the educational institution. 4. Eligibility of the trust for registration as a charitable institution under s. 12AA of the Act. Analysis: The assessee appealed against the rejection of their application for registration under s. 12AA of the Act by the Administrative CIT. The counsel for the assessee argued that the trust, which established an educational institution, should be considered charitable as per its objects. The counsel contended that the trust did not violate any provisions and that the registration should be granted based on the genuineness of its objectives. On the contrary, the Departmental Representative argued that the trust was not engaged in charitable activities and was operating the educational institution on a commercial basis for profit. It was alleged that the institution collected capitation fees from students, which were shared among the members of the managing committee. The Departmental Representative asserted that such practices disqualified the trust from being considered charitable. After considering the submissions and evidence, the Tribunal found that the trust collected capitation fees over and above the prescribed amounts, indicating commercial operations for profit. Citing legal precedents, the Tribunal concluded that when an educational institution is run in a commercial manner, even under the guise of charitable purposes, it loses its charitable status. Referring to relevant judgments, including those of the apex court and the jurisdictional High Court, the Tribunal held that the rejection of registration was justified due to the commercial nature of the institution. Ultimately, the Tribunal upheld the lower authority's decision to dismiss the appeal, ruling that the trust was not entitled to registration under s. 12AA of the Act. The judgment emphasized that the overwhelming evidence of commercial operations in the educational institution precluded its classification as a charitable institution, in line with legal precedents and established principles. In conclusion, the appeal was dismissed, and the order confirming the rejection of registration under s. 12AA of the Act was upheld by the Tribunal.
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