2019 (10) TMI 652 - AT - Income Tax

Registration u/s 12A as a charitable institution - HELD THAT - We are convinced that the vocational educational / training programme run by the appellant society are systematic programme imparting class room as well training with focus on employment generation. The education given by the appellant, in our view, can safely be said to be in the mode of systematic instructions / schooling or training given to the young in preparation for the work of life and, in our view, duly fall within the purview and scope of the term Education as used in section 2(15) of the Act. So far as the observation of the CIT(E) that the income of the assessee is not from voluntary donation or that the same cannot be said to be income from property held under the trust is concerned, we are not convinced with the above observation of the CIT(E) for rejecting the claim of the appellant trust. The appellant trust is reimbursed the amount spent by the Government for carrying out its education / training programme as per the skill development programme of the Government. Thus it can be safely said to be income generated from the activity of the appellant trust and the said activity as observed above, falls within the purview and scope of charitable purpose. It is not be case of the CIT(E) that the major or main activity of the appellant trust is towards commerce or business. The receipt of income, in our view, is in the course of carrying out of Educational activity of the assessee. Third objection raised by the CIT(E) is that the appellant could not corroborate the receipts towards the corpus funds from the members of the trust with bank entries. In our view, this cannot be ground for rejection of the application u/s 12A of the Act. The appellant has shown the receipts towards its corpus funds from the members of the trust and the same has been duly recorded in the books of account. It makes no difference if the receipts were received in cash or through banking channel. Moreover, whether the receipts are towards corpus funds or for application is to be seen at the time of assessment. So far as the expenditure on two cars the appellant has explained that the said cars are used by the society for its activities as the society members have to travel between Delhi and Chandigarh for meetings and review of its work done by the Central / State Government and further that the said expenditure is completely related to the activities and objects of the appellant society. The impugned order of the CIT(E) is set aside and the Ld. CIT(E) is further directed to grant registration to the appellant society u/s 12A read with section 12AA of the Act in accordance with the relevant provisions of the Act. Appeal of appellant society stands allowed.

Summary

Issues:
1. Rejection of application for registration u/s 12A of the Income Tax Act as a charitable institution.
2. Activity of the appellant society not falling within the definition of 'Education' as per section 2(15) of the Act.
3. Appellant society being considered as an implementing agency of the Government.
4. Purchase of cars for personal use not considered for charitable purposes.
5. Lack of corroboration of receipts towards corpus funds.
6. Expenditure on cars and participation in Pradhan Mantri Kaushal Vikas Yogna (PMKVY) program.

Analysis:

1. The appellant society appealed against the rejection of their registration application u/s 12A of the Income Tax Act by the Commissioner of Income Tax (Exemptions), Chandigarh (CIT(E)). The rejection was based on various grounds, including the nature of the activities conducted by the society and the source of its income.

2. The CIT(E) rejected the application partly on the basis that the activities of the society did not qualify as 'Education' under section 2(15) of the Act. The appellant society was running a private Industrial Training Institute recognized by the Government of Haryana and affiliated with the National Council for Vocation Training (NCVT). However, the CIT(E) argued that the society's activities focused on skill enhancement rather than systematic education, as per the definition of 'Education' established by the Hon'ble Supreme Court.

3. Another objection raised was that the appellant society was acting as an implementing agency of the Government and receiving reimbursements for its activities, which were considered commercial rather than charitable in nature. The CIT(E) questioned the voluntary nature of the society's income sources and the utilization of funds for personal benefits, such as purchasing cars for members' use.

4. The appellant presented evidence to support their claim that the vocational training courses provided were systematic and aimed at skill development for employment opportunities. The courses were recognized by both state and central governments, and the society was affiliated with NCVT and SCVT, Haryana. The Tribunal concluded that the activities of the society fell within the scope of 'Education' as defined in the Act.

5. Regarding the lack of corroboration of receipts towards corpus funds, the Tribunal found that the appellant had recorded the receipts in their books of account, whether received in cash or through banking channels. The Tribunal held that this discrepancy should not be a ground for rejecting the registration application.

6. The Tribunal also addressed the expenditure on cars, explaining that they were used for society activities related to government meetings and reviews. Additionally, the participation in the PMKVY program was considered alongside the long-term vocational training courses offered by the society. The Tribunal directed the CIT(E) to grant registration to the appellant society under sections 12A and 12AA of the Act, overturning the initial rejection.

This detailed analysis of the judgment provides insights into the legal reasoning behind the decision and the considerations made by the Tribunal in evaluating each issue raised in the case.