2021 (6) TMI 358 - AT - Income Tax

Exemption u/s 11 - Registration u/s 12AA - satisfaction of the lower authority pertaining to genuineness of the activities of the trust - HELD THAT - Undoubtedly in the present case the activities of the assessee are genuine as is clear from the chart of the activities reproduced herein above - as the assessee is also claiming exemption u/s 10(23) from the respondent for the last three years i.e 2017-18 to 2019-20, which were granted to the assessee for the purposes of imparting the education only. Thus the first condition as stipulated under section 12AA , regarding the genuineness of the activity have duly been proved by the assessee before the Commissioner exemption. We have no doubt about the genuineness of the activities of the assessee i.e the assessee was/is imparting education and imparting of education is a charitable activities u/s 2(15) of the Act. Thus we hold that the activities of the assessee are charitable within the meaning of section 12AA (1) (i) read with 2(15). In the present case the assessee is registered with the object to render services in the field of education by establish and operating schools and educational institutions in respect of any reservation for any caste creed race religion or language. In paragraph 4 of the impugned order it is mentioned that in order to fulfill its objectives the trust has been running a school by the name of the Aryans School at Atri Gardens Sipri Bazar, Jhansi. The Aryans School is an English Medium School, affiliated with CBSE Board, upto Class 12th. Commissioner exemption has sought the information from the assessee, as mentioned by her in with respect to the permissions received from the competent authorities with respect to charitable activities carried out by the assessee, which are material for the purposes of achieving its objects. It is clear that the Commissioner exemption had not specified which are the competent authorities, from which the assessee was required to seek the approval/permission and which according to Commissioner exemption are material for achieving its objects in the absence of specific querry it was not possible for the assessee to answer it. The perusal of these documents shows that the assessee have all the requisite permissions/ approval as are necessary to run the school. All these documents were never sought from the assessee during proceedings before the CIT( Exemp). Hence there was no occasion to produce these documents before the lower authority. The assessee can not be relegated back to the lower authority for the purposes of satisfaction of the revenue, as the assessee can not be made to suffer on account of failure of the lower authority, for giving show cause notice and making enquiries on the said aspects. In the light of the above we find that the assessee was having necessary approval /affiliation from the respective authorities as required by the Commissioner exemption. These permission/ approval now produced by the necessary may not be necessary for the purposes of considering registration, as the same had already been filled with Board at the time of affilliation. Nonetheless now these permission / approval are available, there is no point of denying the registration on the pretext of alleged deficiency. We are of the considered opinion that the assessee is entitled to registration under section12AA of the Income Tax Act 1961. Accordingly, we direct the Respondent to grant registration to the assessee from the date of its application - Appeal of the assessee is allowed.

Summary

Issues Involved:

1. Denial of registration under Section 12AA of the Income Tax Act, 1961.
2. Arbitrary and unjust rejection of application by CIT (Exemption).
3. Compliance with other statutory requirements for imparting education.
4. Genuineness of the activities of the trust.
5. Compliance with the requirements of other laws for achieving the trust's objectives.

Detailed Analysis:

1. Denial of Registration under Section 12AA:

The assessee, an educational charitable trust, filed an appeal against the CIT (Exemption) for rejecting its application for registration under Section 12AA of the Income Tax Act, 1961. The CIT (Exemption) denied the registration on the basis that the trust failed to comply with the statutory requirements for imparting education and did not submit necessary approvals/permissions from competent authorities.

2. Arbitrary and Unjust Rejection by CIT (Exemption):

The assessee contended that the CIT (Exemption) acted arbitrarily and unjustly by rejecting the application based on unilateral inferences and unwarranted observations, contrary to the facts and evidence on record. The trust argued that it had been genuinely conducting charitable activities in accordance with its objectives and had complied with all necessary legal requirements.

3. Compliance with Statutory Requirements:

The CIT (Exemption) observed that the trust was running a school but failed to provide evidence of scholarships or fee concessions to students, annual financial statements, and compliance with other laws such as the Right to Education Act, 2010, and various state education acts. The assessee argued that it had submitted all necessary documents, including affiliation with the Central Board of Secondary Education (CBSE) and compliance with the Right to Education Act.

4. Genuineness of Activities:

The assessee provided audited financial statements, income tax returns, and evidence of charitable activities, including running a CBSE-affiliated school. The CIT (Exemption) did not doubt the charitable nature of the trust's activities but questioned the compliance with other statutory requirements. The tribunal noted that the genuineness of the trust's activities was established, as it had been imparting education and claiming exemptions under Section 10(23C)(iiiad) of the Act.

5. Compliance with Other Laws:

The tribunal emphasized that the CIT (Exemption) should specify which laws and approvals are necessary for achieving the trust's objectives. The assessee argued that it had complied with all relevant laws, including obtaining necessary approvals from CBSE and other statutory authorities. The tribunal found that the CIT (Exemption) had not given specific queries or show cause notices regarding compliance with other laws, leading to an unjust rejection of the application.

Conclusion:

The tribunal concluded that the assessee trust had fulfilled all conditions for registration under Section 12AA, including the genuineness of activities and compliance with relevant laws. The tribunal directed the CIT (Exemption) to grant registration to the assessee trust from the date of its application, citing various judicial precedents supporting the assessee's case. The appeal of the assessee was allowed.