2024 (10) TMI 757 - HC - Income Tax

Refusal to register the Society u/s 12A r.w.s. 12AA - charitable activity or not? - application was rejected by the CIT (E) on the ground that gaining of knowledge or skill does not qualify for the label education and does not come within the four corners of education as defined in the case of Sole Trustee Loka Shikshana Turst 1975 (8) TMI 1 - SUPREME COURT and assessee-Society did not partake the character of voluntary donations, and the income received from the property cannot be said to be vested in the trust for charitable purpose and purchase of two cars by the society alleged to be meant for personal use of the members of the society - ITAT allowed exemption - HELD THAT - The law as laid down in M/S NEW NOBLE EDUCATIONAL SOCIETY 2022 (10) TMI 855 - SUPREME COURT requires to be applied and the view expressed by the Kerala High Court M/S. ANNADAN TRUST 2018 (8) TMI 518 - KERALA HIGH COURT cannot be accepted to be the correct interpretation. We are also of firm view that vocational education is a form of education which is necessary for the development of an individual for the purpose of earning his living. Vocational training has been now recognized to be as important as any other field of education, and it is for this reason that National Council for Vocational Training has been established to streamline and lay down a systematic pattern of providing education. As the institute is duly approved by the NCVT, it cannot be said that the institute is not imparting education. In view of the specific findings of fact arrived at by the ITAT as noticed above, no interference of this Court is warranted. Appeal is thus found to be without merits and the same is accordingly dismissed.

Summary

Issues:
- Appeal against the order refusing registration under section 12A read with section 12AA of the Income Tax Act, 1961.
- Whether the activities of the society qualify as education for charitable purposes.
- Whether the society's income from property and corpus funds meets the criteria for charitable purposes.
- Whether the society's vocational training programs are systematic and qualify as education.
- Whether the society is entitled to registration under Section 12A and 12AA of the Act.
- Interpretation of relevant legal provisions and precedents.

Analysis:

The High Court heard an appeal by the Revenue against the ITAT's decision allowing the registration of a Society under section 12A and 12AA of the Income Tax Act, 1961. The Society, engaged in vocational training, had its registration refused by the CIT (E) on the grounds that the training provided did not qualify as education for charitable purposes. The Tribunal, however, found that the vocational training courses offered by the Society were systematic and recognized by government bodies, thus falling within the scope of education as defined by the Act. The Tribunal directed the registration of the Society under Section 12A and 12AA, emphasizing the importance of vocational education in individual development and livelihood earning. The Court upheld the Tribunal's decision, stating that vocational education is crucial and recognized by the National Council for Vocational Training, thus qualifying the Society for registration under the Act.

Regarding the income generated by the Society, the Court disagreed with the CIT (E)'s assertion that the income did not stem from voluntary donations or charitable activities. The Court noted that the Society's income was derived from government reimbursements for educational/training programs, which were in line with charitable purposes. The Court emphasized that the Society's activities were not primarily commercial in nature and fell within the realm of educational endeavors. The Court also dismissed objections related to corpus funds, stating that the Society had appropriately recorded receipts and that the nature of funds could be assessed during the relevant period.

In considering the Kerala High Court's judgment in a similar case, the High Court distinguished the circumstances and emphasized the importance of vocational education and training programs. The Court highlighted the systematic nature of the Society's educational activities and the recognition received from government bodies, supporting the registration under Section 12A and 12AA. The Court also referenced a Supreme Court decision emphasizing the necessity of applying the law consistently and recognizing the significance of vocational education for individual development and livelihood opportunities.

Ultimately, the High Court dismissed the Revenue's appeal, upholding the Tribunal's decision to register the Society under Section 12A and 12AA of the Income Tax Act, 1961. The Court found no grounds for interference, given the factual findings and the importance of vocational education in the Society's activities. All pending applications were disposed of accordingly.