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TMI Blog2011 (12) TMI 287X X X X Extracts X X X X X X X X Extracts X X X X ..... ts raised the following similar Grounds of Appeal: "1. That the order of the ld. Commissioner of Income-tax III Ludhiana, thereby refusing to registration of the Society is illegal, invalid and void ab initio and the same is liable to be cancelled. 2. That no reasonable proper opportunity of being heard has been allowed before refusing to register the Society. The ld. CIT either should have disclosed his mind or he should have allowed reasonable opportunity of being heard before refusing to register the Society. As such, the order of the ld. CIT is illegal and invalid and is liable to be cancelled. 3. That the ld. CIT did not appreciate that the conditions laid down under Section 12A of the Income-tax Act, 1961 were duly fulfilled and as such the registration as claimed should have been allowed. 4. That the ld. CIT did not appreciate that the objects of the society are as under: (a) To establish and promote establishment of or to render aid to school, college, educational institutions, technical education institutions, training institutions in one or all fields of engineering research, medical, commerce, arts or any other system of education. (b) To promote E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vered by the definition of 'charitable purpose' as provided u/s 2(15) of the Act. He vehemently contended that the proviso added to Section 2(15) of the Act, by Finance Act, 2008 w.e.f. 01.04.2009, is not applicable to the first three limbs of the 'charitable purpose' enumerated in the said definition. He, further, contended that a further proviso inserted below Section 2(15) of the Act, supports his case. The said proviso mandates that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is or less than the prescribed limit. In the present case, object marked as clause 't' was never implemented and remained on paper, which was even deleted from the objects of the appellants before the conclusion of proceedings before the CIT. Ld. 'AR', further, contended that the impugned assessee appellants namely Baba Amarnath Educational Society and ACE Educational Charitable Society are carrying on similar activities, with similar objects and the main objectives of both the appellants are to impart education including technical and vocational education. He specifically made a mention of the concrete activities carried out by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herewith" 4. The ld. 'AR', further, mentioned that the activities of the appellant are at its initial stage and concrete activities were carried out with a view to achieving the main object of imparting education. He annexed various evidences to support his claim and the relevant details of such activities as carried out by the appellant are reproduced hereunder (Paper Book Page 31): "Ace Educational Charitable Society is a society registered under societies registration act, 1860 vide R. No. 51 of 2009. The main objects of the society are to establish and promote establishment of or to render aid to school, colleges, educational institutions, technical education institutions, training institutions in one or all fields of engineering, research, medical, commerce, arts or any other system of education. To fulfil their object, the society decided to establish an Engineering Management College under the name and style of Ludhiana Group of Colleges. In the year 2009-10 they purchased a piece of land measuring 10.76 Acres and started construction of building, as required under the norms of AICTE to setup an Engineering Management College. They incurred a sum of Rs. 134.05 Lacs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the society is eligible for registration u/s 12A r.w. Section 12AA of the Act, which is reproduced hereunder: "(ITA 825/826/Chd/2011) 1. Digember Jain Society for Child Welfare v. Director General of Income-tax (Exemptions) [2010] 329 ITR 459 (Del.) 2. M/s Pinegrove International Charitable Trust v. Union of India others [2010] 27 ITR 73 (P H) 3. ACIT v. Thanthi Trust [2001] 247 ITR 785 (SC) 4. ICAI Accounting Research Foundation another v. Director General of Income Tax (Exemptions) ors. [2009] 226 CTR 27 (Del.) 5. Oxford Academy for Career Development v. Chief Commissioner of Income Tax others [2009] 315 ITR 382 (All.) 6. American Hotel Lodging Association Educational Institute v. Central Board of Direct Taxes others [2008] 301 ITR 86 (SC) 7. CIT v. Dharmodayam Co. [1998 ] 233 ITR 250 (Ker.) 8. Addl.CIT, Gujrat v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC) 9. Aditanar Educational Institution v. Addl.CIT [1997] 224 ITR 310 (SC) 10. Haryana State Counselling Society v. Chief CIT [2010] 40 DTR 169 (P H) 11. Raebareily Polytechnic Association v. CIT [2010] 48 DTR 1 (Lucknow)(Trib) 12. Saint Kabir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shan Dalmia, in furtherance of the objects of the Trust. The concerns were started for the purpose of earning profits, which were to be distributed to the shareholders who invested share money in those concerns. It is submitted with utmost respect that the ratio of the Hon'ble Apex Court is not applicable to the present case as the facts are materially different and distinguishable. In the present case, the object earmarked as clause (t) remained on only paper and was not at all implemented, whereas in the decision relied upon by the CIT, the concerns were started by the Trust. Further, in the present case, the appellants undertook only charitable activities pertaining to the object of imparting education, as is evident from the contents of page 31 of paper book reproduced earlier. In view of this, the decision relied upon by the CIT is not applicable to the facts of the present case. It is, further, mentioned that the Hon'ble Apex Court discussed the decision, in the case of East India Industries (Madras) (P.) Ltd. (supra), while rendering decision in the case of Yogi Raj Charities Trust (supra) relied upon by the CIT. It is, further, pertinent to mention here that the decision re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied out activities, pertaining to achieving the charitable objects incorporated under the Memorandum of Association. Deleted object clause at 't' remained purely on paper. 10. A bare perusal of the impugned order passed by the CIT reveals that he did not appreciate the amendment effected to the definition of 'Charitable Purpose', as provided u/s 2(15) of the Act. Similarly, the applicability of the amended provisions of Section 2(15), by way of insertions of first and second proviso has not been considered by the CIT, in the context of factual-matrix of the case. The CIT has not doubted the genuineness of the activities and identity of the assessee appellants. The assessee has carried out concrete activities, to achieve the charitable purpose of imparting education, as discussed above and the first session commenced, in the year 2010. It is undisputed fact that the assessee appellant has not carried out any activity, in pursuance of object clause (t). The assessee has only carried out charitable activities of imparting education, as contemplated in the definition of 'charitable purpose' provided under Section 2(15) of the Act. The amended provision of Section 2(15), by way of ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r: "Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity: Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees or less in the previous year." 13. In simple language, the activities incorporated in the newly inserted proviso are excluded from the 'definition' of charitable purpose provided u/s 2(15) of the Act (a) any activity in the nature of trade, commerce or business (b) any activity of rendering any service in relation to trade, commerce or business (c) if fee or cess or any other consideration, irrespective of the nature of use or application or retention of such income by the concerned entity. The aforesaid proviso will be operative from 1.4.2009 and will accordingly apply in relation to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity." 17. Section 119 of the Income-tax Act, 1961, confers jurisdiction, on the Central Board of Direct Taxes (CBDT), to issue such orders, directions and instructions as it may deem fit, for the proper administration of the Act. It is provided in the said Section that the authorities and all other persons employed in the execution of the Act shall observe and follow the circulars issued by the Board. The circulars issued are basically interpretation of the tax law and are meant to guide the officers administering the Act and bring about uniformity about such administration. It is well settled principle of law that such circulars are binding on the Income Tax authorities and this view is fortified by the decisions of Supreme Court, in the following cases; Navneet Lal C. Javeri v. K.K. Sen, Asstt. CIT [1965] 56 ITR 198 (SC); Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913 (SC); K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 (S.C); UCO Bank v. CIT [1999] 237 ITR 889/104 Taxman 547 (SC) etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 issued by the Additional Registrar of Societies, Moga mentioning therein that the amendment/deletion in object clause made as per provisions of Sections 12 12A of the Societies Registration Act, 1860. The said certificate as annexed at page 42 of the Paper Book is reproduced hereunder : CERTIFICATE OF FILING R. No. 50/2008-09 OFFICE OF ADDITIONAL REGISTRAR OF SOCIETIES MOGA The Additional Registrar of Societies, Moga acknowledge the receipt of the under mentioned document(s) relating to Baba Amarnath Educational Society, Satya Yog Niwas, Gill Road, Moga. (Description of document(s) 1. Resolution for deletion of object clause "t" of the Memorandum of Association (Date of filing 13.06.2011) 2. Amended Memorandum of Association of Baba Amarnath Educational Society (Date of filing 17.06.2011) Remarks : The Resolution amending (deletion) of object clause "t" placed on record and clause "t" of the Object clause in Memorandum of Association stand deleted from the date of the resolution. The certified copy of Amended Memorandum of Association issued on request. Further the Amendment/Deletion in Object clause made as per the provisions of Sections 12 and 12A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licable to the facts of the present case, as the first appellate authority, dealt with exemption u/s 11 in this case. We are dealing with a case of grant of registration u/s 12AA of the Act. The granting of exemption u/s 11 is different and distinct vis- -vis the grant of registration u/s 12AA of the Act. 25. The assessee relied on the decision, in the case of Pinegrove International Charitable Trust (supra), the Hon'ble Punjab Haryana High Court where it was held as under: "Even after the new dispensation from April 1,1999, the test of pre-dominant object of the activity continues to apply as under Section 1-(22) of the Act. As long as an institution exists solely for educational purposes, it would qualify for grant of exemption u/s 10(23C)(vi) of the Act. Merely because profits have resulted from the activity of imparting education, that would not change the character of the institution existing solely for educational purpose. At the initial stage, when the application for exemption is filed by an educational institution, the scope of inquiry is restricted only to ascertaining the genuineness of the activities of such an institution. Such an inquiry may even extend to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the charitable object of imparting education. This intention has not been in dispute and doubt. The object clause marked at 't' has since been deleted in accordance with Sections 12 12A of the Societies Registration Act, 1860, as is applicable to the State of Punjab. This factum of deletion has been duly recorded by the competent authority in Certificate of Filing dated 6.7.2011, reproduced in the foregoing para of this order. The single non-operative and deleted object marked as 't' cannot obliterate the whole range of charitable objects and the actual activities undertaken by the assessee appellants, in pursuance of such objects. 28.1 In the light of the above discussions, findings of the ld. CIT cannot be sustained. Consequently, we set aside the impugned order passed by the CIT and direct that registration applied for by the assessee appellants u/s 12AA of the Act be granted. 28.2 In view of the above finding, the first 8 grounds of appeal, being inter-connected, and revolve around the single issue of declining of the grant of registration, by the CIT, stand disposed of. 28.3 Ground No. 9, raised by the assessee appellant pertains to the contention that CIT did not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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