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TMI Blog2012 (5) TMI 664X X X X Extracts X X X X X X X X Extracts X X X X ..... Accountant Member) For the Petitioner : Harry Rekhy For the Respondent : Jyoti Kumari ORDER Sushma Chowla (Judicial Member) The assessee has filed the present appeal against the order passed by the Commissioner of Income Tax-II, Chandigarh dated 21.02.2011 under section 12AA r.w.s. 254 of the Income-tax Act (in short the Act ). 2. The assessee has raised the following grounds of appeal: 1. That the order of the Learned Commissioner of Income Tax II, Chandigarh is defective both in law and facts of the case. 2. That the Learned Commissioner of Income Tax II. Chandigarh is not justified in rejecting the application of the appellant for the grant of registration u/s 12A of Income Tax Act. 1961 as the appellant Trust duly fulfills all the necessary conditions for registrationus12A of Income Tax Act, 1961. 3. That the Learned Commissioner of Income Tax - II. Chandigarh has brought on record no new facts and has ignored the directions given by the Hon'ble Income Tax Appellate Tribunal, Chandigarh vide its order dated 30-07-2010. Hence, the rejection of the appellant's application for the grant of registration u/s 12A of Income Tax Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. The assessee had entered into a collaboration with M/s Fountainhead franchise of Euro Kids and the amount received on the sharing of revenue were used in the objects of the trust. In the assessment year 2009-10 the amount realized was utilized for payment of lease money and installment to Chandigarh Administration. 5. The Tribunal vide para 8 took note of the fact that though the assessee was compiling income and expenditure statement and Balance Sheet for the financial year 2004-05 to 2008-09, the application for registration of trust under section 12A of the Act was moved by the assessee on 31.3.2008. The Tribunal gave finding in para 10 that from the perusal of the objects of the assessee trust were to run a school and in order to achieve its objects the trust had purchased land and constructed school building on the same. The Tribunal thus held that Such activities of purchasing the land and constructing the building for setting up the school is application for charitable purpose . The assessee had further entered in a collaboration for running the school, which in turn established the bonafides of the assessee trust to carry on its object of imparting educatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in turn established the bonafides of the assessee trust to carry on its object of imparting education. The assessee had executed a trust deed and later executed a supplementary trust deed on 03.09.2008, wherein the assessee had clarified its intention with regard to the dissolution of the trust. The supplementary deed was executed for further clarification and the same is in continuation of the original trust deed. We find no merit in the objections raised by the CIT in this regard. The assessee is entitled to the claim of registration under section 12A of the Act from the date of filing the application under section 12A of the Act in accordance with law. 9. The Tribunal thus held the assessee entitled to claim of registration under section 12A of the Act from the date of filing the application under section 12A of the Act in accordance with law. However, the matter was remitted back to the file of the CIT (Appeals) to follow the ratio laid down in Pinegrove International Charitable Trust Ors Vs Union of India and Ors. (supra) 10. The Commissioner of Income Tax in third round of proceedings has observed that the assessee has failed to file the Balance Sheet and Profit L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income Tax in rejecting the application for grant of registration under section 12A as the assessee has fulfilled necessary conditions laid down under the Act. 12. On perusal of the order of the Tribunal in assessee s own case dated 30.7.2010 in ITA No.1189/Chd/2009, and the consequent order of the Commissioner of Income Tax passed under section 12AA of the Act dated 21.2.2011 we find that the Commissioner of Income Tax-II, Chandigarh has completely misguided himself in adjudicating the issue of grant of registration to the assessee under section 12A of the Act. The Commissioner of Income Tax acknowledges that the order under section 12AA of the Act has been passed r.w.s. 254 of the Act. However, while deciding the issue in hand the observations of the Tribunal in various paras of the order dated 30.7.2010 have been completely overlooked by the Commissioner of Income Tax and the various principles which have been settled by the Tribunal for grant of registration under section 12A of the Act have been relooked and redecided by the Commissioner of Income Tax by overreaching his jurisdiction in deciding the limited issue reverted back to his file. 13. The Tribunal in ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matters which, if allowed to become widespread, could result in- considerable harassment to the assessee public without any benefit to the Revenue. We would like to say that the department should take these observations in the proper spirit. The observations of the High Court should be kept in mind in future and utmost regard should be paid by the adjudicating authorities and the' appellate authorities to t h e requirements of judicial discipline and the need for giving effect to the orders of the higher appellate authorities which are binding on them. 14 , Likewise, in t h e case, of Sub Inspector Roop Lal and Another vs. Lt. Governor, Delhi (supra) the Hon'ble Supreme Court held as under: We are indeed sorry to note the attitude of the Tribunal in this case which,, after noticing the earlier judgment of a coordinate bench and, after noticing the judgment of this Court, has still though, it fit to proceed to lake a view totally contrary to the view taken in the earlier judgment thereby creating a judicial uncertainly in regard to I ha declaration of lam involved in t h i s case. Because of this approach of the latter bench of the Tribunal in this case, a lot o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at was laid down for the guidance of the nation as a solemn preposion by the epic Fundamental Rights case................................................... It is wise to remember that fatal flaws silenced by earlier rulings cannot survive after- death because a decision does not lose its authority merely because it was badly argued, inadequately considered and fallaciously reasoned. 17. In this backdrop, we hold that the C1T(A) erred in disregarding the binding decision of the Tribunal for assessment year 2004-05 (supra) without any just and reasons. The order of th e CIT(A) is therefore unsustainable in the eyes of law. 14. In the above said backdrop of judicial precedent, we hold that the appellate authorities are to follow judicial discipline and there is a need to give effect to the orders of the higher appellate authorities which are binding on them. The said principle was laid down by the Hon'ble Supreme Court in Kamalakshi Finance Corporation Ltd.(supra). In view thereof we hold that the order of the Commissioner of Income Tax-II, Chandigarh is, therefore, unsustainable in the eyes of law. 15. The Tribunal while deciding the appeal against the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id finding of the Tribunal wherein it was held that the assessee was entitled to the claim of registration under section 12A of the Act from the date of filing the application, the order of Commissioner of Income Tax dated 21/22.2.2011 in relooking at the issue i.e. activities of the assessee trust, objects of entering into collaboration with a third party and thereafter holding that the educational activities were not provided by the trust, was not in the domain of Commissioner of Income Tax to deliberate upon. The conclusion of the Commissioner of Income Tax that the assessee was engaged in leasing out the building to third party and hence no charitable activities was undertaken during the relevant year and in the subsequent year were incorrect, specially in view of the finding of the Tribunal in this regard and the matter being set aside to the file of the Commissioner of Income Tax for limited purpose of following the ratio laid down by the Hon'ble Punjab Haryana High Court in Pinegrove International Charitable Trust (supra). In view of the order of the Tribunal dated 30.7.2010, the claim of the assessee that it was a charitable institution engaged in the activity of educ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deems fit provided that they are not in conflict with the provisions of the Act. The parameters of earning profit beyond 15% and its investment wholly for educational purposes may be expressly stipulated as per the statutory requirement. Thereafter the Assessing Authority may ensure compliance of those conditions. The cases here exemption has been granted earlier and the assessments are complete with the finding that there is no contravention of the statutory provisions, need not be reopened. However, after grant of approval if it comes to the notice of the prescribed authority that the conditions on which approval was given, have been violated or the circumstances mentioned in 13th proviso exists, then by following the procedure envisaged in 13th proviso, the prescribed authority can withdraw the approval. (3) The capital expenditure wholly and exclusively to the objects of education is entitled to exemption and would not constitute part of the total income. (4) The educational institutions, which are registered as a Society, would 1continue to retain their character as such and would be eligible to apply for exemption under Section 10 (23C)(vi) of the Act. [See para 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to grant registration to the assessee under section 12A of the Act was in view of the ratio laid down by the Hon'ble Uttarakhand High Court in CIT, Haldwani Vs M/s Queen 's Educational Society, Haldwani (date of decision 24.09.2007), which stands overruled by the Hon'ble Punjab Haryana High Court in Pinegrove International Charitable Trust (supra). The ratio laid down by the Jurisdictional High Court is applicable to the assessee before us and merely because it earned profit would not be deciding factor to conclude that the educational institution exists for profit. In the facts of the present case before us and as pointed out at pages 1 and 2 of the order of Commissioner of Income Tax dated 21/22.2.2011 the assessee had received voluntary contribution to the corpus fund for the purposes of investment in land and construction of building in various years. The said contributions are to be considered only for the financial years 2007 08 and 2008-09 i.e. the date from which the assessee had filed the application for registration under section 12A of the Act. The observations of the Commissioner of Income Tax in respect of the contribution received in the earlier year ..... X X X X Extracts X X X X X X X X Extracts X X X X
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