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TMI Blog2017 (1) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT has grossly erred in denying registration to the assessee society u/s. 12A(a) of the Income Tax Act, 1961. 2. That on the facts and circumstances of the case and in the law, the CIT has grossly erred in failing to appreciate that the asseessee society has been incorporated essentially for the purpose of providing education which is per se a charitable purpose and that the entire income is wholly and exclusively dedicated for the purpose of society without even a single rupee distribution on account of profits to its members clearly entitling the society for registration in accordance with the decision of Hon ble Supreme Court in the case of American Hotel Lodging Educational Institute vs. CBDT 301 ITR 86 SC other decision, inter alia, from Hon ble Supreme Court. That the appellant craves leave to add to and / or amend, modify or withdraw the grounds outlined above before or at the time of hearing of the appeal. 2. The brief facts of the case are that the Applicant filed an Application for registration u/s. 12A(a) dated NIL on 8.4.2013 before the Ld. CIT, Dehradun. Accordingly, the assessee was served the notice dated 25.4.2013 by the Ld. CIT for furnishing the followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, replies furnished, Balance Sheet and Income expenditure account have been carefully gone through. The objects of the Trust have also been perused. 2.3 A perusal of the above material, however, brings out that the trust is apparently a commercial institute, engaged in sale of education and the business is expanding year after year. There is increase in capital expenditure also which shows that the society is engaged in expansion and increasing receipts rather than concentrating on the objective of imparting education while correlating it with the spirit behind the Legislation granting exemptions which is bold and clear i.e. 'charity'. The activities of the society are commercial in character and not charitable precisely as concluded by the Hon'ble High Court of Uttarakhand on similar facts in the case of CIT Vs. Queens Education Society reported in 177 Taxman 321. 2.4 Further, in the case of National Institute of Aeronautical Engineering Educational Society vs. CIT (2009) 184 Taxman 264 (Uttarakhand) it was observed that charity is the soul of the expression charitable purpose as defined in Section 2(15) of the I.T Act. Mere trade or commerce in the name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of hearing Ld. DR relied upon the orders of the lower authorities and placed reliance upon the decision of the Hon ble Uttarakhand decision in the case of CIT vs. National Institute of Aeronautical Engineering Educational Society (Uttarakhand). 5. We have heard the both parties and perused and considered the relevant records available with me especially the impugned orders passed by the Revenue Authorities, copy of the order passed u/s. 12AA of the CIT in the case of Shree Balaji Educational Trust framing identical reasons for denial of registration u/s. 12A and the ITAT, Delhi decision dated 18.3.2016 passed in the case of Shree Balaji Educational Trust vs. CIT in ITA No. 877/14. We have also perused the true translated copy of aims and objectives of the assessee society and true copy of aims and objectives of Shree Balaji Educational trust as considered by the Coordinate Bench of ITAT in the case of Shree Balaji Educational Trust vs. CIT vide decision dated 18.3.2016 in ITA No. 877/14 under exactly identical circumstances. For the sake of convenience, we are reproducing Order of ITAT, Delhi in the case of Shree Balaji Trust vs. CIT dated 18.3.2016 in ITA No. 877/14 under exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poses the educational institution exists solely for educational purposes and not for the purposes of profit. 5. Replying to the above the Ld DR supported the impugned order and submitted that in the case of National Institute of Aeronautical Engineering Educational Society Vs. CIT (2009) 184 Taxman 264 (Uttarakhand) it was observed that charity is the soul of the expression charitable purpose as defined in section 2(15) of the I.T.Act. Mere trade or commerce in the name of education cannot be said to be a charitable. No other argument was submitted by the Ld DR. 6. Placing rejoinder to the above submissions of the revenue the Ld Counsel again placed his reliance on the recent decision of Hon ble Apex Court in the case of Queens Educational Society Vs CIT (Supra) and submitted that the Hon ble Supreme Court reversing the decision of Hon ble Uttarakhand High Court has held that when a surplus is ploughed back for educational purposes then it cannot be said that the institution exist for profit motive. The Ld Counsel pointed out that the CIT(E) has not brought out any allegation to show that the surplus of receipt was misused or used other then the educational purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the registration thereof as the case may be. However, before passing order for refusal of registration, the assessee will be provided reasonable opportunity of being heard. Therefore, from the above provision of law, we find that at the time of registration u/s 12AA, the Commissioner is only required to examine the objects of the society / institution as well as genuineness of activities of the assessee and if he finds that the objects of the society are charitable, and the activities as stated in the object clause of the society are being carried out, then he is bound to grant registration u/s 12AA of the Act. Hon'ble High Court of Uttarakhand as relied upon by Ld. D.R. in the case of CIT VS National Institute of Aeronautics and Education 181 Taxman 205 has held that where the assessee was earning profits by charging hefty fees, the assessee cannot be said to be engaged in charitable activities and was not eligible for registration u/s 12AA of the Act. However, the Hon'ble Supreme Court in the case of Queens' Educational Society Vs CIT 245 CTR 449 has held that mere earning of profit cannot be the reason for not allowing registration under the provisions of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduced as under: 2. The respondent-society applied for registration under Section 12AA of the Income Tax Act, 1961 (hereinafter referred to as the. Act ) on 31.3.2009. The said application was declined by the Commissioner of Income Tax, Bathinda (for short the CIT ) vide order dated 25.9.2009. The CIT came to', the conclusion after examining the income and expenditure and the balance sheet for the period ending on 31.3.2006, 31.03.2007 and 31.3.2008 that the society had received donations and the capacity of donors and genuineness of transactions have not been explained. The CIT while noticing that society was running a Polytechnic College further took into consideration that the society was earning profits for the last two year and had claimed exemption under Section 10(23C) of the Act. The reasons to switch over to Section 11 of the Act remained unexplained for claiming exemption under Section 12AA of the Act and while taking into consideration Section 2 (15) of the Act the CIT came to the conclusion that since the society was charging building fund, development fund, sports fund and transportation costs etc., the same could not be termed as charitable activity by an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enuine or are not being carried out in accordance with the objects of the society/institution. 5. The power of the CIT regarding the scope of Section 12AA of the Act has been considered by this Court in the order dated 5.10.2011 passed in CIT Vs. Surya Educational Charitable Trust [2011] 203 Taxman 53/15 taxmann.com 123 (Punj. Har.) and it has been held that Section 12AA of the Act, requires satisfaction in respect of the genuineness of the activities of the Trust, which includes the activities which the Trust was undertaking at present and also which it may contemplate to undertake. The insertion of Sub Section 3 to section 12AA of the Act regarding the powers of the Commissioner to cancel the registration if the activities of the trust are not carried out in accordance with such objects was also noticed. 6. The Allahabad High Court in CIT Vs. Red Rose School [2007] 163 Taxman 19 has held that the jurisdiction of the Commissioner at the stage of processing application under Section 12AA of the Act is limited regarding whether the activities are genuine and in consonance with the objects of the trust or institution and where education is being imparted as per the ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aper book pages 124-126) has noted that society was running a school. In view of above facts and circumstances and in view of the judgements as noted above, we direct the Commissioner to allow registration u/s 12AA of the Act. The A.O. during assessment proceedings will however be entitled to examine the books of accounts of assessee with a view to examine any violation of the Act and can disallow exemption u/s 11 if anything adverse is found. 10. In view of above, appeal filed by assessee is allowed. 9. On the basis of forgoing discussion we reach to a fortified conclusion that the CIT dismissed application of the assessee for grant of registration under section 12A of the Act by recording incorrect and irrelevant facts and circumstances and the assessee successfully established that it was created for the charitable purposes including education activity and it used its funds for the purpose of educational activities and therefore the applicant trust is eligible for registration under section 12A of the Act. 10. It is relevant to mention that grant of registration under section 12A of the Act does not automatically make eligible the applicant for exemption under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the two institutes i.e. Kunti Naman Institute of Pharma Technology Science and Kunit Naman Institute of Management and Technology for providing education in the curriculum of BBA, BCA, MBA, MCA etc. These institutes are affiliated to Punjab Technical University and Uttarakhand Open University. It is also noted that the fee structure charged by the assessee is very reasonable i.e. ₹ 2000- 25000 per month for even specialized course such as BBA, BCA, MSC etc. We also note that the ld. CIT has framed two reasons for refusing to grant registration u/s. 12A i.e. first narrated in para no. 2 in his impugned order that the education should be given free of cost to some needy students and the second reason vide para no. 4 that the assessee is expanding and is increasing receipts, therefore, not entitled for exemption. We also note that Ld. CIT relied on the decision of the Uttarakhand High Court in the case of CIT vs. Queens Educational 177 Taxman 321 and another similar decision in the case of National Institute of Aeronautical Engineering Educational Scoeity vs. CIT 184 Taxman 264 which have been since been reversed by the Hon ble Supreme Court vide decision in the case of Que ..... X X X X Extracts X X X X X X X X Extracts X X X X
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