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TMI Blog2020 (8) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... registration u/s. 12AA Assessee society ought to have been granted the registration u/s 12AA of the Act, as per the settled position of law regarding grant of registration of section 12AA which the Ld. CIT, Durgapur erroneously has not given, therefore, his order is erroneous and also considering the fact that so many years have passed after the assessee has submitted the application/rejection of the application by the Ld. CIT, Durgapur and assessee is still running educational institution it would be a travesty of justice, if we remit the matter back to the Ld. CIT for fresh consideration. Direct the Ld. CIT/the competent authority to grant registration u/s. 12AA of the Act as per section 12A(2) of the Act, which states that where an application has been made on or after the 1st day of 1st June, 2007, the provisions of section 11 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made. So, since the assessee filed application for registration u/s. 12AA of the Act on 17.08.2012, the provisions of section 11 and 12 shall apply in relation to the income of such as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umbers, amount, and the stream in which the students got admission etc. in the Institute. Considering the said facts, the Ld. CIT, Durgapur was of the opinion that assessee was receiving donation connected with the admission of the students and therefore it has to be treated as collection of Capitation fees as held by the Hon ble Supreme Court in TMA Pai Foundation Vs. State of Karnataka 2002 (8) SCC 4. Thereafter, the Ld. CIT, Durgapur relied on the decision of the Hyderabad Tribunal in Vodithala Education Society Vs. ADIT (Exemptions)-II, 20 SOT 353 (Hyd.) and held that the assessee is indulged in sale of education and, therefore, it cannot be considered as a charitable institution u/s. 2(15) of the Act because the purpose of the assessee as a whole is to make profit and therefore denied the registration u/s. 12AA of the Act. 3. Regarding the assessee s application for grant of exemption u/s. 80G of the Act, the Ld. CIT reproduced his observation as made in the order denying 12AA registration and held that the assessee did not satisfy the condition as laid down for grant of exemption u/s. 80G of the Act. Aggrieved, by both the action of ld. CIT, Durgapur, the assessee is befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an be seen that the date of admission and receipt of donation there was interval of about six to seven months which clearly reveals that donation has nothing to do with the admission. And even in management quota, at the time of admission the capitation fee is insisted and so the donation in this case is post-admission and unless evidence is brought on record to prove otherwise the adverse inference drawn by Ld CIT is erroneous. And the ld AR pointed out that the variance in the amount of donation as well as the fact that few students gave the donation shows and the fact that the donations were not received at the time of admission goes on to show that the donation were given voluntarily by the students/parents and has nothing to do with the capitation fee which is normally insisted before admission itself. The ld. AR submitted that since CIET was established recently and it had the vision drive to grow and was up-coming, it needed support for growth and development. Since there were future plans for expansion of the college premises for setting up of new college/institute for providing education in other fields/disciplines and up-gradation of the library, computer lab, practical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As on 01.04.2011 Addition Land and Land Development ₹ 4,01,44,153 ₹ 1,23,11,500 Building ₹ 12,88,59,040 ₹ 1,95,60,525 6. According to the Ld. AR, the investment in land and building was made for setting up of a new educational institute namely, Camellia Institute of Polytechnic and he brought to our notice that initially the assessee society was having only one educational institution namely Camellia Institute of Engineering Technology and the assessee society got approval to set up a new institute in the name of Camellia Institute of Polytechnic on 03.08.2011 (refer pages 44 to 45 of paper book). The Ld. AR also drew our attention to the pages 46 to 74 of the paper book to show the sample bills for construction of building, proof of purchase of land etc to show the genuineness of the application of donation. Thus the Ld. AR contended that the entire donation received by the assessee including the donation received from the companies to the tune of ₹ 2.03 crore was expended for the purpose of the expansion/appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e society was misused/diverted for any other purposes other than for achieving the objectives of the society, therefore, he has contended that the denial of registration u/s. 12AA of the Act and approval u/s 80G of the Act was totally unjustified in law. Thereafter, he cited the decision of the Hon ble Supreme Court in the case of Ananda Social Educational Trust Vs. CIT (2020) 114 taxmann.com 693 (SC) wherein it was held as under: Section 12AA undoubtedly requires the Commissioner to satisfy himself about the objects of the trust or institution and genuineness of its activities and grant a registration only if he is so satisfied. The said section requires the Commissioner to be so satisfied in order to ensure that the object of the trust and its activities are charitable since the consequence of such registration is that the trust is entitled to claim benefits under sections 11 and 12. In other words, if it appears that the objects of the trust and its activities are not genuine that is to say not charitable the Commissioner is entitled to refuse and in fact, bound to refuse such registration. [Para 9] The purpose of section 12AA is to enable registration only of such t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charitable in nature and in furtherance of its object, their activities are genuine, then registration u/s. 12AA of the Act cannot be denied. According to ld. AR, the Ld. CIT, Durgapur erred in relying on the decision of the Hon ble Supreme Court in TMA Pai Foundation (supra) and the decision of ITAT, Hyderabad in the case of Vodithala Education Society (supra) wherein the facts are distinguishable. Therefore, he prayed that the relief may be granted to the assessee society. 11. Per contra, the Ld. CIT, DR Shri Vijay Shankar vehemently opposed the plea of the assessee s Ld. AR and contended that the assessee having received the donation which is more than the prescribed fees stipulated has indulged in collecting capitation fees and thereby the ld. CIT, Durgapur has rightly relied on the decision of Hon ble Supreme Court in TMA Pai Foundation (supra) and also the decision of ITAT, Hyderabad in the case of Vodithala Education Society (supra) to reject the application for registration u/s 12AA and approval u/s 80G of the Act. The Ld. DR pointed out that the assessee society in the first FY 2010-11 collected from 19 students and in FY 2011-12 had collected from 34 students goes on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee. From a perusal of paper book page 1 and 2 it is noted that the assessee had collected donation from 19 students during the FY 2010-11 and in the next year i.e. FY 2011-12 from 34 students. We note that other than the entries in the books of account maintained by the assessee, there is no other material on the basis of which the Ld. CIT has drawn an inference that the assessee was collecting Capitation fee. But the books of account of the assessee nowhere says that the amount collected from the students are in the nature of Capitation fee. In this regard, it is noted that the assessee institution had given admission to 84 students in the first academic session and for 113 students in the second academic session and the donations were collected only from 19 and 34 students in the FY 2010-11 and 2011-12 respectively. It was brought to our notice that the assessee has given admission to the students way back as in August (Month) and the donation were collected after six months after their admission (February/March, Next Year). According to assessee, this donation was given on voluntary basis without any coercion. According to Ld. CIT, DR, these seats must be the managem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing that the students gave donation, then it should have been the starting point of enquiry to unravel the truth. Since the address of students who gave the donations were furnished by the assessee, which fact the Ld. CIT acknowledges, then in all fairness he should have enquired by issuing summons u/s. 131 of the Act and/or issued notices u/s. 133(6) of the Act or the Ld. CIT ought to have called for some reports from the field and collected some materials which could have cleared the doubt in his mind and in that process could have been able to bring out the truth, which unfortunately the Ld. CIT, Durgapur failed to carry out and moreover, there was no complaint from any quarters in the public domain that the assessee society insisted or indulged in the nefarious practice of collecting donation/capitation fee for giving admission in Management quota etc. Therefore, the Ld. CIT, Durgapur erred in finding that the donation collected by the assessee was Capitation fee or is indulged in collection of in-voluntary donation or the assessee society was running the Institute for making profit or it was selling the seat. So, we find that there is no material to find that assessee had or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT Durgapur misdirected himself by the wrong assumption that assessee has collected Capitation fees from the students for admission, which act of assessee according to him was akin to sale of seats, which fact when contested and denied by the assessee, the Ld. CIT without even conducting a preliminary enquiry on this issue, however, stuck to his impression/assumption that assessee was indulging in Collection of Capitation Fees. However, as discussed in detail (supra) this fact could not be proved against the assessee, which activity if done by assessee was illegal and deprecated by the Hon ble Supreme Court. And in that process, the Ld. CIT did not bother to look at the objects of the assessee society and the genuineness of the activities. It is settled law that at the time of registration, the authority need to satisfy himself that the objects are charitable in nature and the activities being carried out are genuine, meaning thereby that the activities are in consonance for achieving the charitable objects and nothing else. Since we have seen from the objects of the assessee society that education one of the main objects which is a charitable object/activity as per the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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