S. 11, 12 – CIT cannot purview Right of Children to Free and Compulsory Education Act, 2009 for rejection application u/s 12AA(1)(b)(ii) and also CIT had no jurisdiction to make the observations regarding aided/unaided schools, that there is no requirement u/s 12AA of the Act.
Shri Gian Ganga Vocational Educational Society vs CIT
Dated: 18th Jan 2013
Dated: 18th Jan 2013
The assessee Society filed an application u/s 12AA(1)(b)(ii) of the Act in Form No.10A before the ld. CIT. However CIT rejected the application filed by the assessee for registration observing that the provisions of s. 11 and 12 do not envisage that a charitable institution shall provide charity by charging hefty and indiscriminate amount of fees from public at large. The fees received are outside the scope of sec 11 and 12 and shall, therefore, be taxable. Fees imply direct involvement of consideration for the services rendered. Fees cannot be voluntary and are, therefore, taxable under the head profit and gains of the business or profession. In fact, the fact is that the educational institutions run by the society in question charge whooping fees. The copy of the revised constitution of the society does not contain any clause which could eliminate profit making from becoming the real or dominant purpose of the society while imparting education. The society/educational institution is making systematic profit year to year as under and diverting its profit towards corpus/capital to enhance its earning capacity through the acquisition of buildings & other fixed assets.
Thus, the society is running its institutions on purely commercial lines and earning profits/ surpluses systematically year after year by charging substantial fees from the students and making huge profits.
The assessee was asked the details of fee concession to poor and needy students during the financial years 2010-11 and 2011-12, as assessee not furnished any details like name & financial status of the family of the students to whom fee concession was given, it can not be verified whether those students were is in the category of EWS (Economically Weaker Section) as per Right of Children to Free & Compulsory Education Act, 2009. Since, as per RTE Act, the state government is to fix norm for EWS qualification and as per notification of government of Haryana, children of parents who are Below Poverty Line (BPL) card holder are qualified under EWS category. As no evidence was produced regarding financial status of families of those students to whom fee concession was given, it cannot be verifiable whether these students falls under EWS category as per the criteria or not.
CIT(A) following CIT vs National Institute of Aeronautical Engineering & Educational Society observation of the Apex Court in the case of the Un-aided private schools of Rajasthan vs. UOI & others (writ petition (C) No. 95 of 2010)(ibid) , held Consequently, neither aims/objects and terms of memorandum are of the charitable nature, nor are there activities which may be put to a test of genuineness. With the result, the request of the applicant trust for registration u/s 12AA of the IT Act cannot be acceded to and the application in form 10A is, therefore, rejected accordingly u/s 12AA(I)(b)(ii) of the Income Tax Act, 1961."
On appeal before ITAT, it was observed that the ld. CIT has not raised any objection against the objects of the assessee Society. The main object of the Assessee Society is education, which, undeniably, is of charitable nature, in line with the provisions of Section 2(15) of the Act. Further, the ld. CIT has taken recourse to the RTE Act to reject the assessee's application. Now, as correctly contended, it is not within the CIT's purview to do so. Under Section 12AA, what is required to be seen by the ld. CIT while considering an application for grant of registration, is as to whether the object of the applicant is charitable and as to whether its activities are genuine any further. The jurisdiction and competence to examine an issue under the RTE Act obviously lies with the authorities mentioned therein. Then, the CBDT Circular No.11 of 2008 clearly states, inter alia, that the proviso to Section 2(15) does not apply in the case of education and where the purpose of a Trust or institution is education, it will constitute 'charitable purpose' even if it incidentally involves in carrying on of commercial activities.'
ITAT following various order direct the ld. CIT to grant registration to the Society on verifying the original document of establishment of the assessee Trust.
Followed:
1. In 'Shri Sain Ji Dharmarth Trust, it has been held, at the stage of granting or refusing registration, CIT is not required to examine as to what amount should form corpus of trust, in what manner accounts were maintained and what should appear in balance sheet.
2. In 'St. Don Bosco Educational Society, it has been held that mere charging of high fees is not no ground of refusing registration, where the CIT has not doubted the objects and genuineness of the assessee's activities.
3. In 'Surya Educational & Charitable Trust, held that u/s 12AA of the Act, the CIT is only to examine the genuineness of the objects of the Trust and not the application of income for charitable purpose, which can be examined at the stage when the Trust files its return.
4. In 'Baba Gandha Singh Education Trust , it has been held that merely because the assessee has generated surplus income after meeting expenditure on its educational activities, such activity cannot be regarded as 'education, trade and commerce in the name of education' so as to invite cancellation of registration; and that education is a charitable purpose in itself. While rendering this decision, the ld. Chandigarh Bench of the Tribunal took into consideration 'Aeronautical Engineering and Educational Society', (relied on by the ld. CIT), wherein, it was held that mere imparting education for primary purpose of earning profits cannot be said to be a charitable activity. The Chandigarh Bench of the Tribunal held, following 'Pinegrove Internationala Charitable trust & Others vs. UOI & Ors. (rendered by the Hon'ble High Court so far as regards the present assessee also), that merely because an institution has earned profits, it would not be a deciding factor to conclude that such an educational institution exists for profit and that merely because profits have resulted from the activity of imparting education, it would not result in change of character of the institution that exists solely for educational purposes.
5. In 'Reliable Educational Alliance, held that at the time of granting registration, the CIT is required only to satisfy himself about the objects of the Trust and the genuineness of its activities, and no further.
6. In 'Dream Land Educational Trust, it has been held, again, in accordance with the Section 12dAA of the Act, the CIT is required to satisfy himself only about the objects of the Trust and the genuineness of its activities and where the CIT has recorded no dissatisfaction on either of these aspects, he is not justified in refusing grant of registration on extraneous considerations.
Regards
Prarthana Jalan
__._,_.___
No comments:
Post a Comment