IT: Merely because exemption is denied to a society under section 10(23C)(vi), registration under section 12AA cannot be denied
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[2013] 38 taxmann.com 173 (Allahabad)
HIGH COURT OF ALLAHABAD
Commissioner of Income-tax
v.
School of Management Sciences*
R.K. AGRAWAL AND RAM SURAT RAM (MAURYA), JJ.
IT APPEAL NO. 251 OF 2011†
OCTOBER 29, 2012
Section 12AA, read with sections 11 and 12A, of the Income-tax Act, 1961 - Charitable institution - Registration of [Denial of exemption] - Registration granted to assessee was cancelled by Commissioner solely on ground that Chief Commissioner had denied exemption under section 10(23C)(vi) - However, in order of Commissioner there was no whisper that assessee had not fulfilled any of conditions of section 11 for claiming it to be a charitable institution - Whether registration was to be restored - Held, yes [Para 5][In favour of assessee]
FACTS
| ■ | The Chief Commissioner disallowed the exemption claimed by the assessee on the ground that the assessee institution was not solely established for educational purpose; in the objects of the assessee there were certain other objects. | |
| ■ | On basis of this order, the Commissioner cancelled the registration invoking section 12AA (3). | |
| ■ | On appeal, the Tribunal set aside order of the Commissioner and restored the registration on the ground that proceeding under section 10(23C)(vi) is an independent proceeding and cannot be made sole ground for cancellation of registration granted under section 12A. |
HELD
| ■ | The exemption under section 10(23C)(vi) can be claimed by an assessee without applying for registration under section 12A as it is not required to fulfil the conditions mentioned under section 11 while claiming exemption under section 10(23C)(vi). Further in the order passed by the Commissioner, there is no whisper that the assessee has not fulfilled any of the conditions of the section 11 for claiming it to be a charitable institution. He had solely relied on the order of the Chief Commissioner passed under section 10(23C)(vi) while denying the exemption under the aforesaid sub-section. Therefore, the Tribunal had rightly restored the registration on the ground that in the assessment years 2004-05 and 2006-07 benefit of exemption/deduction under section 11 was allowed to the respondent-assessee. | |
| ■ | In view of the foregoing discussion, there was no error in the impugned order passed by the Tribunal, Allahabad. The appeal fails and is dismissed. |
A.N. Mahajan and D. Awashthi for the Appellant. Kunal Ravi Singh and Manjari Singh for the Respondent.
ORDER
1. The present appeal has been filed under Section 260-A of the Income-tax Act, 1961, hereinafter referred to as "the Act" against the order dated 12.11.2009 passed by the Income Tax Appellate Tribunal, Allahabad. The Revenue has proposed the following three substantial questions of law said to be arisen out of the order of the Tribunal.
| "(1) | Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in coming to the conclusion that registration u/s 12-AA cannot be cancelled by taking into consideration an order passed u/s 10(23C) (vi) of the Act by the Chief Commissioner as both the proceedings are independent proceedings? | |
| (2) | Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in not appreciating the fact that the assessee was not doing any charitable activity as found by the A.O. During assessment proceedings as such the provisions of Sections 11, 12, 12-A, 13 of the Act had been violated by the assessee therefore the cancellation of registration by the CIT was justified? | |
| (3) | Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in not taking into consideration the decisions relied upon by the CIT in his order u/s 12-AA (3) of the Act while cancelling the registration of the assessee society as the assessee was engaged in activities which are in violation of the objects of the society for which registration was granted earlier?" |
2. Briefly stated that the facts giving rise to the present appeal are as follows: The respondent-assessee was granted registration under Section 12A of the Act being a charitable institution. It claimed exemption under Section 10(23C)(vi) of the Act on the ground that the income earned by it is relating to educational institution as the institution is solely for the educational purposes. The claim of exemption under Section 10(23C)(vi) of the Act was disallowed by the Chief Commissioner of Income Tax, Varanasi vide order dated 25th February, 2009 on the ground that in the objects of the institution there are certain other objects, which proves that the institution has not solely been established for educational purposes. Relying on the said order proceeding under Section 12AA(3) of the Act was initiated and vide order dated 29th September, vvvb2009, the Commissioner of Income Tax, Varanasi cancelled the registration granted to the respondent-assessee under Section 12A of the Act. Feeling aggrieved by the order dated 8th June, 2009 cancelling the registration granted under Section 12A of the Act, the respondent-assessee preferred an appeal before the Income Tax Appellate Tribunal, Allahabad which was registered as I.T.A. No.249(Alld)09. The Tribunal vide impugned order dated 12th November, 2009 had allowed the appeal and set aside the order of the Commissioner of Income Tax dated 29th September, 2009 and the registration had been restored. The Tribunal had come to the conclusion that the proceeding under Section 10(23C) (vi) of the Act is an independent proceeding and cannot be made the sole ground for cancellation of the registration granted under Section 12A of the Act. It further found that the deduction under Section 11 of the Act has been allowed to the respondent-assessee herein for the Assessment Year 2006-07 and in the assessment order passed for the Assessment Year 2004-05 exemption under Section 11 of the Act was disallowed, which order was reversed in appeal by the Commissioner of Income Tax (Appeal), Varanasi, allowing the deduction under Section 11 of the Act vide order dated 3.10.2007, which order has been accepted by the Revenue as no second appeal was preferred against the said order.
3. We have heard Sri Dhananjay Awasthi, learned Standing Counsel for the Revenue and Sri Kunal Ravi Singh, learned counsel appearing for the respondent-assessee.
4. Sri Awasthi, learned counsel, submitted that as the institution has been established solely for the educational purposes and is a profit earning institution exemption under Section 10(23C) (vi) of the Act having been rightly denied to it as it ceased to be a charitable institution., therefore, the Tribunal has erred in restoring the registration. The submission is wholly misconceived. Admittedly, one of the objects of the trust was for running educational institutions and imparting education. The trust, however, has other objects also, which are reproduced below:
| "(i) | Development of Scientific Education amongst Indian Children. | |
| (ii) | Modern Education with moral duty and character building in accordance with Indian culture as well as development of educational atmosphere. | |
| (iii) | To provide as well as arrange commercial and practical education to children. | |
| (iv) | Development as well as publicize the Indian culture and arts. | |
| (v) | To establish the school and management thereof from Primary education to Intermediate Education. | |
| (vi) | To publicize as well as to educate and propagate the Cottage Industries as well as industries based on village amongst the youth so that they may lead their life independently and freely." |
5. In our considered opinion, exemption under Section 10(23C)(vi) of the Act can be claimed by an assessee without applying for registration under Section 12A of the Act as it is not required to fulfil the conditions mentioned under Section 11 of the Act while claiming exemption under Section 10(23C) (vi) of the Act. Further in the order passed by the Commissioner of Income Tax, there is no whisper that the assessee has not fulfilled any of the conditions of the Section 11 of the Act for claiming it to be a charitable institution. He had solely relied on the order of the Chief Commissioner of Income Tax passed under Section 10(23C)(vi) of the Act while denying the exemption under the aforesaid sub-section. We are, therefore, of the considered opinion that the Tribunal had rightly restored the registration on the ground that in the Assessment Years 2004-05 and 2006-07 benefit of exemption/deduction under Section 11 of the Act was allowed to the respondent-assessee.
In view of the foregoing discussion, we do not find any error in the impugned order passed by the Income Tax Appellant Tribunal, Allahabad. The appeal fails and is dismissed.
Regards
Prarthana Jalan
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