IT: Where assessee-institution imparting education in field of nursing, claimed registration under section 12AA, in view of fact that assessee was charging nominal fee from students and, moreover, hostel facility run by it for students was only incidental to its main objective, it was to be concluded that assessee's activities were chartiable in nature and, thus, its claim for registration was to be allowed
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[2013] 38 taxmann.com 280 (Agra - Trib.)
IN THE ITAT AGRA BENCH
Society for Advance Health Education
v.
Commissioner of Income-tax-II*
BHAVNESH SAINI, JUDICIAL MEMBER
AND A.L. GEHLOT, ACCOUNTANT MEMBER
AND A.L. GEHLOT, ACCOUNTANT MEMBER
IT APPEAL NO. 431 (AGRA) OF 2011
[ASSESSMENT YEAR 2010-11]
[ASSESSMENT YEAR 2010-11]
SEPTEMBER 7, 2012
Section 2(15), read with section 12AA, of the Income-tax Act, 1961 - Charitable/religious purpose [Education - Nursing institution] - Assessment year 2010-11 -Assessee was running general nursing and midwifery Institution imparting G. N. M. in nursing - It filed application for grant of registration under section 12AA - Commissioner found that assessee was charging high fee from students and, thus, its activities were being conducted with profit motive - He also noted that assesseee was running a hostel for its students in respect of which no separate books of account were maintained - Commissioner, thus, concluded that activities of assessee were not charitable in nature as per section 2(15) - Accordingly, assessee's application for registration was rejected - On appeal, it was noted from records that after meeting expenditure on imparting education, only small amount of surplus was left and, thus, there was no profit motive of assessee to run institution - It was also seen that provision for hostel facility to medical students was only incidental to aims and objects of assessee and there was no material on record showing that assessee was running hostel for business purpose - Whether on facts, objects of assessee were charitable in nature within meaning of section 2(15) and, therefore, Commissioner was to be directed to grant registration to assessee-trust - Held, yes [Para 6.6] [In favour of assessee]
FACTS
| ■ | The assessee was running general nursing and midwifery institution imparting G. N. M. in nursing and different post graduation courses in paediatrics, cardiology, ophthalmology, oncology etc. It filed application for grant of registration under section 12AA. | |
| ■ | The Commissioner noted that assessee was charging high fee from students and, thus, its activities were being conducted with profit motive. | |
| ■ | The Commissioner further found that assessee was running a hostel for its students. No evidence was adduced to the effect that separate books of account were maintained in respect of incidental activities of running of hostel, which was considered to be in the nature of business. | |
| ■ | The Commissioner, thus, concluded that activities of assessee were not charitable in nature as per section 2(15). Accordingly, the assessee's application for registration was rejected. | |
| ■ | On appeal: |
HELD
| ■ | At the time of consideration of application for registration under section 12AA, the Commissioner is only required to satisfy himself about the objects of the assessee and genuineness of its activities. The definition of charitable purposes includes relief for poor, education and medical relief. [Para 6.1] | |
| ■ | In the instant case, the assessee is imparting education. It was registered with the Indian Nursing Council and affiliated to the State Medical Faculty. The assessee got affiliation for training 40 students for general nursing and midwifery. | |
| ■ | Thus, the assessee society is running nursing training institute to impart education and as per photographs also, the assessee has made free medical check-up camps. The building is provided to the society free of rent by one of the members of society. After incurring the expenditure on imparting education, only small surplus is left with the assessee. | |
| ■ | Therefore, the fees charged by the assessee from the students annually could not be treated to be very high and as a result, there was no profit motive of the assessee to run the institution. | |
| ■ | It may be also noted that the annual fees received from the students not only include tuition fees, but other charges like clinical fee, library fee, examination fee, lab fee etc. Therefore, it could not be treated as very high fees charged by the assessee. Further, hostel facilities were granted to only 6 students out of permission given for 40 students. | |
| ■ | It was also found that the hostel charges of the assessee could not be said to be excessive. Since only six students were provided hostel facilities, it could not be considered as the assessee is running hostel for the purpose of business. The provision for providing hostel facility to the medical students was only incidental to aims and objects of assessee. | |
| ■ | The Assessing Officer in his report submitted that the assessee society is running general nursing and midwifery training institute imparting nursing training up to the level of post graduation. Therefore, providing educational facilities is part of the charitable purposes as per section 2(15). Therefore, the objects of the assessee were charitable in nature. | |
| ■ | Considering the totality of facts and circumstances, it is opined that the assessee satisfied all the necessary conditions for grant of registration under section 12AA and accordingly, the assessee is entitled for registration. In view of above the impugned order is set aside and the Commissioner is directed to grant registration to the assessee. [Para 6.6] | |
| ■ | In the result, the appeal of the assessee is allowed. [Para 7] |
CASES REFERRED TO
CIT v. Red Rose School [2007] 163 Taxman 19 (All.) (para 4), Shavak Shiksha Samiti v. CIT [2007] 16 SOT 23 (Delhi) (URO) (para 4), Fifth Generation Education Society v. CIT [1990] 185 ITR 634/[1991] 54 Taxman 237 (All.) (para 4), Dream Land Educational Trust v. CIT [2008] 166 Taxman 27 (Asr.) (Mag.) (para 4) Aditanar Educational Institution v. Addl. CIT [1997] 224 ITR 310/90 Taxman 528 (SC) (para 6.1) DIT (Exemption) v. Moti Bagh Mutual Aid Education [2008] 298 ITR 190/[2007] 163 Taxman 490 (Delhi) (para 6.2), American Hotel & Lodging Association Educational Institute v. CBDT [2008] 301 ITR 86/170 Taxman 306 (SC) (para 6.3) and CIT v. Gujarat Maritime Board [2007] 289 ITR 139 (Guj.) (para 6.4).
Navin Gargh for the Appellant. K.K. Mishra for the Respondent.
ORDER
Bhavnesh Saini, Judicial Member - This appeal by the assessee is directed against the order of the ld. Commissioner of Income-tax-II, Agra dated 21.09.2011 rejecting the application for registration u/s. 12AA of the IT Act on the following grounds :
'1.1. Because in any view, the Ld. CIT-II, Agra has erred in rejecting the grant of registration u/s. 12AA of the Income-tax Act, vide order dt. 21.09.2011.
1.2. Because the section 2(15) of the IT Act defines "charitable purpose" include education.
The Society for Advance Health Education in Bundelkhand is running the Nursing Training institution Raghvendra Hospital and Nursing Training Institute, registered with Indian Nursing Council, New Delhi and U.P. State Medical Faculty, Government of U.P., Lucknow.
The fee charged by the institution is "normal" which is apparent from the Income and Expenditure account.
The hostel facility has been provided to very few needy students. The fee is normal which is apparent from the Income and Expenditure account.
2. Because in any view, without properly appreciating the aims and objects of the society, the rejection of registration u/s. 12AA is wrong, illegal, without proper opportunity, bad in law and against the facts & law of the case.'
2. We have heard the ld. representatives of both the parties, perused the impugned order and considered the material available on record.
3. Briefly, the facts of the case are that the assessee filed application for grant of registration u/s. 12AA of the IT Act in prescribed form before the ld. CIT on 31.03.2011. The ld. Commissioner in order to verify the activities and objects of the assessee-society directed the report from the AO who has reported that the assessee is running general nursing and midwifery Institution imparting G.N.M. in nursing and different post graduation courses in pediatrics, cardiology, ophthalmology, oncology etc. The fee for the course being charged from the students is very high. Thus, the assessee is making profits by running this institution. It was reported that looking into the fee structure, it was obvious that the assessee society is not doing any charitable activity for the welfare of Bundelkhand Rural Area. No evidence could be placed in support of charitable activities of the society as mentioned in "Smrati Patra". It is also observed that as an incidental activities, the assessee society is providing hostel facilities to its students at the rate of Rs.45,000/-. A comparative chart was procured which showed that other societies were charging Rs.19,200/-, Rs.25,000/-, Rs.27,600/-, Rs.31,200/- and Rs.33,600/- etc. from the students. No evidence was adduced to the effect that separate books of account were maintained in respect of incidental activities of running of hostel, which was considered to be in the nature of business. Thus, the activities of the assessee were not found to be charitable in nature as per section 2(15) of the IT Act. The ld. Commissioner was unable to satisfy himself about the genuineness of the objectives and activities of the assessee-society for the benefit of general public which were necessary for grant of registration u/s. 12AA of the Act. Accordingly, application for registration was rejected.
4. The ld. counsel for the assessee reiterated the submissions made before the ld. Commissioner and submitted that the assessee is assessed to tax with the Revenue department. It is registered with the Registrar of Societies of Uttar Pradesh. PB-3 is registration certificate. The objects of the assessee are charitable in nature and of imparting education etc. Copy of "Smrati Patra" is filed at page 4 of the paper book and English translation at PB-44A. The assessee society is running the Institution, Raghvendra Hospital and Nursing Training Institute, Jhansi and is registered with the Indian Nursing Council, New Delhi (PB-5). The educational institution of the assessee-society is also affiliated to U.P. State Medical Faculty, Government of U.P., Lucknow for nursing training centre and certificate filed at PB-6. The ld. counsel for the assessee, therefore, submitted that the assessee society is running nursing training institute for imparting education in Jhansi Bundelkhand region, organizing various free health check-up camps in rural area of Bundelkhand. PB-19 & 20 are fee structure annually and in session 2010-11 fees shown is Rs.48,600/- annually. PB-20 is the fee structure for session 2011-12 annually at Rs.51,600/-. PB-38 is the income & expenditure account and after spending entire amount and incurring expenditure on educational activities, the surplus was left at Rs.33,563/- only. PB-42 is the details of hostel fees, which is charged from the students @ Rs.36,000/- per year and hostel was provided only to six students, out of which salary is also paid to the warden, guard, peon and amount was also spent for fooding etc. PB-46 is tuition fees receivable. He has submitted that the Commissioner has wrongly given finding that the assessee charged very high fees and the assessee was running for profits. The ld. Commissioner also gave wrong finding of charging Rs.45,000/- for hostel facility. There is no profit motive of the assessee as it was imparting education only and was having charitable objects only. PB-22 is photographs for doing free medical check up camps. Hostel is integral part of the educational institution. He has also submitted that the building used by the society has been given free of rent for fulfillment of the objects of the society by Shri Ram Avtar Singh, one of the members of the society. The ld. counsel for the assessee, therefore, submitted that since only education is imparted and free medical check-up camps held by assessee, therefore, its objects are charitable in nature and registration may be granted to the assessee. He has relied upon following decisions :
| (i) | Decision of Hon'ble Allahabad High Court in the case of CIT v. Red Rose School [2007] 163 Taxman 19, in which it was held — | |
| "Whether while considering application of a trust or institution for registration under section 12AA, Commissioner is required only to see that activities of said trust/institution are genuine and in consonance with its objects; section 12AA does not speak anywhere that the Commissioner while considering application for registration, shall also see that income derived by trust or institution is either not being spent for charitable purpose or such institution is earning profit - Held - Yes." | ||
| (ii) | Order of ITAT, Delhi Bench in the case of Shavak Shiksha Samiti v. CIT [2007] 16 SOT 23 (URO), in which it was held — | |
| "Section 12AA, read with section 2(15), of the Income-tax Act, 1961, Charitable or religious turst - Registration of - Whether education per se is a chartable purpose - Held - Yes." | ||
| (iii) | Decision of Hon'ble Allahabad High Court in the case of Fifth Generation Education Society v. CIT [1990] 185 ITR 634/[1991] 54 Taxman 237, in which it was held — | |
| "At the time of considering application for grant of registration under s. 12A, the CIT is not required to examine the application of income or carrying on of any activity by assessee trust or institution." | ||
| (iv) | Decision ITAT, Amrisar Bench in the case of Dream Land Educational Trust v. CIT [2008] 166 Taxman 27 (Mag.) in which it was held — | |
| "CIT, having found no fault with objects of the trust and genuineness of its activities, was not justified in refusing registration under s. 12A on extraneous considerations." |
5. On the other hand, the ld. DR relied upon the impugned order.
6. We have considered the rival submissions and the material on record. Section 12AA of the IT Act provides as under :
"12AA. Procedure for registration.— (1) The Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) for clause (aa) of sub-section (1) of section 12A, shall—
| (a) | call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and | |
| (b) | after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he— |
| (i) | shall pass an order in writing registering the trust or institution; | |
| (ii) | shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, |
and a copy of such order shall be sent to the applicant :
Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.
(1A) All applications, pending before the Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.
(2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) or clause (aa) of sub-section (1) of section 12A.
(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution:
Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard."
Section 2(15) of the IT Act provides as under :
'(15) "charitable purpose" includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility:
Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity:
Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty-five lakh rupees or less in the previous year;'
6.1 Considering the above provisions, it is clear that at the time of consideration of application for registration u/s. 12AA, the ld. Commissioner is only required to satisfy himself about the objects of the assessee and genuineness of its activities. The definition of charitable purposes includes relief for poor, education and medical relief. Hon'ble Supreme Court in the case of Aditanar Educational Institution v. Addl. CIT [1997] 224 ITR 310/90 Taxman 528 held as under :
"Held, affirming the decision of the High Court, that it would be unreal and hypertechnical to hold that the assessee-society was only a financing body and would not come within the scope of "other educational institution" as specified in section 10(22) of the Act. The object of the society was to establish, run, manage or assist colleges or schools or other educational institutions solely for educational purposes and in that regard to raise or collect funds, donations, gifts, etc. Colleges and schools were the media through which the assessee imparted education and effectuated its objects. In substance and reality, the sole purpose for which the assessee had come into existence was to impart education at the levels of colleges and schools and so, such an educational society should be regarded as an "educational institution" coming with section 10(22) of the Act."
6.2 Hon'ble Delhi High Court in the case of DIT (Exemption) v. Moti Bagh Mutual Aid Education [2008] 298 ITR 190/[2007] 163 Taxman 490 held that "Even if there were minor contradictions or deviations in the accounts of the assessee, that by itself did not substantiate the allegation that the assessee did not exist solely for educational purposes or that it existed partly for a profit motive.
6.3 Hon'ble Supreme Court in the case of American Hotel & Lodging Association Educational Institute v. CBDT [2008] 301 ITR 86/170 Taxman 306, considering the scope of enquiry by prescribed authority u/s. 10(23C)(vi) of the IT Act observed that "once an applicant institution came within the phrase "exists solely for educational purposes and not for profit", no other condition like application of income was required to be complied with. The prescribed authority was only required to examine the nature, activities and genuineness of the institution. The mere existence of profit/surplus did not disqualify the institution."
6.4 Hon'ble Gujarat High Court in the case of CIT v. Gujarat Maritime Board [2007] 289 ITR 139 confirmed the order of the Tribunal in which the Tribunal was of the view that if an assessee was an institution whose objectives are charitable as defined u/s. 2(15), the trust/institution would be entitled to registration u/s. 12A. Although the assessee earned income from its activities of profit, infrastructure facilities and also from other ancillary activities such as rental income from letting out of the property, sale of goods, etc. which may not be exempted, the Tribunal held that whether part of the income was exempt or not was irrelevant for registration of the institution for which the Commissioner has to satisfy himself about the object of the institution and genuineness of the activities of the institution and not about the nature of the income.
6.5 Considering the facts of the case in the light of the above decisions and the decisions cited by the ld. counsel for the assessee, it is clear that the ld. Commissioner on irrelevant and extraneous consideration, wrongly rejected the application of assessee for grant of registration. The assessee society is registered with Registrar of Society and its objects read as under :
| "1. | To Organize Seminars and Camps in rural areas with Nursing staff and with the help of N.G.Os and I.M.A. Import Nursing Training which include training for E.C.G. Lab Technician, Pharmacist etc. | |
| 2. | To provide feeless medical services to poor and helpless patients of Cancer, AIDDS, TB and other infectious diseases and to organize camps from time to time in rural areas. | |
| 3. | To organize meetings and seminars in order to maintain gender proportion. | |
| 4. | To organize Seminars and camps with nursing staff and with the help of NGSs and IMA and to run various nursing training (Diploma in Nursing, B.Sc. Nursing, M.Sc. Nursing) including ECG Technician, Lab Technician, Pharmacist and all other Para Medical courses." |
6.6 The assessee is, therefore, imparting education and was running the institution, Raghvendra Hospital & Nursing Training Institute and was registered with the Indian Nursing Council, New Delhi and affiliated to U.P. State Medical Faculty, Govt. of U.P., Lucknow. The assessee got affiliation for training 40 students for general nursing and midwifery. Thus, the assessee society is running nursing training institute to impart education and as per photographs also, the assessee has made free medical check up camps. The building is provided to the Society free of rent by one of the Members of society. After incurring the expenditure on imparting education, only surplus of Rs.33,563/- is left with the assessee. Therefore, the fees charged by the assessee from the students annually could not be treated to be very high and thus, there were no profit motive of the assessee to run the institution. It may be also noted that the annual fees received from the students not only include tuition fees, but other charges like clinical fee, Library fee, examination fee, lab fee etc. Therefore, it could not be treated as very high fees charged by the assessee. The assessee has filed details of hostel fees and provided hostel facilities to only 6 students out of permission granted for 40 students. The annual hostel fees is charged at Rs.36,000/- but the ld. Commissioner wrongly mentioned the same as 45,000/-. As per comparable figure of one of the hostels, the ld. Commissioner mentioned hostel charges at Rs.33,600/-. Therefore, the hostel charges of the assessee could not be said to be excessive or profit motive. Only six students were provided hostel facilities. Therefore, it could not be considered as the assessee is running hostel for the purpose of business. The provision for providing hostel facility to the medical students is incidental to the aims and objects of the assessee. The AO in his report submitted that the assessee society is running General Nursing and Midwifery Training Institute imparting nursing training up to the level of post graduation. Therefore, providing educational facilities is part of the charitable purposes as per section 2(15) of the IT Act. Therefore, the objects of the assessee were charitable in nature and were conducting genuine activities. Other considerations, noted by the ld. Commissioner are irrelevant for the purpose of enquiry for grant of registration. Considering the totality of facts and circumstances, noted above, we are of the view that the assessee is running Nursing Training Institute to impart education in the Bundelkhand Region and also held free health check-up camps. Therefore, the ld. Commissioner should have satisfied himself about the genuineness of the objectives and activities of the assessee-society, which were meant for the benefit of general public and as such, rejection of the application u/s. 12AA of the IT Act is clearly unjustified. Considering the above discussion, we are of the view that the assessee satisfied all the necessary conditions for grant of registration u/s. 12AA of the IT Act and accordingly, the assessee is entitled for registration. We accordingly, set aside the impugned order and direct the ld. CIT-II, Agra to grant registration of the assessee u/s. 12AA of the IT Act as prayed for in the application before him, within one month from the date of the receipt of this order.
7. In the result, the appeal of the assessee is allowed.
Regards
Prarthana Jalan
__._,_.___
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