Education per se charitable us 2(15). Registration u/s 12A can not be denied for not free of cost education to needy students-ITAT
ABCAUS Case Law Citation:
ABCAUS 1112 (2017) (01) ITAT
Important Case Laws Cited/relied upon:
American Hotel & Lodging Educational Institute vs. CBDT 301 ITR 86 (SC)
CIT Vs. Queens Education Society (Uttarakhand)
Aeronautical Engineering Educational Society vs. CIT (2009) 184 Taxman 264 (Uttarakhand)
Shree Balaji Educational Trust vs. CIT
JK Education Samiti Vs CIT
Brief Facts of the Case:
The assessee was a society registered under Societies Registration Act, 1860 incorporated with the main objective of providing education. It filed an Application for registration u/s 12A(a). The Society was running two institutes which were affiliated to the Punjab Technical University and Uttrakhand Open University. Along with the application all the required details (i.e. audited accounts, notes on activities, copy of PAN/Income Tax Return, copy of bank account, minutes etc.) were duly filed.
The assessee was asked to clarify if there were some fee, rebate, concessions or discount given to needy students who were being charged less than the normal fee or such students were imparted education free of cost. The assessee reply was in the negative.
The CIT was of the view that section 2(15) of the Income Tax Act, 1961 defines charitable purpose and without any charity being established even the running of an educational institute will not entitle the applicant for registration.
Apart from this, CIT observed that a perusal of the financial statements of the society would reveal that the society was apparently a commercial institute, engaged in sale of education and the business was expanding year after year.
CIT observed that there was an increase in capital expenditure also which exhibited that the society was engaged in expansion and increasing receipts rather than concentrating on the objective of imparting education in line with the spirit behind the Legislation granting exemptions which is bold and clear i.e. ‘charity’.
Thus relying on the judgment in the case of CIT Vs. Queens Education Society, the CIT held that tThe activities of the society were commercial in character and not charitable precisely. In view of the above, the application filed by the society for registration u/s 12A(a) was rejected by the CIT,
Observations made by the Tribunal:
The Tribunal noted that Coordinate Bench of ITAT in the case of Shree Balaji Educational Trust vs. CIT under exactly identical circumstances
The Tribunal observed that CIT had framed two reasons for refusing to grant registration u/s 12A i.e.
(i) that the education should be given free of cost to some needy students and
(ii) that the assessee is expanding and is increasing receipts, therefore, not entitled for exemption.
The Tribunal noted that the decision of the Uttarakhand High Court relied upon by the CIT and another similar decision in the case of National Institute of Aeronautical Engineering Educational Scoeity had been since been reversed by the Hon’ble Supreme Court.
The Tribunal opined that the present case was squarely covered by Coordinate Bench decision in the case of Shree Balaji Educational Trust vs. CIT where under exactly identical facts and circumstances, it was held that ‘education’ is per se a charitable object.
Held:
Held that the assessee was entitled for registration u/s 12A. Accordingly, CIT was directed to grant registration under section 12A to the applicant Society
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