IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G” NEW DELHI

ITA no.4612 /Del/2014
Spring Bird Educational Society (Appellant) vs. Commissioner of Income-tax (Respondent)
Date of order : 28/10/2015

ORDER

PER N.K. SAINI, A.M. :
This is an appeal by the assessee against the order dated 24-6-2014 of ld. Commissioner of Income-tax, Rohtak.

2. In this appeal the assessee has raised as many as 6 grounds, but the only grievance relates to the rejection of application moved by the assessee for grant of registration u/s 12A(1)(aa) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”).

3. The facts of the case, in brief, are that the assessee society moved an application u/s 12A(1)(aa) of the Act. Ld. CIT called report from the concerned AO as to whether the assessee had fulfilled the conditions required for the grant of registration applied for and the report was received through Joint CIT, Sonepat. Ld. CIT observed that the AO as well as JCIT had not clearly recommended the case for registration and left the matter to be decided on merits. Ld. CIT mentioned that the reply of the assessee did not satisfy the very essence of charity, which was necessary for earning the status of being charitable as required u/s 2(15) read with section 12AA of the Act. Ld. CIT held that mere imparting education for primary purpose of earning profit could not be said to be a charitable activity and rejected the application by observing as under:

“On perusal of the income and expenditure account supplied by the assessee for the financial year 2012-13 & 2011-12 it is noticed that the institution has made expenditure on advertisement amounting to Rs. 47,650/- & Rs. 66,704/- respectively and this expenditure is certainly not for the purpose of education & the expenditure has been incurred to procure more admission with the sole motive of earning more profits and hence the condition that the expenditure should be incurred solely for the purpose of education is also not satisfied. Thus, the assessee society is profit oriented business entity and not a charity institute. Keeping in view of the above, the application of the assessee trust does not deserve for registration.”

4. Reliance was placed on the ratio of decision of Hon’ble Uttrakhand High Court in the case of CIT Vs. National Institute of Aeronautical Engineering & Educational Society (2009) 226 CTR 82.

5. Being aggrieved, the assessee is in appeal.

6. Ld. counsel for the assessee reiterated the submissions made before

the authorities below and further submitted that the assessee was running a school, which was recognized by Haryana State Education Board and the assessee charged the fee which was not excessive and even free education was given to the poor students. Reference was made to page 15 of the assessee’s paper book. It was further stated that the profit, if any, earned by the assessee was not for the benefit of the assessee trust or its trustees. It was further stated that the decision of the Hon’ble Uttrakhand High Court, relied upon by ld. CIT was considered by the same High Court in subsequent decision in the case of CIT v. Highlanders Educational Academy [ITA no. 142 of 2007 dated 27-11-2012]. It was further stated that the ld. CIT was required to see the genuineness of the objects, which were charitable in nature and ought to have granted the registration. Reliance was placed on the following case laws:

- Aditanar Educational Institution Vs. Addl. CIT 224 ITR 310 (SC);
- Queen’s Educational Society Vs. CIT 372 ITR 699 (SC)
- Fifth Generation Education Society vs. CIT 185 ITR 634 (All.);
- DIT v. Garden City Educational Trust [2010] 191 Taxman 238 (Kar);
- Saswat Chetna Educational Social Development Research Society v. CIT (Rohtak) [ ITAT Delhi Bench ‘G’ in ITA no. 5376/Del/2012 dated 4-4-2014.
- Shri Gian Ganga Vocational & Educational Society v. CIT, Rohtak [2013] 143 ITD 297 (Del).
- Meritta Welfare Trust Vs. CIT, Dehradun [2015] 68 SOT 433 (Del.).
- Daksh Education Trust Vs. CIT [ITAT Delhi Bench ‘B’ in ITA no. 3512/Del/2012 dated 21-9-2012.]

7. In her rival submissions, the ld. CIT(DR) strongly supported the order of the ld. CIT and further submitted that the earning of profit is not a charitable activity. Therefore, the ld. CIT rightly rejected the application moved by the assessee for registration u/s 12A. It was further stated that the assessee had not applied the corpus funds for the purpose of education and the expenditure was made mainly on advertisement during financial years 2011-12 and 2012-13, which could not be said to be charitable in nature and for the purpose of education. Therefore, ld. CIT rightly rejected the application moved by the assessee.

8. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it appears that the ld. CIT acted upon the recommendation of the AO as well as the JCIT and rejected the application moved by the assessee by following the judgment of the Hon’ble Uttrakhand High Court in the case of National Institute of Aeronautical Engineering & Educational Society (supra), which was later on considered in another decision in the case of Highlanders Educational Academy (supra). In the present case the ld. CIT has not commented as to how and in what manner the objects of the assessee were not charitable in nature and how the assessee did not satisfy the condition for registration u/s 12A. He has also not discussed the objects of the society. We, therefore, in the absence of clear facts on record, deem it appropriate to set aside this issue to the file of CIT, to be adjudicated afresh expeditiously, in accordance with law, providing due and reasonable opportunity of being heard to the assessee, preferably within six months from the receipt of this order.

9. In the result, assessee’s appeal is allowed for statistical purposes.

Order pronounced in open court on 28/10/2015.

Sd/-                                              Sd/-
(C.M. GARG)                           (N.K. SAINI)
JUDICIAL MEMBER    ACCOUNTANT MEMBER