Income Tax Appellate Tribunal - Cochin
M/S.Travancore Education Society, ... vs Assessee on 27 June, 2014
1
ITA No.134/Coch/2014
IN THE INCOME TAX APPELLATE TRIBUNAL
COCHIN BENCH, COCHIN
Before Shri N.R.S. Ganesan (JM) and Shri Chandra Poojari (AM)
I.T.A No. 134/Coch/2014
M/s Travancore Education Society vs CIT, Central
KP-1, 157E, Kallambalam Kochi
Trivandrum
PAN : AACTT0485G
(Appellant) (Respondent)
Appellant by : Shri S Rajeev
Respondent by : Shri M Anil Kumar, CIT, DR
Date of hearing : 16-06-2014
Date of pronouncement : 27-06-2014
ORDER
Per N.R.S. Ganesan (JM) The assessee has filed the present appeal against the order of the Administrative Commissioner rejecting the application for registration u/s 12AA of the Act.
2. Shri S Rajeev, the ld.counsel for the assessee submitted that the assessee was under the bona fide impression that the educational institutions are exempted from income-tax, therefore, the assessee has not 2 ITA No.134/Coch/2014 filed any return of income in the regular course. The assessee has not filed any application for registration u/s 12AA also. However, there was a search in the premises of the assessee. Consequent to the search operation, the assessee filed the return of income. The claim of the assessee for exemption was rejected on the ground that the trust was not registered u/s 12AA of the Act, therefore, the assessee filed application for registration.
3. According to the ld.counsel, the assessee is a charitable trust. The assessee established an educational institution in the name of Travancore Engineering College at Oyoor. Establishing and running educational institution is one of the objects of the assessee trust. Referring to the order of the Administrative Commissioner, the ld.counsel submitted that there is no violation of section 11(5) or section 13(1)(c) as claimed by the Administrative Commissioner. No money of the trust was taken by the trustees at any time. The educational institution is not collecting any capitation fee as claimed by the Administrative Commissioner. According to the ld.counsel, what is to be seen at the time of registration is the object of the trust and its genuineness. Since the object of the trust is to establish an educational institution and the assessee has, admittedly, established an educational institution, the Administrative Commissioner cannot refuse the registration u/s 12AA of the Act.
3ITA No.134/Coch/2014
4. On the contrary, Shri M Anil Kumar, the ld.DR submitted that the assessee trust is not carrying out any charitable activities. Though the assessee is running educational institution, during the course of search operation it was found that the assessee was collecting capitation fees from the students, who seek admission over and above the prescribed fee. It is also admitted by the secretary that the capitation fee collected by the institution was shared amongst the members and the members of the managing committee. Therefore, it is obvious that the educational institution was run on a commercial basis for profit. Therefore, according to the ld.DR, the assessee is not eligible for registration as a charitable institution.
5. We have considered the rival submissions on either side and also perused the material available on record. Establishing and managing educational institution is one of the objects of the trust as per the bye laws. At the initial period, the assessee has not applied for registration and also failed to file the return of income in the regular course. Therefore, a search operation in the premises of the assessee was carried out. During the course of search operation several incriminating materials were found which disclosed the receipt of capitation fee for admission of students over and above the prescribed fee. The treasurer of the trust Shri Shajahan 4 ITA No.134/Coch/2014 has admitted in his sworn statement dated 26-04-2012 that the trust is collecting capitation fee over and above the fee prescribed for admission of the students. Similar admission was also made by one Shri Sainulabdeen, the secretary of the trust, in his sworn statement dated 27-04-2012. It is also on record to show that the capitation fee collected for admission of the student over and above the prescribed fee was shared amongst the trustees. In view of the overwhelming material available on record, it is obvious that the trust is running the educational institution in a commercial manner for profit.
6. The question arises for consideration is when the educational institution was run in a commercial manner by the so-called charitable institution, whether such a trust is entitled for registration u/s 12AA of the Act. This Tribunal is of the considered opinion that when the assessee trust was collecting capitation fee for admission of the students over and above the prescribed fee, whatever the name it may be called, either as a building fund, development fund, etc. then the element of charity no longer remains. Such an institution cannot be considered to be a charitable institution for the purpose of grant of registration u/s 12AA of the Act. This view of the Tribunal is fortified by the judgment of the Apex Court in the case of T.M.A. Pai Foundation & Ors vs State of Karnataka & Ors (2002) 8 SCC 481 and in Islamic Academy vs State of Karnataka in (2003) 6 SCC 5 ITA No.134/Coch/2014
697. A useful reference can also be made in Mohini Jain vs State of Karnataka (1992) 2 SCC 666 and in P.A. Inamdar vs State of Maharashtra (2005) 6 SCC 537. The jurisdictional High Court in Dawn Educational Charitable Trust (ITA No. 300 of 2013) by judgment dated 12-02-2014 held that when the school is running on commercial lines under cloud of charitable purpose, the rejection of application for registration is justified. Since the material available on record clearly suggests that the educational institution is being run in a commercial manner, this Tribunal is of the considered opinion that the assessee is not entitled for registration u/s 12AA of the Act. Therefore, we do not find any infirmity in the order of the lower authority. Accordingly, the same is confirmed.
7. In the result, the appeal of the assessee stands dismissed.
Order pronounced in the open court on this 27th June, 2014.
Sd/- sd/-
(Chandra Poojari) (N.R.S. Ganesan)
ACCOUNTANT MEMBER JUDICIAL MEMBER
th
Cochin, Dt : 27 June, 2014
pk/-
copy to:
1. M/s Travancore Education Society, KP-1, 157E, Kallambalam, Trivandrum
2. CIT (Central), 5th Floor, Kandamkulathy Towers, M.G. Road Kochi - 682 011
3. The DR (True copy) By order Asstt. Registrar, Income-tax Appellate Tribunal, Cochin Bench