Income Tax Appellate Tribunal - Chandigarh
Bhai Gurdas Educational Trust, Patiala vs Assessee on 26 August, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
MRS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER
ITA No. 878/Chd/2014
Assessment Year: 2013-14
Bhai Gurdas Educational Trust Vs. The CI T,
B-50 D.L.F, Colony Patiala
Sirhind Road, Patiala
PAN No. AAATB8146N
(Appellant) (Respondent)
Appellant By : Sh Rajiv Saldi
Respondent By : Sh Manjit Singh
Date of hearing : 17/08/2015
Date of Pronouncement : 26/08/2015
ORDER
PER ANNAPURNA MEHROTRA A.M. This appeal has been filed by the assessee against the order of the Ld. CIT, Patiala dt. 18/09/2014 under section 12AA of the Income Tax Act ,1961,rejecting the application of the assesse under section 12A(1) of the Act in Form No.10A Ifiled on 31-03-2014,for granting registration to the assesse Trust.
2. Stated briefly the facts relevant for the disposal of this appeal are that the assesse Trust had filed an application in Form No. 10 A for registration under section 12AA on 31/03/2014. The application was accompanied with a copy of its Trust Deed dated 28-08-1998,copies of Audit Report and of its return of income for the A.Ys 2011-12,2012-13 2013-14.
3. The CIT ,vide his order dt. 18/09/2014, refused to grant registration to the Trust ; firstly for the reason that the aims and objects of the trust included running 2 of coaching centre which could not be said to be in the nature of providing education. The Ld. CIT held that the assessee had non- charitable activities as part of its objects. Relying upon the decision of the Apex Court in Yogiraj Charity Trust vs CIT 103 ITR 777 and in Fast India Industries (Madras) (Pvt) Ltd. 65 ITR 611 he held that if there were several objects of the Trust ,some of which were charitable and some non-charitable and the trustees might apply the income to any of the objects in their discretion ,the whole trust would fail and no part of its income would be exempt from tax. Secondly the Ld. CIT held that the accounts of the assessee were not maintained correctly, since the assesse had not shown interest on FDR's as part of its receipts so as to avail exemption u/s 10(23C)(iiiad) by showing its total receipts to be below Rs. 1.00 crores and therefore the activity and affairs of the assessee were not genuine. The Ld. CIT also held that the assessee had been earning huge profits year after year which showed that it was not running for the purpose of charity .The CIT stated that it belied its claim of helping poor and needy student. The Ld. CIT therefore rejected the application under section 12AA, being not satisfied about either the genuineness of the objects of the assessee trust or of its activity.
4. Aggrieved by the same the assessee filed appeal before us and has raised the following grounds:
1. That the Ld. Commissioner of Income Tax Patiala has wrongly and arbitrarily refused the registration u/s 12AA which is illegal, arbitrary and against the facts of the case.
2. That the Ld. CIT Patiala wrongly presumed that objects & activities of the Trust are not genuine. This presumption is totally against the facts on record.
3. That the Ld. CIT Patiala under misconception of facts presumed that the appellant is running a coaching centre which is factually wrong as the Ld. CIT Patiala in his order u/s 12AA has clearly mentioned that the assessee is running B.Sc. Nursing, A.N.M Nursing & G.N.M. Nursing College.
4. That the Ld. CIT Patiala has wrongly stated the trust is running for profit only and applied the Hon'ble Uttrakhand High Court reported in 315 ITR page 428 which has already been over ruled by the Hon'ble Jurisdictional High Court in the 3 case of Pinegrow International Charitable Trust and other V/s Union of India 327 ITR page 73 (Paper book). So merely because there is a profit will not render itself ineligible for registration.
5. That the Ld. CIT Patiala has wrongly held that the interest on FDRs is not shown as such maintenance of books is not correct. Whereas no interest was received but there was accrued interest only which was not utilized but remained in the bank as such could not be included in the income expenditure statement.
6. That the receipt of interest on FDRs is not includable in the receipt of education Institution as the annual receipt of Education Institution would be only receipt of education. Income from interest on FDR was an additional income of trust and cannot be considered to be the part of annual receipt of college/institution.
7. That the objects of the Trust are genuine and activity is that running educational institute covered u/s 2(15). Hence the Ld. CIT be directed to allow registration.
5. Before us the AR argued that object of the trust and its activities are genuine. The AR submitted that the applicant trust is running regular recognized professional college and imparting education to the Nursing students of B.Sc. Nursing, ANM and GNM Nursing. The assessee is also running recognized Nursing college under the permission of Indian Nursing Council New Delhi and Govt. of Punjab, Department of Medical Education & Research Health. The AR filed NOC to start GNM and ANM course granted to it by the Department of Medical & Research at pages 6 to 8 &10 of its Paper Book. Also under Baba Farid University of Health Sciences Faridkot, Diploma or Degree is granted by the University in nursing. Grant of consent of affiliation certificate of the same was filed by the AR at page 9 & 11 of the Paper Book. The AR argued that the sanctioned strength for admission of student is fixed by the Indian Nursing Council for different courses and also by the Punjab Govt. relevant document filed at page 12 of the Paper Book. The students from this Institution are at the same level as that of training in the medical college/hospital of the State/Centre Government. The students get the practical training in the nearby Govt. Hospitals i.e. Govt Rajindra Hospital Patiala, Govt Mata Kaushalya Hospital Patiala, Govt. Civil Hospital Rajpura, Govt Civil Hospital Nabha and other Government and recognized health Institutes as sanctioned by the Government 4 itself, relevant document filed at page 13 & 14 of the Paper Book. He further stated that the trust had sufficient building as required by the Indian Nursing Council and by the State of Punjab Government and all other facilities and was equipped with Lab equipment, required Library, Hostel accommodation. Further he stated that it was being regularly inspected by the Indian Nursing Council New Delhi and other Government Departments. The AR pleaded that the assessee trust is Govt. recognized Institute imparting education to the regular students and was thus clearly covered under section 2(15) of the Income Tax Act. The AR further pleaded that despite the fact that there are several objects of the trust but from the very beginning there was no activity other than education ,as such there was no application of income of trust till date for any purpose other than education. The AR stated that the CIT had picked up only one object out of the several objects in its trust deed ,emphasized upon the same and thereby held the activity of the trust to be non charitable. He stated that coaching may have been stated to be one of the object for which the trust was established but the fact is that the trust has been conducting no activity other than education and therefore it is a charitable trust as per the definition provided under section 2(15) of the Income Tax Act, 1961. The AR stated that the CIT had erred by treating it as a coaching centre.
6. The AR pleaded that merely because it did not show interest on FDRs in its annual receipts, it did not tantamount to non-maintenance of correct books resulting to refusal of registration. The AR stated that in fact no interest was received and the interest only accrued on FDRs . He stated that the same was not includable in the educational annual receipts because u/s 10(23C)(iiiad) only annual receipt of school or university would be considered for deciding exemption and not interest income of the Trust. Moreover, the AR pleaded that 5 non showing of accrued interest was only a technical fault and did not tantamount to non-maintenance of correct books.
The AR further pleaded that the huge profit earned by it from year to year, which had been taken as one of the ground by the Ld. CIT for rejecting the application under section 12AA, had actually been utilized for the purpose of expansion of educational activity of the trust and not for personal profit. He pleaded that merely earning the profit which were being utilized for the purpose of education could not be taken as a ground for treating the asessee as ineligible for registration.
7. Ld. DR on the other hand placed reliance on the order of Ld. CIT.
8. We have heard the Representatives of both the parties and perused the documents placed before us.
9. Since the present appeal relates to the provisions of section 12AA, it is imperative to understand the scope of the powers of the Ld. CIT for granting or refusing registration u/s 12AA before adjudicating on the issue in the present appeal.
9.1 A reading of provisions of sub-cls. (a) and (b) of s. 12AA makes it clear that the CIT has to satisfy himself about the genuineness of the activities of the trust of institution and also about the objects of the trust or the institution . On being satisfied about the genuineness of the activities of the trust or the institution and also about its objects, the Ld. CIT would either grant the certificate or would reject the prayer. In order to satisfy himself about the genuineness of the activities of the trust or the institution, he can call for such documents or information from the trust or the institution, as he thinks necessary and he is also empowered to make such enquiries as he may deem necessary in this behalf. The objects of the trust can be had from the bye-laws or the deed of trust, as the 6 case may be and unless, of course, the objects of the trust apparently make out that they were not in consonance with the public policy or that they were not the objects of any charitable purpose, registration cannot be refused accordingly on this ground. In regard to the genuineness of the activities of the trust or the institution, whose objects do not run contrary to public policy and are, in fact, related to charitable purposes, the Ld. CIT is again empowered to make enquiries as he thinks fit. In case the activities are not genuine and they are not being carried out in accordance with the objects of the trust/society or the institution, or course, the registration can again be refused. 9.2 In the present case, one of the reasons for rejecting the application of the assesee for granting registration under section 12AA that has been stated by the Ld. CIT is that the aims and objects of the trust include running of coaching centre which cannot be said to be in the nature of providing education and hence is not charitable.
9.3 A perusal of the Trust Deed of the assesse Trust, filed at Page 19 of the Paper Book , reveals that the assessee trust was established on 28/08/1998 with the following aims and objectives:
a) To establish a Guru Nanak Museum and a Research University / Centre to study the ancient Literature at Chandigarh and at other cities of Punjab and outside Punjab and other States of India.
b) To promote education amont rural people by establishing the Colleges, Professional Colleges, IAS, PCS Coaching Centre and public schools and by granting the scholarships to the poor and the deserving students.
c) To work for the welfare of down-trodden and for the creation of castless society and to start short stay homes for women and girls on the name of Mata Tripta Ji in Chandigarh, Punjab and other parts of the country and to make programmes for the welfare and development of the children of destitute children and for those children who belong to the weaker sections of society i.e. SC/ST/BC and to make programmes for early child-hood care and education for 3-6 age group children and to construct a women hostel.
d) To help the old people by establishing the home for sick and old to construct Guru Nanak Community Centre and a Bhai Gurdas Niwas.
e) To enlighten the people about their fundamental rights.7
f) To work for the religious, economic and special uplift of the people.
g) To promote the comparative study of the preaching of great Gurus, Bhagats and Sufi Saints through books, papers journals.
h) To promote a better understanding of the religion, history and tadition by media.
i) To promote the study of history and culture in its true form.
j) To propagate the ideal of brotherhood i.e. Manas ki Jat Sabe Eko Pachanbo through media.
9.4 Clearly ,as per the trust deed , ten objects were listed as being the purpose for which the trust had been created. The Ld. CIT has picked up one object out of the many listed by the assessee and treating the same as not charitable, has rejected the application of the assessee. We find that merely because one of the objects of the Trust appears to be not charitable ,it cannot be a ground for holding the objects of the Trust as being not in the nature of charity and refusing to grant registration u/s 12AA. In the case of Yogiraj Charity Trust vs CIT 103 ITR 777, the apex court has held that 'If the primary or dominant purpose of a trust is charitable ,another object which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the Trust from being a valid charity". The decisions relied upon by the Ld. CIT in support of his contention that even if some objects of the trust are charitable while some are non-charitable the assesse is not entitled to registration u/s 12AA are distinguishable on facts since those judgments have not been rendered in the context of grant of registration u/s 12AA. In fact those decisions deal only with the issue of grant of exemption u/s 4(3)(i) of the 1922 Act.
9.5 In this case on facts we are convinced that the objects are in the field of education and merely because one of the objects is relating to coaching which has not been pursued so far does not make the objects non-charitable. 8 9.6 Therefore we do not find any infirmity in these objects as charitable objects.
10. The Ld. CIT has also refused registration u/s 12AA for the reason that since the assesse had not shown interest on FDR's as part of its receipts, so as to avail exemption u/s 10(23C)(iiiad) by showing its total receipts to be below Rs. 1.00 Crores, The accounts of the assessee were not maintained correctly and therefore the activity and affairs of the assessee were not genuine.
11. As stated above , while granting or refusing registration to a Trust the Ld. CIT is only required to examine whether the objects of the Trust were for charitable purpose and whether the activities of the Trust were genuine . The finding of the Ld. CIT that the accounts of the assesse were not correctly maintained does not effect the genuineness of the activities of the Trust. Genuineness of the activities of the Trust has to be seen keeping in mind the objects of the Trust. The Ld. CIT has to satisfy himself about the fact that the activities are genuine and in consonance with the objects of the Trust. The enquiry regarding genuineness of the activities cannot be stretched beyond this.
12. We therefore find that this ground for rejecting registration u/s 12AA is not correct. However AO is not precluded from examining this issue during the course of assessment proceedings while examining the assessees claim for benefit u/s 11 and 12 of the Income Tax Act,1961, in accordance with law.
13. The Ld. CIT also held that the assessee had been earning huge profits year after year which showed that it was not running for the purpose of charity .The Ld. CIT stated that it belied its claim of helping poor and needy student. The Ld. 9 CIT therefore rejected the application under section 12AA, being not satisfied about either the genuineness of the objects of the assessee trust or of its activity.
15. We find that even this ground does not justify the refusal of registration as profit earning per se has no reflection on the genuineness of the activities of the Trust. In fact it is not the earning of surplus which is relevant but its utilization for non charitable purposes which effects the genuineness of the activities of the Trust. The Supreme Court in Queens Educational Society Vs. CIT, Civil Appeal No. 5167 of 2008 dt. 16/03/2015 has stated that mere surplus does not mean that the institution is existing for making profit. The predominant object test must be applied. The reliance placed by the Ld. CIT on the decision in the case of CIT Vs. National Institute of Aeronautical Engineering Educational Society (2009) 315 ITR 428 (Uttarakhand) is of no relevance, as it has been overruled by the Apex Court decision(supra).
16. In view of the above we set aside the order of Ld. CIT rejecting the application of the assesse for grant of registration u/s 12AA of the Income Tax Act,1961 and direct the Ld. CIT to grant registration.
17. In the result, appeal of the assessee is allowed.
Order pronounced in the Open Court on 26/08/2015
Sd/- Sd/-
(BHAVNESH SAINI) (ANNAPURNA MEHROTRA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 26/08/2015
AG
Copy to: The Appellant, The Respondent, The CIT, The CIT(A), The DR