Income Tax Appellate Tribunal - Amritsar
M/S The Rural Education Welfare ... vs Commissioner Of Income Tax ... on 7 March, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH: (CIRCUIT BENCH AT JALANDHAR)
BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER, AND
SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
I.T.A No.546/ASR/2016
(ASSESSMENT YEAR N/A)
Rural Educational and Women Vs.. CIT (Exemption)
Welfare Society, VPO Mukand Pur Chandigarh.
PAN No.AADAT0585B
(Assessee) (Revenue)
Assessee by Shri . Y. K. Sud, CA.
Revenue by Shri Bhawani Shankar,DR.
Date of Hearing 18.01.2017
Date of Pronouncement 07 .03.2017
ORDER
PER, A. D. JAIN, JUDICIAL MEMBER:
This is assessee's appeal filed by against the action of the ld. CIT(E) in rejecting the assessee's application dated 09.03.2016, seeking registration u/s 12A of the Act.
2. The appellant society filed its application (APB-4) in (Form No. 10-A) prescribed under rule 17A of the IT Rules, seeking registration u/s 12A(a)(i)(ia) of the IT Act, appending therewith, copies of its trust deed, registration certificate, accounts for the latest three years and notes on activities. The ld. CIT(E), while rejecting the assessee's application, observing, interalia, that the assessee had I.T.A No.546/ASR/2016 2 amassed capital funds to the tune of Rs.5.59 crore and fixed assets to the extent of Rs.5.85 crore; that the fee receipts had also been consistently over Rs.02 crores; that the emphasis of the Society had been mainly on creation of assets, rather than, on re-deployment of funds towards education; that the income and expenditure statements and balance sheets further indicated that during F.Ys. 2013-14 and 2014-15, the emphasis of the society had mainly been on adding to their vehicles Buses; that the transportation charges being earned by the society were approximately 40% of the fee income received from the students; that such emphasis and generation, thereby, on another source of income did not fit into the definition of "Education", as laid down by the Hon'ble Supreme Court in the case of "Sole Trustee Lok Shikshan"; that further, the salary and fee structure of the society was not in sync with the instructions issued by the CBSE while providing affiliation to an entity; that the salary structure was pitiable low and in the absence of a suitable salary structure, it was safe to conclude that the society could not maintain the quality of education; that, as such, the activities of the society did not reflect adherence to the stated charitable intent; and that the society was held to be faltering on statutory requirements of filing of return of income despite substantial receipts in excess of Rs.2 crore every year.
3. The ld. Counsel for the assessee has contended that the order under appeal is illegal and invalid, as the ld. CIT(E) who is the prescribed Authority under the Act, did not give any hearing to the assessee society and illegally delegated is functions I.T.A No.546/ASR/2016 3 u/s 12AA of the Act to the DCIT(E), who illegally conducted the proceedings, but it was the ld. CIT(E) who passed the order rejecting the assessee's application; that however, this Objection was not being pressed; that on merits, instead of examination the Objects of the society and the genuineness of its activities, which is the requirement of section 12A of the Act, it was the application of the income of the society, which was considered for rejecting the application; that it has been observed that the society had been claimed exemption u/s 10(23c) of the Act, but since 2007, it has amassed a capital fund of Rs.5.59 crore and assets to the extent of Rs.5.85 crore; that this Objection is entirely uncalled for, since the assets of the society, i.e., land and building, etc., have been created out of donations received for the setting up of the school of the society, i.e., Sadhu Singh DAV Rural Public School, Mukand Pur; that it has been further objected that the total receipts of the society are of Rs.2 crore, charged by way of fees; that this Objection is not relevant, since the fees received from the students have been spent on the working of the school, which application of income can be examined only at the time of assessment, rather than at the juncture considering grant of registration; that the finding that the emphasis of the society was on creation of assets and not on re- deployment of the funds for education, is an imaginary finding; that the twenty three balance sheets filed alongwith the application, it is amply clear that every single rupee spent by the society has been spent for the purposes of the school only and the assets acquired which also meant for an establishment of the school; that I.T.A No.546/ASR/2016 4 moreover, to reiterate, here also, the finding is qua the application of the income of the society, which is beyond the requirement for grant of registration; that apropos the observation regarding the purchase of Buses, the same are meant for the exclusive used of ferrying the students from and to various villages which are as far as twenty K.M. away from the school; that further, the finding that the salary structure low and it does not follow the CBSE instructions, is, again, an imaginary finding, since it is the CBSE itself, which has granted Affiliation (APB 36-39) to the school, without raising any such Objection, though it is only the CBSE, which is the Competent Authority to raise any objection, if there be any non-compliance of their instructions; that the assessee society has been established for its various avowed charitable objects and for educating school children; that the society has no other activity beyond its objects, nor has any such other activity been proved to have been carried out by the society; and that hence, the order under appeal be reversed and registration be directed to be granted to the assessee society, on allowing the appeal.
4. Per contra, the ld. DR has sought to place strong reliance on the impugned order.
5. We have heard the rival contentions in the light of the material on record. Under the provisions of section 12AA of the Act, the Competent Authority is required to examine the objects and genuineness of activities of the institution applying for registration. In the present case, as appeared its Memorandum of I.T.A No.546/ASR/2016 5 Association (APB 1-2), the assessee society has , amongst its aims and objects, the object "To Promote the Quality and Scope of Education in Rural Area and Managed the affairs of Sadhu Singh Rural Public School, Mukand Pur".
6. While refusing registration to the assessee society, the Objection raised by the ld. CIT(E) is that the applicant has amassed capital funds to the tune of Rs.5.59 crore and fixed assets to the extent of Rs.5.85 crore. This observation, it is seen, impinges on neither the objects of the applicant, nor the genuineness of its activities. It has been submitted before us that the assets of the applicant, i.e., its land and building, etc., have been created out of donations received for the setting up of the school of the society. As per Object (APB- 1), as set out in the Memorandum of Association of the applicant society, the applicant is "To Promote the Quality and Scope of Education in Rural Area and Managed the affairs of Sadhu Singh Rural Public School, Mukand Pur". In its reply (APB 23-29) (Dated 12.08.2016) to the Questionnaire (APB 21-22) (Dated 04.08.2016) the applicant stated that the details of donations received were being Annexed. The contention that the earned got created from such donations has received for the setting up of the school, has not been rebutted based on anything to the contrary on record. And be that as it may, the fact remains that the observation in this regard in the impugned order fails to carry out the statutory mandate of satisfaction regarding the objects and genuineness of activities of the applicant. It, therefore, is superfluous and not detrimental to the applicant's claim for registration. I.T.A No.546/ASR/2016 6
7. So far as regards, the observation that the fee receipts of the applicant have consistently been in excess of Rs.2 crore, again, this objection does not pertain either to the objects or to the genuineness of the activities of the applicant. The contention that the fees received have been spent on the running of the school has not been controverted with any material on record. Moreover, to reiterate, examination of application of income can be undertaken only at the time assessment.
8. Likewise, the Objection regarding the emphasis of the applicant allegedly being on creation of assets, rather than, on deployment of funds for education, does not render the claim for registration untenable, in as much as, even if this observation is taken, for the sake of argument to be, correct, despite there being no basis for it spelt out in the order, nothing has been brought on record that the assets of the applicant are meant for any purposes other than its avowed aims and objects, which include managing the affairs of the school. Too it has not been refuted that as seen from the three balance sheets filed by the applicant, the entire expenditure incurred by it, has been for the purposes of the school only. Then, the assets of the applicant have also not been shown to be existing, much less utilized, for any purposes other than that of the school. Further, once again, as to how the question of application of income is germane to the grant of registration, is not evincible from the order.
I.T.A No.546/ASR/20167
9. Concerning the finding that emphasis of the society has mainly been on adding Buses, it has not even been alleged that any of the business "added" has not been used for ferrying students and that they have been used for any other purposes. Obviously, a rural school having students from villages would require Buses, ferrying them.
10. Coming to the record that the salary structure is low and that instructions of the CBSE have been flouted, evidently, grievance against such infraction, if any, would lie with the CBSE and not with the Income Tax Department. On the contrary, it is seen that the Affiliation granted to the school of the CBSE hitherto continues in hinder. Meaning thereby, that CBSE itself nurses no such grouse, and if that be so, as to how the Authority Below is aggrieved incomprehensible. Then, yet again, the objects and genuineness of activities of the applicant remain unchallenged, even in spite of this observation.
11. The proposition that at the time of considering the grant of registration, only the Objects and the genuineness of the activities of the applicant are to be got satisfied about, besides constitution the bare provisions of section 12AA of the Act, has also been upheld, inter alia, in the following decisions, as rightly relied on by the assessee, to contents that application of income is not to be considered on this stage: i) "CIT vs. Suraya And Bahara Educational and Charitable Trust", 355 ITR 280 (P & H). ii) "CIT vs. Vijay Vargiya Vani Charitable Trust", 369 ITR 360 (Raj). iii) "CIT vs. IILM Foundation Association", 389 ITR 148 (P & H). iv) I.T.A No.546/ASR/2016 8 "Shree Anjaneya Medical Trust vs. CIT", 382 ITR 399 (Ker). v) "Vikas Low Sewa Samiti Vs. CIT", 147 ITD 294 (Agra). vi) "Shri Gyan Ganga Vocational and Educational Society vs. CIT", 143 ITD 297 (Del).
12. No converse decision has been brought to our notice.
13. In view of the above, finding merit in the grievance raised by the appellant/applicant society, the same is accepted. The order under appeal is reversed. The ld. CIT(E) is directed to grant registration to the applicant society forthwith, w.e.f. the date of the application.
14. In the result, the appeal is allowed.
Order pronounced in the open court on 07/03/2017.
Sd/- Sd/-
(T. S. KAPOOR) (A.D. JAIN)
ACCOUTANT MEMBER JUDICIAL MEMBER
Dated 07/03/2017
*AKV*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
By Order AR/Sr.P.S./P.S.
I.T.A No.546/ASR/2016
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