Income Tax Appellate Tribunal - Chandigarh
Mahatma Gandhi State Institute Of ... vs Cit(E), Chandigarh on 9 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH 'B', CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.1262/Chd/2017
(Assessment Year : 2017-18)
Mahatma Gandhi State Institute Vs. The C.I.T., Exemptions,
of Public Administration Chandigarh.
Sector 26, Chandigarh.
P A N : AAAJM0319A
(Appellant) (Respondent)
Appellant by : Shri T.N. Singla, Adv.
Respondent by : Manu Malik, CI T DR
Date of hearing : 21.03.2018
Date of Pronouncement : 09.04.2018
ORDER
PER ANNAPURNA GUPTA, A.M.:
Th i s a p p e a l h a s b e e n p r e f er r e d by t h e a s s es s e e ag a i n st t h e o r d e r o f L d. C o m m i s s i o n e r o f I n c om e Ta x ( E x e m p t i o n s ), C h a n d i g a rh ( h ere i n a f t e r r e f e rr e d to as ( ' L d . CI T( E ) d a t ed 2 8 . 7 . 2 0 1 7, d e n y i n g g r a n t o f re gi s t r a t i o n u / s 12 A A o f t h e Act.
2. Th e g r o u n d s r a i se d b y t h e a s s e sse e r e a d as u n d er :
"1. T h at th e o r d e r o f h e L e ar n e d C o mmi s s i o n e r o f In c o me T ax is b ad , ag a i n s t th e f ac ts & l a w.
2. T h at th e L e ar n e d C o mmi s s i o n e r o f In c o me T ax h as n o t g iv e n o p p o r tu n i ty o f b e in g h e ar d .
3. T h at th e L e ar n e d C o mmi s s i o n e r o f In c o me T ax h as wr o n g l y r e je c te d th e ap p l i c at i o n f o r g r an t o f r e g is tr a t i o n u / s 1 2 A A of th e In c o me T ax A c t, 1 9 6 1 .2
4. T h at th e ap p e l l an t c r av e s l e av e to ad d , al te r , a me n d o r wi th d r a w an y g r o u n d s o f ap p e al b e f or e th e f in al h e ar in g . "
3. B r i e f l y s t a t ed , th e a s s es s e e h a d a p p l i ed f o r g r an t of r e g i s t r a ti o n s u bm i t t i n g a n a p p l i c a t i o n i n F o r m N o . 1 0 A o n 2 7 . 1 . 2 0 1 7. Th e L d . CI T( E ) a f t e r r a i s i n g r e l e v a n t q u e r i e s t o satisfy h i m s el f of the ge n u i ne n e s s of t he ob j e c t s a nd a c t i v i t i e s o f t h e a s s e s se e a nd af t e r c on s i d e ri n g t h e r e p l y filed by the assessee in this r eg a r d , held t he a p p l i c a n t/ a s s e sse e i n e l i g i b l e f o r g r a n t o f re g i s tr a t i o n u/ s 1 2 A A o f t h e A c t s i n c e as p e r t h e L d . CI T( E ) , t he a ct i v i t i e s o f the a s s es s e e soc i e t y c o ul d n o t b e t e r m e d t o f al l u n d e r t he category of c ha r i t a b l e p u rp o se and the absence of d i s s o l u t i o n c l a u se i n t h e M e m o r an d u m o f A s s o c i at i o n o f t he a p p l i c a n t- a s s e sse e impinged on the public charitable c h a r a c t e r o f t he s o c i e t y .
4. D u r i n g t h e co u r se o f he a r i n g b e f or e u s t h e Ld . c ou n s el f o r a s s e s se e d r e w o u r a t t en t i o n to t h e o r d er o f t he L d . CI T( E) a n d p o i n te d o u t t h e r e f r o m t h e spe c i f i c re a s o n s f or d e n i a l o f r e g i s t r a ti o n . Ta k i n g u p e a c h f i n d i n g o f t h e L d . CI T( E ) o n e b y o n e , l e a d i n g t o th e d e n i a l of g r an t o f r e g i st r a t i on u / s 1 2 A, t h e L d . c o u n se l f o r a s s es s e e f i r st d r e w o u r a t t e nt i o n t o t he f i n d i n g s o f t h e Ld . CI T( E ) t h a t s i nc e t h e p r e s en t ap p l i c a t i on w a s t r i gg e r e d by r e j e c t i o n o f t h e c l a i m of t h e a ss e s s e e t o e x e m p t i o n u / s 10 ( 2 3 C ( i i i a b ) b y th e A s s e s si n g O ff i c e r , a ny d e c i s i o n a t t hi s s t a g e w ou l d a mou n t t o su b v e r ti ng t h e d ue p r o c e s s o f l a w i m b i b e d i n th e a p p e l l a t e p r o ce ed i n g s a nd f u r t h e r t h at s e e ki n g r e g i s t ra t i o n a f t e r l a p s e of 3 9 y e a r s w a s anachronistic an d r e g i s t r at i o n sh o u l d h a v e b e e n s o u g h t a t 3 t h e i n i ti a l s ta g e o r a t i t s i n ce pt i o n . Th e L d . co u n s e l f or a s s e s s e e dr e w ou r a t t e n t i o n t o pa r a s 7 . 1 & 7. 2 of t h e o r d e r o f t h e L d. CI T( E ) i n t h i s r eg a r d as u n d e r :
"7.1. The reply submitted by the applicant has been perused. The applicant vide its undated reply at para 3 has submitted the reason for forwarding the present application as the denial of exemption u/s 10(23C)(iiiab) of the Act by the jurisdictional assessing officer. The response to the query regarding seeking registration under section 12A after a lapse of 39 years' of existence is perfunctory. Mere denial of claims under section 10(23C)(iiiab) does not provide ample grounds for a 12A registration. The undated response received in this office on 7lh July 2017, clearly exemplifies that the entity claims to be mainly financed by die Government. If that be so, the applicability of 10(23C)(iiiab) is more pertinent. Given the fact that self-confessedly the present application was triggered by rejection of claims u/s 10(23C)(iiiab) by the Assessing Officer, any decision at this stage shall amount to subverting the due process of law imbibed in the appellate procedure.
7.2. Seeking registration after lapse of 39 years is further anachronistic. Registration, as is commonly understood, entails die same at die initial stage or at its inception (Society has been in operation since 28.03.1978)."
5. V i s - à - v i s t h e a fo r e s a i d f i n d i n g s o f th e L d. CI T( E ) , t he L d . c o u n s el f o r a s s e s s e e po i n te d o u t t h a t t h e a s s e s s e e 's claim of e x e m pt i o n u/s 1 0 ( 2 3C ( i i i a b ) p er t a i n i n g to t he a s s e s s m e nt y e a r 2 0 1 3 - 1 4 r e f er r ed t o b y t h e L D .C I T( E ) , h a d b e e n a l l o w e d b y t h e I . T. A . T. v i d e i t s o r d e r p a s se d i n I TA N o . 2 7 0 / C hd / 2 0 17 d a t e d 3 0 . 1 0 .2 01 7 . Copy of the order was p l a c e d be f o r e us . F u r th e r , t h e L d . co u n s e l f or a s s e ss e e s t a t e d t h at t h e a s s e s s e e i s f r e e t o s e e k r e gi s t r a ti o n a t a ny p o i n t o f t i me an d i s n o t r e q ui r e d u n d e r t h e S t a t u t e t o n e c e s s a r i l y s e e k t h e s a m e o n l y a t t h e i n i t i a l s t a ge o r a t i t s i n c e p t i o n. Th e L d . c o u ns e l f o r a s s e s s e e d r e w ou r a t t en t i on t o t h e p r o v i si o ns o f s ec t i o n 1 2 A( 1 ) ( a ) / 1 2A ( 1 ) ( aa ) w h i c h a r e as under:
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"[(1)] The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:--
(a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the [***] Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, [whichever is later and such trust or institution is registered under section 12AA ] :
[Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,--
(i) from the date of the creation of the trust or the establishment of the institution if the [***] Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons;
(ii) from the 1st day of the financial year in which the application is made, if the [***] Commissioner is not so satisfied:] [Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007;] [(aa) the person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June, 2007 in the prescribed form and manner to the Commissioner and such trust or institution is registered under section 12AA;]"
6. Th e L d . c o u ns e l f o r as s e s s ee po i n t e d o u t th e re f r o m t h a t t h e a s s e ss ee w a s al w a y s f r ee t o a pp l y f or r eg i s t r a t i o n a t a n y p o i nt o f t i m e b o t h b e fo r e 1 . 6 . 2 0 0 7 wh i c h i s g o v e r n e d b y t h e p r o v i si o ns o f s e c t i o n 1 2A ( 1 ) ( a ) a n d af t er 1 . 6 . 2 0 07 w h i c h i s g o v e rne d b y t he p r o vi si o n s o f s e c t i on 1 2 A ( 1 ) ( a a) . Th e L d . c o u n s e l f o r a s s e s s ee c on t e n d e d t h at t he r e w a s n o m e r i t t h e r e fo r e i n t h i s g r o u n d o f L d . CI T( E ) f o r d e ny i n g g r a n t o f r e g i st r a t i o n t o t h e a s s es s e e u/s 1 2 A A o f t h e Act . 5
7. Th e L d . D R o n t h e o t h e r h a n d , fa i r l y a g r e e d t h at t h e r e j e c t i o n o f c l a i m o f e x e m p ti o n u / s 1 0 ( 2 3 C( i i i a b) h a d b e en r e v e r s e d by t h e I . T. A . T. h o l d i n g t h a t i t i s e l i g i b l e f o r t h e s a m e v i de i t s o rd e r r e f er r e d t o ab o v e . F u r t h e r th e L d . D R c o u l d n o t c o n t rov e r t t h e c o n t e nti o n o f t h e L d . co u n s e l f o r a s s e s s e e t ha t i t c o u l d s e e k r eg i s tr a t i o n a t a n y po in t o f t i m e a n d w a s n o t n ec e s s a r i l y r e q u i red t o s e e k th e sa m e a t t h e i n i t i a l s t a g e o r at i t s i nc e p t i on o nl y .
8. In view of the above, we reject the denial of r e g i s t r a ti o n b y th e L d . CI T( E ) t o th e a s s e s s e e fo r th e r e a s o n of denial of cl a i m of e x e m pti o n in e a r l i er year u/s 1 0 ( 2 3 C ( i i i a b ) a nd s e ek i n g r e g i st r a t i o n a f t e r a l a p s e o f 3 9 y e a r s , a n d h o l d t h e s a m e a s b e i n g i m m a t e ri a l a n d of n o c o n s e q u e nc e f or t h e p u r po s e o f gr a n t o f r e g i s t r a t i o n t o t he a s s e s s e e u / s 1 2A A o f t h e A c t .
9. Th e Ld. c o u n s el for as s e s s ee t h e r e a f t er drew our a t t e n t i o n t o p a ra 8 o f t h e o r d er a n d po i n t e d o ut t h e r ef r o m t h a t t h e n e x t re a s o n f o r d e n i al o f r e g i s t r a t i o n w a s t he findings of the L d . CI T( E ) that the a p p l i c a n t -a s s e s s e e 's a c t i v i t i e s o f a f f or d i n g t r a i n i n g t o g o v e r n m e n t e mp l o y e e s d i d n o t f i t i n t h e def i n i t i o n of e d u c at i o n s o a s t o b e h e l d a s a c h a r i t a b l e a c ti v i t y w i t hi n t h e de f i n i t i on o f t h e s a m e u/ s 2 ( 1 5 ) o f th e A c t. Th e r e l e v a n t f i n d i n g s o f t h e Ld . CI T( E ) a t p a r a 8 o f t h e or de r i n t hi s r e g ar d a r e a s u nd e r :
"8. Moreover, there are other issues that do not render the applicant's activities measuring upto the requirement of registration. Affording training to government employees does not fit into the definition of "education" laid down by the Supreme Court in the case of "Sole Trustee Lok Shikshan 6 Sansthan". The sense in which the word "education" has been used In section 2(15) as interpreted by the Apex Court in the case of Sole trustee, Loka Sikslian Sansthan (101 1TR
234) is systematic instruction, schooling or training given to the young in preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word "education" has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education."
10. V i s - à - v i s t h i s f i nd i n g o f t h e L d .CI T( E ) , t h e L d . c ou n s e l f o r a s s e s s ee p o i nt e d o u t t h a t t h e I . T. A . T. i n i t s o rd e r p a s s e d i n t h e c a s e o f th e a s s e ss e e , w h i l e g r a n ti n g e x e mp t i o n u /s 1 0 ( 2 3 C ) ( i i i a b ) i n I TA N o . 27 0 / C hd / 2 0 1 7 d at e d 30 . 1 0 . 2 0 1 7, h a d d e a l t w i t h i d e n t i c a l i s s u e an d h a d h e l d t h e a c t i v i t y o f a f f o r d i n g t h e t r ai n i n g t o g ov e r n me n t e m p l o ye e s as b e i n g i n t h e n a tu r e o f edu c a t i o n . Th e Ld. c o u n se l fo r as se s s e e dr e w o u r a t t e n t i o n t o p a r a s 1 8 a n d 1 9 o f t h e o r d e r o f t h e I . T. A . T. i n t h i s r e g a r d w hi c h a r e as u n d er :
" 1 8 . E v e n o th e r wi s e , we f in d th at th e ac ti v i ty of tr ai n i n g an d c o n d u c tin g s tu d y courses, c o nf e r e n ce s , s emi n ar s an d l e c tu r e s to Public s e r v ic e ad mi n is tr a ti v e o f f ic e r s in th e f ie l d of pu b l ic ad mi n i s tr at i o n t an ta mo u n ts to n o th in g e l s e b u t i mp ar t i n g e d u c at i o n . A l l th e s ta t e d o b je c ts o f th e as s e s s e e s o c ie ty ar e ai me d at d if f us in g c e r tai n b r an c h o f k n o wl e d g e i. e . P u b l ic ad mi n i s tr at i o n b y c o n d u c ti n g tr ai n i n g p r o g r a mme s , s tu d y c o u r s e s , c o nf e r e n ce s , s emi n ar s , l e c tu r e s o r b y p r o mo ti n g r e s e ar c h an d tr ain i n g , p u b l is h i n g p ap e r s an d p e r io d i c al s an d ma i n ta i n i n g l ib r ar i e s an d i nf o r ma ti o n s e r v ic e s in th e ar e a o f P u bl ic ad mi n i s tr at i o n . T h e u n de r tak in g o f tr a i n in g an d s tu d y c o u r s e s i s c ar r i e d o u t i n a s tr u c tu r e d man n e r by c o n d u c ti n g r e g u l ar courses f or i mp ar t i n g in s tr u c tio n an d tr a i n i n g o n v ar io u s s u b je c ts r e l ate d to p u b l ic ad mi n i s tr at i o n . T he ac ti v i t ie s u n d e r tak e n th e r e f o re is in th e n atu r e o f i mp ar t i n g e d u c at io n . T he H o n ' bl e G u jar at H ig h C o u r t d e al t wi th an id e n ti c al is s u e in th e c as e o f G u jar a t S t ate C o - o p e r at i v e U n io n v s C IT re p o r te d i n 1 9 5 IT R 2 7 9 . In th e s ai d c as e al s o th e as s e s s e e s o c ie ty was e s tab l i s h e d wi th th e o b je c t o f s p r e ad i n g e d u c a ti o n r e l at i n g to c o o p e r at i v e mo v e me n t by c o n d u c ti n g courses, tr ai n i n g 7 p r o g r a mme s , r e s e ar c h an d s tu d y o f th e s u b je c t, o p e n in g l ib r ar ie s an d p u b l is h in g p e r io d ic al s an d l i te r a tu r e o n th e s u b je c t. T h e q ue s tio n b e f o re th e H o n ' b l e H ig h c o u r t was wh e th e r th e as s e s s e e h ad b e e n r ig h tl y d e n i e d e x e mp ti o n u / s 1 0 ( 2 2 ) of th e In c o me T ax A c t, 1 9 6 1 , h o l d in g i ts ac tiv i t i e s to b e n o t e d u c at i o n al in v i e w o f th e me an i n g g iv e n b y th e S u p r e me c o u r t i n S o l e T r u s te e , L o k a S h ik s h an a T r us t v s C IT 1 0 1 IT R 23 4 . T h e Ho n ' b l e H ig h C o u r t h e l d th a t th e o b je c ts o f th e as s e s s e e in d i c ate d th a t th e s o c ie ty was e s tab l i s h e d f o r dif f us io n o f c e r tai n b r an c h of k no wl e d g e an d th e r e f ore was i n th e n atu r e o f i mp ar t i n g e d u c ati o n . F u r th e r r ef e r r in g to th e d e c is io n o f th e s u p r e me c o u r t i n L o k S h ik s h an a ( s u p r a) , th e c o u r t h e l d th at th e o b s e r v at i o n o f th e ap e x c o u r t th a t e d u c at i o n me an s s c h o o l in g wo u l d me an , th a t s c h o o l s , in s tr u c ts o r e d u c ate s an d th e o b s e r v at io n s o f th e ap e x c o u r t we r e n o t in te n d e d to g i v e a n ar r o w o r p e d an ti c s e n s e to th e wo r d e d u c at i o n . T he r e l e v an t f in d in g o f th e H ig h C o u r t ar e as u n d e r :
"The controversy which we are called upon to decide is, therefore, whether the assessee is an educational institution existing solely for educational purposes and not for purposes of profit within the meaning of s. 10(22) of the Act. Under s. 10(22) of the Act, it is provided that in computing the total income of a previous year of any person, any income falling within the said clauses, i.e., any income of a University or other educational institution existing solely for educational purposes and not for purposes of profit, shall not be included. The objects of the assessee-Co-operative Union as also the activities actually carried on by it will throw considerable light on the question whether the assessee-Co-operative Union is existing solely for educational purposes or not. Bye-Laws 2 of the assessee-Co-operative Union, a copy of which is placed on record by the consent of both the learned counsel for our consideration, enumerates therein eight objects of the assessee- Co-operative Union and they read as under:
(i) to impart education to members of co-operative societies and to workers in the Co-operative Movement;
(ii) to act as a co-ordinating agency on all matters pertaining to Co-operative education and function as a body of experts in matters relating to education;
(iii) to function as a focusing centre on non-official opinion on various subjects affecting the movement and for representing it in proper quarters;
(iv) to further the spread of the Co-operative Movement;
(v) to promote the study of problems connected with Co-
operation and carry on research in the same;
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(vi) to open circulating libraries, to publish periodicals, books, pamphlets, and literature in general on co-operation; rural development and allied subjects;
(vii) to conduct training classes, training centres, schools, colleges, prescribe courses of instruction for them, conduct examination and award certificates or diplomas; and
(viii) to run a printing press.
The activities carried on by the assessee-Co-operative Union have been briefly summarised at Annexure 'A' to the order of the CIT(A) dt. 22nd Nov., 1983 and the said list of activities is referred to in para 5 of the order of the CIT. The fact that these activities are carried on by the assessee-Co-operative Union has not been disputed. The list of activities at Annexure 'A' gives particulars of the courses conducted by the assessee-Co- operative Union and their duration. The assessee conducts Courses for Higher Diploma in Co-operation (condensed)--18 weeks, Diploma in Land Development Banking--12 weeks, Certificate Course in Co-op. Credit & Banking--10 weeks, and Specialised short-term courses/Orientation Courses. The assessee also conducts Seminars. It also appears that the assessee has been running four co- operative training which conduct junior basic courses of 24 weeks duration for Diploma in Co-operation, Special Course for employees of Urban Co-op. Banks, Dist. Co-op. Banks and Market Class, and also Seminars. The assessee also conducts Co-operative Education Programme, Consumer Education Programmes (Project), Women Co-op. Education Programme, Special Training Classes in the District under Co-op. Education and Industrial Projects of the nature and duration as mentioned in detail in the said list of its activities. It is not suggested that the assessee-Co- operative Union is doing any activity other than those enumerated in the said list.
4. From the nature of the activities of the assessee, it is abundantly clear to us that the assessee is existing solely for educational purposes. It was sought to be contended by the learned counsel for the Revenue that having regard to the objects enumerated in cls. (iii), (iv), (vi) and (viii) of the Bye-law 2 of the Bye Laws of the assessee, it cannot be said that the assessee was existing solely for educational purposes. In cl.
(iii) of the Bye-law 2, the object enumerated is that the assessee will function as a focusing centre on non-official opinion on various subjects affecting the movement and for representing it in proper quarters. Under cl. (iv), its object is to further the spread of the Co-operative Movement. Clause (vi) refers to objects of opening circulating libraries, publishing periodicals, books, pamphlets, and literature in general on co- operation, rural development and allied subjects, while cl. (viii) refers to running of a printing press. It is difficult to accept the contention of the Revenue that these clauses indicate any object other than educational for which the assessee seems to have been established. On totality of the objects enumerated in Bye-law 2, it is clear to us that the assessee-Co-operative Union is existing solely for educational purposes and even the objects which are enumerated in cls. (iii), (iv), (vi) and (viii) are referable to such purposes. It will not be open to read any of these clauses in isolation torn of its context for the purposes of 9 urging that the assessee is not existing solely for educational purposes as envisaged under s. 10(22) of the Act. It is obvious that the objects of functioning as a focusing centre on non- official opinion on various subjects affecting the movement and for representing it in proper quarters, promoting the study of problems connected with co-operation and carrying on research in the same and of opening circulating libraries, publishing periodicals, books, pamphlets and literature are connected with educational purposes for which the assessee- co- operative Union is established. The object of running a printing press as enumerated in cl. (viii) has to be read in context of the object of publishing periodicals, books, pamphlets and literature. Therefore, so read, it becomes part of the educational activities of the assessee-Co-operative Union. The subsidiary objects such as printing and publishing books and literature on the relevant subjects are in our judgment ancilliary and do not detract from its exclusively educational character. The question whether an educational institution is existing solely for educational purposes or not can also be resolved with reference to the activities actually carried on by it and, as noted above, the list of activities of the assessee clearly indicates that it is existing solely for educational purposes. It cannot be doubted that the assessee was a society for diffusion of a certain branch of knowledge of the co- operative movement in various fields governing human life and the activities for the purposes were carried out in an organised and systematic manner by conducting regular courses for imparting instruction and training on various subjects included in the curricula as is reflected from the list of its activities. There is no dispute about the fact that the assessee-Co-operative Union is given financial assistance by the Government. The resolutions of the Government dt. 15th Feb., 1968 and 10th Dec., 1982 [mentioned in para 8 of the order of the CIT(A)] clearly indicate that the grants sanctioned by the Government are for educational purposes. The Government had sanctioned Rs. 15 lakhs for the year 1982-83 which appears to have been raised to Rs. 20 lakhs from the year 1988-89. We are fully satisfied from the nature of the activities of the assessee-Co-operative Union and its objects that the assessee is existing exclusively for educational purposes and not for the purposes of profits. The assessee was publishing two Journals : (1) "Sahakar", a weekly Journal having circulation of 6,700 copies, and (2) "Gram Swaraj", a monthly magazine having circulation of 7,150 copies. Both these Journals were published in connection with the activities of the assessee and on the subject of co-operative movement. The assessee was also having an audio-visual unit for exhibiting films on co-operative movement to educate the masses. It also appears that the assessee maintained a rich library on the subject of co-operation. As noticed above, from the objects of the assessee, it is conducting training centres and colleges for various courses having bearing on the field of co-operative movement. It appears to us that the decision of the Tribunal which seeks to rest it on the observations made by the Supreme Court in "lok shikashana trust's case (supra), for holding that the assessee is not entitled to exemption under s. 10(22) of the Act is based on a complete misreading of the observations of the Supreme Court. In Lok Shikashana Trust's case (supra) the Supreme Court while dealing with the 10 provisions of s. 11 r/w s. 2(15) of the Act which defines 'charitable purposes' observed as under :
"The sense in which the word 'education' has been used in s. 2(15) in the systematic instruction, schooling or training given to the young in preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word 'education' has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education. According to this wide and extended sense, travelling is education, because as a result of travelling you acquire fresh knowledge....... But that is not the sense in which the word 'education' is used in cl. 15 of s. 2. What 'education' connotes in that clause is the process of training and developing the knowledge, skill, mind and character of students by normal schooling."
The Supreme Court in the above observations by referring to the systematic instruction, schooling or training given to the young has only cited an instance in order to indicate as to what the word 'education' appearing in s. 2(15) of the Act which defines 'charitable purposes' is intended to mean. We are certain that these observations were not intended to keep out of the meaning of the word 'education', persons other then 'young'. The expression 'schooling' also means "that schools, instructs or educates" (The Oxford English Dictionary, Vol. IX
217). The Supreme Court has observed that the word 'education' also connotes the whole course of scholastic instruction which a person has received. This clearly indicates that the observations of the Supreme Court were not intended to give a narrow or pedantic sense to the word 'education'. By giving further illustrations of a traveller gaining knowledge, victims of swindlers and thieves becoming wiser, the visitors to night clubs adding to their knowledge and hidden mysteries of life, the Supreme Court has indicated that the word 'education' is not used in a loose sense so as to include acquisition of even such knowledge. The observations of the Supreme Court only indicate proper confines of the word 'education' in the context of the provisions of s. 2(15) of the Act. It will not be proper to construe these observations in a manner in which they are construed by the Tribunal when it infers from these observations, in para 17 of its judgment, that the word 'education' is limited to schools, colleges and similar institutions and does not extend to any other media for such acquisition of knowledge. The observations of the Supreme Court do not confine the word 'education' only to scholastic instructions but other form of education also are included in the word 'education'. As noticed above, the word 'schooling' also means instructing or educating. It, therefore, cannot be said that the word 'education' has been given an unduly restricted meaning by the Supreme Court in the said decision. Though in the context of the provisions of s. 10(22) the concept of education need not be given any wide or extended meaning, it surely would encompass systematic dissemination of knowledge and training in specialised subjects as is done by the assessee. The changing time and the ever widening horizons of knowledge may bring in changes in the methodology of teaching and a shift for the better in the institutional setup. Advancement of knowledge bring within its fold suitable methods of its dissemination and though the 11 primary method of sitting in a class-room may remain ideal for most of the initial education, it may become necessary to have a different outlook for further education. It is not necessary to nail down the concept of education to a particular formula or to flow it only through a defined channel. Its progress lies in acceptance of new ideas and development of appropriate means to reach them to the recipients."
1 9 . In v ie w o f th e ab o v e we h o l d th a t th e ac ti v i t ie s c ar r ie d o u t b y th e as s e s s e e s o c ie ty o f c o n d u c ti n g c o u r s e s an d tr a in i n g p r o g r a mme s a mo u n ts to e d u c a ti o n . "
11. Th e L d . D R f a i rl y a g r e e d w i t h t he a b o v e co n t e n ti o n o f t h e L d . co u n s e l fo r a s s e s se e .
12. I n v i e w o f th e a bo v e , w e h o l d t h a t t h e c on t e n t io n of t he L d . CI T( E ) that the a s s es s e e wa s not carrying out t he a c t i v i t y o f i m p ar t i n g ed u c a t i o n i s w i th o u t a n y m e r i t and n e e d s t o b e r e je ct e d .
13. Th e Ld. c o u n s el for as s e s s ee t h e r e a f t er drew our a t t e n t i o n t o p a ra 9 o f t h e o r d e r o f t he L d .CI T( E ) p o i n ti ng o u t t h e r e f ro m t he n e x t c o n t e n ti on o f t h e L d . CI T( Ex e m p t i o n s) t h a t t h e a s s e ss ee w a s n ot e l i gi bl e f o r gr a n t of e x e m p t i o n u / s 1 2 A A s i n ce i t s a c ti o n s d i d n o t f l o w f r om an a l t r ui s t i c intent but w ere part of its statutory ob l i g at i o n s . Th e r e l e v a n t f i n d i ng s o f t h e L d. CI T( E ) a t p a r a 9 & 1 0 t o w h i c h o u r a t t e nt i o n was i n v i t e d a r e as u n d e r :
"9. Further when the applicability of sections 11 & 12 is examined in the instant case it is evident that the government grants cannot be termed to be voluntary and are not free from encumbrances, It has been laid down in clause of the Memorandum of Association of the applicant society that the expenditure of grants would be subject to directions of the Government of Punjab emanating from time to time. Similarly, the society's functioning is hemmed in by the powers of the government to issue directions and the finality accorded to such decisions. Clause XV of tine Rules & Regulations are as under.
"In the discharge of its functions, the General Council shall be guided by such directions on questions of policy as may be given to it by the 12 Government of Punjab. The decision of the Government of Punjab whether a question is or is not a matter of policy shall be final. Such directions shall be in writing''.
These impinge on the independence of the society. In order to qualify to be treated as an entity capable of redeeming its charitable intent and existing for the benefit of public at large, independence of that entity is a sine qua non. The various clauses of the MOA of the society as well as the composition enable the Government to issue directions, inquire into the affairs and control the finances of the applicant. To that extent the society's functional independence is impinged and the same seemingly is not amenable to Independent decision making. The composition of the society is again drawn from the Government Departments and. to that extent is a continuation of the said department. There is no scope for public participation in the composition of such society.
10. In the instant case, given all of the above it is clearly held that the applicant's activities don't fit into the established definitions of charitable purposes. Lack of commercial intent does not in any way mean that the activities are charitable. The concept of charity that entails exemption from taxation can't be stretched and attached to anything that is altruistic. Further, the actions of the applicant don't flow from an altruistic intent but are part of statutory obligations. Redeeming one's statutory functions can't be passed off as charity. In light of the above it is held that the objects and the activities are not charitable as envisaged in section 2(15) of the Income TaxAct,1961. Imparting training to Government servants don't in any way tantamount to qualify as 'education1 in the way interpreted by the Supreme Court in the case of Sole Trustee Lok Sikshan Sansthan."
14. V i s - à - v i s h e a bov e c o n t e nt i o n of t h e L d . CI T( E ) , t he L d . counsel f or a s se s s e e c o n te n d e d that the f a ct that the a p p l i c a n t- a s s e sse e w a s g o v e rn ed i n t h e di s c ha r g e o f i t s f u n c t i o n s b y t h e G o v e r nm e n t o f P u n j a b di d n ot t a k e a w a y t h e f a c t t h a t i t h a d b e e n f o r me d t o c a r r y o u t c h a r i t a b l e a c t i v i t i e s a n d , th e r e f o r e , n o a d ve r s e v i e w c o u l d b e t a k e n v i s - à - v i s e i t h e r th e o b j e c t s of t h e a p p l i c a n t -a s s e ss e e o r v i s - à - v i s t h e ge n u i ne n e s s o f t he a c ti v i t i e s c ar r i e d ou t b y i t i n pursuance of the stated o b je c t s on a c co un t of the 13 a f o r e s t a te d o b se r v a t i o n s of t he L d . CI T( E ) r e ga r d i n g the i n d e p e n d en t f u nc t i o n i n g o f t h e ap p l i c a n t -a s s e s see .
15. Th e L d . D R , o n th e o t h e r ha n d r el i e d u p o n t h e f i nd i n gs o f t h e L d. CI T( E ) .
16. W e h a v e h e a rd h e c o n te n t i o ns o f b o t h t h e p a r ti e s i n t h i s r e g a rd . We f i n d m e r i t i n t h e c o n t e nt i o n o f t h e L d . c o u n s e l f o r a s s es s e e . Th e f a c t t h a t t h e a c t i v i t i e s c a r r i ed o u t b y t h e a p p l i c a n t /a s s e s s ee a r e ch a r i t ab l e i n n at u r e b e e n c o n f i r m e d b y u s i n t he e a r l i e r pa r t o f t h e o r d e r. M e r e l y b e c a us e t h e f u n c t i o n i n g o f t h e a p p l i c a n t / as s e s s e e i s guided by the directions g i ve n by t he G o ve r n m e n t of P u n j a b , d o e s no t t a k e a w a y t h e ch a r i t a b l e ch a r a ct e r o f t h e o b j e c t s o f th e a ss e s s e e , n o r d o th e y e f fe c t th e gen u i n e n e s s of the a c t i v i t i es carried out by the a p p l i c a n t/ a s s e s s e e. Even if the ap p l i c a n t /a s s e s see is w o r k i ng under the d i r e c t i o ns o f t he G o v e r nm e n t a s l on g a s t he a c t i vi t i es c a r r i e d o u t b y i t a r e i n s y n c w i t h i t s s t a t e d o b j ec t s , w h i ch h a v e b e e n he l d to b e c h a r i ta b l e b y u s i n t h e e a r l i e r p a r t o f o u r o r d e r a n d a s l o n g a s t h e r e i s n o o t h e r f i n di ng v i s - à - v i s t h e g e nu i n e n e ss o f th e a ct i v i ti es c a r r i e d by t h e a s s e s se e , t h e i n d e pe n d e n ce o f t h e a s s e ss e e i n d e c i s i o n ma ki n g c a n n ot i n a n y w a y e f f e ct t h e g e n u i n e n es s o f t h e a c t i v i t i e s c a r r i ed o u t b y th e a p pl i c a n t / a s s es s e e . Th e a f o r es a i d co nt e n t i o n o f t h e L d . CI T( E ) i s , t h e r e f o r e, d i s mi ss e d b y u s.
17. Th e Ld. c o u n s el for as s e s s ee t h e r e a f t er drew our a t t e n t i o n t o p ara 1 1 o f t h e o r d er o f t h e L d . CI T( E ) p o i n t i n g o u t t h e r e f ro m t ha t t h e g r a n t o f re g i s t r a ti o n w a s al s o d e n i ed 14 f o r t h e re a s o n tha t t h e M em o r a n du m o f A s so c i a t i on h a d no d i s s o l u t i o n c l a u se a s a c o n s eq u e nc e o f wh i c h t h e p r o v i s i o ns o f s e c t i on 1 3 ( 1 ) ( c ) o f t h e Ac t w e re c l e a r l y a t t r a cte d m a k i n g t h e a s s e s s e e i ne l i g i b l e f o r g r an t of r e g i s t r a ti o n u /s 1 2 A A o f the Act. Th e re l e v a n t fi n d i n g s o f t h e L d .CI T( E ) i n t h i s r e g a r d a re a s und e r :
"11. It is also observed that the MOA submitted by the applicant lacks dissolution clause. The provisions of section 13(l)(c) of the IT Act states that "in case of a trust/ society for charitable or religious purposes or a charitable or religious institution, any income thereof -
(i) If such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income enures, or
(ii) If any part of income or any property of the trust or the institution (whenever created or established) is during the previous used or applied, directly or indirectly for the benefit of any person referred to in sub-section (3):"
18. V i s - à - v i s t h e a f or e s a i d c o n te n t i on , t h e L d . c o u nse l f o r a s s e s s e e s t a t ed t h a t t h e s a i d c l au s e h a d b e e n am e n d e d by t h e E x e c u t i v e Co m m i t t e e o f t h e a p p l i c a n t - a ss e ss e e i n i t s m e e t i n g h e l d o n 2 5 . 1 1 . 2 0 0 8 . C op y o f t h e M i n u t e s o f t h e M e e t i n g w er e r ef e r r e d t o be f o r e u s a n d o u r at te n t i o n w a s d r a w n t o A g e n da I t e m No . XI X i n t h e s a m e w h i c h s t a t e d a s under:
Agenda Item No.XIX: Addition of Dissolution Clause in Memorandum of Association Approved Additional Agenda Item No.I: Eminent Chair Def erred Additional Agenda Item No.I: Documentation and Publication ac tivities of the Ins titute.
Def erred 15 AGENDA ITEM NO.XIX ADDITION IN THE MEMORANDUM OF ASSOCIATION, RULES & REGULATIONS OF MGSIPAP This agenda seeks the approval for insertion of dissolution clause in Memorandum of Association, Rules & regulation of the Institute
2. The Institute had applied for registration u/s 12A of the Income Tax Act. 1961 to get exemption u/s 80G of the Income Tax Act. The Commissioner Income Tax has informed that it is presently not possible to process the case on merit unless appropriate dissolution clause in memorandum of association, rules & regulation of the Institute is inserted that in the event of dissolution of this Society/ institute, assets and funds of the society would be transferred to another society with similar aims & objectives.
3. Executive Committee may approve to insert the above dissolution clause in Memorandum of Association, Rules & regulation of the Institute. This will be put up to the General Council for ratification later on."
19. Th e L d . c o u n se l f o r a s s es s e e s t a te d t h a t i n vi e w of t h e a f o r e s a i d a m e n dm e n t t h e c o n t en t i o n o f t h e L d.C I T( E ) d i d n o t s u r v i v e . Th e L d . D R co u l d not c o n t r o ve r t t he s a m e .
20. I n v i e w o f t h e a bo v e , w e f i n d n o m e r i t i n th e c o n te n t i on o f t h e L d . CI T( E ) t h a t i n t h e a b s en c e o f d i s s ol u t i on c l a u se i n the M e m o r a nd um of A s s o c i a ti o n of the a s se s s e e , the p r o v i s i o ns o f s e ct i o n 1 3 ( 1 ) ( c ) o f th e A c t w e r e a t t ra c t e d s i n ce t h e s a i d d i s so l u ti o n c l a u s e h ad b e e n a m e n d e d w a y b a c k i n 2 0 0 8 i t se l f p ro vi d i n g f or t h e t ra n s f e r of t h e as s e t s a n d f u n d s o f t he s oc i e t y t o a no t h e r s o c i e t y w i t h s i m i l a r a i m s a n d o b j e c t s i n th e e v e n t o f t h e di s s o l u t i on o f t h e a p p l i c a n t - assessee.
21. I n vi e w o f t h e a b o v e , s i nc e n on e o f t h e r ea s on s f o r d e n i a l o f r e g i st ra t i o n s u r v i ve , we s e t a s i d e t h e or d e r o f t h e L d . CI T( E ) a n d d i r e c t g r a n t r e g i st r a t i o n u / s 1 2 A o f t h e A c t t o t h e A pp l i c a nt s o c i e t y .
16
22. I n t h e re s u l t , th e a p p e a l f i l ed b y t h e a s s e s se e i s , t h e r e f o r e, a l l o w ed .
O r d e r p r on o u n c ed i n t h e O p e n Cou r t .
Sd/- Sd/-
(SANJAY GARG) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 9 t h April, 2018
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh