Income Tax Appellate Tribunal - Chennai
K.R.T.A.Varatharaj Educational And ... vs Assessee on 18 November, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'B' CHENNAI
Before Shri Abraham P. George, Accountant Member and
Shri George Mathan, Judicial Member
I.T.A. Nos. 1931 & 1932/Mds/2009
Assessment Year : 2009-10
M/s. K.R.T.A. Varatharaj The Commissioner of
Educational and Charities Trust, v. Income-tax-II,
4/252, Sattur Main Road, Madurai.
Thayilpatti, Sivakasi(Via),
Virudhunagar Dt. PIN : 626 128.
(PAN:AABTK4747R )
(Appellant) (Respondent)
Appellant by : Shri N. Devanathan
Respondent by : Shri P.B. Sekaran
ORDER
PER GEORGE MATHAN, JUDICIAL MEMBER : ITA 1931/Mds/2009
is an appeal filed by the assessee against the order of the learned CIT-II, Madurai in C. No. 101/37/CIT-II/2009-10 dated 18-11-2009 refusing to grant registration u/s. 12AA of the Income-tax Act, 1961 as a charitable trust. ITA No. 1932/Mds/209 is an appeal filed by the assessee against the order of the learned CIT-II, Madurai in C. No.102/37/CIT-II/2009-10 refusing to grant the assessee the certificate of exemption u/s. 80G of the Act.
2. Shri N. Devanathan, Advocate represented on behalf of the assessee and Shri P.B. Sekaran, CIT-DR represented on behalf of the Revenue.
3. It was submitted by the learned authorised representative that the assessee trust had filed an application for grant of registration u/s. 12AA on 2 I.T.A. No.1931 & 1932/Mds/2009 4-6-2009. It was the submission that the assessee trust was created on 10- 12-2008. It was the submission that the learned CIT had rejected the assessee's application on the ground that no income had been received by the trust as also on the ground that the assessee was taking loans from its sister concerns to the extent of `. 2.4 crores and had again returned the money after a period of 2 months. It was the submission that the learned CIT had verified the accounts of the assessee and it was found that the assessee had paid an amount of `. 20,000/- to Mahatma Gandhi Primary And Nursery School, Vijayakarisalkulam, an institution which is not enjoying the benefit of sec. 12AA and 80G and another amount to KRT Alagarsamy Naidu Government Higher Secondary School, Thgailappati (Govt. School) for an amount of `. 20,000/- and had also paid the tuition fees to the extent of `. 20,000/- in the case of one Shri B. Madana Kamaraj and an amount of `. 30,000/- to Ms. Mahalakshmi who are two students pursuing engineering studies. It was the submission that the learned CIT held that the donation to Mahatma Gandhi Primary And Nursery School as also the financial assistance given to the two engineering students were not charitable in nature and for giving the financial assistance to the two students no transparent method of selecting the students was also shown. It was the submission by the learned authorised representative that the loans taken from the sister concerns was only to comply with the AICTE members verification as the assessee trust 3 I.T.A. No.1931 & 1932/Mds/2009 was proposing to start an engineering college. It was the further submission that the payment to Mahatma Gandhi Primary & Nursery School of an amount of `. 20,000/- was to assist the school in conducting its educational activities in a more better way. On a specific query from the Bench it was submitted that both B. Madana Kamaraj and Ms. Mahalakshmi, the two engineering students, were in no way related to any of the persons connected with the trust in any manner whatsoever. It was the submission that as per the provisions of section 2(15) of the Act charitable purpose included education. It was the submission that the fact that the assessee had given the donation to Mahatma Gandhi Primary And Nursery School was obviously for education so also in respect of the financial assistance to the two students studying for engineering. It was the submission that the fact that the payments had been made for education purposes remains undisputed and it was a charitable purpose. It was the submission that the assessee was entitled to the registration u/s. 12AA.
4. In reply, the learned DR vehemently supported the order of the learned CIT. It was the submission that there was no transparent manner for selecting the students for giving the financial assistance.
5. It was the further submission by the learned authorised representative that the assessee was also eligible for the grant of exemption u/s. 80G as prayed for.
4
I.T.A. No.1931 & 1932/Mds/2009
6. We have considered the rival submissions. The fact that the assessee has taken loans from sister concerns and has repaid that amount is undisputed. Further the fact that the loans were taken in connection with the proposed visit by the AICTE members is also undisputed. That the loans have been repaid to the sister concerns without any interest is also undisputed. The assessee has also been granted the necessary certification and registration and approval from AICTE vide their letter dated 24-4-2009 is also undisputed. Thus the taking of the loans from the sister concern can in no way be treated as a violation or an illegal act. The loan has been taken for the purpose of complying with the requirement as maintained by the AICTE. It is further noticed that there is no allegation that the amount of `. 2.4 crores borrowed by the assessee and repaid is the unaccounted income of the sister concern or that there is any fraudulent intent in the hands of the assessee. Therefore, the taking of the loan for the purpose of complying with the requirement of the AICTE cannot be ground for rejecting the assessee's claim for registration u/s. 12AA of the Act.
7. In respect of the donations given to the educational institution, viz. Mahatma Gandhi Primary And Nursery School as also the financial assistance given to the two students pursuing engineering studies, the fact that the assessee has shown the intention and has also paid the money for education purposes is proof of the charitable activities of the assessee. Undisputedly, 5 I.T.A. No.1931 & 1932/Mds/2009 education is treated as a charitable purpose u/s. 2(15) of the I.T.Act, 1961. There is no allegation in the order that the amount has been paid for anything other than education. The issue in respect of the transparency in the manner of selecting the students for giving the financial assistance would in no way come in the way of granting the assessee the benefit of registration u/s. 12AA. One should keep in mind that for setting in place the machinery for transparency the expenditure involved is enormous when that money can very well be used for some charitable purpose which the assessee has done. While dealing with charitable institutions one should have a pragmatic view and look at the practicalities and see whether the charity in its right perspective is being done. One should not be looking at minor technicalities to deny the assessee, especially when one has done actual charitable activities, the benefit of registration u/s. 12AA. In the circumstances, we are of the view that the assessee is a charitable institution which is entitled to the benefit of registration u/s. 12AA. Consequently, the learned CIT is directed to register the assessee as a charitable trust u/s. 12AA of the Act.
8. Even though we have granted the registration u/s. 12AA, issues regarding violation of the provisions of sections 11, 12 and 13 would still be open to the assessing authority for examination in the course of assessment. 6
I.T.A. No.1931 & 1932/Mds/2009
9. As we have already granted the assessee the registration u/s. 12AA, the appeal of the assessee in respect of the grant of certificate of exemption u/s 80G is restored to the file of the learned CIT for re- adjudication, after granting the assessee adequate opportunity to substantiate its case. This is because as per the order of the learned CIT refusing to grant the certificate of exemption u/s. 80G it is noticed that the said certificate of exemption has been denied only on the ground that the registration u/s. 12AA has been denied. Now as we have held that the assessee is entitled to the registration u/s. 12AA, the issue of the grant of the certificate of exemption u/s. 80G is restored to the file of the learned CIT for re-adjudicating after granting the assessee adequate opportunity. In the circumstances, the appeal of the assessee in ITA No.1931/Mds/2009 is allowed and the appeal in ITA No. 1932/Mds/2009 is allowed for statistical purposes.
10. The order was pronounced in the court on 13-08-2010.
Sd/- Sd/-
(Abraham P. George) (George Mathan)
Accountant Member Judicial Member
Chennai,
Dated the 13th August, 2010.
H.
Copy to: Assessee/AO/CIT (A)/CIT/D.R./Guard file