Income Tax Appellate Tribunal - Amritsar
Bhai Mastana Singh International ... vs Commissioner Of Income Tax ... on 29 October, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR
BEFORE SH. B.R. BASKARAN, ACCOUNTANT MEMBER AND
SH. N.K.CHOUDHRY, JUDICIAL MEMBER
ITA No.485/Asr/2018
Assessment Year: Nil
Bhai Mastan Singh Vs. CIT(Exemptions)
International Educational & Chandigarh
Charitable Society
Malout Road, Near Bus Stand
Muktsar
[PAN:AABTB 0588R]
(Appellant) (Respondent)
Appellant by : Sh. Ashwani Kalia (Ld. CA)
Respondent by: Sh. Sandeep Chauhan (Ld. CIT- DR)
Date of hearing: 28.08.2019
Date of pronouncement: 29.10.2019
ORDER
PER N.K.CHOUDHRY, JM:
The instant appeal has been preferred by the Appellant/Society against the order dated 31.08.2018 impugned herein passed by the Ld. CIT(Exemptions), Chandigarh, u/s 80G(vi) of the I.T. Act, 1961 (hereinafter called as 'the Act') whereby the Ld. CIT(Exemptions) denied the approval sought u/s 80G of the Act.
2 ITA N0.485/Asr/ 2018 Bhai Mastan Singh International Educational & Charitable Society vs. CIT(E)
2. The brief facts of the case are that the Appellant has moved an application on dated 21.08.2018 before the Ld. CIT(E), Chandigarh and sought approval u/s 80G of the Act, which was taken into consideration by the Ld. CIT(E) by fixing the date on 22.06.2018 and thereafter detailed questionnaire was dispatched to the appellant for filing reply to the certain queries by 2nd July, 2018 as detailed in para No.2 of the order. The Appellant replied the queries, thereafter the Ld. CIT(E) again raised additional queries as mentioned in para No.3 of the order, which were also replied by the appellant and ultimately the Ld. CIT(E) rejected the application of the appellant society u/s 80G of the Act by holding as under:
"The applicant society in response to the above queries submitted the detailed reply vide letter dated 28.08.2018. Further, on perusal of the financial statements it was seen that the applicant society's aggregate annual receipt has been gradually increasing year after year. The financial statements also reveal that the applicant is continuously focusing on creation of assets. The quantum of the current assets and addition in fixed assets are in huge amount through the accounting period ending on March, 2015 to March, 2017, the tabulated extract of the same is under:-
F.Y. 2014-15 2015-16 2016-17
Gross Receipts 2,73,54,559/- 3,04,06,650/- 3,30,09,970/-
Current Assets 84,89,611/- 1,13,45,962/- 84,08,802/-
Additions in Fixed 58,56,755/- 58,46,648/- 1,01,47,832/-
Assets.
The applicant has received income by way of Admission, Examination & tuition fee to the tune of Rs. 2,73,54,559/-, Rs. 3,04,06,650/- & Rs. 3,30,09,970/- during the F.Y. 2014-15, 2015- 16 & 2016-17. The purpose of legislature to include this section in the Act is to promote and encourage people for making donations to the societies/trusts which otherwise lacks funds for performing charitable activities. On the contrary, the trust has accumulated a large fund in the form of current assets and fixed assets. Moreover, the finances also reflect no palpable financial stress as the society is
3 ITA N0.485/Asr/ 2018 Bhai Mastan Singh International Educational & Charitable Society vs. CIT(E) in receipt of excess of Rs. 3 crores and created fixed assets to the tune of Rs. 1.10 crores and current assets of Rs. 84 lakhs.
4. Further, the applicant was granted affiliation by Central Board of Secondary Education, Delhi. As per the CBSE affiliation guidelines under the clause 11 of the bye laws fees "No capitation fee or voluntary donations for granting admission in the school or for any other purpose should be charged/collected in the name of the school" which clearly shows that while granting affiliation CBSE specifically precludes indulgence/acceptance of donation. The applicant claiming to pursue the limb of education has to adhere strictly to all conditions/regulations related to the field of education. It's also pertinent that the societies 'running schools have invariably claimed and accepted as any other educational institution as per the scheme of the Act. Also, there are no previous instances of donation as well except Rs.6,000/- during F. Y. 2016-17.
5. Keeping, in view all of the above, it is safe to conclude that the applicant failed to provide a cogent rationale for seeking donations that substantiate the need of donations in absence of which the real purpose of the applicant is not established. It is also pertinent to mention that even though the applicant has a 12AA registration, that being a pre-condition but not a sufficient condition for approving exemption to donations, the case for approval is not made out. In the light of the above, I have no option but to deny the approval to the applicant u/s 80G of the Income Tax Act, 1961."
3. Being aggrieved, the appellant preferred the instant appeal and raised the arguments in support of its case.
4. On the contrary, the Ld. DR submitted that the order under challenge does not require any interference as the same is based on the logical reasoning and in any sense cannot be termed as perverse or improper or illegal.
5. Having heard the parties and perused the material available on record. The Ld. CIT(E) mainly emphasized that from the financial statements it appears that the appellant's aggregate annual receipt has been increasing gradually year after year and the continuously focusing on creation of assets . The Ld. CIT(E) further observed that the applicant has received 4 ITA N0.485/Asr/ 2018 Bhai Mastan Singh International Educational & Charitable Society vs. CIT(E) income by way of Admission, Examination & tuition fee to the tune of Rs. 2,73,54,559/-, Rs. 3,04,06,650/- & Rs. 3,30,09,970/- during the F.Y. 2014-15, 2015-16 & 2016-17. The purpose of legislature to include this section in the Act is to promote and encourage people for making donations to the societies/trusts which otherwise lacks funds for performing charitable activities. On the contrary, the trust has accumulated a large fund in the form of current assets and fixed assets. Moreover, the finances also reflect no palpable financial stress as the society is in receipt of excess of Rs. 3 crores and created fixed assets to the tune of Rs. 1.10 crores and current assets of Rs. 84 lakhs. The Ld. CIT(A) further observed that the applicant was granted affiliation by Central Board of Secondary Education, Delhi. As per the CBSE affiliation guidelines under clause 11 of the bye laws i.e. fees "No capitation fee or voluntary donations for granting admission in the school or for any other purpose should be charged/collected in the name of the school" which clearly shows that while granting affiliation CBSE specially precludes indulgence/acceptance of donation. The Ld. CIT(E) finally concluded that it is safe to conclude that the applicant failed to provide a cogent rationale for seeking donations that substantiate the need of donations in absence of which the real purpose of the applicant is not established.
6. We have applied our mind independently to the peculiar facts and circumstances of the case. The Ld. CIT(E) while declining the application u/s 80G of the Act has held that the applicant is continuously focusing on creation of assets and aggregate annual receipt has been gradually increasing year after year and has accumulated fund in the form of current and fixed assets and from the financial statements, no palpable financial stress as the society is in receipt of excess of Rs.3 crores and created fixed assets to the tune of Rs.1.10 crores and current assets of Rs.84 lakhs.
5 ITA N0.485/Asr/ 2018 Bhai Mastan Singh International Educational & Charitable Society vs. CIT(E)
7. The Apex Court in the case of Queen's Educational Society vs. CIT [2015] 85 SCC 47 summarized the legal position as under:
"11. Thus, the law common to Section 10(23C) (iiiad) and (vi) may be summed up as follows:
Where an educational institution carries on the activity of education primarily for educating persons, the fact that it makes a surplus does not lead to the conclusion that it ceases to exist solely for educational purposes and becomes an institution for the purpose of making profit.
The predominant object test must be applied - the purpose of education should not be submerged by a profit making motive.
A distinction must be drawn between the making of a surplus and an institution being carried on "for profit". No inference arises that merely because imparting education results in making a profit, it becomes an activity for profit.
If after meeting expenditure, a surplus arises incidentally from the activity carried on by the educational institution, it will not be cease to be one existing solely for educational purposes.
The ultimate test is whether on an overall view of the matter in the concerned assessment year the object is to make profit as opposed to educating persons."
The Hon'ble Apex Court clearly held that a surplus does not lead to the conclusion that it ceases to exist solely for educational purposes and becomes an institution for the purpose of making profit. The predominant object test must be applied - the purpose of education should not be submerged by a profit making motive. Further the activities of the institutions be looked at carefully and if they are not genuine, or are not being carried out in accordance with all or any and approval has been given, such approval and exemption must forthwith withdrawn.
6 ITA N0.485/Asr/ 2018 Bhai Mastan Singh International Educational & Charitable Society vs. CIT(E) In our considered view creation of assets in the instant case does not come into play for rejection of application u/s 80G of the Act, because it is not the case of revenue department that creation of assets is not in sync with the provisions of the law as applicable thereto and the appellant has ceased to be one existing solely for educational purposes and the object of the appellant society is to make profit as opposed to educating persons.
8. Next ground of rejection by the Ld. CIT(E) is that as per the CBSC affiliation guidelines under the clause 11 of the bye laws i.e. fees was that "No capitation fee or voluntary donations for granting admission in the school or for any other purpose should be charged/collected in the name of the school" which clearly shows that while granting affiliation CBSE specially precludes indulgence/acceptance of donation. In our considered view the restrictions set out by the CBSC Board were required considerations in view of provisions of sec.80G of the Act, which the Ld. CIT(E) failed to do so . The Ld CIT(E) did not analyze the relevant provisions and parameters set out for consideration of application u/s 80G of the Act, hence, for the end of justice, we are inclined to set aside the order passed by the Ld. CIT(E) and remand back this case to the file of the Ld. CIT(E) for decision afresh. In case the Ld. CIT(E) will find guidelines/bye laws of CBSE Board contrary to Sec.80G of the Act and If the applicant society intends not to follow the guidelines/bye laws of CBSE Board and to forego affiliation of the CBSE, then the Ld. CIT(E) would be at liberty to consider the application as per peculiar facts and circumstances of the case. Consequently the order passed by the Ld. CIT(E) is set aside and the case is remanded to the file of the Ld. CIT(E) for decision afresh, suffice to within 06 months of this order, while affording reasonable opportunities of being heard to the appellant.
7 ITA N0.485/Asr/ 2018 Bhai Mastan Singh International Educational & Charitable Society vs. CIT(E)
9. In the result, the appeal filed by the appellant stands allowed for statistical purposes.
Order pronounced in the open Court on 29/10/2019.
Sd/- Sd/-
(B.R.BASKARAN) (N.K.CHOUDHRY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated:29/10/2019.
/PK/ Ps.
Copy forwarded to:
1.The Appellant
2.The Respondent
3.The CIT
4.Then CIT(Appeals)
5.SR DR, I.T.A.T. Amritsar
6.Guard File
True Copy
By Order