Income Tax Appellate Tribunal - Hyderabad
Mahindra Educational Institutions, ... vs Assessee on 28 November, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "A", HYDERABAD
BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER
AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
ITA No. 1338/Hyd/2014
Assessment year - N.A.
M/s. Mahindra Educational vs The Director of Income-tax
Institutions, Hyderabad (Exemptions)
PAN: AAICM5632K Hyderabad
Applicant Respondent
Appellant by: Sri T.S. Ajai
Respondent by: Smt. G. Aparna Rao
Date of hearing: 26.11.2014
Date of pronouncement: 28.11.2014
ORDER
PER ASHA VIJAYARAGHAVAN, JM:
This appeal by the assessee is directed against the order of the Director of Income-tax (Exemptions) [DIT(E)], Hyderabad dated 30.5.2014.
2. The assessee is a company incorporated u/s. 25 of the Companies Act, 1956 and the assessee-company is "private limited". The company applied for registration u/s. 12AA of Income-tax Act, 1961 vide application in Form 10A on 8.11.2013. The DIT(E) vide letter dated 5.3.2014 called for various informations regarding the activities of the assessee, the objects of the assessee-company, minutes and records of the company, the charitable nature of company and the details of beneficiaries. In response, the assessee company filed detailed information and explanations vide its reply letters dt. zo"
March 2014, 15th April 2014 and 12th May 2014 furnishing all the information called for by the DIT(E) and clarifying among other things that the assessee company is a charitable institution formed with the sole objective of promoting quality of primary and higher education in India. The assessee also resubmitted its Memorandum of 2 ITA No. 1338/Hyd/2014 M/s. Mahindra Educational Institutions ============================= Association and Article of Association after omitting relevant clauses permitting activities "abroad", which amendments were passed as special resolution in its EGM held on 25th March 2014. The DIT(E) also asked the management of the company to be present, in response to which Sri Rakesh Soni, Director of the Company, Rahul Bhuman, CEO and Mrs. Madhu Sarma, Registrar of the Institution appeared on 23.04.2014 and clarified that the Company has been incorporated with the sole charitable objective of promoting quality of primary and higher education in India.
3. However, the DIT(E) vide letter dt. 15.05.2014 referred to the name of the assessee-company i.e. "Mahindra Educational Institutions" and having regard to such name asked the assessee to clarify as to why it should not be construed as "several institutions/entities" and how the same can be granted registration u/s 12AA of the Income-tax Act, 1961. The operating portion of the letter dt. 15.05.2014 of the DIT(E) is reproduced below for reference:
"After considering the submissions made during the proceedings and your said application in Form No. 10A filed on 8-11-2013, it is pointed out that the name of the applicant in your case is shown as "MAHINDRA EDUCATIONAL INSTITUTIONS" mentioned in that application in Form No. 10A. From such very name, it indicates plurality of institution. In other words, that name suggests several institutions. However, in Section 11 of the Income Tax Act, 1961, which deals with exemption of income and Section 12A & Section 12AA which pertain to registration and the procedure for the same, there is reference to only "institution". In other words, the said term "institution" is used in singular sense. Under the circumstance and in view of such name used and also mentioned in your application, please explain as to why it should not be construed as several institutions j entities and having regard to the specific word used in Section 12A and 12AA of the Income Tax Act, 1961 how the same can be granted registration ujs 12AA of the Income Tax Act, 1961. You are requested to furnish your reply on 22.05.2014 at 11.30 AM, when your case is fixed for hearing. "3 ITA No. 1338/Hyd/2014
M/s. Mahindra Educational Institutions =============================
4. The assessee vide letter dt. 21.05.2014 clarified the issue and submitted that the assessee is a single legal entity and mere use of the name in plural does not make it multiple entities, that the name, "Mahindra Educational Institutions" is in fact singular in as much as the name is noun in English language and as per the construction of English grammar is always singular. Also that the Company is registered with one corporate number and one single permanent account number. The assessee also clarified that the word "institutions" was placed in the name only to identify different colleges operating in different locations forming part of one entity. The assessee therefore submitted that the registration u/s 12AA may be granted to it. The gist of the replies furnished by the assessee is as below:
1) The company was incorporated with the object of setting up and operating many colleges in different faculties viz., engineering, commerce, civil, computers, etc. Further, those colleges are to be set up across India at different locations. All these colleges are 'institutions' forming part of ONE entity. The public should be able to identify each and every college / institution as part of one entity, viz., Mahindra Education. The promoters felt it appropriate to name company as 'Mahindra Educational Institutions' as they propose to set up and operate many colleges and institutions under one umbrella.
2) However, it may be noted that the use of "s" after the Institution is not to bring plurality as per the construction of English grammar. It is more to serve as part of the name of NOUN as in the English language. Further, the names of companies and organizations are usually regarded as singular regardless of their ending.
3) We pray you Honour to appreciate that the registration u/s 12A is for the legal entity. The legal entity in 4 ITA No. 1338/Hyd/2014 M/s. Mahindra Educational Institutions ============================= this case is one and only one called "Mahindra Education Institutions". Under the umbrella of the Legal Entity, there could be several colleges or educational institutions. The registration envisaged under the Income Tax law is for the legal entity and hence, the use word Institutions will not cause any conflict with section 12AA.
5. The DIT(E), however, vide letter dated 30.5.2014 rejected contentions of the assessee and refused registration sought u/s. 12AA of the Act for the following reasons:
a) It is not possible to accept such contention for treating the applicant as a single entity with that name Mahindra Educational Institutions' as mentioned in the application in Form No. 10A.
b) So far as reference made by assessee to the names of some companies, incorporating words enterprises, industries, mills, etc., are concerned, it may be stated that such names are ending with the word 'Limited', thereby, signifying only one company. However, in the instant case, the name itself which ends with the word 'institutions', signifies existence of multiple institutions i.e. multiple entities.
c) It is stated by the applicant that, it has been registered with that name under the Companies Act, 1956. However, such name which clearly indicates cluster of institutions has to be kept in view, having regard to the provisions contained in section 11, 12A & 12AA of the Act, where there is reference to the word 'institution' i.e used as singular term.
d) Thus, as may be noticed, in all those sections in the Act, which are important in the context of registration u/s 12AA of the Act, the specific word used is 'institution' i.e., in a singular term. Further it may be mentioned that, the column no. 1 of the statutory Form No. lOA pertains to information, 'Name of 5 ITA No. 1338/Hyd/2014 M/s. Mahindra Educational Institutions ============================= the trust/institution in full'. Apart from this, in other parts of that statutory form, the word used is 'institution' i.e., in a singular term. Thus, the name of the applicant is significant, while considering an application in Form No. lOA for registration u/s 12AA.
e) The applicant should be a single entity.
f) The name "Mahindra Educational Institutions" clearly
indicates a cluster of such institutions i.e, several entities existing at the same time.
g) As per the statutory Form No. 10A, contained in the Income Tax Rules, 1962, the applicant has to be single institution i.e, single entity and also u/s 12A & 12AA of the Act, the applicant has to be single institution or single entity.
h) In view of such legal provisions, the multiple institutions, in this case, as per that name shown in the application filed in Form No. 10A, in my view, cannot be granted registration u/s 12AA of the Act.
i) To put it differently, to my mind, with such name, "Mahindra Educational Institutions", which clearly indicates cluster of institutions Le, multiple entities at the same time, it may not be permissible to grant registration u/s 12AA of the Act with the name.
6. Aggrieved, the assessee is in appeal before us.
7. The learned counsel Sri Ajay reiterated the arguments put forth before the DIT(E) before us.
8. Heard both parties. We are of the opinion that the word "institutions" was placed in the name only to identify different colleges in different locations as forming part of one entity. The name is indicative to the public that there was only single entity but 6 ITA No. 1338/Hyd/2014 M/s. Mahindra Educational Institutions ============================= it consists of different colleges/institutions forming part and operating under such single entity. Further, plurality is common Indian practice in names such as 'enterprises', 'industries', 'firms', 'projects', etc., which are used as singular noun rather than to bring more than one entity. The company had applied to the ROC for grant of name and then proceeded with incorporation of the company under the Company's Act, 1956. As submitted by the learned counsel even section 25 companies which are limited by shares and function not for profit have such plural names like Samana Educational Institutions, Al- Azhar Educational Institutions. We also find that under the Companies Act, 1956 only one corporate identity No. is allotted to the entity and there is only single Permanent Account Number. Therefore, there is no possibility of claiming registration granted u/s. 12AA for a single entity, by different entities simultaneously.
9. Further, the DIT(E) has not expressed adverse findings against the charitable nature of the assessee-company or genuineness of its activities .
10. The learned counsel brought our attention to pages 6 and 7 of the Paper Book where all the details have been discussed threadbare by the ITO (Hq), attached to the DIT(E). We find merit in the argument of the learned counsel that once the Commissioner is satisfied about the genuineness of the activities of the trust and objects of the trust, he shall grant registration. Only if the Commissioner is not satisfied with the objects of the trust and genuineness of the activities, he shall pass an order in writing refusing registration of the trust. On this issue, reliance was placed on the decision in the case of Manockjee Cowasjee Petit Charities vs. DIT(E), 21 taxmann.com 456 (Mum) (TM).
11. Hence the in the present case since the assessee has complied with all the conditions which are necessary for grant of registration u/s. 12AA and since we are of the opinion that 'institutions' is used as singular Noun rather than to bring more than one entity and also 7 ITA No. 1338/Hyd/2014 M/s. Mahindra Educational Institutions ============================= that Mahindra Educational Institutions is only a single entity but consists of different colleges/institutions operating under such single entity, we direct the DIT(E) to grant registration to the assessee- company u/s. 12AA of the Income-tax Act, 1961.
12. In the result, appeal of the assessee is allowed.
Pronounced in the open court on 28th November, 2014 Sd/- Sd/-
(P.M. JAGTAP) (ASHA VIJAYARAGHAVAN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, dated the 28th November, 2014
tprao
Copy to:
1. M/s. Mahindra Educational Institutions, Tech Mahindra Ltd., Survey No. 62/1A, Bahadurpally, Jeedimetla, Hyderabad-43.
2. The Director of Income-tax (Exemptions), 3rd Floor Annexe, Aayakar Bhavan, Basheerbagh, Hyderabad.
3. The DDIT(E)-II, Hyderabad.
4. The DR, A-Bench, ITAT, Hyderabad.