Income Tax Appellate Tribunal - Chennai
Vidhya Sikshaa Educational And ... vs Assessee on 16 March, 2011
And IN THE INCOME TAX APPELLATE TRIBUNAL
Bench 'C' Chennai
Before Shri Hari Om Maratha, J.M. and
Shri Abraham P. George, AM
.....
I.T.A. No. 1331/Mds/2010
Assessment Year 2009-10
Vidhya Sikshaa Educational and Vs. The C.I.T - II
Charitable Trust Madurai
Podikaman Vadi Village
Siddayankottai Post
Dindigul Distt.
(Appellant) (Respondent)
Assessee by : Shri Subbarayan
Department by : Shri Tapas Kumar Dutta
ORDER
Per Abraham P. George, AM
In this appeal filed by the assessee, it assails the order of the ld. CIT-II, Madurai, whereby he refused to grant registration u/s 12AA of the Income-tax Act, 1961 [in short, the Act]. As per the assessee, the reasons cited by the ld. CIT(A) for refusing Page 2 of 14 I.T.A. No. 1331/Mds/2010 registration was not relevant for the purpose of grant of registration U/S 12AA of the Act.
2. Assessee was represented by Shri Subbarayan. The Bench queried Shri Subbarayan as to under what capacity he was appearing on behalf of the assessee. Thereupon, he replied that he was appearing as an authorized representative. He further submitted that he was a retired Deputy Commissioner of Income tax and an authorized representative as defined under sub-section 288(1) of the Act. Quoting clause (v) of sub-section (1) of section 285, Shri Subbarayan submitted that he was a person who had passed the Accountancy Examination recognized by the Central Board of Direct Taxes. Attention was invited to Rule 50 of the Income-tax Rules, 1962 [In short, the Rules] which sets out the Accountancy examinations which were recognized. According to him, Sub-rule (4) of Rule 50, clearly mentioned that the Departmental Examinations conducted by or on behalf of the Central Board of Directed Taxes was one of those examinations which were recognized and he, having passed such an examination, Page 3 of 14 I.T.A. No. 1331/Mds/2010 was eligible to appear before this Tribunal as an authorized representative.
3. Per contra, the ld. D.R. submitted that as per Rule 54 of the Rules, any person who wished to have his name entered as an authorized income tax practitioner in the register, was obliged to apply to the Chief Commissioner within whose area of jurisdiction he was practicing. According to him, Shri Subbarayan was yet to obtain such registration as specified in Rule 55 of the Rules.
4. We have heard the parties and have also seen the relevant sections and rules. To resolve the issue, we reproduce sub-sections (1) and (2) of section 288 of the Act hereunder:
(1) Any assessee who is entitled or required to attend before any income-tax authority or the Appellate Tribunal in connection with any proceeding under this Act otherwise than when required under section 131 to attend personally for examination on oath or affirmation, may, subject to the other provisions of this section, attend by an authorised representative.Page 4 of 14
I.T.A. No. 1331/Mds/2010 (2) For the purposes of this section, "authorised representative" means a person authorised by the assessee in writing to appear on his behalf, being -
(i) A person related to the assessee in any manner, or a person regularly employed by the assessee; or
(ii) Any officer of a Scheduled Bank with which the assessee maintains a current account or has other regular dealings; or
(iii) Any legal practitioner who is entitled to practise in any civil court in India; or
(iv) An accountant; or
(v) Any person who has passed any accountancy examination recognised in this behalf by the Board; or
(vi) Any person who has acquired such educational qualifications as the Board may prescribe for this purpose; or (via) Any person who, before the coming into force of this Act in the Union territory of Dadra and Nagar Haveli, Goa, Daman and Diu, or Pondicherry, attended Page 5 of 14 I.T.A. No. 1331/Mds/2010 before an income-tax authority in the said territory on behalf of any assessee otherwise than in the capacity of an employee or relative of that assessee; or
(vii) Any other person who, immediately before the commencement of this Act, was an income-tax practitioner within the meaning of clause (iv) of sub- section (2) of section 61 of the Indian Income-tax Act, 1922 (11 of 1922), and was actually practising as such. Explanation: In this section, "accountant" means a chartered accountant 2254 within the meaning of the Chartered Accountants Act, 1949 (38 of 1949), and includes, in relation to any State, any person who by virtue of the provisions of sub-section (2) of section 226 of the Companies Act, 1956 (1 of 1956), is entitled to be appointed to act as an auditor of companies registered in that State.
5. What we can understand from sub-section (1) of section 288 is that an assessee, who is entitled to appear before this Tribunal, can attend through his authorized representative. Authorized representative is defined in sub-section (2) of section 288 and by virtue of clause (v) thereof any person who has passed any Page 6 of 14 I.T.A. No. 1331/Mds/2010 Accountancy examination recognized by the Board is an "authorized representative". Rule 50 of the Income-tax Rules specifies the examinations recognized for the purpose of clause (v) of sub-section (2) to section 288. Such accountancy examinations recognized are as under:
(1) The National Diploma in Commerce awarded by the All-
India Council for Technical Education under the Ministry of Education, New Delhi, provided the diploma-holder has taken Advanced Accountancy and Auditing as an elective subject for the Diploma Examination.
(2)Government Diploma in Company Secretaryship awarded by the Department of Company Affairs, under the Ministry of Industrial Development and Company Affairs, New Delhi.] [(2A) Final Examination of the Institute of Company Secretaries of India, New Delhi.] [(3) The Final Examination of the Institute of Cost and Works Accountants of India constituted under the Cost and Works Accountants Act, 1959 (23 of 1959).] [(4) The Departmental Examinations conducted by or on behalf of the Central Board of Direct Taxes for [Assessing Officers], Class I or Group 'A', Probationers, or for [Assessing Officers], Class II or Group 'B', Probationers, or for promotion to the post of [Assessing Officers], Class II or Group 'B', as the case may be.] Page 7 of 14 I.T.A. No. 1331/Mds/2010 [(5) The Revenue Audit Examination for Section Officers conducted by the Office of the Comptroller and Auditor General of India.]
6. By virtue of Sub-rule (4) of Rule 50, departmental examinations conducted by or on behalf of CBDT is recognized for the purpose of clause (v) of sub-section (2) to section 288 of the Act. There is no dispute raised by the ld. D.R. on the claim of Shri Subbarayan that he had passed such departmental examination while in service. Now coming to the contention of the ld. D.R. that every authorized representative, for appearing before this Tribunal had to apply to the Chief Commissioner within whose area of jurisdiction he was practicing, in accordance with Rule 54 of the Rules and obtain a certificate of registration as per Rule 55, we are unable to accept. Rule 54 of the Rules is reproduced as under:
54. (1) Any person who wishes to have his name entered as an authorized income-tax practitioner in the register shall apply to the [Chief Commissioner or Commissioner] within whose area of jurisdiction he has been practicing. The application shall be made in Form No. 39 and shall be accompanied by documentary evidence regarding his eligibility for income-tax Page 8 of 14 I.T.A. No. 1331/Mds/2010 practice under clause (v) or clause (vi) 2[or clause (via)] or clause (vii) of sub-section (2) of section 288.
(2) The applicant shall also furnish such further information as the [Chief Commissioner or Commissioner] may require in connection with the disposal of the application.
7. As per this Rule, a person who wishes to have his name entered as an authorized income tax practitioner in the register, has necessarily to apply to the Chief Commissioner within whose area of jurisdiction he was practicing. Obviously a person who did not wish to have his name so entered, need not make any such application at all. Authorized Income-tax practitioner is a nomenclature which does not appear anywhere in section 288 of the Act. It finds a mention in Part XI and Rule 49 of the Rules only. Said rule reads as under:
In this Part--
(a) "authorized income-tax practitioner" means any authorized representative as defined in clause (v) or clause (vi) or clause (vii) of sub-section (2) of section 288;Page 9 of 14
I.T.A. No. 1331/Mds/2010
8. Thus as per clause (a) of Rule 49, an "authorized income-tax practitioner" is any authorized representative as defined in clause
(v) or clause (vi) or clause (vii) of sub-section (2) of section 288 for appearing before this Tribunal. It cannot be read to mean that an authorized representative as defined in sub-section (2) has to get himself registered as an authorized income-tax practitioner. Sub- section (2) of section 288 does not say that the authorized representative shall also be an authorized I.T. practitioner registered under Rules 54 and 55 of the Rules. The right given in this respect by the Act cannot be diluted by Rules nor can it be restricted by Rules, by specifying a procedure for registration. The right given to an assessee to appoint an authorized representative who has the qualification to become authorized representative as defined under the Act cannot be denied. In other words, a person having the qualification mentioned under the Act cannot be stopped from appearing before this Tribunal on behalf of the assessee. We are, therefore, of the opinion that Shri Subbarayan is authorized under the Act to appear before this Tribunal as authorized Page 10 of 14 I.T.A. No. 1331/Mds/2010 representative and objection of the department in this regard is rejected.
9. Having dealt with the initial objection raised, we now proceed with the merits of the appeal. Reasons why the ld. CIT denied registration u/s 12AA appears at para 7 of his order which is reproduced hereunder:
"7. I have carefully considered the submission of the Authorised Representative and the absence of original trust deed, the amended deed cannot be accepted as the original deed more so, when original name and address of the trust has been changed by the trust on its own without seeking clearance from the Income Tax Department. Secondly, 25 persons have initially invested in land by contributing entire money in cash and similarly they have brought in a sum of Rs.12 lakhs in the trust by bringing in Rs. 50,000/- in cash for construction of the school. Many of the trustees do not have taxable income and investment made by them is questionable in their respective hands. Thirdly, the trust is charging exorbitant fees as school fees and is spending only a small part towards the salary of the Page 11 of 14 I.T.A. No. 1331/Mds/2010 teachers and other related expenses. The school is generating substantial surpluses year to year which are being utilized for the construction of the building of the school. It is apparent that no charitable activity has been carried out by the trust and it is run with profit motive only. Lastly, the trust is also running hostel and transport services which are not part of education activity and the trust is making profit on these activities also. In view of various defects as pointed out above, I am of the view that the applicant trust is not eligible for grant of registration u/s.12AA of the Act. Therefore, its application for registration is hereby rejected."
10. According to the ld. CIT, the amendment to the original trust deed could not be accepted where original name and address of the trust was changed without seeking prior clearance from the Income- tax department. We cannot see in any of the sections 11, 12 and 13 any provision which says that an assessee cannot make any changes of the like mentioned, without getting prior clearance from the Income tax department. Related Rule 17A, 17B and 17C of the I.T. Rules also do not mention anywhere that an assessee has to get any previous sanction from the I.T. department before effecting any Page 12 of 14 I.T.A. No. 1331/Mds/2010 such amendments. In our opinion, the department cannot fasten on the assessee a duty more than what has been prescribed under the statute and by doing so, the department was taking up the role of a law making authority and indulging in acts which are ultra vires the powers vested on it. It is to be noted that this was the first application ever moved by the assessee for such a registration. Second reason cited by the ld. CIT is that 25 persons had initially invested in land by contributing entire money in cash and further brought in a sum of Rs. 25 lakhs. According to him, many of the trustees did not have taxable income and investments made by them were questionable in their respective hands. We find that the Act specifies a methodology where anonymous receipts are received by a trust. Section 115 BBC of the Act specify a method for taxing anonymous donations. Thus even if we consider that the trustees were not having any wherewithal to contribute the sums mentioned and even if we treat such donations as coming from anonymous sources, it would not be reason to deny registration u/s 12AA of the Act. Third reason cited by the ld. CIT is that the trust was charging exorbitant amounts as school fees and was spending only a small part towards the salary of the teachers and other related expenses. Page 13 of 14
I.T.A. No. 1331/Mds/2010 This reasoning, in our opinion, could be relevant only if running of the school was incidental to the running of the main objects of the trust. When education itself was the main object, running of a school could never be considered as incidental. There is no finding by the ld. CIT that any excess or surplus was used or diverted, for any purpose other than for educational needs. On the other hand, there is a clear finding that the funds were used for construction of the building of the school. Where education is itself is charitable u/s 2(15) of the Act, construction of the building to carry on such education, or in other words spending money for raising necessary infrastructure would also be very much charitable. The final finding of the ld. CIT is that the trust was running hostel and transportation services, and such activities were not part of its education activity and that the trust was making profit on these activities. This view is also incorrect in our opinion. A school has to have hostel and a mode of transporting the students. Surplus if any generated, as long as it was used for educational objects would not make the institution non charitable. Thus none of the reasons cited by the ld. CIT were relevant for the purpose of considering the application for registration u/s 12AA of the Act. We are of the opinion that such Page 14 of 14 I.T.A. No. 1331/Mds/2010 registration was unjustly denied to the assessee. Order of the ld. CIT is quashed and he is directed to grant registration sought by the assessee trust.
11. In the result, appeal of the assessee stands allowed.
Order pronounced in the open court on 16.03.2011.
Sd/- Sd/-
(HARI OM MARATHA) (Abraham P.George)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Chennai,
Dated the 16th March 2011.
VL
Copy to:
Assessee/AO/CIT (A)/CIT/D.R./Guard file