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Kalyan Educational Society Vs. Commissioner of Income Tax-Durgapur - (Income Tax Appellate Tribunal) (31 Jul 2020)

At the time of registration, authority must satisfy that, the objects are charitable in nature and activities being carried out are genuine


Direct Taxation

Present appeals preferred by the Assessee are against the separate orders of Commissioner of Income-tax (CIT) denying registration under Section 12AA of the Income-tax Act, 1961 and denial of approval under Section 80G of the Act. The Learned CIT, was of the opinion that, Assessee was receiving donation connected with the admission of the students and therefore, it has to be treated as collection of Capitation fees as held by the Hon'ble Supreme Court in TMA Pai Foundation Vs. State of Karnataka.

The Assessee is a registered society registered under the West Bengal Societies Registration Act, 1961 on 2nd February, 2005 and as per the MOA of the society, the Assessee is running educational institution not for profit. Since the activity of imparting education as well as 'Education' falls within the definition of charitable purpose, and the establishment of an educational institution is an activity of charity and expenditure incurred in establishing the educational institution, namely, acquisition of land, construction of building, etc. are all application of income for charitable activity, the said income would be construed as if it was generated in the course of carrying on the charitable activity. Therefore, such receipt/income received in the course of carrying on charitable activity was also eligible for exemption, provided the same was applied or set apart for educational purposes.

The Learned CIT misdirected himself by the wrong assumption that, Assessee has collected Capitation fees from the students for admission, which act of Assessee according to him was akin to sale of seats, which fact when contested and denied by the Assessee, the Learned CIT without even conducting a preliminary enquiry on this issue, however, stuck to his impression/assumption that, Assessee was indulging in Collection of Capitation Fees.

It is settled law that, at the time of registration, the authority need to satisfy himself that, the objects are charitable in nature and the activities being carried out are genuine, meaning thereby that the activities are in consonance for achieving the charitable objects and nothing else. Since, present Tribunal have seen from the objects of the Assessee society that "education" one of the main objects which is a charitable object/activity and the genuineness of the society stands established by the Assessee which is running educational institutions, which imparts engineering courses and is recognised by the All India Council for Technical Education as well as established Polytechnic College, present Tribunal is of the considered opinion that, Assessee society was eligible for grant of registration under Section 12AA of the Act.

The Learned CIT/the competent authority is directed to grant registration under Section 12AA of the Act. And regarding grant of approval for registration under Section 80G of the Act, is concerned, matter remitted back to Learned CIT/competent authority to examine whether the Assessee satisfies the conditions stipulated under Section 80G (5) read with Rule 11AA. Appeal of Assessee is partly allowed.


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