Dismissed

Commissioner of Income Tax v. Yadvindra Public School Association

Punjab & Haryana HC9 Sept 2024ITA/253/2011

Case brief

AI extract

What is this about?

The High Court dismissed the revenue's appeal against the ITAT's order granting Section 12AA registration to Yadvindra Public School Association. Relying on Ananda Social and Educational Trust, the court held that for a registered educational institute, actual expenditure need not be proven at the stage of registration. The court found no error by the ITAT in applying the principle that genuine in

What did the court decide?

Compliance of the ITAT order passed expeditiously.

Commissioner of Income Tax Vs Yadvindra Public School… — Income Tax | Punjab & Haryana HC (2024)

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�� P resent appeal has been prefer r ed under Section 260A of th e Income Tax A ct, 1961 against the ITAT or d er dated 28.02.2011, passed i n ITA No. 109 4 /Chd/20, whereby the appeal w as preferred by the respondent - Yadvindra P u blic School Association, Patial a .

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�� T he respondent/assessee had challenged the refusal o f registration o f the association under section 12AA of the Act, passed by CIT , Patiala vide order dated 25.09.2009. The Commissioner of Income Ta x observed tha t the society had not been c a rrying on with any charitabl e activity as the society was not imparting e d ucation as a charitable purpos e within the m e aning of Section 2 (15) of the A ct. The society had already bee n granted appr o val under Section 10 (23)(vi) o f the Act but mere approval doe s not automati c ally entitle the assessee to reg i stration under section 12AA o f the Act. Furt h ermore, it was for the assesse e to show before the authoritie s that the soci e ty was carrying out charitable activities. The CIT relied upo n

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the judgment passed by the Supreme Court i n Municipal Corporation Delhi v. Children Book Trust ; (1992) 3 SCC 390 w herein, it was held that there i s no charity un l ess there is an element of subsi d y or alimonies for the poor an d needy. Wher e as, in the present case it is apparent from the accounts and ne t surplus gene r ated by the society, that ther e is no element of subsidy o r alimony invo l ved.

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�� T he Tribunal in appeal set aside the order of the CIT(A) relyin g on the judg m ent passed in Baba Gandha Singh Education Trust v. CIT Patiala , IT A No.357/Chandi/2010 & IT A No. 803/Chandi/2009. Th e relevant extr a ct of the said judgment is repro d uced as under:-

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"The observations of Hon'bl e Supreme Court quoted fro m para 82 of the aforesaid jud g ment to the effect that - "what we want to stress is where a s ociety or body is making syst e matic profits, even though that profit is utilized only for cha r itable purposes, yet it cannot be said that it could claim exe m ption" deserves to be read in conjunction with the exp r ess provisions of the third proviso to S. 10(23)(vi) of the Act which stipulate the retention o f 15 per cent of the profits of t he total income after quant if ication thereof, of the edu c ational institution earned in e a ch year provided 85 per cen t of the total income is spent for the objects of the society. Inf a ct, the judgment rendered by H o n'ble the Supreme Court in C hildren Book Trust case (supr a ) on the facts and in the circumstances of the case of the pe t itioner-society herein, is not at all applicable by virtue o f the applicability of the

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me c hanism contained in the third p roviso to S. 10(23(vi) of the A ct. It may be clarified that H o n'ble the Supreme Court had decided the case of Children B ook Trust (supra) under the D elhi Municipal corporation A c t, 1957 and had not dealt wit h the provisions of S. 10(23 (vi ) of the Act which are a co m plete code in itself, interalia p r oviding a mechanism for the utilization of surpluses and p rior to the utilization det e rmination of the existence of t h e educational institution sol e ly for educational purposes and not for making profit."

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�� T his Court in Commissioner of Income Tax, Patiala v. Baba Banda Singh Bahadur Education Trust, Fatehgarh Sahib; ITA No. 94 o f 2011 alongw i th Commissioner of Income-Tax, Patiala v. Young Scholar’s Educational Society, Barnala , ITA No. 21 of 2011 , while dismissing th e Appeal of th e revenue and upholding order o f ITAT further observed that th e Commission e r was required to examine the a foresaid factors while grantin g approval of r egistration under Section 10 ( 2 3C) of the Act and the sam e factors woul d also be required to be con s idered for the cancellation o f registration a l ready granted to the education a l institutions, while examinin g the case und e r Section 12AA of the Act, of c ourse, taking into consideratio n the condition s provided therein also.

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�� T he Supreme Court in Ananda Social and Educational Trust v . Commissioner of Income Tax and Anr ., 20 2 0 (17) SCC 254 laid down th e scope of Se c tion 12AA and observed tha t for the purpose of allowin g registration u n der Section 12AA of the Inco m e Tax Act ,1961, the authorit y shall examin e whether the object of the soci e ty is of charitable nature or not ,

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and whether t he activities being performed b y the society are genuine. Th e relevant para is quoted below:-

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“12. Since section 12AA p e rtains to the registration of t h e trust and not to assess of wh a t a trust has actually done, w e are of the view that the term 'activities' in the provision i n cludes 'proposed activities'. That is to say, a C ommissioner is bound to cons i der whether the objects of t h e trust are genuinely charitabl e in nature and whether the a ctivities which the trust propo s ed to carry on are genuine i n the sense that they are in line w ith the objects of the trust. I n contrast, the position wou l d be different where the C ommissioner proposes to canc e l the registration of a trust u nder sub-section (3) of section 12AA of the Act. There the C ommissioner would be bound t o record the finding that an a ctivity or activities actually ca r ried on by the trust are not g enuine being not in accordance with the objects of the t r ust. Similarly, the situation w o uld be different where the t r ust has before applying for reg i stration been found to have u ndertaken activities contrary to the objects of the trust."

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�� Thus, at this stage of registrati o n, the Commissioner of Incom e Tax is requir e d to examine the objectives of the trust and genuineness of it s activities.

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�� I n the present case, we find th a t the institute has been able t o satisfy that it has already been registered un d er Section 10 (23) (vi) to be a n educational i n stitute and Section 12AA pertains to registration of the trust . Since the re s pondent institute is a duly r e gistered educational trust an d whatever ear n ings it receives are also utilize d for the purpose of advancemen t of education, the institution could not have b e en denied the benefit of Sectio n 12AA as me n tioned in Ananda Social Educat i onal Trust's case (supra).

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�� W e, therefore, do not find any error committed by the Incom e Tax Appellat e Tribunal holding the responde n t entitled for registration unde r Section 12A A . The appeal is accordingly dismissed . Compliance of the orde r passed by the ITAT be now done expeditious l y.

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Commissioner of Income Tax v. Yadvindra Public School Association

Case brief

What is this about?

What did the court decide?

Commissioner of Income Tax v. Yadvindra Public School Association

Case brief

What is this about?

What did the court decide?

What the court decided

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