Allowability of registration u/s 12AB as nominal amount charged for functioning Educational Institution was not Commercial Activity

Aarambh Foundation Vs CIT (ITAT Indore)

Conclusion: Mere charging a nominal amount for smooth functioning of educational institution and trust could not called to be a part of commercial activity, and therefore, CIT(E) was directed to grant registration u/s 12AB to assessee.

Held: Assessee filed an application for registration u/s 12AB which was rejected by the CIT(E) on the ground that the activities of  assessee society were commercial in nature as assessee was charging against the services provided by it. Assessee filed an appeal against CIT(E) order but there was a delay of 93 days. Assessee filed an application for condonation of delay explaining it as inadvertence and bonafide mistake which was not opposed by the department. CIT(E) had conducted physical verification report to verify the objects and activities of assessee. In report of the spot verification of CIT(E) vide letter had pointed out that assessee was engaged in the consultancy services, sale of training material, various training seminars & workshops on payment basis, running computer classes and women stitching classes Orbit Mall, A.B. Road Indore. The amounts received by assessee on various heads also clear from the audit report as well as ledger account submitted by assessee therefore, it was held that activities carried out by assessee were commercial in nature.  CIT(E) had not disputed the genuineness of the activities of the assessee and also not doubted the activity and evidence which was produced by the assessee comparison of details as well as audited accounts for preceding three assessment years. Even the objects of the assesse society were not held as not charitable therefore, the twin conditions as required u/s 12AB were satisfied that assessee’s activities were genuine and the objects of assessee society were charitable in nature. It was held that the trust or education institute was running with a nominal fee to cover cost on account of its activities that could not be held to be a commercial activity. Sometime trust or the other institution did not get complete donations either from public or from the government. In that case, if those trusts or education institutes charging nominal amount of fee in order to carrying out its activities in a smoother way, this could not be called a part of commercial activities. Accordingly, CIT(E) was directed to grant registration u/s 12AB to assessee.

FULL TEXT OF THE ORDER OF ITAT INDORE

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