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Trust imparting education irrespective of caste, creed & religion entitled to registration u/s 12AA

DIT (E) was not justified in forming an opinion that the objects of the assessee are for a specific community being violative of the provisions of s. 13(1)(b) of the Act. As a matter of fact, the assessee has been serving the public irrespective of caste, creed and religion by imparting education and, thus, it is entitled to registration u/s 12AA of the Act.

IN THE ITAT BANGALORE BENCH ‘A’

Tunbridge English High School Education Society

versus

Director of Income-tax (Exemption), Bangalore

IT Appeal No. 821 (Bang.) of 2011

[Assessment year 2011-12]

August 31, 2012

ORDER

George George K, Judicial Member 

This appeal of the assessee is directed against the order of the Director of Income-tax (Exemption), Bangalore – DIT(E) – dated 9.8.2011 in rejecting registration u/s 12AA of the Act.

2. The assessee had raised seven grounds. However, all the grounds relate to a solitary issue, namely:

“that the DIT (E) grossly erred in rejecting the application of the assessee Institution u/s 12AA of the Act by ignoring the main and predominant object of the assessee.”

3. Briefly stated, the facts of the issue are as under:

The assessee – trust is running an educational Institution. The assessee had filed an application before the DIT (E) for registration u/s 12AA of the Act on 18.3.2011. On verification of the particulars furnished by the assessee – trust, the DIT (E) had observed that the Memorandum of Association and Articles of Association contained the following objects which were, according to the DIT (E), confined for the benefits of a particular community:

(a)  To conduct on Christian principles and as an expression of Christian service by Tunbridge English High School;

(b)  To ameliorate the educational backwardness of Anglo Indians retaining English as the medium of instruction to preserve the employment of English as such medium.

4. After due consideration of the contentions of the learned AR of the assessee and also placing reliance in the cases of (i) Ganjam Nagappa & Son Trust v. DIT [2004] 269 ITR 59; and (ii) Shubhram Trust [ITA No.380/2009 dated 30.5.2011] of the Hon’ble jurisdictional High Court, the DIT (E) had observed that the objects of the present case under consideration were for the benefit of a particular community which attracts the provisions of s. 13(1) (b) of the Act. Elaborately dealt with the provisions of s. 13 (1)(b) of the Act, the DIT (E) had observed thus:

“5. The Explanation 2 to section 13(1)(b) will not be applicable to the facts of the present case since the Anglo Indian Community is not covered by the said Explanation. Hence, the benefit under section 11 & 12 will not be available in this case. In this connection, reliance is placed on the decision of the Honourable Supreme Court in the case of M/s Palghat Shadi Mahal Trust (254 ITR 212) wherein it has been held that in case of Muslim community which was declared as backward community by the Kerala Govt, the benefit of section 11 will not be available as it was state specific.

6. Considering the facts and circumstances of the case mentioned above and also as the objects of the society are for a specific community being violative of the provisions of section 13(1)(b) of the IT Act, the application for registration u/s 12AA is hereby rejected.”

5. Aggrieved, the assessee trust has come up with the present appeal. During the course of hearing, submissions made by the learned AR are summarized as under:

 (i)  that the assessee institution has been imparting education from the beginning and its only activity in terms of its object 4(c) which reads as under:

‘(c) To maintain a high standard of discipline, excellence and efficiency in the administration of teaching and training imparted at the said Institution calculated at attainment of high qualities of a liberal yet practical education in its pupils and students and turning out well integrated and useful citizens of our country and aware of the needs of our rural and urban underprivileged students.’

(ii)  that the institution has been open to all students at fees fixed by the State authorities and imparting quality and standard education;

(iii)  that the object of the assessee has been only education and 100% of the income was being applied for educational purposes; and that since imparting education is a charitable purpose per se in terms of s. 2(15) of the Act, prima facie the assessee should have been granted registration in terms of s. 12AA(1) of the Act;

   –  that the DIT (E) had failed to appreciate that s. 12A was only an enabling provision and consequently he had to only satisfy as to whether there were objects charitable in nature and the activities of the assessee were genuine;

   –  that indisputably the activities of the assessee-institution from its inception, there were no activities indulged in otherwise than for charitable purposes; &

   –  that assuming that in future any religious activities might be carried on by the assessee, it shall be for the AO to examine such things and deny exemption for that particular year, but, it cannot be a reason for denial of registration u/s 12AA (1).

   –  relies on the case laws:

 (iDIT (E) v. Garden City Educational Trust [2011] 330 ITR 480 (Kar); &

(ii)  Sanjeevamma Hanumanthe Gowda Charitable Trust v. DIT (E) [2006] 285 ITR 327 (Kar)

6. On the other hand, the learned DR supported the stand of the DIT (E). The submissions of the learned D R are summarized as under:

 (i)  that the DIT(E) had relied on the decision reported in 269 ITR 59 to support the view that registering authority must be satisfied both, namely (a) the charitable character; and (b) the genuineness of its activities as one of it cannot substitute the other;

(ii)  that the DIT (E) at the time of registration should only be satisfied with the genuineness of activity and need not resort to s. 13 which is the domain of the AO to be applied at the time of assessment;

Relies on the case law: DIT v. Garden City Educational Trust [2011] 330 ITR 480 (Kar);

(iii)  rejecting the assessee’s contention that registration/exemption cannot be denied on the ground only that one of the many charitable objects was pursued by the trust, it was argued that merely because a charitable object has been pursued, the existence of non-charitable objects in the Memorandum cannot be ignored/overlooked to grant registration as charitable trust;

– that the DIT (E) was bound to examine the objects of the assessee as embodied in the Memorandum of Association and in the present case, there were no main and ancillary objects and merely because one or more objects have not been pursued so far, does not mean that registration should be granted, assuming, such non-charitable objects would never be pursued;

Relines on the case laws: 277 ITR 578 (SC) & 295 ITR 437 (AP);

(iv)  that it is an established law that once registration u/s 12A/12AA is granted, it is a fait accompli and the AO cannot thereafter examine or probe into the objects of the trust;

Relies on the case laws:

 (a)  300 ITR 214 (SC)

 (b)  335 ITR 575 (Guj.)

   –  that if registration is granted with a non-charitable object by the DIT (E), assuming that the assessee had not pursued such objects, the AO cannot question the application of income to such objects during assessment;

   –  that grant of registration to a trust or society was to a charitable society, depending both on the stated objects and genuine activities and not an ‘educational society’ or medical society to pursue only specific objects to the exclusion of other objects which are not charitable;

(v)  rejecting the assessee’s claim that the Anglo Indian is a minority community under the Constitution and, thus, the objects to benefit such community cannot be faulted with to deny registration u/s 12AA of the Act, it was contended that Anglo Indian community is not a religious group or a linguistic minority enjoying privilege of protection under Article 30(1) of the Constitution and that the community has not been identified as an under-privileged class anywhere in India and as enlisted in Explanation to s 13(2) (b) of the Act.

6.1 In conclusion, it was argued that the very first object of the Society to conduct Christian principles was nebulous and raised doubts about the secular charitable objects. Thus, pursuit of religious faith and expression through the society is not prohibited in law and in such case, registration could only be granted as ‘religious and charitable society.’

7. Refuting the Revenue’s contentions that the School is confined for the benefit of a particular community, viz., the Anglo Indian Community and that too, to conduct on Christian principles, the learned A R submitted that the premises on which the DIT (E) based his order of rejection is ill-conceived for the following reasons:

 (i)  that the assessee’s institution has been imparting education following ICSC Syllabus from its inception and its activity has been in conformity with its object 4(c) cited supra;

   –  that though the School unaided, it has been open to the students of all communities at the fees fixed by the State Authorities and imparting quality and standard education; and that the object of the assessee has been only education and hundred per cent of the income is being applied for educational purposes;

   –  that since imparting education is a charitable purpose per se in terms of s. 2 (15) of the Act, prima facie the assessee is eligible for registration in terms of s. 12AA (1) of the Act;

   –  that the DIT (E) had failed to appreciate that s. 12A was only an enabling provision and consequently, the DIT (E) had only to satisfy himself as to whether there were objects charitable and the activities of the assessee were genuine;

   –  that the activities of the assessee have been admittedly genuine from the inception of the institution and the past records reveal that there were no activities indulged in otherwise than for charitable purpose and surprisingly, the DIT (E) had not cited any such instance to support his view that the assessee was carrying on any religious activities;

   –  that the ratios laid by the Hon’ble jurisdictional High Court in the cases of (i) DIT v. Garden City Educational Trust [2010] 191 Taxman 238 (Kar.) and (ii) Sanjeevamma Hanumanthe Gowda Charitable Trust v. DIT (Exemptions) – [2006] 285 ITR 327 are fully covered in the assessee’s case;

(ii)  With regard to the DR’s contentions that –

 (a)  the objects of the assessee include other objects, once registration is granted, the assessee can claim that such registration enables the assessee to apply its income to any object including non-charitable object and, consequently, the application u/s 12AA of the Act was rightly rejected;

 (b)  the DIT (E) had relied on the provisions of s. 13(1)(b) of the Act that the assessee is for a particular community, viz., the Anglo Indians and also spreading Christian principles; &

 (c)  once such objects are approved, then the assessee would claim that such approval for applying its income on other purposes also.

7.1 It was submitted by the learned A R that:

   –  the assessee has been enjoying tax exemption in terms of s. 10(22) from the year 1966 up-to the AY 1998-99 and since the assessee’s gross receipts crossed the monetary limit of Rs.1 crore, registration u/s 12A of the Act has been applied for;

   –  that for the immediately preceding three FYs, the amount of fees and other concessions extended to Anglo Indian students constituted hardly 2.07 to 2.34% and similar concession was extended to many non-Anglo Indian students also. Further, differently abled students belonging to other religious communities were also given fee concessions;

Relies on case laws:

   •  Aggarwal Mitra Mandal Trust v. DIT [2007] 293 ITR (AT) 259 (Delhi);

   •  Thiagarajar Charities v. Addl CIT [1997] 225 ITR 1010

8. We have heard the rival submissions, perused the relevant materials available on records and also the case laws on which the rival parties have placed their strong reliance. The assessee has been running an educational institution and applied for registration u/s 12AA of the Act. On verification of details, the DIT (E) had observed that the Memorandum of Association and Articles of Association contained the following objects which, according to the DIT (E) confined for the benefit of a particular community:

(a)  to conduct on Christian principles and as an expression of Christian service by Tunbridge English High School.

(b)  To ameliorate the educational backwardness of Anglo Indians relating English as the medium of instruction to preserve the employment of English as such medium.

8.1 After consideration of the assessee’s contentions and by placing reliance on the rulings of the Hon’ble jurisdictional High Court in the cases of (i) Ganjam Nagappa & Son Trust (supra); and (ii) Shubharam Trust referred supra and also dwelt with the Explanation 2 to s. 13 (1)(b) of the Act, the DIT (E) was of the view that the objects of the assessee – trust were for a specific community, which is being violative of the provisions of the said section, the application for registration u/s 12AA of the Act has been rejected. However, on a close verification of the details furnished by the assessee, the following facts are emerged:

8.2 For appreciation of facts, the particulars are reduced in a tabular as under:

Year

Total No. of students

Anglo Indian Students

Tuition and lab fees

Fees & other concessions

% of concession to A I students

A I Students

Non- A I Students

2007-08

959

21

Rs.70.57 lakhs

21 students

1.6 lakhs

22 students

Rs. 0.64 lakh

2.22%

2008-09

967

19

Rs.75.58 lakhs

19 students

1.6 lakhs

14 students

0.45 lakh

2.07%

2009-10

958

19

Rs.78.70 lakhs

19 students

1.89 lakhs

17 students

1.17 lakhs

2.34%

8.3 Moreover, the fee concessions extended to the non-Anglo Indian and non-Christian students comprised were of Hindus and Muslim students for the academic years 2007-08, 2008-09 and 2009-10. Further, in the academic year 2009-2010, fifteen students of disabled category irrespective of their caste, creed and religion have been extended fee concessions. None of the students were belonged to Anglo Indian community. Moreover, the benefit derived by the Anglo Indian community did not exceed even 5% of the total expenditure incurred by the assessee trust. The above statistics furnished by the assessee has not been dispelled/controverted by the revenue. The above statistics unambiguously testify that the assessee trust’s objects were NOT for the benefit of a particular community as alleged by the DIT (E) and as a result of which, he had invoked the provisions of s. 13(1)(b) of the Act. Another salient feature which we have noticed while analyzing the list containing the fee concessions extended to the disabled students is that they were belonged to either Hindu or Muslim community but, none were from the Christian or Anglo Indian community. This clearly exhibits the secular character of the assessee-trust that the educational institution has been serving the masses irrespective of their caste, creed and religion. Though at the time of inception of the assessee trust, the Memorandum of Association had been carved out the objects of Association, according to which, the twin objects were that of –

(c) to conduct on Christian principles and as an expression of Christian service by Tunbridge English High School.

(d) To ameliorate the educational backwardness of Anglo Indians relating English as the medium of instruction to preserve the employment of English a such medium.

8.4 However, by its amendment dated 5.3.2011, the bye laws have since been amended to cater the needs of Anglo Indians and Christian as sections of the public and also for all others without distinction irrespective of caste, creed, community, physical or economic handicaps etc., This clearly brings out the secular character being adopted by the assessee trust. At this point of time, we would like to recall the findings of the Hon’ble ITAT, Delhi Bench in the case of Aggarwal Mitra Maqndal Trust (supra) wherein it has been observed that “An object beneficial to the section of the public is an object of general public utility and to serve a charitable purpose, it is sufficient if the intention is to benefit a section of public as distinguished from a specified individual. Thus, the provisions of section 13(1) are not directly relevant in this regard,”

8.5 The Hon’ble jurisdictional High Court in the case of DIT v. Garden City Educational Trust [2011] 330 ITR 480 has ruled that “imparting of education being the main object of the assessee trust, it has to be accepted that assessee exists for a charitable purpose and, therefore, it is entitled to registration u/s 12A; manner of application of funds and allow-ability of benefit of exemption under ss. 11 and 12 are matter which are to be examined by the AO at the time of assessment and not by the CIT.”

8.6 Taking into consideration the facts and circumstances of the matter as deliberated upon in the fore-going paragraphs, we are of the considered view that the DIT (E) was not justified in forming an opinion that the objects of the assessee are for a specific community being violative of the provisions of s. 13(1)(b) of the Act. As a matter of fact, the assessee has been serving the public irrespective of caste, creed and religion by imparting education and, thus, it is entitled to registration u/s 12AA of the Act. It is ordered accordingly.

8.7 Before parting with, we would like to reiterate that we have duly perused the case laws on which the Revenue had placed strong reliance and of the firm view that they are not directly applicable to the facts of the issue under consideration.

9. In the result, the assessee’s appeal is allowed.

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