2015 (5) TMI 752 - AT - Income Tax

Tribunal Grants Registration for Educational Charitable Activities

RK. Educational Society Versus CIT (V) Vijayawada

RK. Educational Society Versus CIT (V) Vijayawada - TMI Issues Involved:1. Whether the assessee's activities qualify as 'charitable purpose' under section 2(15) of the Income Tax Act.2. Whether the assessee is eligible for registration under section 12AA of the Income Tax Act.3. Whether the assessee's fee structure disqualifies it from being considered a charitable institution.4. Whether the assessee's lack of property held under trust affects its eligibility for registration.5. Whether the income of the educational institution should be examined under section 10(23C) instead of section 11 of the Income Tax Act.Issue-wise Analysis:1. Charitable Purpose under Section 2(15):The CIT rejected the assessee's application for registration under section 12A, arguing that the activities did not qualify as 'charitable purpose' under section 2(15) due to the focus on EAMCET coaching, charging fees above the government-prescribed rates, and not providing relief to the poor. The Tribunal, however, clarified that 'charitable purpose' includes relief of the poor, education, medical relief, and other public utilities. The Tribunal emphasized that education, as defined under section 2(15), involves training, developing skills, and imparting knowledge, which the assessee was engaged in through its Jr. College.2. Eligibility for Registration under Section 12AA:The Tribunal noted that the CIT must only examine the objects of the society and the genuineness of its activities when granting registration under section 12AA. The assessee's objects were found to be charitable, and the activity of running a Jr. College was genuine. The Tribunal concluded that the CIT's refusal based on extraneous considerations was not justified.3. Fee Structure and Charitable Institution Status:The CIT contended that the assessee's fee structure, charging more than the government-prescribed rates, indicated a commercial activity rather than a charitable one. The Tribunal, however, found that the fees charged were at par with government rates, and any additional fees were for specific facilities like computers and laboratories. The Tribunal held that fee structure considerations should be examined by the Assessing Officer when assessing exemption claims under section 11, not at the registration stage.4. Lack of Property Held Under Trust:The CIT argued that the assessee did not hold any property under trust and thus could not claim relief under section 11. The Tribunal disagreed, stating that the absence of property held under trust does not preclude the assessee from being granted registration under section 12AA, as long as the objects and activities are charitable.5. Examination of Income under Section 10(23C) vs. Section 11:The CIT posited that the income of the educational institution should be examined under specific provisions of section 10(23C) rather than the general provisions of section 11. The Tribunal clarified that an educational institution could seek exemption under either section 10(23C) or section 11 if the respective conditions are met. The Tribunal emphasized that at the registration stage, the focus should be on the objects and genuineness of activities, not on the specific provisions under which income is examined.Conclusion:The Tribunal concluded that the CIT's refusal to grant registration under section 12AA was not justified. The Tribunal directed the CIT to grant registration to the assessee, affirming that the assessee's activities were charitable in nature and met the requirements of section 12AA. The appeal filed by the assessee was allowed.