2017 (3) TMI 522 - AT - Income Tax

ITAT allows appeal for SC/ST benefit activities under Section 12AA

The Income Tax Appellate Tribunal (ITAT) allowed the appeal of the assessee, directing the Commissioner of Income Tax (CIT) to reconsider the rejection of ... Rejection of application U/S 12-A - Held that:- The appellant is an autonomous society under the administrative control of the office of the development Commissioner, Ministry of micro small and medium enterprises, government of India. The annual accounts and the annual report of the Centre are approved by the governing Council adopted by the society in its annual general meeting. In view of this respectfully following the decision in case of Orissa trust of technical education and training vs CIT (2012 (8) TMI 645 - ORISSA HIGH COURT ) wherein held that amount received from horticultural had been utilised in educational activities of the institution and for infrastructure development. Therefore, it could not be treated that the profit was on for non-educational activities. We do not find any plausible reason why assessee should be deprived of registration under section 12 AA of the income tax act from availing such benefit when if in any of the year the assessee is found to have violated the provisions of section 11, 12 and 13 of the income tax act, such registration cane be withdrawn. Further, if similar institutions established by central government in other states having similar objects have been granted registration under section 12 AA of the income tax act as stated by the Ld. authorized representative and submitted the respective such registration certificate, We are also of the view that there is no reason to single out the assessee for not granting such registration. Therefore we set aside the impugned order of Ld. CIT, Meerut and remit the issue back to him to verify the above facts and if it is found that the institutions in other places having similar objects have been granted registration under section 12 AA he may consider granting registration under this act to the assessee under the respective section applied for. That the assessee may be granted reasonable of Portugal due being heard and to adduce any further evidence which it would like to place before him. In the result appeal of the assessee is allowed for statistical purposes. Issues Involved:1. Rejection of application under Section 12A of the Income Tax Act.2. Nature of activities conducted by the assessee and whether they qualify as charitable under Section 2(15) of the Income Tax Act.3. Comparison with similar institutions granted registration under Section 12AA.4. Applicability of judicial precedents and high court decisions.Detailed Analysis:1. Rejection of Application under Section 12A:The primary issue in this appeal is the rejection of the assessee's application for registration under Section 12A of the Income Tax Act by the Commissioner of Income Tax (CIT), Meerut. The CIT's order dated 29/11/2011 was challenged by the assessee on the grounds that it was arbitrary, unjust, and illegal, ignoring the directions of the Hon'ble ITAT.2. Nature of Activities Conducted by the Assessee:The CIT rejected the application on the basis that the assessee received fees for providing various training programs and consultancy services, which were considered as income-earning activities. The CIT concluded that the activities of the society were in the nature of trade, commerce, or business, and thus did not qualify as charitable activities under the Income Tax Act. The CIT also noted that the society could not be considered an educational institution providing regular or systematic education as defined in the statutory provisions.The assessee argued that it is a society registered under the Societies Registration Act, 1860, by the Ministry of Industry, with the main objective of developing new technologies and upgrading existing ones for sports goods and leisure time equipment. The society is set up by the Ministry of Micro, Small, and Medium Enterprises of the Government of India and is engaged in training SC and ST candidates, with grants provided by the government.3. Comparison with Similar Institutions Granted Registration under Section 12AA:The assessee presented evidence that similar institutions established by the central government in other states had been granted registration under Section 12AA of the Income Tax Act. The ITAT considered the decision of the coordinate bench in ITA No. 1563/HYD/2014, where it was held that similar institutions should be granted registration under Section 12AA if they are engaged in charitable activities.4. Applicability of Judicial Precedents and High Court Decisions:The ITAT referred to several judicial precedents, including the decision of the Hon'ble Orissa High Court in the case of Orissa Trust of Technical Education and Training vs. CIT, where it was held that income generated from ancillary activities used for educational purposes does not disqualify an institution from being considered charitable. The ITAT also noted that the application of the proviso to Section 2(15) should be examined at the assessment stage and not at the time of granting registration under Section 12AA.Conclusion:The ITAT concluded that the assessee's activities are primarily for the benefit of SC and ST candidates and are funded by government grants. The ITAT found no reason to deprive the assessee of registration under Section 12AA, especially when similar institutions have been granted such registration. The ITAT set aside the order of the CIT, Meerut, and remitted the matter back for fresh adjudication. The CIT was directed to verify the facts and consider granting registration if similar institutions have been granted registration under Section 12AA. The appeal of the assessee was allowed for statistical purposes.Order Pronounced:The order was pronounced in the open court on 13/02/2017.