2018 (11) TMI 1178 - HC - Income Tax

High Court affirms ITAT's Section 12A registration decision for Society, dismissing Revenue's appeal

The Commissioner of Income Tax (Exemptions), Chandigarh Versus M/s Ambala Public Educational Society, Ambala

The High Court upheld the ITAT's decision to grant registration to the assessee-Society under Section 12A of the Income Tax Act, rejecting the Revenue's ... Charitable activities u/s 2(15) - Cancellation of registration u/s (3) of Section 12AA - Secretary of the Society was getting lease rent for the land given to the Society for running the School or his wife who had requisite qualification was teaching in the school - Held that:- The contentions raised by learned counsel for the Revenue lacks merit. There is no requirement under Section 12A of the Act that the assessee-Society is required to be registered under the 2012 Act. Moreover, the assessee-Society explained before ITAT that it had applied for registration under the 2012 Act but due to back log, grant of registration was delayed. The certificate regarding registration under 2012 Act was produced before the ITAT. The application under Section 12A of the Act cannot be rejected merely on the ground that the Secretary of the Society was getting lease rent for the land given to the Society for running the School or his wife who had requisite qualification was teaching in the school and was being paid the salary. It is not the case set up by the Revenue that the exorbitant amounts had been paid by the assessee- Society to the Secretary or to his wife. No dispute has been raised to the fact that the assessee-Society is running a school as per its aims & objects. The CIT while rejecting the application has not doubted the genuineness of aims and objectives of the assessee-Society. On the other hand the Assessing Officer while finalising the assessment for assessment year 2010-11 under Section 143(3) of the Act has specifically recorded the finding that the income earned by the Society has been utilized for educational purposes. - Decided against revenue Issues:1. Interpretation of Section 12A of the Income Tax Act regarding registration requirements for a Society.2. Validity of granting registration to a Society not registered under the New Haryana Registration & Regulation of Societies Registration Act, 2012.3. Allegations of impropriety in running a school by a Society.4. Compliance with the Right to Education Act in providing freeships to students.5. Consideration of past precedents by the Income Tax Appellate Tribunal (ITAT) in similar cases.Issue 1: Interpretation of Section 12A of the Income Tax Act regarding registration requirements for a Society:The Revenue contested the ITAT's decision to grant registration to the assessee-Society under Section 12A of the Act, arguing that the Society not being registered under the New Haryana Registration & Regulation of Societies Registration Act, 2012, should have precluded such registration. However, the ITAT found no requirement under Section 12A for such registration, and the assessee-Society had applied for registration under the 2012 Act, albeit facing delays. The ITAT accepted the explanation and evidence provided by the Society, leading to the dismissal of the Revenue's appeal.Issue 2: Validity of granting registration to a Society not registered under the New Haryana Registration & Regulation of Societies Registration Act, 2012:The Revenue raised concerns about the registration status of the assessee-Society under the 2012 Act, emphasizing impropriety due to the Secretary receiving lease rent and the Secretary's wife being employed by the school. However, the ITAT found no legal basis to reject the application under Section 12A solely on these grounds. The ITAT noted that the Society had demonstrated its efforts to comply with the 2012 Act, and the registration certificate was eventually produced, supporting the decision to grant registration.Issue 3: Allegations of impropriety in running a school by a Society:The Revenue alleged impropriety in the operation of the school by the assessee-Society, highlighting the Secretary's financial benefits and his wife's employment. In response, the Society argued that the Secretary's wife was a qualified teacher receiving a standard salary, and the Revenue failed to prove any excessive payments or misuse of funds. The ITAT upheld the Society's explanation, emphasizing that the income earned was utilized for educational purposes as confirmed in past assessments.Issue 4: Compliance with the Right to Education Act in providing freeships to students:The Revenue questioned the provision of freeships to only a limited number of students, suggesting non-compliance with the Right to Education Act. However, the ITAT did not find this practice to be in contravention of the Act, especially considering the overall aims and objectives of the assessee-Society to improve education standards for rural students.Issue 5: Consideration of past precedents by the Income Tax Appellate Tribunal (ITAT) in similar cases:The Revenue cited previous judgments to support its appeal, arguing that the ITAT's decision contradicted established principles. However, the ITAT found no merit in these arguments, stating that the current case's circumstances and facts did not align with the precedents referenced by the Revenue. The ITAT emphasized the lack of errors in its findings and dismissed the appeal accordingly.In conclusion, the High Court upheld the ITAT's decision to grant registration to the assessee-Society under Section 12A of the Income Tax Act, rejecting the Revenue's appeal on various grounds related to registration requirements, alleged impropriety, compliance with education laws, and the application of past legal precedents.