Appeal partly allowed for society's registration under Section 12AA & remanded for Section 80G approval review.

The Tribunal allowed the appeal partly, directing the CIT to grant registration under Section 12AA for the society. The denial of approval under Section 80G was remanded for re-examination by the CIT/competent authority to assess compliance with the specified conditions. The order was issued on 31 July 2020.

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Issues Involved:
1. Denial of registration under Section 12AA of the Income-tax Act, 1961.
2. Denial of approval under Section 80G of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Denial of Registration under Section 12AA of the Income-tax Act, 1961:

The assessee, a society registered under the West Bengal Societies Registration Act, 1961, applied for registration under Section 12AA of the Income-tax Act, 1961. The Commissioner of Income-tax (CIT), Durgapur, denied the registration on the grounds that the society was collecting donations from students, which he treated as capitation fees. The CIT relied on the Supreme Court decision in TMA Pai Foundation Vs. State of Karnataka and the Hyderabad Tribunal decision in Vodithala Education Society Vs. ADIT (Exemptions)-II, concluding that the society was indulging in the sale of education and thus could not be considered a charitable institution under Section 2(15) of the Act.

The assessee argued that the donations were received voluntarily from students and their families for the development and expansion of the educational institution, Camellia Institute of Engineering and Technology (CIET). The donations were received six to seven months post-admission, indicating they were not linked to the admission process. The society also received substantial donations from companies, which were utilized for the expansion of educational facilities.

The Tribunal noted that the CIT did not conduct any inquiry to verify whether the donations were voluntary or coerced. No evidence or complaints suggested that the donations were capitation fees. The Tribunal emphasized that the CIT should have conducted an inquiry by summoning students or issuing notices under Section 133(6) of the Act to ascertain the nature of the donations. The Tribunal found that the CIT's assumption was unfounded and that the donations were voluntary and used for charitable purposes.

The Tribunal concluded that the CIT erred in denying the registration under Section 12AA, as the society's activities were genuine and aligned with its charitable objectives. The Tribunal directed the CIT to grant registration under Section 12AA from the assessment year 2013-14 (FY 2012-13).

2. Denial of Approval under Section 80G of the Income-tax Act, 1961:

The CIT denied the approval under Section 80G of the Act, merely reproducing the reasons for denying registration under Section 12AA without discussing the merits of the case. The Tribunal noted that the CIT did not examine whether the society met the conditions stipulated under Section 80G(5) read with Rule 11AA of the Income-tax Rules.

The Tribunal remanded the issue back to the CIT/competent authority to examine whether the society satisfied the conditions for approval under Section 80G. The CIT/competent authority was directed to provide the assessee with a proper opportunity before passing the order on this issue.

Conclusion:

The Tribunal allowed the appeal of the assessee partly, directing the CIT to grant registration under Section 12AA and remanding the issue of approval under Section 80G for re-examination. The order was pronounced in the open court on 31 July 2020.

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