ITAT grants Section 12AA registration emphasizing charitable activities. No adverse inference. Appeal allowed.

The ITAT directed the PCIT(E) to grant registration under Section 12AA to the appellant society, emphasizing that the profit motive should not be predominant and that the charitable activities were satisfactorily demonstrated. The ITAT found no adverse inference on the charitable activities or leasehold land issues, and since the objection regarding franchisee fees had already been addressed in favor of the assessee in a previous order, registration was granted from the date of the application. The appeal was allowed, and the order was pronounced on 14.10.2021.

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Issues Involved:
1. Denial of registration under Section 12AA of the Income Tax Act, 1961.
2. The validity of the denial based on the assessee being a franchisee of Zee Learn Ltd.
3. Examination of charitable activities and the predominant profit motive.
4. Consideration of fee concessions and leasehold land.

Detailed Analysis:

1. Denial of Registration under Section 12AA:
The appellant society filed an application for registration under Section 12AA of the Income Tax Act, 1961, which was denied by the CIT(E), Chandigarh. The denial was contested by the assessee, leading to an appeal before the ITAT, Amritsar.

2. Validity of Denial Based on Franchisee Status:
The primary ground for denial was the society being a franchisee of Zee Learn Ltd. The ITAT, in its earlier order dated 10.09.2018, had already considered this issue and decided in favor of the assessee, stating that "profit-making per se cannot be regarded as detrimental as long as it feeds a charitable purpose (of education)." The Tribunal held that reliance on decisions regarding other schools run as franchisees of Zee Learn Ltd. was of little moment and that the assessee’s reliance on jurisdictional High Court decisions was valid.

3. Examination of Charitable Activities and Profit Motive:
The ITAT emphasized that the object should not be profit-making, and the charitable purpose should not be submerged by the profit motive. The Tribunal cited various Supreme Court decisions, explaining that as long as the activity carried on does not have profit-making as its predominant object, it is not excluded from being considered charitable. The Tribunal noted that the school provided education, including training in Robotics, and justified the fees charged based on the quality of education provided.

4. Consideration of Fee Concessions and Leasehold Land:
The assessee provided substantial evidence of fee concessions given to poor and deserving students, which was not doubted by the CIT(E). The CIT(E) also accepted the affidavit and submissions regarding the leasehold land, drawing no adverse inference in this regard.

Judgment:
The ITAT found that the CIT(E) had not drawn any adverse inference regarding the charitable activities of the school or the leasehold land. The only objection was the payment of franchisee fees to Zee Learn Ltd., which the ITAT had already addressed in favor of the assessee in its earlier order. The Tribunal held that the CIT(E) could not override the findings of the Coordinate Bench and was limited to verifying the two specific issues set aside for reconsideration. Since no adverse inference was drawn on these issues, the ITAT directed the PCIT(E), Chandigarh, to grant registration to the assessee society under Section 12AA from the date of its application.

Conclusion:
The ITAT allowed the appeal, directing the PCIT(E) to grant registration under Section 12AA, emphasizing that the profit motive should not be predominant and that the charitable activities and objectives of the society were satisfactorily demonstrated. The order was pronounced in the open court on 14.10.2021.

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