TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 744
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....ng a frenchisees of Zee Learn Ltd., is bad in law and, as such, this finding deserves to be quashed. 3. That the Ld.Pr.CIT(Exemptions) having not drawn any adverse inference on account of the issues which have been set aside by the Hon'ble ITAT, Amritsar Bench, Amritsar in ITA No. 605/Asr/2017 and, therefore, the refusal of registration u/s 12AA on the issue of Zee Learn Ltd. only, which has already attained finality is bad in law. 4. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off." 3. Briefly, the facts are that an application in Form No.10A was filed by the appellant society on 28.02.2017 in the office of PCIT(Exp), Chandigarh seeking registration u/s 12A of the Income Tax Act, 1961. The application revealed that the society is an ongoing entity that has been in operation since 30.01.2013. 4. This is a second round of the appeal before the Bench as in this case, the ITAT had earlier partly set aside the issue to the Ld. Commissioner of Income Tax (Exemptions), vide its order, dated 10.09.2018. Earlier an order u/s 12AA of the Income Tax Act was passed by the Commissioner of Income Tax (E), Chandigarh ....
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....urther submitted the written response on 17.07.2020. 6. As mentioned in Para 4 above, the ITAT has set aside the case on three points which are, hereby, being discussed issue-wise in separate paras elaborately below. 7. As regards to the issue of being a franchisee of Zee Learn Ltd. the Tribunal has held in Para 5 of its order that "even as clarified by us during hearing, that in view of the assessee's objects, the reliance on the decisions by the tribunal in the context of other schools run as franchisees of Zee Learn Ltd., is rendered of little moment; we ourselves holding that profit-making per se cannot be regarded as detrimental as long as it feeds a charitable purpose (of education). For the same reason/s, and to the same effect, would be the assessee's reliance on the decisions by the Hon'ble jurisdictional High Court, placed in the assessee's compilation, which, even though not referred to during hearing, have been perused by us to find ourselves as in agreement therewith in principle" 8. Further, in its order at Para 4.2, the Hon'ble ITAT has observed as under: "4.2 The question, therefore, is whether the earning of profits, i.e., in a regular and systematic manner ....
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...., therefore, fully endorse the assessee's stand that profit-making, or running the school on business or commercial principles, would not exclude it from being regarded as existing for a charitable purpose. Why, even regarding it as a business; education admittedly being a service that has become increasingly competitive and professional over time, which rather gets borne out by the fact of the same being provided through franchisee units, paying a franchise fee and royalty, so that it may not incorrect to regard it as so, would not though bar the profits and gains from it as being regarded as income liable for exemption u/s. 11(1) (a) where the 'business' is incidental to or subserves the charitable purpose (refer s. 11(4A)). The restriction, prior to sec. 11(4A), was spelt out u/s. 13(1)(bb), since omitted, stipulating a more stringent requirement of the business being carried on in the course of carrying out the primary purpose of the trust or institution, which is also satisfied in the present case as the education is being provided only through the school. The Hon'ble Courts, as a reading of the various decisions in the matter shows, have refrained from providing a quantit....
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....istration u/s 12AA on the issue of Zee Learn Ltd. only, which has already attained finality is bad in law. He also contended that nothing has been doubted by the Ld. PCIT(Exp), Chandigarh, and that for the purpose of 12A only two conditions are required to be satisfied that one with regard to the activities of the trust and the second with regard to the aims & objects of the society as per the decided case laws on this issue which have been addressed in favor of the assessee by the earlier order of the Hon'ble ITAT (APB, Pg. 1-10). He has filed a brief synopsis in support of the contentions pleaded before us on 20.09.2021, as under: 1. It is submitted that this is a second round of our appeal before the Hon'ble Bench of the ITAT and in this case, the Hon'ble ITAT had earlier passed an order, dated 10.09.2018 and partly set aside the issue to the Ld. Commissioner of Income Tax (Exemptions), which finding has been recorded in para 5 of the order of ITAT at page 9 of Paper Book, which is being reproduced as under:- Para 5 Page 9 "5. We, accordingly, i.e., in view of the foregoing, only consider it proper to restore the matter back to the file of the competent authority to allow ....
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....oncession' given to the student in various years and certain photographs to show about the activities and popularity of the school in Faridkot area and the relevant Index and the documents as submitted to the CIT (Exemptions is at pages 23 to 24 of the 'Paper Book'. 4.The CIT(Exemptions) has not doubted the charitable activities of the school and the assessee has placed in the paper book substantial evidences of concession fee, given to the poor & deserving students, some sample copies of which have been placed at pages 26 to 58, 73 to 74 and other details at page no. 75 to 78, where substantial number of students have been 100% and 50% concession along with the letter from Sewa Bharti, the copy of which has been placed at page no. 75 of the paper book and the Ld. CIT (Exemption), has not doubted this aspect in Para No. 6.3 and as only observed as under: "6.4 ..............................The perusal of the same reveals that certain students have been given concessions in their fees by the school/ but only this aspect would not suffice to prove that the institution being. run by the society is completely charitable and is not being run for profit. The activities of the school h....
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....n ITA No.605/Asr/2017 has clearly held that no adverse view is drawn in respect of franchisee fee paid to "Zee Learn Ltd." and the decision of the Hon'ble Bench is in consonance that the decision cited, before the Bench during the course of hearing and in para 5 of the order of ITAT, the Hon'ble Bench has not drawn any adverse inference on account of "Zee Learn Ltd." 9. Therefore, the issue has been set aside only for the limited purpose and the CIT (Exemptions) cannot over ride the finding of the Hon'ble Bench and has only to look into those aspects for which, the case had been set aside and, therefore, the issue of "Zee Learn Ltd." having already been decided in favour of assessee, no adverse view can be drawn against the assessee on such issue, since the department had not carried the matter to the Hon'ble High Court. Thus, the jurisdiction of the CIT(Exemptions) was limited to verification of two issues, one with regard to the 'lease hold land' and the second about the fee concession and on both accounts, the CIT (Exemptions) has not drawn any adverse inference and, therefore, it is prayed that the order of CIT(Exemptions) denying the registration u/s 12AA is bad in laws. The....
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....T (E), Chandigarh' which has been adjudicated by the Hon'ble ITAT, Chandigarh on exactly similar issues. Therefore, just because the school is providing fee concessions to some of its students, the activities of the society cannot be considered as charitable. In view of that the school being run commercially for making profits which has also been made clear through conclusive findings given by the Hon'ble ITAT, Chandigarh in the aforesaid judgement, he prayed for upholding the impugned order. 11. We have heard the rival contentions, perused the impugned order, ITAT Amritsar Bench Order, written submissions and case law citations filed by both the parties during the hearing. 12. In compliance to the directions of the Tribunal, the applicant was granted opportunity vide department's queries dated 22.04.2019 and 21.05.2019 which were duly complied with by the applicant by its written submissions dated 07.05.2019;.27.05.2019 and 17.07.2020. These submissions have been examined and placed on record. The assessee, in respect of the franchise agreement of the society with Zee Learn Ltd., has submitted that the franchise agreement with Zee Learn Ltd. was entered only to achieve the objec....
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....ion along with the letter from Sewa Bharti, (APB, Pg. 75) which have not been doubted by the Ld. CIT (E), as app evident from Para No. 6.4 of the impugned order where he has only observed as under: "6.4 ..............................The perusal of the same reveals that certain students have been given concessions in their fees by the school/ but only this aspect would not suffice to prove that the institution being. run by the society is completely charitable and is not being run for profit. The activities of the school have to be charitable as a whole where the intent of any institution is not for profit making and profit sharing through franchisees." 17. From the above, we understand that as such nothing having been doubted as regard to the aims and activities of the Assessee society being charitable is concerned. However, we note that if there is complete waver of fee, how the society would run the school and further whatever more evidence was required to be given has not been substantiated by the CIT (E). In our view, if on this issue, no adverse inference have been drawn by the PCIT(E) by accepting main object of the society is to carry-out the object of the education only,....