TaxTMI 
TaxTMI 
2022 (3) TMI 1355
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....iginally, the respondent filed an application on 22.06.2009 for grant of registration under section 12AA of the Income Tax Act, 1961 (hereinafter referred to as 'Act'), which was rejected by the Commissioner of Income-tax, Madurai, by order in C.No.464/53/CIT-1/2009-10 dated 01.12.2009. Challenging the said order, the respondent filed an appeal before the ITAT, Chennai, which by order dated 30.09.2010, set aside the said order and remanded the matter to the CIT for fresh consideration. Pursuant to the said order of the ITAT, the Commissioner of Income-tax, Madurai, reconsidered the application of the respondent seeking registration under section 12AA of the Act and ultimately, rejected the same, on the ground that there was no satis....
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.... the basic requirement for grant of registration to a public charitable trust; and they are carrying on the educational activity with receipt of fees of substantial amount, which is purely on commercial basis and they failed to produce the relevant details to the CIT for verification. However, the ITAT, merely placing reliance on the objects of the respondent trust, allowed the appeal filed by the respondent and directed the appellant to grant registration to them under section 12AA of the Act, by the order impugned herein, which is arbitrary and illegal and hence, is liable to be set aside. 5.On the other hand, the learned counsel for the respondent / assessee submitted that the objects of the respondent trust itself would speak for the a....
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....mount which is purely on commercial basis. (iii)Although such commercial activity is permitted under the Act u/s.11(4)/11(4A) - being incidental to attainment of its charitable object - but the statutory requirement that separate books of accounts should be maintained has not been followed. (iv)The I/E Account of the trust which should reflect income of a trust as discussed in para 3.2 above and expenditure clearly showing 'application' of such income towards charitable purpose - within the definition of section 2(15) and as per the objects of the trust deed - is also missing. (v)The surplus for the assessment year 2009-10 and 2010-11 which are of Rs. 2,89,145 and 16,98,122/- should have been utilised for genuine charitable ac....
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....cational objects; and the Act itself contemplates exemption to income of institution imparting education. Ultimately, it was concluded by the Tribunal that the respondent trust was eligible for registration under section 12AA. 9.This court is of the view that such reasoning of the Tribunal without proper verification of the requisite materials, cannot be countenanced and on that score alone, the order impugned herein deserves to be set aside. 10.At this juncture, it is apt to refer to the decision of the Hon'ble Supreme Court in Queen's Educational Society Vs. Commissioner of Income Tax [(2015) 372 ITR 0699 (SC)], in which, after having discussed several decisions of various High Courts, it was held that "the correct tests would a....
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....nd to ignore the tests laid down in the Surat Art Silk Cloth case, Aditanar case and the American Hotel and Lodging case. It is clear that when a surplus is ploughed back for educational purposes, the educational institution exists solely for educational purposes and not for purposes of profit. In fact, in S.RM.M.CT.M. Tiruppani Trust v. Commissioner of Income Tax, (1998) 2 SCC 584, this Court in the context of benefit claimed under Section 11 of the Act held: "9. In the present case, the assessee is not claiming any benefit under Section 11(2) as it cannot; because in respect of this assessment year, the assessee has not complied with the conditions laid down in Section 11(2). The assessee, however, is entitled to claim the benefit of Se....
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....ollowing it are dismissed. We reiterate that the correct tests which have been culled out in the three Supreme Court judgments stated above, namely, Surat Art Silk Cloth, Aditanar, and American Hotel and Lodging, would all apply to determine whether an educational institution exists solely for educational purposes and not for purposes of profit. In addition, we hasten to add that the 13th proviso to Section 10(23C) is of great importance in that assessing authorities must continuously monitor from assessment year to assessment year whether such institutions continue to apply their income and invest or deposit their funds in accordance with the law laid down. Further, it is of great importance that the activities of such institutions be look....