Income Tax Appellate Tribunal – Amritsar
Lord Shiva Educational Welfare … vs Commissioner Of Income Tax ( … on 14 October, 2021 IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR.
BEFORE SH. LALIET KUMAR, JUDICIAL MEMBER
AND DR. M. L. MEENA, ACCOUNTANT MEMBER
I.T.A. No. 174/Asr/2020
Assessment Year: 2017-18
Lord Shiva Educational Welfare Vs. CIT (Exemption)
Society, Kotkapura Road, Chandigarh.
National Highway 15, Faridkot.
[PAN: AAAAL6969J]
(Appellant) (Respendent)
Appellant by Sh. Sudhir Sehgal, Adv.
Respondent by Sh. Rahul Dhawan, CIT.DR
Date of Hearing 20.09.2021
Date of Pronouncement 14.10.2021
ORDER
Per Dr. M. L. Meena, AM:
1. The captioned appeal by the assessee is directed against the
order of the CIT(E), Chandigarh dated 23.10.2020 in respect of
Assessment Year 2017-18.
2. The assessee has raised the following grounds:
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“1. That the Ld. PR.CIT (Exemptions), Chandigarh has erred
in not granting registration u/s 12AA of the Income Tax Act, 1961
vide order, dated 23.10.2020.
2. That the denial of exemption u/s 12AA on the issue that
the assessee is a “franchisees of Zee Learn Ltd.”, is not valid,
since the Hon’ble ITAT, Amritsar bench, Amritsar in ITA No.
605/Asr/2017, vide order, dated 10.09.2018 has already
considered this issue and decided the issue in favour of assessee
and that finding has attained finality and, therefore, non-granting
of registration u/s 12AA on the issue of being 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.
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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 in this
case on 30.08.2017 rejecting the application for grant of registration u/s
12AA. The applicant trust preferred an appeal before the Hon’ble
Income Tax Appellate Tribunal, Amritsar against the order of the
Commissioner of Income Tax (E), Chandigarh. The Hon’ble ITAT,
Amritsar has restored back the case of the applicant trust for fresh
consideration in ITA No. 605/Asr/2017 dated 10.09.2018 by observing
as under: –
” 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 the assessee an opportunity to exhibit its’
activities as being undertaken toward and in satisfaction of its
stated object/s, which no doubt constitute a charitable purpose
under the Act. Before parting, we may also add, and 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
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to find ourselves as in agreement therewith in principle. Further,
as regards the observation of the assessee’s principal asset,
the school building, as not secured, being on a leasehold land,
an aspect which again impinges on the genuineness of its’
activities, may require being addressed in a legal framework, as
per a legal undertaking, etc. We decide accordingly.
6. In the result, the assessee’s appeal is allowed for
statistical purposes.”
5. Consequently, after receiving the order passed by the Hon’ble
ITAT, the case of the applicant was fixed on 22.04.2019 to give appeal
effect to the Hon’ble ITAT’s order dated 10.09.2018 and in compliance,
the applicant has submitted its reply. On the basis of reply submitted by
the applicant, the additional queries were sent to applicant on
21.05.2019 to submit the clarifications/submissions on or before
27.05.2019. The applicant has submitted the response to the additional
queries raised on 21.05.2019. The applicant has further 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
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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 – on which there could
hardly be any doubt, even as the Id. CIT(E) was at pains to
emphasize, by managing its affairs adopting standard and well
accepted/recognized business management practices and
principles, on commercial or market driven basis, could be said
to exclude an activity geared to achieve an object otherwise
constituting a charitable purpose. The Hon’ble Apex Court has,
per a series of decisions, as in Sole Trustee, Loka Shikshana
Trust v. CIT [1975] 101 ITR 234 (SC); Indian Chamber of
Commerce v. CIT [1975] 101 ITR 796 (SC); Dharmadeepti v.
CIT [1978] 114 ITR 454 (SC); CIT v. Surat Art Silk Cloth
Manufacturers’ Association [1980] 121 ITR 1 (SC); Aditanar
Educational Institution v. CIT (Addl.) [1997] 224 ITR 310 (SC);
American Hotel & Lodging Assn. Educational Institute v. CBDT
[2008] 301 ITR 86 (SC); and Queens’ Educational Society v.
CIT [2015] 372 ITR 699 (SC), the last also approving the
decision by the Hon’ble jurisdictional High Court in Pine Grove
International Charitable Trust vs. Union of India (2010) 327 ITR
273 (P & H) settled the law, explaining that on an overall view
of the matter the object should not be make profit, i.e., ‘profit-
making’ should not be the predominant object, as where the
charitable purpose gets submerged by the profit motive, the
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latter masquerading under the guise of the former. As long as it
is not so, so that the activity carried on does not have profit-
making as its’ predominant object, it is not excluded. However
these decisions again, are all rendered in the context of the
charitable purpose being the advancement of an object of
general public utility’ qualified by the defining provision of alw
itself by a bar with reference to profit, or in the context of sec.
10(23C)(iiiad)/(vi) specifically providing for the educational
institution, income from which gets exempt there under, to be
existing solely for education and not for profit, so that the apex
court found it useful to refer to the elucidation of and the
connotation of the preposition for per its earlier decisions, which
is the reason for our enlisting it’s decisions over time, which
thus document the progression of law in the matter. For the
other objects constituting a charitable purpose, the
genuineness of the purpose gets tested by the obligation
created to spend the income exclusively or essentially on
charity, i.e., its’ charitable objects. We, 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
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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 quantitative test for the income
generated from the activity carried on in pursuance of or for
achieving a charitable purpose/object. Nothing, therefore, turns
on the assessee stating before us of its’ expenditure exceeding
income; the expenditure including a handsome component of
depreciation (Rs. 37 lacs for AY 2015-16), so that there is
substantial cash profit and, two, the depreciation stands
provided on an accelerated (WDV) basis at the rates prescribed
under the Act for determining business income, which inflates
the charge for the initial years, as against being applied
uniformly over the life of the asset. Before us, the Id. counsel
sought to justify the fees which, on an annual basis, ranges
from Rs. 40,000/- to Rs. 50,000/-, with refereppe to th%quality
of the education; the school also providing training in Robotics,
a new discipline. Without doubt, the cost of education, as of any
other service, cannot be properly compared without taking into
account its’ quality; rather, the quality of both the input
resources as well as the output. We have however, already
clarified that no quantitative tests (viz. the rate of profit; the rate
of return on investment, etc) in this regard have been laid down,
which the Hon’ble Courts have eschewed for perhaps precisely
this reason, i.e., as a number of variables impinge thereon, and
which aspect is therefore best left for the regulating authority
(as CBSE) or the market place to decide. Our decision in this
regard is thus consistent with the decisions by the Tribunal
cited before us in respect of similar schools run as franchisee
units of Zee Learn Ltd.”
9. The Ld. Counsel Sh. Sudhir Sehgal, Advocate for the assessee
submitted that the denial of exemption u/s 12AA on the issue that the
assessee is a “franchisees of Zee Learn Ltd.”, is not valid, since the
Hon’ble ITAT, Amritsar bench, Amritsar in ITA No. 605/Asr/2017, vide
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order, dated 10.09.2018 has already considered this issue and decided
the issue in favour of assessee and that finding has attained finality
and, therefore, non-granting of registration u/s 12AA on the issue of
being a frenchisees of Zee Learn Ltd., is bad in law. He further
submitted that the Ld. PCIT(Exmp) 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. 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 the assessee an opportunity to exhibit its’
activities as being undertaken toward and in satisfaction of its
stated object/s, which no doubt constitute a charitable purpose
under the Act. Before parting, we may also add, and even as
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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. Further, as regards the observation of the assessee’s
principal asset, the school building, as not secured, being on a
leasehold land, an aspect which again impinges on the genuineness
of its’ activities, may require being addressed in a legal framework,
as per a legal undertaking, etc. We decide accordingly.”
2. From the above, it is clear that on two issues only, matter had
been ‘set aside’ to the Commissioner of Income Tax (Exemptions),
Chandigarh, i.e. one was with regard to the opportunity to exhibit the
activities of the school and the second was with regard to the ‘lease
hold land’, which was taken by the society from ‘Sh. Chaman Lal Gulati’
at a nominal lease money. However, the Hon’ble Bench of the ITAT, has
held that the payment of franchisee fee to”Zee Learn Ltd.” is justified,
because the same have been paid for achieving the objects of the
society and which finding has been given in the order of ITAT at page-8,
where following finding has been given:-
“Our decision in this regard is thus consistent with the
decisions by the Tribunal cited before us in respect of similar
schools run as franchisee units ( of Zee Learn Ltd.)”.
The said finding is to be read with the finding in para 5, as
reproduced above.
3. After the issue had been remanded back, the assessee
appeared before the Ld. CIT (Exemptions), Chandigarh and filed a
reply, dated 16.07.2020, placed in the Paper Book at pages 11 to
13 and other details with regard to the activities of the school,
‘fee concession’ 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
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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 have to be charitable as a whole where the intent
of any institution is not for profit making and profit sharing
through franchisees.”
5. From the above, it is very clear that nothing having been doubted
and if there is complete waver of fee, how the school would run and
what more evidence was required to be given has not been substantiated
by the CIT (Exemption) and according to us, that on this issue no adverse
inference have been drawn and main object of the society is to carry-out
the object of the education only and not doubted.
Further, regarding lease of land, the CIT in para 7.4 after considering
the affidavit and submissions of the assessee as per Para no. 7.3 of his
order has accepted the contention of the assessee. The same para is
reproduced as under:
“7.4 The affidavit and the submission of the assessee in this
regard have been filed and no adverse inference in this
particular aspect is drawn.”
6. In para 7.4, the CIT (Exemptions) has referred to the order of
ITAT, Chandigarh Bench in the case of ‘Jiwan Dass Kartar Singh
Charitable Trust’ with regard to the payment of Franchisee fee to the
“Zee Learn Ltd.” and held that the case is squarely covered by the
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judgment of Chandigarh Bench of the ITAT in the above said case and the
relevant finding of CIT(Exemptions) is in para-8 of his order, which is
being reproduced as under:-
Para 8
“In view of the above discussion and the fact that no clear
direction has been given by the Hon’ble ITAT, Amritsar for
granting registration u/s 12AA in the case, I am inclined to
respectfully follow the order passed by the Hon’ble ITAT,
Chandigarh in the case of ‘M/s Jiwan Dass Kartar Singh
Charitable Trust, Karnal v. The CIT (E),Chandigarh’ in ITA No.
426/Chd/2018, dated 01.05.2019, wherein clear findings have
been given upholding the order passed by the department. The
present case is squarely covered by the said judgment passed
by the Hon’ble ITAT, Chandigarh. Accordingly, keeping in view
all the above, the present application for grant of registration
under section 12AA of the I.T.Act is, hereby, rejected.”
7. From the above, it is very clear that the only objection of the
CIT(Exemptions) for the denial of registration had been made on the
basis of fact that the society is paying franchisee fee to “Zee Learn
Ltd.”.
8. It is vehemently submitted that the Hon’ble Bench in his order,
dated 10.09.2018 in 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
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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
finding of CIT (Exemptions) in para 6.3 with regard to “fee concession”
and all such details were filed in the Paper Book at pages 26 to 58
(sample copies) and at pages 73 to 74, the letter was filed from ‘Sewa
Bharti’ about the ‘fee concession’ at page 75 and details of ‘fee
concession’ year wise at pages 76 to 78 and various appreciation cum
recognition letters at page 85 onwards.
Thus, nothing has been doubted and for the purpose of 12A only two
conditions are to be 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 as placed in the paper book at page no. 1 to 10.
10. On the issue of profit motive, it had clearly been held that profit
motive should not be predominant and for that various decisions have
been cited at page 6, para 2.4 of the order of the Hon’ble Bench and the
Ld. CIT (Exemptions) in para-8 of the order has held that the denial of
registration is being made following the order of the Hon’ble ITAT,
Chandigarh Bench on the issue of the franchise fee paid to ‘M/s. Zee
Learn Ltd.’ and which finding is already in favor of the assessee in the
earlier order of ITAT in ITA No. 605/Asr/2017 and, therefore, the CIT
(Exemptions) not following the order of the Hon’ble ITAT and rejecting
the application for registration u/s 12AA, which issue had already
attained finality is bad in law and, thus, the CIT (Exemptions) may be
directed to grant registration to the assessee u/s 12AA.
10. Per contra, the Ld. CIT (DR) stands by the findings of the
PCIT(Exp), Chandigarh. He contended that in the instant case, as the
character of the school is commercial per se and is hit by the provisions
of Section 2(15) of the Act, giving fee concessions to some of its
students would not take aware the commercial character of the
school/society. Since the primary issue of the society/school remains to
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be commercial with the profit motive through commercial agreement,
the admissions of certain poor students by giving them fee concessions
would not undermine the non-charitable character of the society. The
case of the society, as already discussed in Para 5, is exactly similar to
the case of ‘M/s Jiwan Dass Kartar Singh Charitable Trust, Karnai vs.
PCIT (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 object of providing quality
education to all the sections of the society and there was no profit
earning motive by the franchisee.
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13. The Coordinate Bench while remanding the matter back to the
competent Authority for limited purpose observing in para 5.3 that to
allow the assessee an opportunity to exhibit its’ activities as being
undertaken toward and in satisfaction of its stated object/s, which no
doubt constitute a charitable purpose under the Act and that before
parting, we may also add, and 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, the Tribunal had perused the Hon’ble jurisdictional High
Court, placed in the assessee’s compilation, to find the bench as in
agreement therewith in principle.
14. The Ld. PCIT(Exp), Chandigarh has states that the Hon’ble
ITAT has not given any clear direction for considering the franchise
agreement as charitable in nature is factually wrong. The ITAT, has held
that the payment of franchisee fee to”Zee Learn Ltd.” is justified,
because the same have been paid for achieving the objects of the
society by observing in the order at pg. 8, as under:
“Our decision in this regard is thus consistent with the
decisions by the Tribunal cited before us in respect of similar
schools run as franchisee units of Zee Learn Ltd.”.
15. The Ld. AR argued that before the Ld. PCIT (E), Chandigarh
the assessee has filed a reply, dated 16.07.2020, (APB, Pg.11 to 13)
and other details with regard to the activities of the school, ‘fee
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concession’ given to the student in various years: and certain
photographs to show about the activities and popularity of the school in
Faridkot area and that the relevant Index with the documents (APB, Pg.
23 to 24).
16. It is seen that the PCIT(E) has not doubted the charitable
activities of the school in view of the substantial evidences of
concession fee, given to the poor & deserving students, some sample
copies of which have been placed n record (APB, Pg. 26 to 58, 73 to 74
and 75 to 78), where number of students have been given 100% and
50% concession 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
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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, then refusal
to grant 12 AA to the assessee society was not justified. Further, the
CIT in para 7.4 of his order has accepted the contention of the
assessee regarding lease of land, as follows:
“7.4 The affidavit and the submission of the assessee in
this regard have been filed and no adverse inference in
this particular aspect is drawn.”
18. The CIT (E) has referred to the order of ITAT, Chandigarh
Bench in the case of ‘Jiwan Dass Kartar Singh Charitable Trust’ with
regard to the payment of Franchisee fee to the “Zee Learn Ltd.” and
held that the case is squarely covered by the judgment of Chandigarh
Bench of the ITAT by observing vide 8 of the impugned order, as
under:-
Para 8
“In view of the above discussion and the fact that no
clear direction has been given by the Hon’ble ITAT,
Amritsar for granting registration u/s 12AA in the
case, I am inclined to respectfully follow the order
passed by the Hon’ble ITAT, Chandigarh in the case
of ‘M/s Jiwan Dass Kartar Singh Charitable Trust,
Karnal v. The CIT (E),Chandigarh’ in ITA No.
426/Chd/2018, dated 01.05.2019, wherein clear
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findings have been given upholding the order passed
by the department. The present case is squarely
covered by the said judgment passed by the Hon’ble
ITAT, Chandigarh. Accordingly, keeping in view all
the above, the present application for grant of
registration under section 12AA of the I.T.Act is,
hereby, rejected.”
19. From the above, it is very clear that the only objection of the
CIT(E) for the denial of registration had been made on the basis of fact
that the society is paying franchisee fee to “Zee Learn Ltd.”. The Ld.AR
has vehemently contended that the coordinate Bench in his order,
dated 10.09.2018 in 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, as above we do not find any adverssity in
the observation of the coordinate Bench decision on account of
franchise fee paid to “Zee Learn Ltd.”
20. Since, the issue being set aside with specific findings and
hence, the PCIT (E) cannot over ride the finding of the Coordinate
Bench and was required only to look into those aspects for which, the
case had been set aside and, since, 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, as the department
had not carried the matter to the Hon’ble High Court.
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21. Thus, nothing has been doubted and for the purpose of 12A
only two conditions are to be 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 Coordinate Bench as placed in the paper book at page no.
1 to 10.
22. As regards to the issue of profit motive, it had clearly been held
that profit motive should not be predominant and for that various
decisions have been cited at page 6, para 2.4 of the order of the
Hon’ble Bench and the Ld. CIT (E) in para-8 of the order has held that
the denial of registration is being made following the order of the
Hon’ble ITAT, Chandigarh Bench on the issue of the franchise fee paid
to ‘M/s. Zee Learn Ltd.’ and ignoring the finding is already in favor of the
assessee in the earlier order of ITAT in ITA No. 605/Asr/2017 and,
therefore, the CIT (E) not following the order of the Hon’ble ITAT is
against judicial discipline and rejecting the application for registration
u/s 12AA, which issue had already attained finality is bad in law and,
thus, the PCIT (E) was required to grant registration to the assessee u/s
12AA.
23. In view of the above facts, we are of the considered view, that
the jurisdiction of the PCIT(E) was being 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, and since, the CIT (E) has
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not drawn any adverse inference and, therefore, in our view, the order
of CIT(E) denying the registration u/s 12AA is bad in law.
24. In the above view, we are of the considered opinion that the
assessee is entitled to registration under section12AA of the Income
Tax Act 1961. Accordingly, we direct the PCIT(E), Chandigarh to grant
registration to the assessee society from the date of its application.
Order pronounced in the open court on 14.10.2021
Sd/- Sd/-
(Laliet Kumar) (Dr. M. L. Meena)
Judicial Member Accountant Member
Doc*
Copy of the order forwarded to:
(1)The Appellant
(2) The Respondent
(3) The CIT
(4) The CIT (Appeals)
(5) The DR, I.T.A.T.
True Copy
By Order
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