Insight Educational Society, ... vs Assessee

Insight Educational Society Director of Income Tax Hyderabad - 500 059 vs. (Exemptions), PAN AAAAI5616H Hyderabad - 500 001 (Appellant) (Respondent)

For Assessee : Mr. Ajay Gandhi For Revenue : Mr. D. Sudhakar Rao

Date of Hearing : 27.04.2015 Date of Pronouncement : 30.04.2015

ORDER

PER P.M. JAGTAP, A.M.

This appeal filed by the assessee is directed against the Order of learned Director of Income Tax (Exemptions), Hyderabad dated 25.09.2013 whereby he rejected the application filed by the assessee for registration under section 12A of the Act.

2. The assessee in the present case is a society. An application in Form 10A was filed by it on 23.02.2013 seeking registration under section 12A of the Act. In order to dispose of the said application, the assessee society was called upon by the learned DIT (E) to produce original memorandum of association, furnish detailed reply on specific points raised by him and also to produce books of accounts etc., for verification. After seeking some adjustments initially, the assessee society finally complied with all these requirements of the learned DIT(E). Thereafter, further information required by 2 ITA.No.1577/Hyd/2013 Insight Educational Society, Hyderabad.

learned DIT(E) such as copies of bank account, approval order from DEO, Hyderabad for running the primary school, note on activities, school fee structure, details of credit in bank accounts, details of corpus donations, confirmation of loans and corpus donations etc., was also furnished by the assessee society from time to time.

3. On verification of the information and documents furnished by the assessee, the learned DIT(E) recorded the following adverse findings/observations in his impugned order:

"2. On verification of the objects of the society, it is found that one of the object is to provide coaching for competition examinations, which cannot be treated as a charitable purpose within the meaning of section 2(15) of the I.T. Act, 1961.

3. On verification of the details furnished, it is found that the society received different amounts on various dates totalling to Rs.36,00,000/- from Hikmah Educational Services (P) Ltd. Further the society furnished confirmation letter from Hikmah Educational Services (P) Ltd. wherein no where it was mentioned that these amounts were repaid by the society. However, on verification of provisional accounts for the years ending 31/3/2012 and 31/3/2013, nowhere these amounts are shown as liability. As per provisional accounts for the financial year 2012- 13, it is seen that an amount of Rs.27,25,000/- is shown as deposit held with Hikmah Educational Service (P) Ltd as on 31/3/2013.

When Hikmah Educational Service has advanced loan to the society it is not clear how the amount of Rs.27,25,000/- is shown as deposit in the books of assessee society. Hence, the books of a/cs cannot be relied upon.

4. When the main aim of the society is to provide quality education and scholarships, it is not 3 ITA.No.1577/Hyd/2013 Insight Educational Society, Hyderabad.

clear as to why such a huge amount is kept as deposit with Hikmah Educational Service (P) Ltd. This transaction with Hikmah Educational Service (P) Ltd is clearly not in furtherance of the objects of the society.

5. As per the information furnished by the assessee, the corpus donation received by the society is Rs.13,00,000/- during the financial year 2011-12 and Rs.62,75,000/- during the financial year 2012-13. However, the assessee society furnished confirmations for Rs.15,00,000/- the details of which are as under:

5.1. From the above it is clear that the assessee society has not furnished the entire confirmations as far as corpus donations are concerned. Hence, the genuineness of the balance corpus donations could not be established.

6. It is seen from the information that the assessee society has received income in advance of Rs.2,02,000/- and Rs.7,82,726/- for the financial years 2011-12 & 2012-13 respectively.

When the main object of the society is to provide scholarships to the needy and deserving students, collection of fee in advance is not a charitable activity and is not in accordance with the aims and objects of the society. Under these circumstances, the assessee society, cannot be granted registration u/s.12AA of the Act.

7. It is also observed from the provisional income & expenditure account for the period ending 31/3/2013 that the assessee society paid Rs.1,79,790/- as Commission on admissions, Rs.3,92,500/- as Royalty and Rs.26,69,000/- as Infra Expenses. This shows that the assessee society is running the educational institution on commercial basis and not for charitable purposes. Further, the assessee has so far not furnished returns of income for the asst. years 2011-12 & 2012-13.

4 ITA.No.1577/Hyd/2013 Insight Educational Society, Hyderabad.

8. Further, the Rules & Regulations in Document No.2 does not provide that (i) no addition, alteration and amendment in the objects shall be made without approval of the DIT(Exemptions), (ii) in case of dissolution, the trust property shall be transferred/ handed over to a trust/society having similar aims and objects and also registered u/s.12A of the Act."

4. On the basis of the above adverse findings/ observations recorded by him, the learned DIT(E) held that assessee society was not eligible for registration under section 12A and accordingly, the application filed by it for such registration was rejected by him vide his order passed under section 12AA of the Act. Aggrieved by the said order of the learned DIT(E), the assessee has preferred this appeal before the Tribunal.

5. We have heard the arguments of both the sides and also perused the material available on record. The Ld. Counsel for the assessee has submitted that all the relevant information as required by the learned DIT(E) in order to enable him to dispose of the application filed by the assessee for registration under section 12A of the Act was furnished by the assessee as called for by him from time to time. He submitted that the learned DIT(E) however did not point out any defect or deficiency in the information furnished by the assessee and proceeded to reject the application filed by the assessee society for registration under section 12A on the basis of certain adverse findings/observations recorded by him without giving any opportunity to the assessee to offer its explanation in this matter. He submitted that the assessee has a valid and convincing explanation to offer on all the objections raised by the learned DIT(E) and had an opportunity been given by him, the assessee would have offered such 5 ITA.No.1577/Hyd/2013 Insight Educational Society, Hyderabad.

explanation in respect of each and every point to meet the objections raised by the learned DIT(E). He has contended that the learned DIT(E) thus has rejected the application of the assessee for registration under section 12A without giving proper and sufficient opportunity of being heard to the assessee especially on specific points or objections raised by him and this position clearly evident from the record available before us is not disputed even by the learned D.R. We therefore, consider it fair and proper and in the interest of justice to set aside the impugned order of the learned DIT(E) and remit the matter back to him for disposing of the application of the assessee for registration under section 12A afresh after giving proper and sufficient opportunity of being heard to the assessee.

6. In the result, appeal of the assessee is treated as allowed for statistical purposes.

Order pronounced in the open Court on 30.04.2015.

Sd/- Sd/- (G.C. GUPTA) (P.M. JAGTAP) VICE PRESIDENT ACCOUNTANT MEMBER

Hyderabad, Dated 30th April 2015 VBP/- Copy to

1. Insight Educational Society, 16-1-14/7, Saidabad, Hyderabad.C/o. Gandhi & Gandhi, Chartered Accountants, 1002, Paigah Plaza, Basheerbagh, Hyderabad - 500 063.

2. Director of Income Tax (Exemptions), 3rd Floor, Aayakar Bhavan, Basheerbagh, Hyderabad - 500 001

3. The DDIT (E)-II, Hyderabad

4. D.R. ITAT "B" Bench, Hyderabad.

5. Guard File