Educational Trust Using Earnings For Educational Advancement Entitled To Benefits Under Section 12AA Of Income Tax Act: Punjab & Haryana High Court
The Punjab and Haryana High Court ruled that an institute registered as an educational trust, using its earnings solely for educational advancement, should not be denied the benefits of Section 12AA of the Income Tax Act, 1961.The Bench of Justices Sanjeev Prakash Sharma and Sanjay Vashisth observed that “the institute is a duly registered educational trust and whatever earnings it receives...
The Punjab and Haryana High Court ruled that an institute registered as an educational trust, using its earnings solely for educational advancement, should not be denied the benefits of Section 12AA of the Income Tax Act, 1961.
The Bench of Justices Sanjeev Prakash Sharma and Sanjay Vashisth observed that “the institute is a duly registered educational trust and whatever earnings it receives are also utilized for the purpose of advancement of education, the institution could not have been denied the benefit of Section 12AA.”
Section 12AA of the Income Tax Act, 1961 provides that the trusts and institutions engaged in charitable activities can apply for registration to claim tax exemptions and deductions.
Section 2(15) of the Income Tax Act, 1961 defines the term “charitable purpose” and specifies the conditions under which an organization can be classified as a charitable institution.
Section 10(23)(vi) of the Income Tax Act, 1961 provides that charitable and religious institution can avail tax exemptions.
Facts of the case:
The assessee/respondent had applied for the registration of its association under section 12AA of the Income Tax Act, 1961 but the Commissioner of Income Tax (CIT), Patiala (appellant) cancelled the registration of the assessee under the said Act. The assessee challenged the refusal of the registration of the association before the Income Tax Appellate Tribunal. The Tribunal set aside the order of the Commissioner of Income Tax and allowed the registration. The Commissioner of Income Tax has challenged the order passed by the Tribunal before the Punjab and Haryana High Court.
The department contended that the society was not engaged in charitable activities and was not providing education as a charitable purpose within the meaning of Section 2(15) of the Act. Although the society had been approved under Section 10(23)(vi), but mere approval alone did not guarantee registration under Section 12AA. It was the assessee's responsibility to prove to the authorities that the society was involved in charitable activities.
Observations of the High Court:
The bench referred to the case of Ananda Social and Educational Trust v. Commissioner of Income Tax and Anr. [2020 (17) SCC 254 where the Supreme Court laid down the scope of Section 12AA and observed that for the purpose of allowing registration under Section 12AA of the Income Tax Act, 1961, the authority shall examine whether the object of the society is of charitable nature or not, and whether the activities being performed by the society are genuine.
The bench noted that the institute is already registered under Section 10(23)(vi) as an educational institute, and Section 12AA relates to registration of trust. Since the institute is a duly registered educational trust and whatever earnings it receives are also utilized for the purpose of advancement of education, the institution could not have been denied the benefit of Section 12AA.
The bench found no error in the Income Tax Appellate Tribunal's decision to grant the institute registration under Section 12AA.
In view of the above, the bench dismissed the appeal.
Counsel for Petitioner/ Assessee: Amanpreet Singh, Senior Standing Counsel
Counsel for Respondent/ Department: Abhinav Narang
Case Title: The Commissioner of Income Tax, Patiala v. Yadvindra Public School Association, Patiala
Case Number: I.T.A- 253 of 2011 (O&M)