Ita.300/13 v. Ita.300/13

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE WEDNESDAY, THE 12TH DAY OF FEBRUARY 2014/23RD MAGHA, 1935 ITA.No. 300 of 2013 () ----------------------- AGAINST THE ORDER/JUDGMENT IN ITA 845/2008 of I.T.A.TRIBUNAL,COCHINBENCH DATED 29-12-2009 APPELLANT(S)/APPELLANT IN ITA: ------------------------------ DAWN EDUCATIONAL CHARITABLE TRUST, DOOR NO 33/2000, ARAKKADAVU ROAD, VENNALA P.O KOCHI 682028, REPRESENTED BY MANAGING TRUSTEE DR. JOHNSON LUCKOSE BY ADVS.SRI.KOSHY GEORGE SRI.SAJU J.VALLYARA RESPONDENT(S)/RESPONDENT IN ITA: -------------------------------- COMMISSIONER OF INCOME TAX, KOCHI, 5TH FLOOR, KANDAMKULATHY TOWERS, M.G ROAD KOCHI 682011 BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON12-02-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: MANJULA CHELLUR, C.J & A.M.SHAFFIQUE, J. ---------------------------------------------- I.T.A.No. 300 of 2013 ---------------------------------------------- Dated this the 12[th] February, 2014JUDGMENT Manjula Chellur, C.J. Heard learned counsel for the appellant as well as learned Standing Counsel for the respondent. 2. It is not in dispute, appellant is a registered Trust underthe name and style “Dawn Educational and Charitable Trust”running a school named 'Dawn International School'. Anapplication came to be filed seeking registration under Section12A of the Income Tax Act so as to get income tax exemption onthe ground that they are imparting education and therefore it is atrust meant for charitable purpose. Respondent authority madean enquiry to satisfy himself whether the activity done factually isin the direction of object of the trust, i.e., charitable purpose ornot. Commissioner of Income Tax, who is an authority to grantregistration under Section 12AA of the Act, was of the opinion,assessee intends to run a posh international school in the name ofcharitable activity, therefore, assessee was not entitled for such ITA.300/13 registration. Reasons for rejection of application were, though thetrust says main object of it being to run educational institutionsand establish institutions of training and rehabilitation formentally retarded persons, physically handicapped persons etc.,enquiries revealed that activity of the trust is only to bring under its ambit the already existing Dawn International School run bythe Managing Trustee Dr.Johnson Luckose. Commencement of theschool is in 2006 and the trust formed in 2007. The school is runin a building where air conditioned class rooms with breakfast andlunch are provided. The school is maintained and meant forbenefit of children of non resident Indians. Fee structure indicatedhuge amount collected even in kindergarten classes in the year2006. For play school, which is pre-kindergarten, they werecharging 6,000/- per month. ₹ 3. Apart from above factual situation, clause 6 of the trust deedfurther indicates that the trust is at liberty having absolute discretionto accept contributions as donation and contributors have no right orcontrol over the management or in the administration of the trust. Allthese facts borne on record revealed during the enquiry persuadedthe Commissioner to reject the application. This came to beconfirmed by Appellate Tribunal endorsing views of theCommissioner. ITA.300/13 3. Apart from above factual situation, clause 6 of the trust deedfurther indicates that the trust is at liberty having absolute discretionto accept contributions as donation and contributors have no right orcontrol over the management or in the administration of the trust. Allthese facts borne on record revealed during the enquiry persuadedthe Commissioner to reject the application. This came to beconfirmed by Appellate Tribunal endorsing views of theCommissioner. ITA.300/13 4. Learned counsel arguing for appellant contends,charitable trust does not mean, it imparts education only to thepoor. Even if poor children are excluded, it could still be charitableas long as running an educational institution. He tries to convincethe Bench with his stand placing reliance on the decision reportedin Nedumchalil C.Trust v. Municipal Commissioner (1991(2)KLT 180). The question that arose was whether the fact of specialwards for patients who pay full price are run or that salary is paidinclusive of the expenditure for the trustees will not change thenature of the trust, i.e., charity and charitable purpose. In thatcontext, referring to Section 101(1)(d) of the Municipalities Act,1961 (Kerala) with reference to general meaning of charitablepurpose learned Single Judge of this Court opined what amountsto charity so far as Municipalities Act. We are not concerned withsimilar situation and further said judgment can only have apersuasive value and not binding on the Division Bench. We haveto consider the controversy before us with reference to IncomeTax Act how an application for registration under Section 12A ofthe Income Tax Act has to be considered. It is well settled thateven if nomenclature of the trust may indicate it is meant forcharitable purpose, but if activities reveal otherwise, that should ITA.300/13 weigh with the authorities who grant registration. Similarly, whileconsidering claim of exemption, authorities under the Act wouldlook into the actual activity of the institution, especially mainactivity of the institution. In the absence of facts indicating thatthe activities carried on attracts definition of charitable purpose,one cannot find fault with rejection of registration. When theschool is running on commercial lines under the clad of charitablepurpose, the parties were justified making enquiries and rejectingthe application. We find no good ground to interfere with the order of theAppellate Tribunal. Accordingly, the appeal is dismissed. MANJULA CHELLUR, CHIEF JUSTICE A.M.SHAFFIQUE, JUDGE vgs13.2.14