Itta/168/2015 Of The Director Of Income-Tax [Exemptions] v. The Institute Of Development And Research In Banking

THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN AND THE HON’BLE SRI JUSTICE M.SATYANARAYANA MURTHY I.T.T.A.No.168 of 2015 JUDGMENT:(per Hon’ble Sri Justice Ramesh Ranganathan) This appeal, under Section 260-A of the Income-Tax Act, 1961 (for shortthe “Act”), is preferred by the revenue against the order of the Income TaxAppellate Tribunal, Hyderabad “A” Bench, in I.T.A.No.147/Hyd/2012 dated28.02.2012. The respondent-assessee preferred the appeal before the Tribunalagainst the orders of the Director of Income Tax (Exemptions)[“D.I.T.(E)” forshort] dated 30.11.2011 passed under Section 12AA(1)(b)(ii) of the Act. In the order under appeal, the Tribunal held that the assessee hadapplied for registration as a charitable institution under Section 12AA of the Acton 03.03.1997; the D.I.T.(E) had granted registration only with effect from01.04.2004; on the said order of the D.I.T.(E) being challenged, the I.T.A.T. haddirected the department to grant registration to the assessee with effect from01.04.1997; from the order passed by the D.I.T.(E) they failed to find anyspecific instances on the basis of which it could be said that the assessee wasnot genuine, and its activities were not in accordance with the object of thetrust or institution; the reasoning of the D.I.T.(E), for cancelling the registration,was vague and without any basis; they found force in the submission urged onbehalf of the assessee that the revenue, having failed in its attempt to denyexemption under Section 11 of the Act right from the assessment year 2003-04onwards, has now struck at the very root by cancelling registration underSection 12AA of the Act; after going through the order of the D.I.T.(E), theyfound that the reasons furnished in the order are the same on which theassessee was denied exemption under Section 11 of the Act for theassessment years 2006-07 and 2007-08 wherein the C.I.T. (A) had held that theassessee was entitled for exemption under Section 11 of the Act; the revenue’sappeal was dismissed by the order of the I.T.A.T wherein it was held that the assessee was entitled for exemption under Section 11 of the Act; and whenthere is no material change in the object of the assessee, and there is nospecific allegation regarding the genuineness of the institution or the fact thatthe assessee’s activities are contrary to the aim and objects, the ordercancelling registration, granted under Section 12AA of the Act, could notsustained. The Tribunal annulled the order passed by the D.I.T.(E) cancellingregistration under Section 12AA of the Act. Sri J.V.Prasad, Learned Senior Standing Counsel for the Income TaxDepartment, would submit that it is only if the assessee is carrying oncharitable activities, would they be entitled for exemption under Section 12AAof the Act; educational institutions are mostly carrying on business oncommercial lines solely with the intention to make profits; it is with a view toprevent abuse of the provisions of the Act by these institutions, was Section2(15) substituted by the Finance Act, 2008 with effect from 01.04.2009, andprovisos were inserted thereto; and the Tribunal has erred in interfering with theorder of the D.I.T.(E) cancelling the registration granted earlier in favour of therespondent-assessee. Sri J.V.Prasad, Learned Senior Standing Counsel for the Income TaxDepartment, would submit that it is only if the assessee is carrying oncharitable activities, would they be entitled for exemption under Section 12AAof the Act; educational institutions are mostly carrying on business oncommercial lines solely with the intention to make profits; it is with a view toprevent abuse of the provisions of the Act by these institutions, was Section2(15) substituted by the Finance Act, 2008 with effect from 01.04.2009, andprovisos were inserted thereto; and the Tribunal has erred in interfering with theorder of the D.I.T.(E) cancelling the registration granted earlier in favour of therespondent-assessee. On the other hand Sri K.Vasantkumar, Learned Counsel for therespondent-assessee, would place reliance on a copy of the memorandum ofassociation of the respondent-assessee in support of his submission that therespondent-assessee is an educational institution established by the ReserveBank of India; members of the Governing Council, of the said institution, aremostly officers of the Reserve Bank of India and other Central Governmentinstitutions; its chairman is the Chairman of the Reserve Bank of India; theobjects of the respondent-society is to promote the study of, and disseminateknow-how on, Information Technology, to conduct research in the area ofInformation Technology with respect to the banking and financial sectors etc;and the Tribunal was justified in its conclusion that registration of therespondent-Society was cancelled only as a counter-blast to the earlier order ofthe Tribunal granting them registration retrospectively from the year 1997onwards. The order of the D.I.T.(E) dated 30.11.2011, cancelling the registrationgranted earlier in favour of the respondent-assessee, records that therespondent is carrying on research and development in academic courses and technology for the common man; in order to compete with service providerslike Master Card, VISA etc., the assessee had developed competitive servicesin those areas; the explanation offered by them was mainly focused on thedescription of the activity, and the benefit for the banking institutions in theirdaily business, but not with regard to the charitable purpose as envisaged inSection 2(15) of the Act; the respondent-assessee has been sponsoring adiploma course in Osmania University in Banking sections related to educationand mainly providing service, with cost, to various banks under the control ofthe Reserve Bank of India; it had also collaboration with (a) University ofHyderabad under which the respondent-assessee is running a full-fledged post-graduate course-M.Tech. (Information Technology) with specialisation inbanking technology and information security and (b) University of Hyderabadunder which research fellows have been pursuing research exclusively in theareas of banking technology; and the Society had received grants from variousorganisations, but had not utilized the entire grants for the purpose for which itwas received. The D.I.T.(E) then goes on to extract the definition of charitablepurpose, and comes to the conclusion that the Society was indulging incommercial activities necessitating cancellation of its registration. Charitable purpose, under Section 2(15) of the Act, is defined to includeeducation. The order of the D.I.T.(E) records that the Society has beensponsoring diploma course in banking sections with the Osmania Universityand full-fledged post-graduate course-M.Tech. (Information Technology) withspecialisation in banking technology and information security with costs withthe University of Hyderabad. Sponsoring educational courses would fall withinthe ambit of “education” as defined under Section 2(15) of the Act. Merelybecause education is provided at cost does not result in the Society ceasing tocarry on its activities for a charitable purpose. There is no material on record,nor has any finding been recorded by the D.I.T (E) referring to particularinstances, to hold that the respondent-assessee was carrying on itseducational activities with a profit motive or on commercial lines. The Tribunalhas rightly held that the reasons assigned by the D.I.T.(E), in cancellingregistration of the respondent-assessee, was vague and without reference toany particular instance. The Tribunal is the final Court of fact, and save a perverse finding or a finding based on no evidence, findings of fact recorded by the Tribunal wouldnot give rise to a substantial question of law necessitating interference underSection 260A of the Act. The order of the Tribunal does not suffer from anysuch infirmity. We are satisfied that no substantial question of law arises forconsideration in this appeal. It is unnecessary for us, therefore, to examine thescope of either the amended Section 2(15) of the Income Tax Act or itsprovisos. The Appeal fails and is, accordingly, dismissed. The miscellaneouspetitions pending, if any, shall also stand dismissed. No costs. ______________________________ RAMESH RANGANATHAN, J Date:04.11.2015. ___________________________________ M. SATYANARAYANA MURTHY, J cs