IN INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH G NEW DELHI BEFORE : SHRI I.C. SUDHIR, JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA Nos. 1330 & 1331/Del./2014 Saraswati Shiksha Samiti, vs. Commissioner of Income-tax, C/o Saraswati Sr. Sec. School, Rohtak. Village & P.O. Assawarpur, Rai, Distt. Sonepat (Haryana) (PAN: AAAJS3651 D) (Appellant) (Respondent) Appellant by : Sh. K. Sampath, Advocate & Sh. V. Raja Kumar, Advocate Respondent by : Sh. B. Ramanjaneyula, Sr. DR Date of hearing : 24.08.2016 Date of pronouncement : 19 .09.2016 ORDER Per L.P. Sahu, Accountant Member: These are two appeals filed by assessee against orders of Commissioner of Income-tax, Rohtak, dated 10.01.2014 on ground that ld. CIT erred on facts and law in rejecting applications of assessee for grant of registration u/s. 12A and approval u/s. 80G of IT Act by wrongly holding that aims and objects of Society are not charitable and activities conducted by appellant are not genuine. 2 ITA No.1330 & 1331/Del./2014 2. Since both appeals are interconnected and were heard together, therefore, same are being decided by this consolidated order for sake of convenience and brevity. 3. brief facts of case are that appellant filed applications on 23.07.2013 in Form No. 10A and 10G for seeking registration u/s. 12A and 80G of Act respectively along with copy of Society Registration certificate dated 01.07.1998 issued by Registrar of Firms & Societies, copy of memorandum of society, income & expenditure account, balance sheet along with audit reports in form No. 10B for F.Y. 2009-10 to 2011-12. Notices were issued for hearing. report was called for from Assessing Officer concerned as to whether appellant fulfilled conditions required for grant of registration / approval applied for. In response, JCIT, Sonepat did not clearly recommend case for registration u/s. 12AA and approval u/s. 80G and left matter to be decided on merits. ld. CIT referring to definition of Charitable purpose rejected applications of appellant by observing as under : 3. definition of 'Charitable Purpose' as given in Income Tax Act, 1961 is reproduced below :- "Charitable purpose includes relief of poor, education, medical relief, [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments 3 ITA No.1330 & 1331/Del./2014 or places of objects of artistic or historic interest,] and advancement of any other object of general public utility: Provided that advancement of any other object of general public utility shall not be charitable purpose, if it involves carrying on of any activity in nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for cess or fee or any other consideration, irrespective of nature of use or application, or retention, of income from such activity:]" applicant's reply does not satisfy very essence of charity which is necessary for earning status of being-charitable as is required in view of section 2(15) read with section 12AA of Income Tax Act, 1961. provisions of sec 11 and 12 do not envisage that charitable institution shall provide charity by charging fees from public at large. fees received are outside scope of sec 11 and 12 and shall, therefore, be taxable. Fees imply direct involvement of consideration for services rendered. Fees can not be voluntary and are, therefore, taxable under head profit and gains of business or profession. charging of fee is also in violation of contents of para 13 of trust deed wherein medical camps are said to be organized free. Thus, assessee trust is profit oriented business entity and not charitable institute. Keeping in view of above, application of assessee trust does not deserve for registration. 4. applicant trust has earned huge income under various heads by charging higher fees from students and these charges are over and above cost of basic services provided to students which is never expected from such educational society which is interested in approval for registration u/s 12AA of Income Tax Act, 1961. provisions of sec 11 and 12 do not envisage that charitable institution shall provide charity by charging fees from public. fee received is outside scope of sec 11 and 12 and shall, therefore, be taxable. Fees imply direct involvement of consideration for service rendered. Fees cannot be voluntary and are, therefore, taxable under head profit and gains of business or profession. educational institutions run by society charged hefty fees and earn 4 ITA No.1330 & 1331/Del./2014 systematic profit year to year to enhance its earning capacity through acquisition of buildings & other fixed assets. Thus, society is running its institutions on purely commercial lines and earning profits/ surpluses systematically year after year by charging fees from students and making profits. Keeping in view aforesaid facts and circumstances, neither aims/objects and terms of memorandum are of charitable nature, nor are there any activities which may be put to test of genuineness. Consequently, request of applicant society for registration u/s 12AA of Income Tax Act cannot be acceded to and application in form 10A is, therefore, rejected accordingly u/s 12AA(l)(b)(ii)/250 of Income Tax Act, 1961. 4. During course of hearing, ld. AR of assessee contended that only objection of ld. CIT to reject applications of appellant is that assessee charged hefty fee from students which amounts to be consideration for rendering services. He, therefore, concluded that assessee trust is profit oriented business entity and not charitable institute. It is submitted that ld. CIT has failed to consider aims and objects of appellant-society in right perspective, which completely qualify for registration u/s. 12A and approval u/s. 80G. ld. Counsel for appellant inter alia relied on decision of ITAT, Lucknow Bench in case of St. Don Bosco Educational Society vs. CIT, (2004) 84 TTJ 805 for proposition that mere charging of high fees is no ground for rejecting registration application. It was submitted that aims and objects of assessee society and 5 ITA No.1330 & 1331/Del./2014 its activities are charitable qualifying for registration. Several other decisions have also been relied upon on issue. 5. ld. DR, on other hand, relied on order of ld. CIT and submitted that activities of assessee were found to be commercial in nature and therefore, CIT rightly rejected applications of assessee. 6. We have heard rival contentions and have gone through entire material available on record and we find no justification to support orders of ld. CIT refusing to grant registration u/s. 12A and approval u/s. 80G of Act. It appears that conclusion reached by ld. CIT that assessee trust is profit oriented business entity and not charitable institute, is based only on ground that assessee-society charged fees from students. ld. CIT has failed to throw any light on aims and objects of society and to examine whether activities carried out by assessee-society are to achieve such aims and objects as per its memorandum. Simply because assessee charged fee from students, in our opinion, does not go to suggest refusal of registration to assessee-society as held by ITAT in case of St. Don Bosco Educational Society (supra). ITAT in said decision has further observed that scope of powers of CIT is confined to 6 ITA No.1330 & 1331/Del./2014 examine genuineness of activities of Trust or institution and to examine objects of trust or institution and it is exclusive jurisdiction of AO to examine other aspect of matter when assessee claims any tax benefit. In present case, we have also examined income and expenditure accounts for three years filed by assessee at pages 21 to 50 of paper book, according to which income and expenditure earned and incurred by assessee-society are as under : F.Y. 2009-10 F.Y. 2010-11 F.Y. 2011-12 Gross receipts 25,21,892 37,42,920 57,42,409 Fee received from Students 24,84,445 36,85,557 57,36,634 Cash expenditure incurred Under various heads 22,98,997 33,72,697 50,78,081 Depreciation on fixed assets 1,80,821 3,18,611 4,80,013 Surplus amount with Society 24,074 51,612 1,84,315 From analysis of above financial statements, we find that nominal surplus amounts shown above remained with society and not distributed amongst its. appellant society has charged fees from students, but same has been utilized for running of school for education purpose. Therefore, view of ld. CIT that society has charged hefty fees from students and hence, operating commercial activities is wrong and not supported by any material on record. finger raised by ld. CIT on activities of appellant society and its aims and objects being not charitable is, therefore, based on no good reasons relevant for refusal to grant registration. Therefore, in view of several decisions relied on by ld. Counsel for assessee and in 7 ITA No.1330 & 1331/Del./2014 attending facts of case, we direct ld. CIT to grant registration u/s. 12A and approval u/s. 80G of Act as prayed for. 7. In result, appeals of assessee are allowed. Order pronounced in open court on 19.09.2016. Sd/- Sd/- (I.C. SUDHIR) (L.P. SAHU) Judicial Member Accountant Member Dated : 19.09.2016 aks/- Copy of order forwarded to: (1) appellant (2) respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant. Registrar Income Tax Appellate Tribunal Delhi Benches, New Delhi Saraswati Shiksha Samiti v. Commissioner of Income-tax, Rohtak