The Mumbai bench of Income Tax Appellate Tribunal has recently held that, Charitable Trust who runs pre-school cannot be denied registration under section 12A of Income Tax Act for Income Tax benefits.
The Assessee Green Acres Educational Trust filed an application under section 12A in form No.10A dated 29.05.2012 with the Director of Income Tax (Exemption)-Mumbai for the purpose of seeking registration u/s 12A. It is noted that the aforesaid trust deed was duly registered with the Charity Commissioner of Mumbai on 17.05.2012. The Ld. DIT rejected the application for grant of registration on following two reasons:
(i). The assessee is running the pre-school which is stage prior to normal schooling, and therefore, its activities cannot be treated as falling within the gamut of ‘Education’ as per section 2(15) of the Act. The justification given by the Ld. DIT is that as compared to formal education imparted in course of normal schooling, pre-schooling is a kind of informal education which is not recognized or regulated by the State Government/Education Board/ BMC.
(ii). The assessee trust is charging fees for issue of prospects, additional fees on account of supply of School Kit, admissions fees etc. and on the basis of the same Ld. DIT concluded that assessee trust was engaged in the business of commercial activity while running the pre-school.
The Tribunal bench comprising of Judicial Member Amit Shukla and Accoutant Member Ashwani Taneja observed that, “the view adopted by him is not only contrary to law and facts, but we also find it to be highly myopic and regressive. In today’s world the ‘education’ has attained its unprecedented dimensions. With the advancement of technologies and evolution of multi cultural societies, the complexities in business and real life situations have grown many folds. Under such circumstances, need for appropriate education for each and every person right from its childhood can never be over emphasized. The education has got different meaning, purpose or object for each person depending upon its position and background. We have education of various types e.g. Pre-schooling, schooling, higher education, professional education, vocational training, professions training etc…”.
The Tribunal also relied the case of Life Shines Educational & Charitable Trust (supra) Chennai Bench of the Tribunal held that “pre-schooling’ shall fall within meaning and scope of the ‘education’ as used u/s 2(15).
The Tribunal also observed that, “we do not find any justification in the view adopted by the Ld. DIT that preschooling is not part of education activity. In our considered view pre-schooling is very much integral part of the term ‘education’ as has been envisaged u/s 2(15) of the Act and we hold so”.
On the issue of denial on the grounds that the pre-school charged fees, the ITAT held that, at the stage of application for registration, I-T authorities are required only to examine the genuineness of the trust’s activities. Only at a later stage, during the course of assessment, the I-T exemption can be denied if the income has not been applied for the trust’s educational activities.
The ITAT struck down the stand taken by the Director of Income Tax (Exemption) Mumbai who had denied the registration.
Read the full text of the order below.
