Punjab & Haryana HC allows Benefit U/s 12 AA of Income Tax for Educational Trust for Educational Advancement [Read Order]

In a significant ruling, the Punjab and Haryana High Court ruled that benefit under section 12 AA of the Income Tax Act, 1961 is allowable to an institute registered as an educational trust which using its earnings solely for educational advancement.

The assessee/respondent, Yadvindra Public School Association 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.

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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), 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.

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The bench referred to the case of Ananda Social and Educational Trust v. Commissioner of Income Tax and Anr. ( 2020 ) 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 court found that the institute is already registered under Section 10(23)(vi) of the Income Tax law 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 utilised for the purpose of advancement of education, the institution could not have been denied the benefit of Section 12AA.

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The division 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 utilised for the purpose of advancement of education, the institution could not have been denied the benefit of Section 12AA of the Income Tax Act and dismissed the appeal.

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.

Amanpreet Singh appeared for the petitioner and Abhinav Narang appeared for the respondent.

To Read the full text of the Order CLICK HERE

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