Once registration under Section 12AA is in place, the Income Tax Department cannot question the genuineness of activities for approval under Section 80G.

JUDGMENT :

Ramesh Sinha, C.J.

1. Heard Mr. Ajay Kumrani, learned counsel for the appellant. Also heard Mr. Sumesh Bajaj along with Mr. Rishabh Bajaj, learned counsel appearing for the respondent.

2. The substantial question of law involved, formulated and to be answered in this appeal preferred by the appellant is as under:-

“Whether on facts & circumstances of the case, ITAT is correct in directing that approval u/s 80-G of Act to be allowed only due to existing of approval u/s 12 AA, irrespective of the finding of the CIT that the society is engaged in commercial activities and cannot be considered as charitable?”

3. The necessary facts of the case are that the assessee /respondent is a Society who filed an application for grant of approval under Section 80G of the Income Tax Act, 1961 (hereinafter called as ‘the Act’) before the Commissioner of Income Tax, Raipur (hereinafter called as ‘CIT’) on 28.02.2014. A report in this context was called for from the Assessing Officer about the genuineness of the Society and its activities. An opportunity was provided to the respondent Society by issuing the letter dated 18.07.2014 to produce the copies of audited accounts for last three years and also to produce original documents and proof of charitable activities of the respondent. Shri Pawan Agrawal and Shri Dipesh Sancheti attended from time to time and filed written submissions. On 6.8.2014 the respondent Society was asked to explain:

(i) How vocational training can be considered as education within the meaning of Section 2(15) of the Act.

(ii) How the activities can be considered charitable as fees is being charged and substantial amount is received from Sikkim Manipal University.

(iii) How rent received by the society can be considered as charitable.

The respondent has filed details from time to time. These details are basically regarding work done by the Society. However, regarding charitable work done by the respondent, it insists that it is in the field of education. The respondent has further submitted that if the respondent get registration under Section 80G of the Act, it will be able to get donations for doing charitable work in a meaningful way.

4. The Divisional Commissioner of Income Tax-1(1), Raipur in the report dated 8.8.2014 stated that the Society is engaged in establishment of colleges of different spectrum such as Engineering, Dental, Commerce, Management etc. The following points were observed:

(i) The nature of work done by the assessee is not strictly adhering to its object, for example the fact that it receives a fee for being a center in Chhattisgarh for Sikkim Manipal University (SMU) is not adhering to its objects and the same is nowhere mentioned in the objects.

(ii) The assessee was asked to explain the charitable activities carried out by the society for last three years. They explained about a hostel that they run for the people from Natal-effected districts. However, it is observed that the trust is into providing skill- development courses to various government organizations, these Government organizations reimburse these expenses to the society and the society also receives a fee for conducting these courses. Therefore, this cannot be considered as charitable work done by them. Hence, the DCIT-1(1), Raipur did not recommend for approval under Section 80G of the Act as the society was not doing any charitable work.

5. The CIT, Raipur vide order dated 25.08.2014 rejected the application filed by the assessee / respondent for approval under Section 80G of the Act stating that the respondent Society is running its institutes on commercial lines, the Society has taken huge loans from