Q; Whether registration under Section 12AA can be denied because minority status is accorded to educational institutions run by a society ?
Merely because minority status is accorded to educational institutions run by a society, it cannot be regarded as being established for benefit of a particular religious community; registration cannot be denied on this ground
• Sections 11 and 12 could be taken into consideration for purpose of grant or otherwise of registration under section 12AA inasmuch as it impinges on its public character. Notwithstanding registration granted under section 12AA, no benefit under sections 11 and 12 can be allowed in view of an abiding feature of a society’s constitution or its inherent nature
IN THE ITAT PATNA BENCH
International School of Human Resources & Social Welfare Society
Commissioner of Income-tax-1, Patna
AND SANJAY ARORA, ACCOUNTANT MEMBER
IT APPEAL NOS.72 & 99 (PAT.) OF 2011 & 2012
C.O. NO. 1 (PAT.) OF 2012
JULY 20, 2015
Facts of the Case
The assessee is a society registered under the Societies Registration Act, 1860 since February, 1992, and stands also declared as a Minority Educational Institution (MEI) within the meaning of section 2(g) of the National Commission for Minority Educational Institutions Act, 2004 (‘NCMEI Act’ hereinafter), being issued a certificate on 19.03.2007 to this effect by the National Commission for Minority Educational Institutions (NCMEI). The assessee applied for registration as a charitable institution u/s. 12A(1)(aa) on 06.10.2008, which was rejected by the competent authority vide its order dated 18.03.2010
The principal grounds for the denial of registration are as under:
(a) the membership of the assessee’s society is open only for members of a religious community, i.e., Muslims, or the followers of the Islam faith;
(b) the educational institutions established and administered by the assessee-society are granted the status of MEIs by NCMEI, set up under the NCMEI Act, 2004. Section 12B of the said Act gives the said authority the power to decide on the minority status of an educational institution; section 12C thereof giving it power to cancel such status on violation of any condition stipulated therein, and for which purpose it can call for the records of the MEI to verify if it had admitted students belonging to the minority (non-minority) community as per the Rules, i.e., has adhered to the percentage prescribed for admission of such students. In fact, section 12C(b) of the MEI Act, 2004 empowers the State Governments to prescribe the percentage governing admission to a MEI;
(c) the educational institutions established by the assessee-society are being run on commercial lines; and
(d) the assessee-society has advanced loan/s to the landlord, being its founding member/s, and to their family members, on interest free basis. Even considering that the same is toward construction of a building to be let to the assessee-society, the arrangement results in augmenting their wealth, both in terms of accretion in the value of the property as well as increase in the rental base, creating, rather, a source of income. The provision of section 13(1)(c) r/w s. 13(3) is therefore attracted.
• To be identified as an educational institution of the minorities, there should be a nexus between the institution and the particular minority to which it claims to be belonging. How could, otherwise, one may ask, it claim to be established for the benefit of the minority community, entitled to the protection guaranteed under article 30(1) of the Constitution, seeking to enshrine the right to serve and promote minority interest? A prescription of a standard or uniform percentage governing admissions may not, however, necessarily serve the purpose, which is to seek non-minority representation to a reasonable extent, while at the same time ensuring that the minority character of the institution is not annihilated, and the right engrafted under article 29(2) not subverted. What is, therefore, required is a balance between the two objectives – the preservation of the rights of the minority to admit the students of their community and that of admissions of ‘outsiders’ without disturbing the minority character. This balance, however, may not be specified in terms of a fixed percentage, which has to take into account the population as well as the educational needs of the area in which the educational institution is located, variables which are also subject to change with time(refer pgs. 8, 9 of the impugned order). The situation, as it appears, thus, is in a state of flux, though the position in law is clear, with the state governments empowered to prescribe the percentage, and which could be revised or changed from time to time.
• Clearly, thus, a right to regulate admission thereto is an important right of a minority institution. However, we do not find the same expressed in the charter of the assessee-society; there being no reference to any percentage or any restriction or mandate in respect thereof in its ‘Aims and Objects’. Whatever implication this may have for its status as a minority institution, we can hardly countenance or subscribe to a proposition which, despite there being nothing either in its memorandum of association (object clause) or its conduct, sanctions a presumption that it is established for the benefit of the minority (Muslim) community, solely on the basis of it being granted the status of minority educational institution – the only restriction in its charter being toward its membership extending only to the members of the said community. If the institution has, by admitting 90 per cent non-minority (non-muslim) students, violated any specific provision or guideline in the matter and, accordingly, stands to lose its minority status, of which we have no clue, so be it. And which again does not help the revenue’s case in any manner; rather, only goes against it. Though, therefore, appearing anomalous in-as-much as the minority status implies an inherent right to serve the minority interest, a finding to it being set up or established for the benefit of a particular (Muslim) community cannot be a matter of presumption and rendered de hors any material on record. The answer, as we understand, lies in the complete freedom allowed in the matter of admissions to unaided MEIs up to the undergraduate level as per the decisions by the Apex Court. Why, NCMEI, on similar facts, i.e., a low percentage of minority/s students in an educational institution established by the minorities, granted minority status to a school, holding that the criterion of fixation of a percentage governing admission of a minority community in a MEI cannot be included in the indicia for determining the minority status of such an Institution (Buckley Primary School vs. The Principal Secretary, Government of Orissa in Case No. 1320 of 2009 dated 06.07.2010/APB-I pgs. 103-129). Further, even where reserving such a right, the same may not necessarily translate into a high ratio of minority (muslim) students, for which other practical considerations may be responsible. That no such right stands reserved in the present case only fortifies the assessee’s case. Why, yet, it stands granted a minority status, we wonder, which may or may not be the Revenue’s concern. There is no claim by it of such status having been granted on account of any mis-representation, or as to the assessee having derived any benefit through misrepresentation. The same may be relevant inasmuch as the genuineness of the activities is a parameter which is to be examined by the competent authority while deciding on registration, even as the allegation cannot be lightly made, and would require being substantiated for it to be taken cognizance of. Notwithstanding, therefore, even if a minority status is accorded to educational institutions run by a society, it cannot be regarded as being established for benefit of a particular religious community. Even though the relevant provision (sec. 13(1)(b)) provides for exclusion of ss. 11 and 12 of the Act, the same could well be taken into consideration for the purpose of grant or otherwise of registration under section 12AA inasmuch as it impinges on its public character. What, we are unable to comprehend, effect or purpose the registration would have where, notwithstanding the same, no benefit under sections 11 and 12 can be allowed in view of an abiding feature of a society’s constitution or its’ inherent nature