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2013 (9) TMI 1120 - ITAT PUNECancellation/withdrawal of registration granted u/s 12A - Trust activities "Genuine" or "Commercial" - Imparting knowledge at cost with profit making intention - "Charitable Educational" work - Cancellation of registration with Retrospective effect u/s-12AA - Question of Contravention of Section-13 - HELD THAT :- the assessee is not receiving any educational grants from the State Govt. which means that State Govt. does not find the so-called "charitable work" of the assessee an absolute necessity to discharge its constitutional liability to give grant. Further, by permitting the assessee to charge fees at a pre-determined rates, the Govt has merely made available a means to meet the assessee's expenditure, at the same time has ensured that the students are not unduly suffered by providing a ceiling for collection of fees. Therefore, the assessee's stand that it is charging fees as permitted by the state Govt., does not necessarily means that the assessee is engaged in charitable activity under sec. 2(15). Moreover, it was allegated the assessee has been providing nothing free of cost, and there is a cost-tag to each and every item which is not less than the upper limit prescribed by the State Govt. Thus IT Department states that Institute is run purely on commercial lines but to initiate steps for the cancellation of the registration of a trust or Institution where the activities of the trust or institution are not genuine or are not being carried out according to the objects for which trust was registered under S. 12A." So basic requirement for invoking S. 12AA(3) is that the activities of the trust are not genuine and are not being carried out in accordance with the objects of the trust. The question raised was that trust is imparting knowledge at cost and therefore, not a charitable Trust u/s 2(15) of the Act and the appellant trust has contravened the provisions of Ss. 11(5) and 13(1) (c) of the Act. Thus, there is nothing found out that the Trust is not 'genuine', the trust is carrying on Educational activities that are charitable in nature. The activities are carried out as per its objects and thus, no infringement of any of the provisions contained in Ss.11(5) and 13 of the Act. The provisions of S.12AA(3) for cancellation/withdrawal of registration granted to it u/s 12A of the Act are not retrospective and order of the CIT passed u/s 12AA(3) is nothing but a review. Payment made by trustees to vendor - HELD THAT:- there is no documentary evidences found to substantiate that payment was made to vendor with the sole purpose of benefiting the managing trustee or his relatives except that the funds of the trust were routed through the trustees to the vendor. Moreover, the utilizations of the trust fund was not for purchase of agricultural land as investment, but a ladder to set up an educational institution in said land Relatives/friends being trustees claiming benefits of the trust - Utilization of Substantial part of trust's income for personal benefits - Huge expenditure incurred for personal benefits of interested persons - HELD THAT:- Whether the trust is a public trust or not depends upon its objects. If the settler himself decides to be the sole trustee or nominates trustees from his family or those in his personal confidence. This does not vitiate either the validity of such trust or its public character. It is natural that settler would like to ensure that the objects of the trust created by him are best carried out by persons in whom he has the required confidence. Accumulated income of the Trust - No investment in specified securities - Already granted exemption u/s-11 in earlier years withdrawn - Non-denial of exemption already granted u/s-11 - HELD THAT:- If there was any misapplication of funds, action would lie against person responsible, but the Institution cannot be denied exemption, which depends upon the objects of the Trust. Advances given to the trustees - Advances lying with the treasurer - HELD THAT:- An advance for purchase of property by itself need not be treated as violation of S. 11(5) but such advance should be treated as bonafide. Decision in the case DEPUTY COMMISSIONER OF INCOME-TAX VERSUS COSMOPOLITAN EDUCATION SOCIETY [1999 (8) TMI 13 - RAJASTHAN HIGH COURT] followed. In the result, there is nothing found out that the Trust is not 'genuine'. In fact, the trust is carrying on Educational activities they are charitable in nature. The activities are carried out as per its objects. There is no infringement of any of the provisions contained in Ss.11(5) and 13 of the Act. The provisions of S.12AA(3) for cancellation/withdrawal of registration granted to it w.e.f. 11-2-1998 u/s 12A of the Act are not retrospective and therefore, the impugned order of the CIT passed u/s 12AA(3) is nothing but a review of its earlier order which is impermissible in law. We hold so. The decision in the case DIRECTOR OF INCOME-TAX (EXEMPTION) , AHMEDABAD VERSUS NH. KAPADIA EDUCATION TRUST [2012 (5) TMI 236 - ITAT AHMEDABAD] and SINHAGAD TECHNICAL EDUCATION SOCIETY VERSUS COMMISSIONER OF INCOME TAX [2012 (3) TMI 262 - BOMBAY HIGH COURT] followed. As a result, the appeal of assessee was allowed
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