TMI Blog2019 (7) TMI 1868X X X X Extracts X X X X X X X X Extracts X X X X ..... s voluntary and such funds have been applied for the purpose of development of buildings and other infrastructures. It is also not in dispute that the donations including fees collected from students is not in excess of prescribed fees fixed by the statement government - CIT(E) erred in cancelling registration granted under section 12A by invoking his powers under section 12AA(3) of the IT Act, 1961 only for the reason of receipt of donations from students/parents without appreciating the fact that such donations are voluntary and also within the limit prescribed limit fixed by the competent authority. DIT(E) in his order except stating that the trust is collecting donations being 'Building Fund from students/parents has not made any observations with regard to activities of the trust, if any, as referred to in section 11 or 13 of the IT Act, 1961. Unless, the Ld. DIT(E) brings on record any evidences to prove that the objects of the trust are not charitable in nature and its activities are not carried out in accordance with objects, then merely for the reason of collection of donations from students, that too when such donations are within the limit at prescribed fees fix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udice to the above, assuming - but not admitting - that the registration of the Appellant trust was liable to be cancelled u/s. 12AA (3) of the Act, the Ld. CIT(E) erred in cancelling the same with effect from 1986-1987. 4. The Appellant craves leave to add to, alter, delete or modify all or any of the above grounds at the time of hearing. 2. The brief facts of the case are that the assessee is an educational institution established as a public charitable trust in the year 1985 with main objects of imparting education. The assessee is running an educational institution and offering various courses in the name of Saraswathi Vidya Bhavan. The assessee trust is registered under section 12A of the Income Tax Act, 1961. The Ld. CIT(E) issued a show cause notice under section 12AA(3) of the Income Tax Act, 1961 on the basis of proposal received from Assessing Officer, as per which the activities of the trust is not carried out in accordance with objects, therefore, the Ld. CIT(E) issued a show cause notice and called upon the assessee to explain as to why registration granted under section 12A of the Income Tax Act, 1961 shall not be cancelled. In response, the assessee has fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. The Ld. CIT(E) further observed that it has accepted donations from students for admission, but reiterated its arguments that donations taken from students do not come within the provisions of Prohibition of Capitation Fee Act (Government of Maharashtra), 1987 without explaining how such donations are not hit by provisions of said Act. The Ld. CIT(E) has also distinguished the case laws relied upon by the assessee, more particularly, in the case of South Indian Educational Society vs. CIT (supra) to argue that although the Tribunal has held that when objects are in charitable in nature and its activities are carried out in accordance with its objects, merely for the reason of acceptance of donations from the students, the registration granted under section 12A cannot be cancelled as long as donations are applied for objects of the Trust. But, facts remain that provisions of section12AA(3) of the IT Act, empowers the Ld. CIT(E) to cancel registration, if the Trust violates any of the provisions of the IT Act, or provisions of Prohibition of Capitation Fee Act (Government of Maharashtra), 1987. Therefore, he opined that merely for the reason that the trust objects are charitable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of a student in school/colleges, then it violates the Prohibition of Capitation Fee Act (Government of Maharashtra), 1987. In this case, the assessee has demonstrated with evidences that it has collected small amount of building fund ranging from ₹ 1000 to ₹ 15000 for the purpose of development of infrastructure being buildings and such donations are voluntarily given by parents without any compulsion for admission to courses conducted by the trust. If you go through the list of donations which is available in paper books, in many cases the donations are meager amount ranging from ₹ 1000 to ₹ 2000. The assessee has accounted those donations in its books of accounts and also applied for the purpose for which such donations have been collected. Therefore, it is incorrect on the part of the Ld. CIT(E) to cancel registration only for the reason of collection of donations without bringing on record any evidences to prove that the assessee has violated any of provisions of section 11 13 of the Act. In this regard, he relied upon various judicial precedents, including the decision of ITAT, Mumbai in the case of South Indian Educational Society vs. CIT-Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examined in light of quantum of donations collected by the assessee and also applications of such donations for the objects of the trust. In this case, on perusal of details filed by the assessee, we find that the assessee has collected donations from parents/students ranging from ₹ 1000 to ₹ 15000 and in total the sum of such donations collected for the year under consideration is at ₹ 70,60,700/-. In most of the cases, the donations collected from parents/students are ranging from ₹ 1000 to ₹ 2000/-. The assessee filed necessary evidences to prove that the donations collected are accounted in the books of accounts and also same has been applied for objects of the trust. The assessee has also filed evidences to prove that the amount of fee collected from students including donations being Building Fund is within the prescribed limit fixed by the competent authority for collection of fees for particular courses. All these facts are not disputed by Ld. CIT(E). The Ld. CIT(E) is only on the point of violation of Prohibition of Capitation Fee Act (Government of Maharashtra), 1987. We have gone through provisions of the Maharashtra Educational Institutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el registration under section 12AA(3) of the IT Act, 1961. The Hon ble Karnataka High Court, in the case of CIT vs. Islamic Academy of Higher Education (2013) 229 taxmann.com held that where assessee trust was fulfilling its main object of imparting education, registration of trust should not be cancelled on the basis of trustees misappropriating trust funds. The Hon ble Karnataka High Court in the case of CIT vs. Garden City Education Trust 28 DTR 139 (Kar.) held that where there is no dispute in respect of the objects of the trust, that of imparting of education and also when there is no dispute regarding the fact that the trust is actually imparting education and not carrying on any other activities, the trust is eligible for getting registration under section12A, as a charitable institution and the question regarding application of funds and allowability of benefit of exemption under section 11 12 are matters which are to be examined by the Assessing Officer at the time of assessment and not by registering authority. 8. Coming to the case laws relied upon by the Ld. D.R. The Ld. D.R. relied upon the decision of Hon ble Bombay High Court in the case of Sinhagad Technical Ed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. The AO assessed surplus for the year under the head income from business or profession for the reason that exemption granted under section12A has been withdrawn for the impugned assessment order for the reason stated in the order of the Ld. CIT(E) as per which the assessee has violated provisions of Prohibition of Capitation Fee Act (Government of Maharashtra), 1987 by collecting building fund from parents/students in connection with admission in schools/colleges run by the trust. Except this, no other reasons have been brought on record to deny the benefit of exemption claimed under section 11 of the Income Tax Act, 1961. We find that the Tribunal has restored registration granted under section 12A to the assessee from the date of registration for the detailed reasons recorded in its order in ITA No.1778/M/2015. Therefore, once registration granted under section 12A is available to the assessee from the date of registration including for the impugned assessment year, then the AO was incorrect in denying the exemption under section 11 of the Income Tax Act, 1961. Therefore, we direct the AO to allow the benefit of exemption claimed under section 11, in respect of income der ..... X X X X Extracts X X X X X X X X Extracts X X X X
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