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2013 (10) TMI 824 - AT - Income TaxScope of enquiry made by DIT(E) u/s 12AA regarding the activities of charitable trust – Held that:- After insertion of section 12AA w.e.f. 1.4.1997, the DIT(E) is empowered to enquire about the activities of the assessee before passing the order. There may be cases where application is made after the commencement of activities by the assessee trust. In such cases the DIT(E) is justified to enquire about the activities. However, where no activity is commenced, the question of making any enquiry regarding any activity by the DIT(E) would not arise. The nature of enquiry would depend on the facts of each case – Contention that scope of the DIT(E) is limited to ascertaining only whether the objects are charitable or not is not acceptable – Decided against the Assessee. Exemption u/s 10(22) of the Income Tax Act for educational institution – Held that:- Legislative intent disclosed in section 10(22) wherein it has been clearly provided that income of any educational institute cannot be exempted unconditionally if such institution also exists for deriving of profit. According to this provision, if any educational institution is running on commercial basis then income of such educational institution cannot be exempted from taxation. However, such institution can claim exemption u/ss. 11 and 12 as element of profit is not excluded by the Legislature - 75% of the income is to be applied for charitable purposes itself shows that element of profit is not excluded from the definition of charitable purpose for the purpose of sections 11 and 12. Because some profit has been earned by an educational institution registration u/s. 12AA cannot be denied so long as provisions of sections 11, 12 and 12AA are complied with. Whether on the facts and in law, the registration u/s. 12AA of the Act can be refused to the assessee – Held that:- When societies/trusts are created with the sole object to advance the cause of education but if such objects coupled with the motive to earn profits, then such institution will not be entitled to exemption under section 10(22), since in such cases cannot be said to exist solely for the purpose of education. Therefore, registration under section 12A/12AA would not be relevant by itself for claiming exemption under section 10(22) though the same would be relevant for claiming exemption under sections 11 and 12. Therefore, where education is imparted by an institution with the purpose of profit i.e., by running the schools/colleges purely on commercial basis, the assessee would not be entitled to exemption under section 10(22) but such case may be considered for exemption under section 11 if the conditions imposed by the Legislature are satisfied – Decided in favor of Assessee.
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