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2017 (1) TMI 1671 - AT - Income TaxExemption u/s 11 - cancellation of registration of the trust u/s 12AA(3) - charitable activity u/s 2(15) or not? - search proceedings - trustees are diverting trust funds for the benefit of persons specified, thereby infringing the provisions of section 13(1)(c) and violating provisions of section 11(5) - trust is not maintaining proper books of accounts and no returns of income were filed for the A.Y. 2006-07 onwards - HELD THAT:- onus for proving the existence of factors calling for cancellation of registration granted to an institution is on the Department rather than on the institution. In the present case, the CIT has miserably failed to discharge such onus. No material has been brought by the CIT that the assessee society exists for profit motive. The Department has not been able to discharge its onus of showing as to how the conditions for grant of registration have been breached by the assessee. The assessee remained enjoying the registration granted to it for the last number of years under the same unchanged facts and circumstances. It has also not been demonstrated by the Department as to how the approach of the assessee has turned to a commercial one. The predominant object of the assessee is and remains to carry out charitable purpose of advancement of education, and not to earn profit. In fact, no profit has been established to have been earned by the assessee. The CIT has failed to specify as to how profit earning is the predominant activity of the assessee instead of carrying out its said charitable purpose. On the other hand, the assessee has filed various details of income from property held under trust and application of income for charitable purpose as per which its application of income for its object is more than its income generated from property held under trust for all these years. CIT’s observations are baseless as the administrative expenditure shown by the assessee in its financial statements predominantly consists of amount spent for objects of the trust which is evident from the fact that the assessee has filed a statement of expenditure showing details of administrative expenses which is enclosed in paper book page no. 159. Therefore, the allegation of the CIT that the trust is running education on profit motive in baseless and without any application of mind. CIT is not justified in withdrawing the registration granted u/s.12AA of the Act by invoking the provisions of section 12AA(3) of the Act. Such act of the Revenue will only affect the poor students, who are studying in the institution by paying nominal / normal fees and also other students thereby defeating the very purpose of these provisions of the Act, which are enacted with the intention of promoting education in the country. In the instant case, the material on record shows that the Trust has established educational institutions and was imparting medical education. Every year, students are admitted. Huge investment is made for construction of buildings for housing the college, hostel and for providing other facilities to the students who are studying in the College. The College is recognized by the Medical Council of India, State of Kerala and all other statutory authorities. Therefore, it cannot be said that the Trust is not genuine. Admittedly, the students are being admitted every year. Students are studying in all courses. Thus, the object of the constitution of the Trust namely imparting of education is going on uninterruptedly. Therefore, it cannot be said that the activities of the Trust are not being carried out in accordance with the objects of the Trust. When the aforesaid two conditions are fully satisfied, the registration of the Trust cannot be cancelled for the reasons stated by the CIT in her order, i.e. non maintenance of books, non filing of returns of income or belated filing of returns of income, collection of additional fees and diversion of funds in violation of sections 11(5) and 13(1)(c) as these are passing remarks which are not relevant for the purpose of section 12AA(3) and also all observations of the CIT has been negated by the assessee with enough evidences which are discussed in detail in foregoing paragraphs. Therefore, we are of the considered view that the CIT was erred in withdrawing registration granted u/s 12AA, by using her powers u/s 12AA(3). Hence, we set aside order passed by the CIT u/s 12AA(3) and restored registration granted u/s 12AA of the Act. - Decided in favour of assessee.
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