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2018 (11) TMI 1542 - AT - Income TaxCancellation of registration U/s. 12AA(1)(b) - withdrawing the approval granted to the assessee trust U/s. 10(23C)(vi) and (via) - unaccounted capitation fee - Held that - NIMS University, Rajasthan, Jaipur has been notified by an enactment passed by the Legislature of Rajasthan. The said university was enacted to provide higher education in various fields. The sponsoring body of the University was Indian Medical Trust. Thereafter in the Gazette Notification, Schedule-1 provided that the University will have 60.67 acres of land comprising of various khasras numbers in village Jugalpura, Teshil- Amber, district-Jaipur. The said schedule also enlists various buildings, academic facilities and various kinds of degrees run by the said University. In an enquiry conducted by the CIT (E), it was found that certain Khasra number as mentioned in the Government Notification for the allotment of land to the University was not in the ownership of the Indian Medical Trust or NIMS University. Solely on this ground, he has refused to grant registration. No where he has discussed the objects for which the said University is running; nor there is any whisper about the genuineness of the activities qua the objects. It is well settled position of law that at the time of granting registration u/s 12AA, CIT(E) is required to examine the objects of the Trust or institution as to whether they are for the charitable purposes or not and also to see the genuineness of the activities qua the objects. If certain Khasra numbers as notified by the Government has not been acquired or is not owned by the Indian Medical Trust or by the NIMS University and it is standing on some different land bearing different Khasra numbers, but that does not mean that its activities are not genuine or is not carrying out charitable activities. Even if there is some technical breach or violation of the Notification pertaining to land that the said University is not standing on a particular Khasra notified, then that would be a subject matter of issue of dispute with State authorities and not the Income Tax Department. What is required to be seen in terms of Section 12AA is, only the objects and the genuineness of the activities. Accordingly, the reasons given by the CIT (E) for refusing the registration cannot be upheld. Since the objects and the genuineness of the activities have not been examined, therefore, we are remitting the issue of grant of registration back to the file of the CIT(E), who shall examine the objects of the institution whether they are for educational or charitable purposes or not; and whether its activities are being carried out in accordance with such objects including the genuineness of the activities qua that objects . With this direction, the entire matter is restored back to the CIT (E) who shall decide and examine the issue of registration u/s 12AA afresh and in accordance with law after giving due and effective opportunity of hearing to the assessee to substantiate its case. Accordingly, the appeal relating to refusal of registration U/s 12AA of the Act is allowed for statistical purposes only. In so far as the issue of material found during the course of search in the case of Indian Medical Trust that it was receiving unaccounted capitation fee, the same was applicable till the date of search and that to be in the case of Indian Medical Trust for which we have already given our finding while deciding the case of the Indian Medical Trust. However, the same charge or allegation cannot be imported in the case of NIMS University also until and unless there is some incriminating material or any kind of enquiry has been conducted leading to any adverse inference, for instance, receiving of unaccounted capitation fee is still continuing or is permeating in the subsequent years also, that is, from the date when NIMS University has taken over by entire assets and liabilities of the Trust and also the educational activities. The issue of grant of approval u/s 10(23C) needs to be examined afresh. On the issue of running of a news channel also, the issue needs to be examined under the scope of 3rd proviso to Section 10(23C) (vi) & (via) and Section 11(5). CIT (E) shall examine this aspect also without getting prejudice with the finding given in the appeals of the Indian Medical Trust as decided above for the reason that here the activities of the NIMS University had only started after 01/10/2016 when all the assets and liabilities of the Indian Medical Trust has been transferred to NIMS University by way of an agreement between the Indian Medical Trust and NIMS University. The genuineness of the agreement whereby entire assets and liabilities have been transferred from the Indian Medical Trust to NIMS University also can be examined whether it is in accordance with relevant provisions of law and there is actual transfer of assets and liability or it is mere paper entry or is just a fa ade. The issue of approval U/s 10(23C) is also remanded back to the file of the ld. CIT(E) to be examined denovo and afresh and in accordance with law after examining the objects and genuineness of the activities - Appeal of the assessee allowed for statistical purposes only.
Issues Involved:
1. Withdrawal of approval under Section 10(23C)(vi) and (via) of the Income-tax Act, 1961. 2. Cancellation of registration under Section 12AA of the Income-tax Act, 1961. 3. Refusal of grant of registration under Section 12AA(1)(b) of the Act. 4. Refusal of grant of approval of exemption under Section 10(23C)(vi) and (via) of the Act. Issue-wise Detailed Analysis: 1. Withdrawal of approval under Section 10(23C)(vi) and (via) of the Income-tax Act, 1961: The Indian Medical Trust, Jaipur, faced withdrawal of approval under Section 10(23C)(vi) and (via) due to several reasons cited by the Principal Commissioner of Income Tax (Pr. CIT). The Pr. CIT noted that the Trust was involved in collecting unaccounted 'capitation fees' from students, which were not recorded in the regular books of account. The Trust's activities were deemed not genuine as it was found to be profiteering by taking unaccounted capitation fees. Further, the Trust was also found to be operating a news channel, which was not in line with its stated objectives. Additionally, the Trust made unaccounted cash payments to doctors, which further indicated non-genuine activities. Consequently, the approval granted under Section 10(23C)(vi) and (via) was withdrawn retrospectively from 01/04/2006. 2. Cancellation of registration under Section 12AA of the Income-tax Act, 1961: The cancellation of registration under Section 12AA was based on similar grounds as the withdrawal of approval under Section 10(23C). The Pr. CIT found that the Trust's activities were not genuine and were not being carried out in accordance with its objects. The Trust was involved in collecting unaccounted capitation fees, operating a news channel, and making unaccounted cash payments to doctors. These activities were deemed to violate the conditions laid down in Sections 11 to 13 of the Act. Consequently, the registration under Section 12AA was cancelled retrospectively from 01/04/2006. 3. Refusal of grant of registration under Section 12AA(1)(b) of the Act: The NIMS University, Rajasthan, Jaipur, faced refusal of grant of registration under Section 12AA(1)(b) due to discrepancies in the ownership of land. The CIT (Exemptions) noted that certain Khasra numbers of land mentioned in the government notification were not in the ownership of the sponsoring body, Indian Medical Trust. Despite the University being engaged in educational and medical activities, the CIT (Exemptions) concluded that the ownership of land intended to be vested in the University was not established. Consequently, the registration under Section 12AA was denied. 4. Refusal of grant of approval of exemption under Section 10(23C)(vi) and (via) of the Act: The NIMS University also faced refusal of grant of approval of exemption under Section 10(23C)(vi) and (via) based on the activities of the sponsoring body, Indian Medical Trust. The CIT (Exemptions) noted that the Indian Medical Trust was involved in collecting unaccounted capitation fees, operating a news channel, and making unaccounted cash payments to doctors. These activities were deemed to be non-genuine and in violation of the conditions laid down in the Act. Consequently, the approval of exemption under Section 10(23C)(vi) and (via) was denied. Decision: The Tribunal upheld the cancellation of registration under Section 12AA and withdrawal of approval under Section 10(23C) for the Indian Medical Trust but modified the effective date of cancellation to A.Y. 2009-10 onwards instead of A.Y. 2006-07. The Tribunal remanded the issue of grant of registration under Section 12AA and approval under Section 10(23C) for NIMS University back to the CIT (Exemptions) for fresh examination of the objects and genuineness of the activities. The appeals of the Indian Medical Trust were dismissed, while the appeals of NIMS University were allowed for statistical purposes.
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