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2018 (2) TMI 1371 - AT - Income TaxNon granting registration under section 12AA - proof of charitable activities - scope of primary objects - unsecured loans taken - way in which education is imparted - complete intermingling of funds - Board of Governance as well as Board of Management is entirely controlled by Sponsoring Body namely Bhandari Charitable Trust - Held that:- President shall be appointed by the sponsoring body in consultation with State Government for a period of three years by following such procedures and on such terms and conditions as may be prescribed by the statute. The president shall preside at the meeting of the governing body. Thus, in the Act a mechanism has been provided that there will be search committee and it will be searching eminent personalities and professionals to be appointed by the Board of management. At every stage there would be a consultation with the State Government. Apart from the above, it is pertinent to observe that how this aspect is relevant to test genuineness of objects of the university. Objects of the university are to impart education. Whether such education is being imparted in a controlled manner, financially or administratively, then those objects would not change. If some actions at the end of the assessee are being taken against the provisions of Income Tax Act and then section 13 etc. are already there to keep a check of misuse of powers. Next reasons assigned by the ld.DIT that university has shown unsecured loan of ₹ 3.15 crores from Bhandari Charitable Trust is not a relevant factor to determine genuineness of objects. All financial affairs if misused can be considered at the time of assessment proceedings with the help of section 13 In the present case, even if the assessee has taken funds from “BCT” it will not be affect its objects, if it has extended some undue benefits to “BCT” then safeguards are already there under section 13 of the Income tax Act. Registration cannot be rejected at the threshold only under an anticipation that something could be controlled either by the “BCT” or some undue benefit would be given to “BCT”. These are concerns which can always be looked into at the time of assessment proceedings. If a charitable institution enjoying benefit under section 12A is being dissolved then either those assets would be given to other institutions being charitable trust and enjoying benefit under section 12A, In case the assets are being parted with either individual entity or institution, who are not having charitable objects or registration under section 12A, then under the scheme of the Act it will first suffer tax, only thereafter, it will vest in such individual or entity. This is not a valid reason for rejecting registration under section 12A. The ITAT in the case of Rai University (2015 (6) TMI 633 - ITAT AHMEDABAD) has observed that at the time of registration, ld.DIT(E) has to satisfy with regard to genuineness of the activities of the trust, and not anything else. - Decided in favour of assessee
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