TMI Blog2008 (11) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... st can be had from the bye laws or the deed of the trust as the case may be and as held in the case of Red Rose School [ 2007 (2) TMI 575 - ALLAHABAD HIGH COURT] unless the objects of the Trust apparently make out that they are not in consonance with the public policy or that they are not the objects of any charitable purpose, registration cannot be refused on this ground. Genuineness of the activities of the Trust - HELD THAT:- If it is found that the activities are not genuine and they are not being carried out in accordance with the objects of the Trust, the registration can be refused on this ground also. However as held by Hon ble Allahabad High Court in the case of Red Rose School , mere presumptions and surmises that income derived by the Trust is being misused or that there is some apprehension that the same would not be used in the proper manner and for the purposes relating to any objects, the registration applied for under section 12A cannot be rejected. The procedure for registration laid down in section 12AA thus requires the Commissioner to satisfy himself about the genuineness of the activities and the charitable nature of objects of the Trust and as such, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mrs. Anusha Khurana for the Respondent. ORDER P.M. Jagtap, Accountant Member. - This appeal by the assessee is directed against the order of ld. CIT, Hissar dated 28-12-2004 passed under section 12AA whereby he rejected its application for registration under section 12A. 2. The assessee in the present case is a Trust settled by one Smt. Krishna Devi with a sum of Rs. 10,000 with the main object of opening and running Educational Institution. Application for registration under section 12A was filed by it in the prescribed form and in the prescribed manner to the CIT, Hissar on 17-6-2004. In order to dispose of the said application, the assessee-trust was called upon by the ld. CIT to furnish certain documents and information. On examination of the said documents and information, the ld. CIT recorded his observations in his impugned order as under : "( i )The Trust has received a corpus fund of Rs. 25,37,000 detailed as under: ( a )Smt. Krishna Devi Rs. 7,62,000 ( b )Sh. Bahadur Singh Rs. 6,00,000 ( c )Mr. Mukesh Joshi Rs. 3,75,000 ( d )Mr. Sardar Singh Rs. 4,00,000 ( e )Sh. Jaswant Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g actually carried out are not proved beyond doubt. ( v )The assessee-trust has acquired agricultural land in Pali for Rs. 4.52 lakhs for the purpose of constructing premises for both the colleges. It is stated that Sarpanch, Grampanchayat, Pali. The. Distt. Mahendragarh has no objection for this purpose. However, necessary approval/permission have not been furnished from any Government authority or the concerned university to which these colleges are affiliated. Rather, the assessee-trust has not furnished any information as to with which university these colleges are affiliated and how these are started from the month of October instead of beginning of the financial year which is normally done. Prima facie the agricultural land cannot be utilized except for agricultural activities. The expenditure incurred by the Trust, therefore, cannot be considered for the objects of the Trust for which it has been constituted. ( vi )The AR of the Trust has furnished relevant extract of the prospectus in respect of both the colleges showing fees and other charges payable by the students for admission as discussed in earlier part of this order. It may be appreciated that there is no pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made into the activities of the Trust at the stage of registration itself to check its misuse. These provisions cannot be allowed to be employed as a devious tax device for tax evasion within the ambit of Hon ble Supreme Court decision in the case of Mc.Dowell Co. Ltd. v. CTO [1985] 154 ITR 148 (SC) and exemption can be denied. The so called creation of Trust on the pretext of imparting education after charging exorbitant fees from the students appears to be a colourful device to divert the unaccounted funds in the garb of donations/receipts to take the benefit of exemption available to the religious/charitable institutions under section 12A( a ) of the Income-tax Act, 1961." 4. The ld. counsel for the assessee while assailing the impugned order passed by the ld. CIT rejecting the applications filed by the assessee-trust for registration under section 12A, submitted that the scope of enquiry which the ld. CIT can make while disposing of the application of the assessee filed for registration under section 12A is limited and he has to confine himself to get satisfied about the objects of the Trust being charitable and its activities being genuine. He submitted that the so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Exemptions) [2007] 106 ITD 531 (Delhi); - Modern Defence Shikshan Sansthan v. CIT [2007] 108 TTJ (Jodh.) 732; - St. George Educational Trust v. DIT, Exemptions [2006] 9 SOT 636 (Bang.); - CIT v. Red Rose School [2007] 163 Taxman 19 (All.). 6. The ld. D.R. on the other hand submitted that the adverse observations recorded by the ld. CIT in his impugned order are sufficient to point out that the activities of the assessee-trust were not genuine and it therefore cannot be said that the enquiries made by the ld. CIT on these aspects of the matter as well as adverse observations recorded by him were beyond the scope of enquiry permissible under section 12AA. She contended that the said observations recorded by the ld. CIT on the other hand are sufficient to show that the activities of the assessee-trust were not genuine and even its objects were not of substantially charitable nature. She contended that the said observations thus are to be appreciated from this angle and if the same are taken into consideration in totality, it can be seen that neither the objects of the assessee-trust were charitable nor its activities were genuine. She submitted that the lack of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held by Hon ble Allahabad High Court in the case of Red Rose School ( supra ), mere presumptions and surmises that income derived by the Trust is being misused or that there is some apprehension that the same would not be used in the proper manner and for the purposes relating to any objects, the registration applied for under section 12A cannot be rejected. Section 12AA which lays down the procedure for registration does not speak anywhere that the CIT while considering the application for registration shall also see that the income derived by the Trust or the institution is either not being spent for a charitable purpose or such institution is earning profit. The profit earning or misuse of the income derived by charitable institution from its charitable activities may be a ground for refusing exemption only with respect to that part of the income, but cannot be taken to be on synonym to the genuineness of the activities of the Trust. Genuineness of the activities of the Trust has to be seen keeping in mind the objects thereof which necessarily means that the CIT shall satisfy himself about the fact that the activities are genuine and are in consonance with the objects of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts activities. Moreover the said allegation was based merely on suspicion and surmises and there was no evidence to support and substantiate the same. Similarly the fact that educational institution was started by the assessee-trust from Mahendragarh whereas it was based in Charkhi Dadri, Bhiwani was in no way having any bearing on the genuineness of the activities of the trust or its charitable objects. As a matter of fact, there was no violation of the provisions of the Trust Deed on this count as rightly pointed out by the ld. counsel for the assessee from the relevant portion of the trust deed. 11. The objection of the ld. CIT about the inadequate infrastructure facility also was based on the financial statements prepared and furnished in respect of the Trust separately without taking into account the books of account of the educational institution which were maintained by the assessee separately as pointed out by the ld. counsel for the assessee from the consolidated financial statements placed at page Nos. 43 to 45 of his paper book. Moreover, the inference about the inadequacy of infrastructure facilities to run the educational institution was drawn by the ld. CIT on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be taken as basis to say that the nature of the activities of the assessee-trust was not charitable as attempted to be done by the ld. CIT. Even the relevant clauses of the Trust Deed referred to by him in his impugned order were usual clauses contained in any standard Trust Deed and there was nothing contained in the said clauses to show that the Trust was created for the benefit of the trustees or that it was like a private trust. 13. In our opinion, the adverse observations recorded by the ld. CIT(A) in his impugned order thus were neither relevant nor material to dispute or doubt the charitable nature of the objects of the assessee-trust or the genuineness of its activities and his action in denying the assessee-trust registration under section 12A on the basis of the said observation was totally unjustified. On the other hand, a perusal of the relevant trust deed clearly shows that the assessee-trust was established for the purpose of setting-up and running an institution in order to impart education which by itself was an activity of charitable nature within the meaning given in section 2( 15 ). In furtherance of the said object, colleges were also established b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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