TMI Blog2012 (11) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act refers to "relief to poor, medical relief, education and the advancement of any other object of general public utility". - eleemosynary element is not essential element of charity. It is also not a necessary element in a charitable purpose that it should provide something for nothing or for less than it costs or for less than the ordinary price. The surplus generated, if it is held for charitable purpose and applied for charitable purpose of the assessee, and then the Assessee has to be considered as existing for a charitable purpose. There are enough safeguards provided in Sec.12 and 13 of the Act to ensure that personal benefits of the persons in control of the trusts are not treated as having applied for charitable purpose and for being brought to tax like provisions of Sec.13(1)(c) of the Act which restricts unreasonable and excessive payments to certain category of persons connected with a trust or other institution - In such circumstances, order u/s 12AA(3) of the Act, cannot be sustained - In the result,appeal of the assessee is allowed. - IT Appeal No. 86 (Bang.) of 2012 - - - Dated:- 14-9-2012 - N.V. VASUDEVAN AND JASON P. BOAZ, JJ. S. Venkatesan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used by the trustees for receiving important dignitaries and was a necessary status symbol to convince parents, students of the abilities and achievements of the assessee. 5. Another allegation in the show cause notice was that the assessee was availing loans in cash (from Sindhi Financers) and was repaying loans in cash. The assessee submitted that it did not avail any loan from Sindhi Financiers and that whatever were the borrowings by the Assessee, were made by persons duly authorized by the trust deed and after proper documentation. The assessee explained to the DIT(E.) that cancelled cheques that were found during the course of survey cannot be a basis to take any adverse conclusion against the assessee. The assessee also gave details of the cancelled cheques and the reasons for the cancellation. 6. One of the complaints in the show cause notice was that the accounts of the assessee were not maintained on a regular basis. On this allegation, the assessee submitted that the assessee was migrating from a particular software to another software namely tally accounting and because of this migration the accounts were not up to date. The assessee submitted that after migration t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Trust v. CIT. Further, reliance was also placed on the decision of the Hon'ble Madras High Court in the case of DIT (Exemptions) v. Vallal MD Seshadri Trust, wherein it was held that the cancellation of registration u/s 12AA(3) can be done only after a finding that the trust was not genuine. 10. The DIT(E) however, did not agree with the submissions made on behalf of the assessee. He referred to the decision of the ITAT Chennai Bench in the case of Rajah Sir Annamalai Chettiar Foundation v. DIT (Exemptions) [2011] 48 SOT 502 wherein the Chennai Bench of the Tribunal upheld the order of DIT(E) rejecting an application for registration u/s 12AA of the IT Act, 1961 on the ground that the educational institution did not give free, concession education to the downtrodden of the society or any other deserving sections of the society. The Tribunal held that running of educational institution by itself is not a charitable purpose. Relying on the aforesaid decision, the DIT(E) held that the assessee did not exists for a charitable purpose. 11. The DIT(E) thereafter held that the assessee was paying commission for developing the brand name of the assessee and for bringing students to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terated the stand of the assessee as reflected in the submissions made before the DIT(E). The learned DR reiterated the stand of the revenue as reflected in the order of the DIT(E). 14. We have considered the rival submissions. The power to cancel registration already granted u/s.12AA of the Act is contained in Sec. 12AA(3) of the Act and it reads as follows: "(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution. Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard." 15. A perusal of the above provisions shows that the power to cancel registration already granted can be done in two situations; (a) satisfaction of the Commissioner that the activities of the trust or institution are not genuine (b) satisfaction of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 12A of the Act, 1961. It only goes to show that the revenue was satisfied that the objects of the assessee trust were charitable. The question is whether the amendment of the trust deed in any way makes the assessee non-charitable. We have perused the deed of amendment of the trust dated 07-03-2005. The amendment talks about substitution of sub-clause-a of clause-3 of original deed. The substituted clause refers to imparting education including technical and medical among the masses in all the fields, subjects, culture and literature, irrespective of religion, caste or creed. Similarly, sub-clause-d, of Clause-3 was substituted whereby scholarship to the poor and needy and meritorious students have to be awarded. Similarly, sub-clause (e) of clause-3 of original deed was amended to make the benefits of the trust open to all caste, creed and religion. We fail to see how the above amendment will make the assessee not existing for the purpose of education or not existing for charitable purposes. As already mentioned in the decision of the Hon'ble Allahabad High Court in the case of in the case of Allahabad Agricultural Institute Vs Union of India, 163 Taxman 67(Alhd.) supra there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee as its main and predominant activity. In fact, the order of the DIT(E) does not anywhere show that the assessee is not imparting education. The complaint of the revenue seems to be that education is being imparted but on commercial lines. The definition of Charitable Purpose is given in Sec.2(15) of the Act. The same refers to "relief to poor, medical relief, education and the advancement of any other object of general public utility". The proviso to Sec.2(15) of the Act introduced by the Finance Act, 2008 w.e.f. 1.4.2008 regarding excluding organizations where there is profit motive from the definition of charitable purpose applies only to the category of trusts which has as its object, the object of "advancement of any other object of general public utility". It does not apply to the other categories of charitable purpose viz., "relief to poor, education and medical relief". As rightly pointed out by the learned counsel for the assessee, eleemosynary element is not essential element of charity. It is also not a necessary element in a charitable purpose that it should provide something for nothing or for less than it costs or for less than the ordinary price. The surplus genera ..... X X X X Extracts X X X X X X X X Extracts X X X X
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