TMI Blog2014 (4) TMI 928X X X X Extracts X X X X X X X X Extracts X X X X ..... rd to say that the assessee has carried out the activities other than imparting and promoting the education then the cancellation of registration on the ground of accepting the capitation fee which has been used for the purpose of achieving the objects of the assessee is not sustainable – thus, the order of the Commissioner is set aside and the registration u/s 12A is restored – Decided in favour of Assessee. - ITA No.3288/Mum/2013 - - - Dated:- 29-11-2013 - Vijay Pal Rao And N K Billaiya, JJ. For the Appellants : Shri Vijay Mehta Shri Paresh Shaparia For the Respondent : Ms Abha Kala Chanda ORDER:- PER : Vijay Pal Rao This appeal by the assessee is directed against the order dated 20.3.2013 of Commissioner of Income Tax passed u/s 12AA(3) of the Income Tax Act whereby the registration u/s 12A granted to the assessee was withdrawn with effect from assessment year 2003-04. 2. The assessee is a Charitable Educational Trust and was set up in the year 1932 as per the registration certificate under Registration of Societies Act. Subsequently, the assessee was also registered with the Bombay Public Trust on 22.5.1953. The assessee was granted registration u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough management quota in the educational institutions run by the assessee trust. Thus, on the basis of statements recorded, it was found by the search party that Shri N. Venkatanathan had collected cash of Rs. 2.28 crores from students seeking admission by way of donation/capitation fee over a period of 3 to 4 years. Shri N. Venkatanathan submitted that the amount was siphoned by him from the money collected from students. Statement of Shri G. Chidambram, Trustee was also recorded in which he explained that the mark R appearing on certain papers stands for "receipt required" where the receipt is required by the admission seeker for the donation and mark "NR" stands for "not required" where a receipt is not required by the admission seeker. Shri G. R. Ramachandran explained that where the receipt was required the assessee trust issued receipt for the donation and the amount is deposited in the corpus found of the trust. The amount of donation against which receipt was not issued is kept aside in the locker operated by Shri N. Venkatanathan. 4. Based on the information gathered from the evidence and statements recorded during the search and survey action the Commissioner found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut the said receipt being utilised for the objects of the assessee. He has further submitted that part of the capitation fee received in cash and against which receipt was not desired by the admission seekers has been regularised and brought into books by taking donations from third parties. Thus, the Ld. Counsel has submitted that the entire amount of capitation fee has been shown in the books though part of the amount received in cash was shown as donation from third parties as cheques were taken from the third parties against the cash. Some amount was siphoned of by Shir N. Venkatanathan in his own capacity in the process of admission and the same was offered to tax by him. The assessee issued receipts against the capitation fee in the case where the receipt was asked for balance amount though received in cash but was converted into donation from third party. Therefore, the entire amount collected as capitation fee was accounted for though under different heads. Thus, the Ld. A.R has submitted that the amount collected under capitation fee has been used for achieving the objects of the assessee trust. He has further submitted that the objects of the assessee are charitable in na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but is a subject matter of assessment being source of income. He has then referred the decision of this Tribunal in case of Rama Rao Adik Education Society Vs CIT in ITA No. 5742/2007 and submitted that only when the funds collected by the assessee trust through capitation fee/donation have been used for the purpose other then running the institution can be said to be the activities are not carried out in accordance with the objects of the assessee. He has then relied upon the decision of this Tribunal in case of Vidyavardhini Vs CIT in ITA No. 6509/2007 and submitted that if some person indulges in wrong activities that does not mean that the institution has indulged in the wrong activities. The Ld. A.R has also relied upon the following decisions: - M/s Padanilam Welfare Trust Vs DCIT 20 Taxman 113 (Chennai) - ADIT Vs St. Francis Education Trust in ITA No. 2669/M/2012 - Miss Mohini Jain Vs State of Karnataka and Ors. 2 SSC 666 - Shavak Shiksha Samiti Vs CIT 104 TTJ 127 (Del) - Amby International School Academy Vs DIT (Exemp.) in ITA No. 6214/M/2009 - M/s Krupanidini Education Trust Vs DIT (Exemp.) in ITA No. 86/Bng/2012 - Project Management Ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the facts of the case are not in dispute where the assessee has accepted donation/capitation fee for admission which amounts to sell of education and not charitable activity. Thus, the acceptance of capitation fee itself is a activity for a profit motive and the education loses is character of charity when the activities carried out with the motive of earning profit in the shape of capitation fee. 8. We have considered the rival submissions and carefully perused the relevant record as well as the decisions relied upon by the parties. There is no dispute regarding the fact that the assessee has received the donation/capitation fee from the admission seekers in various courses in the institute run by the assessee. The Commissioner has noted the fact that from the locker No. 320H with Bank of India, Matunga, a sum of Rs. 2.28 crores found during the search and seizure action. The locker was in the name of Shri N. Venkatanathan. Apart from the amount of Rs. 2.28 crores found in the locker a sum of Rs. 1.18 crores was also seized from the residence of Shri N. Venkatanathan. Out of this the total amount of Rs. 3.46 crores Shri N. Venkatanathan has admitted Rs. 2.28 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are accepted as charitable in nature. Even otherwise the fact of the promotion and imparting education through various schools and institutions run by the assessee is also not in dispute. Therefore, the primary activity of the assessee is in the field of education which is undoubtedly a charitable activity as per Section 2(15) of the Income Tax Act. It is further corroborated by the registration granted by the Income Tax Authorities u/s 12A as well as 80G and also the registration under Bombay Public Trust Act, 1950. A registration granted u/s 12A can be cancelled u/s 12AA(3) on satisfaction of either of the two conditions viz. i) if the activities carried out by the trust/institution are not genuine ii) the activities are not being carried out in accordance with the objects of the trust or institution as case may be. The Commissioner has cancelled the registration by considering the activity of accepting the capitation fee as non-genuine activity. It is pertinent to note that the activity of the assessee trust is promoting and imparting the education and the receipt of donation/capitation fee is only a source of income and not the activity itself. The activity of education is no w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t charity cannot be brought under the provisions of Section 12AA(3) of the Act. In the case of Maharashtra Academy of Engineering Education Research Vs CIT (supra) the Tribunal has held in para 11.9 and conclusion in para 11.14 as under: "11.9 We have also gone through a decision referred from the side of the Revenue namely the Jammu Kashmir Bank Priority Sector Asset Risk Funs Vs CIT (ITA No. 61/Asr/2006 order dt. 1st Sept., 2006) (supra); cited in support of the argument that firstly the CIT has been vested with the powers vide s. 12AA(3, inserted w.e.f. 1st Oct., 2004, to enquire about the genuineness of the activities of a trust and to satisfy himself that such activities are being carried out in accordance with the objects of the trust. Secondly in case of dissatisfaction he is empowered to cancel the already granted registration. Thirdly in case it is found that the activities are not in conformity with the object that too is the good reason for cancellation of registration. Fourthly the sweep of the section is wide enough to empower the CIT to examine the nature of the object whether for general public utility and philanthropic in nature. In our conscientious view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rants, in the light of the foregoing discussion, not to endorse the view of the learned CIT; consequence there upon reverse those findings. The order of cancellation of registration is hereby revoked. Grounds allowed." 11. Similarly, in the case of Rama Rao Adik Education Society Vs CIT (supra) the Tribunal has held in para 46 and 47 as under: "46. Nowhere in his proceedings the Commissioner has stated that the activities carried on by the Assessee are not genuine. It is beyond doubt and brought on record that the assessee is carrying on a number of Educational Institutions approved by the Central and State Government Agencies including University Grants Commission. It is a fact that more than 7000 students are pursuing their education in these Institutions. The Assessee is running Hospitals and Rural Health Centres. There is no doubt regarding these facts. The Commissioner has not brought any materials on record to hold a view that the above activities carried on by the Assessee-Trust are not genuine. There is no such case at all. The objects of the Assessee-Trust are to engage in the activities in the field of education, medical care and rural development. The activities n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word charitable activity. If income earned by a trust is utilised for charitable purposes it cannot be held that trust is carrying out business. FAA has rightly pointed out that there is no evidence on record that profit earned by the assessee-trust were not utilised by it for non charitable purposes. It is also a fact that there is no instance of violation of provisions of sections 11-13 of the Act by the trust. In our opinion principles enumerated by the Hon ble Supreme Court in the cases of Gujarat Maritime Board and Surat City Gymkhana are applicable to the case under consideration. Therefore, we are of the opinion that assesseetrust was carrying out charitable activities and was entitled to exemption. Therefore, confirming the order of the FAA we decide Ground No. 1 against the A.O." 13. It is clear from the series of decisions relied upon by the assessee that the mere accepting the capitation fee cannot be brought into the scope of Section 12AA(3) if the prominent activity of the assessee are not doubted being imparting of education and promotion of education. The assessee has been carrying on the activity in the field of education through its aided and unaided institu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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