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TMI Blog2015 (5) TMI 814X X X X Extracts X X X X X X X X Extracts X X X X ..... hat objects were not charitable in nature and further holding that the assessee was charging hefty fees and therefore, was not making any charity and instead was earning huge profits. In this respect, Ld. A.R. took us to a copy of audited accounts for the years ended 2010-11 to 2012-13 placed in paper book pages 33-77 and invited our attention to the fact that assessee was not earning huge profits and CIT has considered gross receipts onlywhereas the net profits earned by the assessee were marginal at Rs. 19479/-, Rs. 4,15,579/- and Rs. 5,43,905/- respectively in the year ending 31.03.2010, 31.03.2011 and 31.03.2012. He further submitted that such profits earned by the assessee were re-invested in the school in the form of additional fixed assets which itself was a charitable purpose. Ld. A.R. invited our attention to various replies filed by it during proceedings before CIT and highlighted that all the queries raised by the Commissioner were duly replied to and original certificate of registration of society was also produced for his verification. Ld. A.R. submitted that the issue is duly covered in favour of assessee as various Hon'ble High Courts has held that at the time of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reas the present case is with respect to registration u/s 12AA which deals with exemption u/s 11 and therefore submitted that the case law cited by Ld. A.R. is not comparable. Ld. A.R. submitted that u/s 10(23C)(iiiad) the exemption is allowed to institutions where the turnover is less than Rs. 1 crores and where the turnover exceeds Rs. One crore, the exemption is available u/s 11 and 12 subject to registration u/s 12AA. He submitted that though the case law of Queens' Educational society is with respect to section 10(23C)(iiiad) but the Hon'ble Apex Court has held that it is difficult for an institution to carry out an activity in such a way that no profit accrues to the institution and has further held that mere earning of profits in the course of charitable activities cannot be a reason to deny registration. Therefore, he argued that the ratio of Hon'ble Supreme Court decision is squarely applicable to the facts of the present case. 5. We have heard rival parties and have gone through the material placed on record. We find that Section 12AA deals with the procedure for registration which inter alia provides that on an application filed by assessee, the Commissioner of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the language of the Sec 'on and to ignore the tests laid down in the Surat Art Silk Cloth case, Aditanar case and the American Hotel and Lodging case. It is clear that when a surplus is ploughed back for educational purposes, the educational institution exists solely for educational purposes and not for purposes of profit. In fact, in S.RM.M.CT.M. Tiruppani Trust v. Commissioner of Income Tax, (1998) 2 SCC 584, this Court in the context of benefit claimed under Section 11 of the Act held" 6. Though, the above findings of Hon'ble Supreme Court are with reference to Section 10(23C)(iiiad) and not in respect of Section 11 and 12 yet the ratio of decision is that mere earning of profit in the course of carrying out charitable activities cannot be a reason for not granting registration u/s 12AA of the Act. 7. Hon'ble Punjab & Haryana High Court in the case of CIT Bhatinda Vs Baba Deep Singh Educational Society vide order dated 13.10.2011 has held that the jurisdiction of the Commissioner at the stage of processing application u/s 12AA of the Act is to examine the genuineness of the objects of the Trust, whether they are genuine and in consonance with the objects of the trust o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquiries as he may deem necessary in this behalf. 2. Whether, in the facts and circumstances of the case the Id. ITA T was right in law in granting registration to the assessee Trust when no work of relief to the poor in the field of education was done as per definition of "Charitable Purposes" provided u/s 2(15) of the Act." 4. The Tribunal while allowing the appeal has noticed at Memorandum of Association and the objects of the society was to do charitable work, projects and activities relating to education which have not been considered while declining the application under Section 12AA of the Act. It was further held that the CIT should have only seen the genuineness of the activities of the society and circular NO.11/2008 dated 19.12.2008 was also referred that the provisions of Section 2(15) of the Act are not applicable to a society. Accordingly, it was held that nature and scope at the stage of grant of registration under Section 12AA of the Act is to only regarding the objects of the society. The Tribunal also distinguished the provisions of Sections 10(23C) and 12AA of the Act and scope of the said sections and held that it was open to the revenue authorities while proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per its objects. The Commissioner while processing the application under Section' 12AA of the Act was not to act as an Assessing Authority and thus, the Tribunal has rightly allowed the appeal filed by the society In the facts and circumstances of the present case. Accordingly, no substantial question of law as contended in the present appeal arises for determination by this Court and the order dated 31.3.2010 passed by the Tribunal is upheld. Consequently, the appeal is dismissed." 8. Similarly, Hon'ble Delhi High Court in the case of CIT Vs O.P.Jindal Global University, I.T.A. No. 190/2011 and 285/2012 dated 2.5.2013, under similar circumstances, has held as under: "Therefore, the object of Section 12AA of the Act, is to examine the genuineness of the objects of the Trust, but not the income of the Trust for charitable or religious purposes. The stage for application of income is yet to arrive i.e. when such Trusts or institution files its return. Therefore, we find that the judgement referred to by the Learned Counsel for the appellants are not applicable to the facts of the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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