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2015 (6) TMI 633 - ITAT AHMEDABAD

2015 (6) TMI 633 - ITAT AHMEDABAD - TMI - Application filed by the assessee u/s 12AA rejected - Held that:- In the instant case, in case of dissolution of University, property would go to sponsoring body that itself is registered under section 12AA of the Act, subjected to the relevant provisions of the Act. Undisputedly, the education is included into the definition of charitable purpose as per Section 2(15) of the Act.

It is settled position of law that at the time of registration .....

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on the basis of commercial consideration. It is pointed out by the ld. Counsel for the assessee that as per the Gujarat Government Gazette Notification under the provisions of the Gujarat Private Universities Act, 2009, the University cannot run commercially. The ld. DR could not controvert the contention of the ld. Counsel for the assessee that under the identical facts other Universities have been granted registration u/s 12AA by the Revenue. Under these facts, we are of the view that the ld. .....

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ecting the application filed by the assessee u/s 12A of the Income-tax Act. 2. In this appeal by the assessee, following grounds were raised:- 1. The learned Director of Income Tax (Exemption), Ahmedabad has erred in passing order giving effect to the order of I.T.A.T. in ITA No.815/Ahd/2013 though the Miscellaneous Application No. 15/And/2014 against the said order filed by the Appellant was kept pending by the Hon'ble I.T.A.T. for disposal. 2. The learned Director of Income Tax (Exemption) .....

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Board - 295 ITR 561 granting exemption u/s.12A though the same was not constituted under separate Trust Deed or Memorandum of Association or Article of Association but the same was formed under Gujarat Maritime Board Act. 4. The learned Director of Income Tax (Exemption), Ahmedabad has erred in holding that there was no clause in the first statute that the university will not be dissolved and if at all it has to be dissolved, its assets will go to another trust carrying on similar activities of .....

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Act. 6. The learned Director of Income Tax (Exemption), Ahmedabad has erred in not considering the definition of sponsoring body contained in section 2(t) of the Gujarat Universities Act which requires the sponsoring body to be the society registered Societies Registration Act or Public Trust or company registered u/s.25 of the Companies Act, 1956. 7. The learned Director of Income Tax (Exemption), Ahmedabad has erred in holding that the Appellant was not a Charitable Institution and was for pr .....

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idual body but almost absolutely controlled by the sponsoring body though even sponsoring body is also a Charitable Institution registered u/s.12A of the Act, and there cannot be any question of being governed by private individuals. 9. The learned Director of Income Tax (Exemption), Ahmedabad has finally erred in holding that activities and objects of the Appellant are not genuinely charitable. 10. Your appellant reserves the right to add, alter, amend and/or withdraw any of the above Grounds o .....

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tion of the assessee. The assessee, therefore, being aggrieved by the aforesaid order of the DIT(Exemptions) has preferred the present appeal. 4. Both the representatives of the respective parties have made oral arguments as well as written submissions. 5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The assessee has filed written submissions dated 08.05.2014 and 12.05.2014, which read as under:- WRITTEN SUBMI .....

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cipal Secretary , Education Department, Govt of Gujarat had vide letter dated 19-09-2011 allotted land to the Appellant (Paper Book Page No 372 & 373). Thereafter the Education Department vide letter dated 22-02-2012 gave a letter of intent for setting up of the university under the Gujarat Private University Act Rules and Regulations (Paper Book Page No 375 to 377). On completion of the formalities relating to setting up of the University, the Gujarat Government Gazette amended the Gujarat .....

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ting as per the provisions contained in the Gujarat Private University Act. 3. The Appellant had then filed an application for registration u/s 12 A and exemption u/s 80G of the Income Tax Act, 1961 alongwith the necessary enclosures to the Director of Income Tax (Exemption) on 16-08-2012 (Paper Book Page 1 to 41). 4. Thereafter, in response to the queries raised by the Learned DIT, the Appellant had given responses vide letters dated 05-11-2012, 26-11-2012 and 18-02-2013 (Paper Book Page No 42 .....

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arat Private University Act and the details of the same were produced at Paper Book Page No 105 to 111. In the said case the University has been granted registration u/s 12A on 30-03-2010 and has also been approved u/s 10(23C) of the Income Tax Act 1961. The facts of the said university are exactly the same as the Appellant. 6. Further, during the course of hearing a similar university -OP Jindal University case law (38 taxmann.com 366 ) (P & H) (Judgement Paper Book Page No 1 to 4 ) was als .....

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the assessee." 8. Since there was no trust deed by which the Appellant was set up and the said fact was mentioned during the hearing to the Hon. Bench, the Appellant filed a Miscellaneous Application against the said Order of the Hon. Tribunal. The Said MA has been heard on 17-04-2015 and the Order is awaited. 9. Meantime, in response to the letter filed by The Department Representative to the DIT(E) for expediating the set aside matter, the Appellant filed submissions dated 21-03-2014, 25 .....

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and has been granted registration u/s 12A on 10-02-1997. The Appellant is governed by the provisions of the Gujarat Private University Act, 2009 which mentions the rules regarding setting up of a University, Application process thereof, Officers of the University namely Registrar, CFO & other officers, Authorities of the University i.e Governing Body, Board of Management, etc, Statutes, Ordinances and Regulations, Regulation of University, Funds of University, Accounts Audit & Annual Rep .....

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lso states that if it is established otherwise than under the instrument, the document evidencing the creation of Trust or establishment of the Institution should be submitted. In the present case, the Institution viz. Rai University is established by the provisions of Gujarat Private Universities Act, 2009 and therefore, there cannot be any separate instrument for the creation of Rai University but none the less the same complies with the provisions of Rule 17A. 3. In support of the above conte .....

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est Corporation vs. DCIT - 297 ITR 1 (SC), wherein it was established under UP, Forest Corporation Act, 1974. Registration u/s.12A has been granted in all the above cases on the basis of provisions of relevant Act though there was no separate Trust Deed or registration under Trust Act. 4. We would further like to point out the decision of M.P. High Court in the case of Laxminarayan Maharaj vs. CIT - 150 ITR 465, wherein it was held that where the Trust is not created under instrument, it is impo .....

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Sd/- Place: Ahmedabad. Appellant WRITTEN SUBMISSIONS In support of our written submissions dated 07-05-2015 and the oral arguments put forward during the hearing dated 07-05-2015, we would like to put on record the following arguments: 1. Any Trust who wants to avail of exemption u/s 11 & 12 of the Income Tax Act has to satisfy the conditions mentioned in section 12A of the Income Tax Act which states that: "(1) The provisions of section 11 and 12 shall not apply in relation to income .....

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ution is registered under section 12AA]:" 2. Further as per the aforesaid provisions, Rule 17A of the Income Tax Rules 1962, shall be applicable and the application for registration u/s.12A should be submitted in Form No.10A along with copy of instrument creating the Trust. However, it also states that if it is established otherwise than under the instrument, the document evidencing the creation of Trust or establishment of the Institution should be submitted. In the present case, the Insti .....

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it has been mentioned that: "The [Principal Commissioner or] Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) [or clause (aa) of sub-section (1)] of section 12A, shall - (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquires as he may deem necessary in this behalf; and .....

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plication has to be made in Form 10B - The same has to be vetted as per the prudence of the Hon. CIT as to whether the activities of the Trust are genuine or not. 5. The Appellant - Rai university is thus qualified to get the registration on the following grounds: (1) It is a University established under the Gujarat Private University Act and is a institution by itself. (2) It has a sponsoring body namely Rai Foundation which is registered Trust having 12A Registration. (3) Rai University has ma .....

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as been placed on record during the hearing. (5) Rai University is at present functioning on full fledge basis and the activity can be witnessed from its website wyw.rajuniversity.edu The sponsoring body has already placed a deposit of ₹ 5 crores as security with the Government of Gujarat as per the terms of setting up of the University. Apart from that it is also funding the University expenses in the initial years of operation. 6. Our contention is further supported by the following judg .....

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C): Wherein it is held that enquiry of Commissioner at such preliminary stage should be restricted to genuineness of objects and not activities, unless such activities have commenced. (3) Swargiya Jagannath Jatteshwar Shikshan Sanstha Vs CIT : (31 taxmann.com 321)(Nag)(Trib): Wherein it is held while granting registration to a charitable Trust, Commissioner has to examine genuineness of objects and activities of the Trust and application of income for charitable purposes which can be examined at .....

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s of the activity of the Trust which in case of the Appellant can be seen directly from the present activities carried on by the university. In view of the above, we request the Hon'ble Members of the Bench to kindly consider the above and grant registration u/s.12AA of the I.T. Act, 1961 to the Appellant. Date: 12.05.2014 Sd/ Place: Ahmedabad. APPELLANT 6. The Revenue has also filed written submissions which reproduced as under: Subject: written submission on importance of Dissolution claus .....

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ying on similar activities as the public gave funds and Govt forgave revenue for carrying on the activities as per the objects of the trust. The CAs argue that under Bombay or Gujarat public trust Act dissolution of trust is not possible. Then the argument is that trustees function as per the trust deed and mostly ill equipped to read or even think of the Act Lastly it has been noticed that trusts have amalgamation clause in the deed which shows that despite the Bombay public trust act trustees .....

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for registration under section 12AA - A perusal of trust deed submitted by assessee showed that activities proposed to be carried out were not charitable in nature - Neither there was any clause in trust deed imposing legal obligation on assessee to hold income for charitable purposes nor element of private gain excluded - Moreover, there was no provision in trust deed to ensure that properties of trust upon dissolution would be transferred to another trust having similar object - Whether in vi .....

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bjects, so far as material, were as follows: (a).To promote commerce and trade in art silk yarn, raw silk, cotton yarn, art silk cloth, silk cloth and cotton cloth. (b).To carry on all and any of the business of art silk yarn, raw silk, cotton yarn as well as art silk cloth, silk cloth and cotton cloth belonging to and on behalf of the members. (c).To obtain import licences for import of art silk yarn, raw silk, cotton yarn and other raw materials as well as accessories required by the members f .....

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roperty of the assessee wheresoever derived shall be applied solely for the promotion of its objects as set forth in the memorandum and sub-clause (2) directed that no portion of the income or property shall be paid or transferred, directly or indirectly, by way of dividend, bonus or otherwise by way of profit, to persons, who at any time are or have been members of the assessee or to anyone or more of them or to any person claiming through any one or more of them. What should happen to the asse .....

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or may acquire jurisdiction in the matter. The income or property of the assessee were thus liable to be applied solely and exclusively for the promotion of the objects set out in the memorandum and no part of such income, or property could be distributed amongst the members in any form or under any guise or utilised for their benefit either during the operational existence of the assessee or on its winding up and dissolution." 3. In the case of Jammu Development Authority 52 SOT 153 ITAT A .....

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here are other objects like sale and purchase, which makes the Authority a commercial organization. Therefore, in the facts and circumstances of the case, even on dissolution or winding up by not having any restriction on application of asset for charitable purpose, the objects pursued by the assessee cannot be said to be a charitable in nature." In view of the absence of dissolution clause, It is, therefore, requested that the plea of appellant may be turn down to grant 12AA under the IT A .....

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there is no clause that the university will not be dissolved and if at all it has to be dissolved, its assets will go to another trust carrying on similar, activities of university education. (ii) Gujarat Private University Act permits the Sponsoring Body to dissolve itself and only that, it permits the Sponsoring Body to dissolve the university and take back all its assets which would be public assets built by the university on the basis of tax exemption and public funds. This cannot be permitt .....

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ntrolled by the Sponsoring Body with respect to appointments as well as funds. In view of the above, the application u/s 12A is rejected as the activities and objects of the trust cannot be said to be genuinely charitable. 8. From the above finding of Ld. DIT(E), it is evident that the ld. DIT(E) is concerned about the assets of the University in the event of dissolution and what would be the fate of the assets created in the event of dissolution of University. Under the identical facts, the Hon .....

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ion of law that at the time of registration u/s 12AA of the Act, the DIT(E) has to satisfy with regard to the genuineness of activities of the Trust. In our considered view, the DIT(E) ought to have given specific finding with regard to genuineness of the activities of the University. The DIT(E) has rejected the application on the ground that in case of dissolution there is no safeguard to the properties created by the University. There is no finding that the University is not imparting educatio .....

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hese facts, we are of the view that the ld. DIT(E) was not justified in declining the registration to the assessee u/s.12AA of the Income-tax Act, 1961. Moreover, the assessee has placed reliance on various judicial pronouncements. The ld. DIT(E) has not adverted on the submission of the assessee that the case of the assessee is also covered by the judgment of Hon ble High Court of Punjab and Haryana in the case of CIT vs. O.P. Jindal Global University (supra), wherein the Hon ble High Court has .....

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