TMI Blog2014 (3) TMI 1012X X X X Extracts X X X X X X X X Extracts X X X X ..... .12A of the Income Tax Act. - Decided in favour of assessee. Denial of renewal of approval u/s.80G - Held that:- While deciding the appeal filed by the assessee for restoring the registration u/s.12A we have already held that the assessee has not violated any of the provisions of section 11 r.w.s. 13(1)(d) and that the assessee is entitled for registration u/s.12A. Since the assessee fulfils the conditions for approval u/s.80G(5)(vi) of the Income Tax Act, therefore, we hold that the assessee is entitled to renewal of approval u/s.80G of the Income Tax Act. We accordingly direct the Ld.CIT to grant renewal of approval u/s.80G. - Decided in favour of assessee. - ITA.Nos. 1348 and 1349/PN/2010 - - - Dated:- 27-3-2014 - Shri Shailendra Kumar Yadav, Judicial Member, and Shri R.K. Panda, Accountant Member. For the Appellant: Shri Sudhir Kumar Jha Shri Ketan Shah For the Respondent: Shri S.K. Singh, CIT ORDER PER R.K. PANDA, AM: ITA No.1349/PN/2010 filed by the assessee is directed against the order dated 17-09-2010 of the CIT Central, Pune cancelling the registration u/s.12A. ITA No.1348/PN/2010 filed by the assessee is directed against the order d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fees) Act, 1987. According to the Ld.CIT the activity that is illegal cannot be the genuine activity. Thus, the activities of the society are not genuine. It was further noted by the Ld.CIT that the assessee has invested in shares of Cooperative society which is not the one of the specified modes of section 11(5) of the I.T. Act. Thus, the activity of the Mandali is not in accordance with the objects. 2.3 The assessee sought adjournments on various occasions on different grounds. Subsequently, the successor CIT again asked the assessee to explain as to why the registration granted u/s.12A should not be cancelled in view of the show cause notice issued earlier dated 26-08-2009. In the said letter, it was further stated by the Ld.CIT that the registration granted earlier u/s.12A also required to be withdrawn/cancelled as there is constructive fraud on the part of the institution as the institution is charging huge donations for admission to the students in the Colleges/Schools as discussed in the said show cause notice. Thus, there is violation of trust and confidence put in the institution while granting registration u/s.12A. Relying on the decision of Hon ble Uttarakhand High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in shares of Cooperative bank are in violation of provisions of section 11 r.w.s. 13(1)(d) is concerned it was argued that the assessee required funds for carrying on its educational activities and therefore it had availed loan from cooperative bank. Under rules of the cooperative bank, the borrower has to become member of the cooperative bank by becoming a shareholder of the requisite amount. It was argued that the purchase of the shares of the cooperative bank is not an investment. It was also submitted that the investment in shares was not out of surplus fund of the assessee which was accumulated u/s.11(2) (b) of the I.T. Act and therefore the prescribed modes of investments u/s.11(5) are not applicable to it. It was accordingly argued that cancelling registration u/s.12A is uncalled for. 4. However, the Ld.CIT was not satisfied with the explanation given by the assessee. As regard the preliminary objection of the assessee that the Ld.CIT does not have power u/s.12AA(3) to cancel registration granted u/s.12A he held that in view of the amendment of sub-section (3) of section 12AA the CIT has power to cancel the registration granted earlier u/s.12A. He accordingly hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apaskumar Choudhary Rs.65,000/- Shri Suvradip Tapas chjoudhary for admission in F.Y. BSc (Computer) No Receipt 4 Shri Ashok C. Thakkar Rs.1.50 lacs Miss Unnati Thakkar for admission in F.Y. J.C. (Commerce) in Poddar College No Receipt 5 Shri Vijay A. Thakkar Rs.1.5 lacs Miss Twinkle V. Thakkar for admission in F.Y.J.C. (Commerce) in Poddar College No Receipt 6 Mrs. Zenobia Viraf Motiwala ₹ 1 lac Miss Karishma V. Motiwala for admission in 11th Standard in Poddar College No Receipt 7 Shri Sunil Sethi Rs.1.5 lac Miss Shruti S. Sethi for admission in 11th Standard in Poddar College No Receipt 8 Shri Z. Rahiman I. Parkar Rs.50,000/- Mr. Mani R. Parkar for admission in 11th Standard in Ruia College No Receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 11 above that cash has been received as donation for admission in Ruia and Podar colleges. The same has not been entered in the Books of Accounts and no receipts have issued for the same and the same is therefore unaccounted. Out of this only ₹ 12,730/- is accounted for in the Cash Book of TDM Laboratory. 4.5 He accordingly observed that during the course of the search Shri Anant Mate very clearly admitted that the cash found was out of the donation receipts for admission. In his subsequent communication however, Shri Anant Mate retracted and claimed that out of ₹ 12 lacs, ₹ 8 lacs belonged to him. He referred to answer of Mr. Mate to Q.No.28 which reads as under : Q.28 In your reply to show cause notice dtd 02.09.2008 you have written that cash of ₹ 8 lakhs belongs to you. Please explain the source thereof? Ans: I cannot give the answer. 4.6 He observed that an attempt has been made to delink the donations from admissions. However, he observed that the questions and answers from the statement of Shri Anant Mate dt. 13/09/2008 ( i.e. after almost 2 months of the search) make it very clear that the true state of affairs is what Shri Anant Mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SP Mandali. Further you have negative (Sic) the statement of Mr. Shah involving in donation of ₹ 4 lakhs. All these statements are quite contrary to your statement dtd 21.07.2008 wherein you have accepted in clear cut terms that SP Mandali is giving admissions out of management quota in Ruia and Podar Colleges for donations. Further your statement regarding donation received from Mr. Tapas Choudhuri, Thakkar, Motivala have been confirmed by them and they have accepted that donations have been given for admissions only. Moreover, you have not been able to produce any books of accounts showing the deposit of above mentioned donations. Please explain. Ans: I cannot explain right now. The accountant of SPM is on leave and I cannot verify the entry in the books of accounts right now. 4.7 As regards the objection of the assessee questioning the reliance being placed on xerox copies of documents seized during the course of the search in view of the loss of the original seized documents he observed that the original seized documents are missing from the office of the AO. It is quite likely that there is some foul play involved in this and it is anybody's guess as to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dard. At the end of the F.Y. 2007-08 accumulated surplus was ₹ 32,20,71,791/-. Therefore, the generation of such huge surplus year after year from the activities of the society, is a clear indication that the activities of the society are running on commercial lines and are not charitable in nature. 4.11 The Ld.CIT further observed that the assessee had invested shares in the cooperative bank from which it has obtained loans. According to him as per the provisions of section 13(1)(d) if any funds of the society are invested or deposited otherwise than in any one or more of the forms or modes specified in sub-section(5) of section 11 the society loses the benefits u/s.11 and 12. This stipulation covered on all funds and not only funds accumulated u/s.11(2)(b). There is no exception provided in section 13(1)(d). Therefore, he held that the investment in the shares of cooperative bank are clearly in violation of the said object clause. He accordingly held that the activities of the assessee are not genuine and was not being carried out in accordance with its objects and therefore the registration granted to the assessee is liable to be cancelled under subsection( 3) of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ganization. f. The appellant society as per the byelaws of the Co-op. Bank had to purchase the shares thereof for obtaining the loan required for its educational activities and hence, the shares was not an investment but the shares was an expenditure on the objects of the Trust. g. The appellant society is granted the exemption u/s. 10 (23 C)/11 over the years and just because of the above incident, the society does not cease to be a charitable organization and it cannot be held that the society is not entitled to the exemption u/s.10 (23C)/11. h. The surplus cannot be looked into in isolation but has to be seen in light of Gross Collection of the institute before concluding whether these surpluses are nominal or huge. Similarly, accumulated surplus of ₹ 32,20,71,791/- cannot be claimed or commented upon as huge as it is legacy of the 100 years/120 years of Shikshana Prasaraka Mandali, Pune. i. The question of accumulated huge surplus was not relevant for the purpose of registration of the Charitable Trust. 5. The appellant submits that registration already granted to the appellant u/s 12A should be continued should not be cancelled. 6. Without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32(4) of the Act of Mr. Mate was recorded during the search. He submitted that the seized papers depicted names, amounts and percentage against each name. Total 121 names were there and the total amount was ₹ 296 lakhs. It was clarified by Mr. Mate in his statement that names recorded by him were of students/parents who visited him for entry level admission to Poddar college, Mumbai and Ruia College through management quota. He also clarified that percentage noted was percentage of marks of the admission seekers and amount noted was of donation offered. Varying amount of donation was because of capacity to pay and percentage of the marks. It was therefore inferred that cash found was against donations received. 6.1 He submitted that Mr. Mate had clarified in his statement recorded on 21-08-2008 as well as letter addressed to ADI on 12-09-2008 (a copy of which is placed at page 57 of the paper book) that donations were not linked for admission and that they were voluntary and that all the donations were fully accounted for and receipts were duly issued to donors by the trust office in Pune. He submitted that the search action did not result in any seizure of evidence that M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Pune Bench of the Tribunal in the case of Bharati Vidyapeeth Medical Foundation (Supra) there is no violation at all. He accordingly submitted that registration u/s.12A cannot be cancelled on this ground. 6.4 Now coming to the first issue, i.e. by charging huge donation for admission from students to various institutes the assessee has violated the provisions of The Maharashtra Educational institutions (Prohibition of Capitation Fee) Act, 1987 and that institutes are being run on commercial lines with profit motive he submitted that there is no violation of the Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987 as no complain has ever been filed against any of the institute of the assessee trust. He submitted that even the Income Tax Department or its investigation wing which conducted the search has not filed any complaint after the search with the Govt. of Maharashtra for any such violation. Referring to section 3(2) of Prohibition of Capitation Fee Act, 1987 he submitted that the said Act permits educational institutions to take donations for its educational activities and the only rider is that there should not be prior reservation of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer had held that these institutions were charging inflated fees on commercial line disregarding the prevalent rules set by Mumbai University. The Hon. ITAT upheld the order of the CIT(A) deleting the addition. While doing so, the Tribunal at para 10 of the order held that the AO erred in selectively considering surplus of few institutes and that too few specific accounts ignoring losses by others. The Hon. ITAT also held in para 9 of the order that the assessee should be considered as a whole as a single charitable entity and that profit loss cannot be considered in respect of few institutions. The ITAT also held in para 10 of the order that there was no violation of any rule and that the surplus of the institutes cannot be taxed and that exemption u/s. 11 is available as activity was purely educational. He submitted that in the present appeal also the CIT has considered two units namely Ruia College and Poddar College out of the 63 units and that too in a very narrow compass of admission under the Management quota. He submitted that in view of the decision of the Tribunal in assessee s own case the order of CIT cancelling registration u/s.12A should be set-aside. 6.6 Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... autical Engineering Education Society reported in 315 ITR 428 and the decision in the case of CIT Vs. Queens Educational Society reported in 319 ITR 160 are concerned he submitted that the facts in those cases are quite different. In the case of National Institute of Aeronautical Engineering Education Society (Supra) the finding has been given that the institute was charging fees from students making huge profits. However, in the instant case, there is no question of charging any substantial fees from any student. As against 70 seats under the Management Quota in the two colleges the assessee has collected some donation in case of only 9 students. Further, as per Government Regulations under Management Quota the assessee can collect upto 5 times of the normal fees from the students and the assessee has not exceeded that, therefore, the decision of the Hon ble Uttarakhand High Court in the case of National Institute of Aeronautical Engineering Education Society (Supra) is not applicable to the facts of the present case. So far as the decision of Hon ble Uttaranchal High Court in the case of Queens Education Society (Supra) is concerned he submitted that the same is u/s.10(23C) and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance sheet of the trust for A.Y. 2006-07 to A.Y. 2009-10 whereas the borrowing from the bank during the above assessment years are ₹ 18.60 crores, ₹ 21.99 crores, 39.21 crores and ₹ 33.55 crores respectively. We find the assessee has taken loan from the bank for which it had to invest in the shares of the cooperative bank as per the by-laws of the said bank. We find the Pune Bench of the Tribunal in the case of Bharati Vidyapeeth Medical Foundation (Supra) while deciding an identical issue has observed as under : 18. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. In the instant case the AO denied the exemption u/s.11 on the ground that there is violation of provisions of section 13(1)(d) r.w.s.11(5) since the assessee has made the following investments or continued to hold the investments for the impugned assessment year as under : a. Shares in Bharati Sahakari Bank ₹ 25,250/- b. Advance to Bharati Vidyapeeth- Deemed university Medical College ₹ 56,73,499/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he bank and that the bank while disbursing the loan had deducted the amount towards such share subscription from the loan amount and therefore, the same should be considered as an application of income. In our opinion, under the peculiar facts and circumstances of the case the purchase of shares amounting to ₹ 25,250/- in the past which the assessee continued to hold during this year cannot be a ground to hold the same as in violation of provisions of section 11(5) r.w.s. 13(1)(d) especially when the assessee is still having an overdraft of ₹ 12,87,665/- from the bank as mentioned by the AO. Since the assessee is still enjoying overdraft facility from the bank, therefore, we find no logic on the part of the AO CIT(A) to hold that there is violation of provisions of section 11(5) r.w.s. 13(1)(d) because the assessee continues to hold the shares once the loan was repaid. Considering the totality of the facts of the case, considering the fact that the revenue had no objection in the past for holding the shares of the bank during the tenure of loan utilised by the assessee trust and considering the fact that the assessee trust is still enjoying overdraft facilities from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roverted by the Ld. Departmental Representative. 8.4 From the various details furnished by the assessee we find the assessee has received donation from 9 students out of which 4 are through cheques and 5 are in cash, the details of which are as under : Sr.No. Name of the Person whose statement u/s. 131 recorded Amount of Donation Name of student who sought Admission Receipt No Bank Details of Donation 1 Shri Pramod N Karlekar ₹ 5 Lacs Shri Mandar for Admission in 11 th Standard in Ruia College 6520/02.08.08 Chq. No- 009968 , Axis Bank 2 Smt. Leena S Dharne ₹ 4.25 Lacs Shri Aditya for admission in 11 th Standard in Ruia College 5890/ 10.07/08 Chq. No - 016823, HDFC Bank 3 Shri Tapaskumar Choudhary ₹ 65,000/- Shri Suvradip Tapas Choudhary for admission in F.Y.Bsc (Computer) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... YEAR INCOME EXPENDITURE SURPLUS DEFICIT 2002-03 419769599.15 410778732.37 8990866.78 - 2003-04 438334841.84 466731866.40 - 28397024.56 2004-05 557831537.81 528144893.95 29686643.86 2005-06 673060487.97 642504919.63 30555568.34 2006-07 848077942.45 774679424.55 73398517.90 2007-08 946894691.52 858171882.07 88722809.45 2008-09 1077415402.47 1005830397.33 71585005.14 4,961,384,503.21 4686842116.30 302939411.47 28397024.56 From the above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under which various amounts/fees are collected from student which are legal allowed to be collected from students. The following are the said 9 sub-heads 1) College Development Fund- The college is allowed to charge Development Fund from students. (Allowed vide Circular no. CONCOL/FEE/190 of 2003 dated 13th May 2003) Please refer page 77 78 of paper book. 2) VPM-Vidyarthi Pratinidhi Mandal- This is a recommended activity by the University for overall development of students and to promote extra curricular activities amongst students. This is required to be formed as per the provisions of Maharashtra Universities Act, 1974 and its Amendment continuance Act, 2000. Please refer page no. 79 80 of paper book. 3)O level and NRY Account These courses are approved/authorized by an authorized Body of Ministry of Information Technology, Government of India and Municipal Corporation of Greater Bombay. The courses is designed to impart computer training to boys below poverty line. Refer page 82 to 85 of paper book. 4) Ruia College of Computer and Electronics - In this account, receipt and expenditure is maintained in respect of computer and electroni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net position of all these accounts viz. Junior College, Senior College and Miscellaneous accounts. Another major point to be noted that all activities are purely educational. 7B) Therapeutic Drug Monitoring (T.D.M.) Laboratory : The T.D.M. Laboratory (IATRIS) is research centre approved by University of Pune University of Bombay for guiding students of M.Sc degree and Ph.D(science) degree in the subject of Analytical Chemistry, Bio-Chemistry and Microbiology. The respective approval are at pages 89 to 93 of paper book. The T.D.M Laboratory is the only private college with the facility of Bio equivalence Studies and this is because of our expertise in analytical chemistry providing better methods of analysis with more sensitivity and accuracy. The Assessing Officer without noticing or understanding the fact that this is research wing for the students has assumed it to be business income and taxed accordingly. (page 46 47 of Paper Book) The net surplus is ₹ 25,40,673/- (page 10 of Assessment Order) Thus, in view of the above, it can be said that the laboratory is not carrying on any Business Activity and solely exists for education only. 7C)R.A. Poddar Col ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer has observed : 1. Fees are very high. (page 18 of Assessment Order) 2. Expenses like advertisement, placement expenses, promotional expenses and expenditure on giving gifts and entertainment expenses including hotel bills etc. are like business activities of any concern doing business. (page 17 18 of Assessment Order) As such Assessing Officer concluded that this college is not predominantly existing for charitable purpose but for profit and hence taxed profit of ₹ 63,22,114/- from autonomous courses and ₹ 63,45,208/- from PGDBA course (surplus ₹ 63.45 lacs) calling it to be business activity. 10. Having gone through the assessment order, we find substance in the above contention of the assessee that the A.O has selectively considered surplus of few institutes and that too few specific accounts or certain profit making divisions of certain colleges ignoring losses or deficit incurred by the other accounts or division of same colleges. He has considered it to be business income and denied exemption u/s. 11 to those surpluses and simultaneously ignored deficit incurred by other divisions of same colleges. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under : The question for consideration is whether an educational institution existing solely for educational purposes but which shows some surplus at the end of the year is eligible for this exemption. If the profit of the educational institution can be diverted for personal use of the proprietor thereof, then the income of the educational institution will be subject to tax. However, there may be cases where the educational institutions may be owned by the Trusts or societies, to whom the provisions of Sec. 11 may be applicable. Where all the subjects of these are educational, and the surplus, if any, from the running the educational institution is used for educational purposes only it can be held that the institution is existing for educational purposes only and not for the purposes of profit. However, if the surplus can be used for non-educational purposes it cannot be said that the institution is existing solely for educational purposes and such institution will not be liable for exemption under sec. 10(22). The Ld CIT(A) has also placed reliance on the decision of Hon ble Supreme Court in the case of ACIT Vs. Surat Art Silk Cloth Manufacturer s Association, 121 ITR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered all these opinions as well as the submissions made by learned counsel for the parties. We must at the inception itself note that the three components scrutinized by the Assessing Officer are the Admission Fee, Corpus Fund and the Loans taken from parents. Thus it really can't be disputed that even the source of funds is relatable to the activity of education. It may be noticed that there are factual findings on the loans having been availed of by the assessee from a nationalized bank for the purpose of creating additional infrastructure/schools and the three sets of amounts have been addressed only towards the object of creating additional infrastructure and easing the liability of the assessee towards the interest burden of loan repayment. What is pertinent to be taken note of is that there is no finding or allegation of any diversion of these funds for the purpose other than carrying on educational activity. There is no diversion of funds to the individual members or taking away of profits for some other activity. It does appear to us that the Assessing Authority appears to have been weighed down by the factum of some questions being raised in the Parliament about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein the Commissioner of income-tax was considering cancellation of registration on the basis of the plea that the assessee was accepting capitation fee/donations. Following discussion by our co-ordinate Bench is relevant: 48. Now the question is the legal consequence of the assessee accepting capitation fees / donations from students seeking admission to various courses offered by the Institutions run by the Assessee-Trust. Even in the matter of capitation fees / donations, the Commissioner of Income Tax has no case that the funds collected by the Assessee- Trust through capitation fees / donations have been used for the purposes other than running the Institutions managed by the Assessee Trust. It is to be seen that all the Institutions run and managed by the Assessee Trust are carrying on the activities envisaged in the Memorandum of Association the Assessee-Trust. It is stated by the Commissioner in his order itself that the moneys collected by the Assessee-Trust by way of capitation fees / donations are used for the purpose of not only by the Assessee-Trust but also for other Institutions of similar nature It is to be seen that application of funds for the charitab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed by the Commissioner could at a maximum be attributed to the question of accepting capitation fees / donations. In this context, the Commissioner-DR has raised a contention that the donations received by the Assessee-Trust are not voluntary and that fact also should be contributed to justify the cancellation of the registration. On the basis of the aforesaid decision of the Tribunal, which has been rendered after considering the judgments of the Hon'ble Karnataka High Court in the case 11 of Sanjevamma Hanumanthe Gowda Charitable Trust (supra) and that of the Allahabad High Court in the case of CIT v Red Rose School 163 Taxmann 19 (AIL), it is quite clear that the objection raised by the Commissioner with regard to the receipt of capitation fee/donations are factors to be considered at the time of assessments while examining the eligibility of the assessee trust for the benefit of section 11 12 and the same do not come into play in the course of the examination by the Commissioner for the purposes of grant of registration under section 12AA of the Act. 14. In view of the aforesaid discussion, in our considered opinion, the Commissioner has examined the application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 12. While reading several case laws as cited supra an important point of view of the Hon'ble Courts have come to our notice that mere registration under s. 12AA would not by itself be a ground for exclusion of such an income from the total income of a trust. To our understanding, also acknowledged in the precedents; the provisions of s. 12AA prescribes conditions for registration of a trust and therefore in the absence of registration disentitles any trust from claiming any benefit of the provisions of s. 11 and s. 12 of the Act in relation to its income. Therefore the conclusion is that s. 12AA prescribes certain conditions for the registration of a trust and thereupon obligates a trust or an institution to seek, rather obtain, a registration under s. 12AA if such trust intends to have the benefits of the exemption as prescribed under ss. 11 and 12 of the Act. It is not the other way round that the benefit of ss. 11 and 12 shall be automatic once the registration is granted. Thus the outcome is that these provisions make it clear that if the trust is not registered under s. 12AA it would not be able to claim any exemption or exclusion of its income from the total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... important feature of s. 12AA is, as also referred to us in this appeal for our adjudication, that this section has only laid down the procedure of registration and this section nowhere speaks that while considering the application of registration, the CIT shall also look into the procedure of earning of income and sources from where receipts are derived. The argument was, it also does not speak anywhere that while considering the registration the CIT shall also see the manner in which the receipts or the income is being spent by the trust. To our humble understanding of various related provisions, the power of enquiry, in respect of sources of receipts and the utilization of income is entrusted in separate sections as already discussed ante. The language thus used in this section only confines to enquire about the activities of the trust and its genuineness, which means, in consonance with the objects for which created and those objects as also activities should not be a camouflage but pure, sincere, charitable and for public utility at large. What is implicit is that the CIT has to sincerely examine that the objects as also the activities should not be prima facie against the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranted to it for violation of the provisions of s. 13(l)(b) and it is ultimately found that the assessee-trust actually accomplished the objects as indicated in clause No. 3(4) only for the benefit of public at large without there being any activity undertaken as per object clause Nos. 3(1) and 3(2), it would be deprived of any benefits which otherwise were available to it under s. 11 or s. 12. This certainly is not the legislative intention as reflected in the scheme laid down in ss. 11, 12, 12A, 12AA and 13. On the contrary, the phraseology of s. 13, as already discussed, makes it explicitly clear that the said provisions become operative or relevant only at the stage of assessment when the AO is required to examine the claim of the assessee for benefits under s. 11 or s. 12 while computing the total income of the assessee of the relevant previous year. The application of s. 13 thus falls within the exclusive domain of the AO and the provisions contained therein can be invoked by him while framing the assessment and not by the CIT while considering the application for registration under s. 12AA. 11.7 An another feature of the impugned order of the learned CIT is in fact bothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt 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 there is no disagreement about the above-mentioned four legal proposition as eruditely laid down by the respected Amritsar Bench. Undisputedly we have also to decide this appeal more or less within these parameters. But the basic question is that before stepping towards the cancellation of registration the heavy burden is on the learned CIT to conclusively demonstrate that all had gone haywire i.e., objects are meant for personal benefits; that engaged in immoral ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al public utility' will only be a mask or a device to hide the true purpose which is trade, commerce, or business or rendering of any service in relation to trade, commerce or business'. 19. In any event, as a plain reading of s. 12AA(3) would indicate that a registration granted under s. 12AA can only be withdrawn when the CIT is satisfied that (a) the activities of the trust or the institution are not 'genuine'; or (b) the activities of the assessee are not being carried out in accordance with the objects of the trust or the institution. There cannot be any other legally sustainable reason for cancelling or withdrawing the registration granted under s. 12AA. By no stretch of logic, the activities of the assessee can be said to be not genuine and the assessee is admittedly pursuing the objects for which it was established. When the assessee is engaged in bona fide activities, with the framework of law, to pursue its objectives, it cannot be said that the activities of the assessee are not genuine. Learned CIT has also not brought on record any material to demonstrate activities of the assessee are not being carried out in accordance with the objects of the trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remained unsupported thus deserves our dismissal. 11.12 Based upon the facts of this case, we now sum up above discussion; the sine qua non for cancellation of registration are two conditions prescribed in s. 12AA(3) needs to be satisfied are : (a) That activities of the trust/institution are not genuine. (b) That activities of the trust are not carried out in accordance with the objects of the trust/institution. Thus the findings of the learned CIT has not to be only conceptual or contextual but should be within the four corners of law so that not surpassing the power, as listed above, granted in sub-s. (3) of s. 12AA. But unfortunately the fallacy is writ large as gathered on perusing the impugned order. We can hold that the CIT's approach for deciding the eligibility of registration of a trust should be different from the angle by which an assessment of an income is made by the AO. We are afraid about the ramification if we approve the action of learned CIT because in that case it may adversely affect the imparting of education especially when the Revenue has not made out a case that the very purpose for creation of the trust was defeated. Rather we wonder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of provisions of the Act and expected to give a finding on facts that either the objects are not for general public utility or not achieved as prescribed under law. However presently the situation is that the Revenue has not said about any immoral activity of the appellant or the collection of fees was by wrongful means; hence deregistration sans our approval. Nevertheless the list of fifteen cases, as highlighted by learned CIT, lack desired positive finding as it was left blank on the excuse that even the other authorities could not lay their hands on alleged defaults so it was also difficult for the Revenue authorities to trace the correct position. While dealing with the facts ante, it was found that after exhaustive enquiry few instances; fifteen in numbers; were noticed by the Revenue authorities wherein it was alleged to be the infringement of Capitation Fee Act. But the irony is that in the same breath the learned CIT has accepted the stand of the assessee that it can charge five times the normal fees in case of admission in the defined management quota. Thereupon there was a circumvent in the approach of the learned CIT that the amount of donation be considered together ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the institutes are being run on commercial lines with profit motive due to the substantial surplus created year after year is also not correct since the assessee has accumulated its surplus which is within the permissible limit of 15% u/s.11 and 12. 8.11 So far as the 2 decisions relied on by Ld.CIT are concerned we find the Ld. Counsel for the assessee has distinguished the same. We fully agree with his arguments. In any case since 2 views are possible on this issue, the view in favour of the assessee has to be adopted in view of the settled proposition of law. In this view of the matter, we hold that the Ld. CIT is not justified in cancelling the registration u/s.12A of the I.T. Act, 1961. We accordingly set-aside the order of the Ld.CIT and direct him to grant registration u/s.12A of the Income Tax Act. We hold and direct accordingly. The grounds raised by the assessee are accordingly allowed. ITA No.1348/PN/2010 (A.Y. 2010-11) : 9. Although a number of grounds have been taken by the assessee they all relate to denial of renewal of approval u/s.80G of the I.T. Act. 9.1 Facts of the case, in brief, are that the assessee made an application on 31-03-2009 be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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