TMI Blog2010 (9) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... ivity as a trade and commence. The proposition laid down by the High Court belies the argument of the CIT, and it is fully applicable in present case also. Notably, there is no allegation by the CIT that any activity other than education has been carried out by the assessee. Another reason is that the activity of education being carried out by the assessee, cannot be regarded as a charitable purpose . the action of the CIT on this aspect is beyond the jurisdiction envisaged u/s 012AA(3) and is accordingly liable to be ignored. In the final analysis, we are unable to uphold the conclusion drawn by the CIT that the activities of the assessee are not being carried out in accordance with its objects merely because it was generating profits from such activity. Therefore, invocation of s. 12AA(3) by the CIT on this aspect has to fail. we set aside the impugned order and the registration granted to the assessee vide order dt. 29th Aug., 2007 is hereby restored. Condonation of delay - CIT did not allow any opportunity to the assessee of being heard although the same was specifically directed by the Tribunal in his order. HELD THAT:- The opportunity allowed by the CIT to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of which registration is cancelled. 3. As per the s. 12AA(3) the registration can be cancelled only if any one of the two conditions are satisfied:- (i) The activities of society are not genuine or (ii) Are not being carried out in accordance with the objects of the institution. The learned CIT has not brought anything on record to reflect that any one of the conditions mentioned above is not satisfied by the society. Hence the cancellation of registration is wrong and bad in law. 4. The net surplus calculated by the CIT is wrong and is against the principles of accounting, as he has not reduced the depreciation from the surplus. 5. The learned CIT while calculating the utilization of funds has not considered the amount spent by the society as capital expenditure. 6. The contention of the learned CIT that activities of the trust are not charitable is wrong, as he has failed to appreciate the facts that the trust is regularly waving the fee of number of students and was running the business, the income from which was negative. These facts were on record before the learned CIT. 7. The cases of MCD us. Children Book Trust and Safdar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the CIT cannot be upheld in this case. It is further argued that the CIT has erred in law and on facts to cancel the registration under s. 12AA(3) of the Act. 4. On the other hand, learned Departmental Representative has defended the order of the CIT by pointing out to the following discussion in the impugned order:- 7. Turning to the case under consideration it is found that:- (i) The trust's claim for registration under s. 12AA of the IT Act, 1961, is based only on the ground that it is imparting education. However, in view of the Hon'ble Supreme Court's decision cited supra, education per se is not a charitable purposes. (ii) The trust has been generating net surplus every year which clearly suggests that the affairs of the trust are being run as a. commercial venture with sole motive of earning profit by using education as a business. (iii) The amount of net surplus (before allowing depreciation) generated by the trust in the financial year cited supra suggests that profit making had been its dominant object, and that no relief is being provided to the poor and needy. (iv) The net surpluses tabulated herein further suggests that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to pass the impugned order under s. 12AA(3) of the Act cancelling the registration earlier granted to the assessee under s. 12AA(1)(b) of the Act. Sub-s. (3) of s. 12AA of the Act, which reads as under:- (3) Where a trust or an institution has been granted registration under cl. (b) of sub-s. (1) and subsequently the CIT 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. empowers the CIT to cancel a registration granted under s. 12AA(1)(b) of the Act. The scope and ambit of the power manifested in the CIT as per s. 12AA(3) of the Act have been examined by the Chandigarh Bench 'A' of the Tribunal in the case of H.P. Government Energy Development Agency vs. CIT (ITA No. 889/Chd/2009, dt. 15th Sept., 2010) [reported at (2010) 46 DTR (Chd)(Trib) 126 : (2011) 134 TTJ (Chd) 33-Ed.] in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut either of the two conditions prescribed therein, namely, that the activities are not genuine or that the activities are not being carried out in accordance with the objects of the trust or institution, as the case may be. Pertinently, the satisfaction about the objects of the trust or institution being as per s. 2(15) of the Act, is not a condition mentioned in s. 12AA{3) of the Act to cancel the registration already granted under s. 12AA(3) of the Act. The only ground available with the CIT to cancel the registration is to either establish that the activities of the trust or institution are not genuine or that the same are not being carried out in accordance with the objects of the trust or institution, as the case may be. In our considered opinion, the CIT is bound to function strictly in accordance with the provisions of the Act. A statutory authority has no power, jurisdiction or discretion to go beyond the statutory provisions. No power can be assumed in the absence of any specific provision. It is quite clear that as per sub-s. (3) of s. 12AA of the Act, CIT has power to rescind the registration only on being satisfied about either of the two points mentioned therein, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... institution existed for profit. The Hon'ble High Court specifically negated the interpretation of the Revenue that there has to be a reasonable profit only to make an institution not to be existing solely for the purposes of the profit. Though the issue before the Hon'ble High Court was in the context of s. 10(23C)(vi) of the Act however the Court has specifically dealt with the question as to whether an educational institution ceases to exist solely for educational purposes and not for purposes of profit, merely because it has generated surplus income over a period of 4/5 years after meeting its expenditures. The Hon'ble High Court opined that merely because profits have resulted from the activity of imparting education, it would not result in change of character of institution that it exists solely for educational purposes. Evidently, identical facet has been considered by the CIT to conclude that generating of surplus from educational activity year after year, changes the character of activity as a trade and commence. The proposition laid down by the Hon'ble jurisdictional High Court belies the argument of the CIT, and it is fully applicable in present case also. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... na High Court in the case of Pinegrove International Charitable Trust (supra), wherein the Hon'ble Court has explained and distinguished the judgment in the case of Children Book Trust (supra), relied upon by the CIT. The following discussion is worthy of notice:- The observations of Hon'ble Supreme Court quoted from para 82 of the aforesaid judgment to the effect that-'what we want to stress is where a society or body is making systematic profits, even though that profit is utilized only for charitable purposes, yet it cannot be said that it could claim exemption' deserves to be read in conjunction with the express provisions of the third proviso to s. 10(23)(vi) of the Act which stipulate the retention of 15 per cent of the profits of the total income after quantification thereof, of the educational institution earned in each year provided 85 per cent of the total income is spent for the objects of the society. In fact, the judgment rendered by Hon'ble the Supreme Court in Children Book Trust case (supra) on the facts and in the circumstances of the case of the petitioner-society herein, is not at all applicable by virtue of the applicability of the mecha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedless to mention here due opportunity be provided to the assessee to substantiate its claim. The assessee is also at liberty to file evidence, if any.' Without affording an opportunity the order is illegal and is liable to be cancelled. 2. The report of learned AO was also not made available and the assessee was not provided any opportunity to give its objections/views on the report. This is arbitrary and against the natural justice. 3. A number of decided cases were referred and were presented before the learned AO including one of which was by the Hon'ble Chandigarh Bench of the Tribunal in the case of Chandigarh Golf Club vs. ITO (2006) 106 TTJ (Chd) 1096 for which there is no mention/rebuttal by the learned CIT and the same is bad in law as he has not followed the principle set by the higher authority. 4. The only case referred to by learned Director of IT (Exemptions) vs. Spic Educational Foundation (2002) 176 CTR Mad) 223 : (2002) 257 ITR 46 (Mad) has no relevancy with this case as in the case mentioned the audit report was not filed along with the return of income, whereas in this case the audit report was very well filed along with the retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of delay before the CIT. In the order dt. 29th Aug., 2007, assessee's application seeking condonation of delay was not examined by the CIT. In an appeal filed before the Tribunal vide ITA No. 878/Chd/2007 against such action of the CIT, the Tribunal in its order dt. 27th Dec., 2007 (supra) restored the matter to the file of the CIT for disposal of the application of the assessee seeking condonation of delay. The Tribunal inter alia observed as under:- Therefore, this appeal on the issue of condonation of delay and consequent registration from the inception of the society is sent to the file of the learned CIT for fresh adjudication. Needless to mention here, due opportunity be provided to the assessee to substantiate its claim. The assessee is also at liberty to file evidence, if any. A perusal of the aforesaid reveals that the matter was sent back to the CIT for fresh adjudication on the issue of condonation of delay, after allowing due opportunity to the assessee to substantiate its claim. In this background, we have examined the impugned order dt. 5th June, 2009 passed by the CIT whereby, assessee's request for condonation of delay in filing the application u ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
