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2016 (3) TMI 969 - ITAT DELHI

2016 (3) TMI 969 - ITAT DELHI - [2016] 47 ITR (Trib) 595 - Registration under section 12A (a) cancelled - Held that:- CIT(E) has not brought out any allegation to show that the receipt/income of the assessee's trust was not used for the educational purposes and the same was used for other purposes beyond the objectives of the applicant trust. CIT dismissed application of the assessee for grant of registration under section 12A of the Act by recording incorrect and irrelevant facts and circumstan .....

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haritable objects and the AO is also empowered to verify as to whether the applicant assessee is conducting any activity in the name of charitable which is actually in the nature of trade commerce or business. These sovereign powers of the tax authorities are perpetual which cannot be taken away only by grant of registration under section 12A of the Act. It is also relevant to mention that the grant of registration under section 12A of the Act merely a pre-qualification for claiming exemption un .....

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:- 18-3-2016 - G. D. Agrawal VP And C. M. Garg, JM For the Petitioner : Shri Piyush Kaushik, Adv For the Respondent : Shri Munish Kumar, CIT DR ORDER Per C M Garg, JM 1. This appeal by the applicant trust has been filed against the order of the CIT, Dehradun dated 17.10.2013 by which the application of the appellant seeking registration under section 12A (a) of the Income Tax Act 1961 (for short the Act) has been rejected. The grounds raised by the assessee read as under: 1. "That on the fa .....

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purpose of trust without even a single rupee distribution on account of profits to its members clearly entitling the assessee trust for registration in accordance with the decision of Hon'ble Supreme Court in the case of American Hotel & Lodging Educational Institute Vs CBDT 301 ITR 86 SC & other decisions, inter-alia, from Hon'ble Supreme Court." 2. We have heard arguments of both the sides and carefully perused the relevant materials placed before us on record. The Ld cou .....

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st deed. The Ld Counsel further pointed out that as per para 17 of the trust deed it is also provide that the property of the trust shall not be used for the private benefit of any trustee or his relatives or his friends therefore the activities of the applicant trust and its application of funds clearly established that the main object of the applicant trust is charitable in nature. The Ld Counsel also pointed out that from the financial results and audited accounts of the trust it is clear tha .....

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ly pointed out that as per amended provision of section 2(15) of the Act the expression charitable purpose includes relief to the poor, education, yoga, medical relief, preservation of environment & monuments and advancement of other object of the general public utility and these independent terms used by the legislation have independent meaning and education per-se is charitable purpose. The Ld Counsel of the assessee has placed reliance on the decision of ITAT Delhi in the case of Shavak S .....

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[2008 301 ITR 86 (SC) submitted it is clear that when a surplus is ploughed for educational purposes the educational institution exists solely for educational purposes and not for purposes of profit. The Ld Counsel lastly pointed out that recently the Hon'ble Supreme Court in its decision in the case of Queen's Educational Society Vs CIT (2015) 372 ITR 699 (SC) reversing the decision of Uttarakhand High Court in the case of CIT Vs Queens Educational Society and other similar decision as .....

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es the educational institution exists solely for educational purposes and not for the purposes of profit. 5. Replying to the above the Ld DR supported the impugned order and submitted that in the case of National Institute of Aeronautical Engineering Educational Society Vs. CIT (2009) 184 Taxman 264 (Uttarakhand) it was observed that charity' is the soul of the expression "charitable purpose" as defined in section 2(15) of the I.T.Act. Mere trade or commerce in the name of educatio .....

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the institution exist for profit motive. The Ld Counsel pointed out that the CIT(E) has not brought out any allegation to show that the surplus of receipt was misused or used other then the educational purposes and against the object of the society. 7. On careful consideration of above rival submissions and perusal of the impugned order and relevant record we note that the CIT(E) has not brought out any allegation to show that the receipt/income of the assessee's trust was not used for the e .....

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le Uttarakhand High Court in the case of CIT VS Queens Educational Society reported as 177 Taxman 321 but we respectfully note that this decision has been reversed by Hon'ble Supreme Court in the case of Queen Educational Society VS CIT (Supra) wherein their lordship held that when the surpluses of a educational institution has been used for educational purposes then it should be held that the educational institution exists solely for educational purposes. We may pointed out that merely beca .....

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. 6251/Delhi/2013, as relied by the Ld Counsel of the assessee, wherein it was held thus: "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 Income Tax will make certain queries as he may deem necessary in this respect and after getting satisfied about the objects of the society/institution and the genuinen .....

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ties of the assessee and if he finds that the objects of the society are charitable, and the activities as stated in the object clause of the society are being carried out, then he is bound to grant registration u/s 12AA of the Act. Hon'ble High Court of Uttarakhand as relied upon by Ld. D.R. in the case of CIT VS National Institute of Aeronautics and Education 181 Taxman 205 has held that where the assessee was earning profits by charging hefty fees, the assessee cannot be said to be engage .....

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nt passage from an applicable judgment, namely, Aditanar and quoting a portion of a property tax judgment which expressly stated at rulings arising out of the Income Tax Act would not be applicable. Quite apart from this, it also went on to further quote from a portion of the said property tax judgment which was rendered in the context of whether an educational society is supported wholly or in part by voluntary contributions, something which is completely foreign to Section 10(23C) (iiiad). The .....

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ct, 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&# .....

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ools is not disputed, the same was a genuine activity and the enquiry regarding genuineness of the activities cannot be stretched beyond this. The relevant findings of Punjab and Haryana High Court are reproduced as under: "2. The respondent-society applied for registration under Section 12AA of the Income Tax Act, 1961 (hereinafter referred to as "the. Act") on 31.3.2009. The said application was declined by the Commissioner of Income Tax, Bathinda (for short "the CIT") .....

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on under Section 10(23C) of the Act. The reasons to switch over to Section 11 of the Act remained unexplained for claiming exemption under Section 12AA of the Act and while taking into consideration Section 2 (15) of the Act the CIT came to the conclusion that since the society was charging building fund, development fund, sports fund and transportation costs etc., the same could not be termed as charitable activity by any definition. 3. The society preferred an appeal before the Income Tax Appe .....

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in law to restrict the powers of the CIT for making the enquiries u/s 12AA(a) of the Act despite the fact that the said section provides that the CIT can make such enquiries as he may deem necessary in this behalf. 2. Whether, in the facts and circumstances of the case the Id. ITAT 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. .....

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re 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 processing the return of the income of those assessees to examine their claim under Sections 11 and 13 of the Act and give such .....

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been considered by this Court in the order dated 5.10.2011 passed in CIT Vs. Surya Educational & Charitable Trust [2011] 203 Taxman 53/15 taxmann.com 123 (Punj. & Har.) and it has been held that Section 12AA of the Act, requires satisfaction in respect of the genuineness of the activities of the Trust, which includes the activities which the Trust was undertaking at present and also which it may contemplate to undertake. The insertion of Sub Section 3 to section 12AA of the Act regardin .....

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eing imparted as per the rules and the factum of the establishment and running of schools is not disputed the same was a genuine activity and the enquiry regarding genuineness of the activities cannot be stretched beyond this. 7. In view of above facts and circumstances, it would be clear that respondent society which was admittedly running a Polytechnic 90llege and the activities were interwoven for furthering the projects and activities pertaining to education, the Tribunal rightly directed th .....

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tial 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 .....

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s apparent from the assessment order of earlier years placed at paper book pages 124-126 and moreover the object clause as placed in paper book pages 3-14 suggests that assessee is running school for educational purposes. The argument of Ld. D.R. that original constitution needs to be examined with respect to objects clause does not hold much force as A.O. in assessment orders of earlier years (as placed in paper book pages 124-126) has noted that society was running a school. In view of above f .....

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hat the CIT dismissed application of the assessee for grant of registration under section 12A of the Act by recording incorrect and irrelevant facts and circumstances and the assessee successfully established that it was created for the charitable purposes including education activity and it used its funds for the purpose of educational activities and therefore the applicant trust is eligible for registration under section 12A of the Act. 10. It is relevant to mention that grant of registration .....

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