TMI Blog2016 (5) TMI 1024X X X X Extracts X X X X X X X X Extracts X X X X ..... as not been entered the books of the assessee or has been utilized by any of the trustees or their relatives or has been utilized for purposes other than education and since neither any of the donor nor the AO has lodged any complaint before the Government authorities for violation of the Act, therefore, the revenue authorities in our opinion are not justified in denying the exemption u/s.11 of the I.T. Act to the assessee on the ground of violation of provisions of section 11(1)(d) of the I.T. Act. We accordingly set aside the order of the CIT(A) and direct the AO to allow the claim of exemption u/s.11 of the I.T. Act. - Decided in favour 0f assessee - ITA No.1166 & 1167/PN/2014 - - - Dated:- 15-4-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee : Shri Arvind Shinde, Shri Kishor Phadke For The Respondent : Shri Hitendra Ninawe ORDER PER R.K. PANDA, AM : The above 2 appeals filed by the assessee are directed against the common order dated 08-01-2014 of the CIT(A)-II, Pune relating to Assessment Years 2008-09 and 2009-10 respectively. Since identical grounds have been taken by the assessee in both the appeals, therefore, these were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not imply that the registration was not granted. It was submitted that without existence of 12A registration the department would not have issued 80G certificates. Therefore, it is incorrect to assume that 12A registration does not exist in the case of the assessee. 4. Referring to the decision of the Pune Bench of the Tribunal in the case of Phaltan Education Society it was argued that the Tribunal in the said decision has held that non-availability of 12A with the assessee cannot be found fault with when the 80G certificates were given for past so many years. Referring to the decision of the Pune Bench of the Tribunal in the case of Poona Blind Mens Association it was argued that the said trust also could not produce registration certificate u/s.12A. Considering the past records and facts the CCIT directed the CIT not to press for production of 12A certificate. It was argued that the CCIT has also directed the concerned CITs under his charge that in deserving cases similar approach should be adopted. The assessee further submitted it is purely an educational trust and there is no other activity except bonafide education which is undertaken by the trust. 5. However, the AO w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and its link to admissions if any. In response to the same, the assessee vide letter dated 22-12-2010 provided a list of donations towards corpus fund, summary of which is as under : 1. Donations against management quota Admissions (Donation to Permanent Fund) : Rs.3,05,16,500/- 2. Fellowship of Member : Rs.1,33,500/- 3. Shri Anirudha Upasana Kendra Pune 5 Willingly Fund and other Pratishthan : Rs.92,484/- Rs.3,07,42,484/- 8. On verification of the submissions the AO noted that around 20% out of the sanctioned seats are under management quota and against each seat of management quota, standard donation amounts were mentioned in the list. The total of such donations against management seats comes to ₹ 3.05 crores. Additionally, fellowship of ₹ 1,33,500/- and willingly fund of ₹ 92,484/- has been received which makes total of ₹ 3,07,42,484/- which is exactly the same figure of donations to permanent fund shown in the balance s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice to the assessee to explain as to why the donations should not be added to the income of the assessee trust as the same are related to admissions and are non-voluntary in nature and therefore why it should not be treated as violation of the provisions of section 11(1)(d) of the I.T. Act. He also asked the assessee to explain as to why the income of the society should not be assessed as AOP within the meaning of section 164 of the I.T. Act. 11. The assessee replied that the donations are voluntary in nature and no one is forced to give the donation. The entire amount of donation has been received for the noble cause of charity. Every donor has been given receipt for the corpus donation. Entire amount received by way of donation has been deposited in the bank account of the assessee. Further society has allotted 80% of the seats as per the Government regulations and norms and only 20% seats are free as per Government norms which are referred to as management quota. The fees for all seats whether 80% Government quota or 20% Management quota are same in quantum. However, considering the compelling expenses on infrastructure such as Library, Hostel Building etc. the trust solici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is registered u/s 12AA. The apex court in the case of UP Forest Corporation Anr. Vs DCIT (2008) 297 ITR 1 (SC) held that for the purpose of claiming benefit u/s 11(1)(a) registration u/s 12A is a condition precedent. It is also seen that the CIT-II vide letter dated 14-05-2010 has lodged and not granted the appellant's application for approval u/s 80G as the trust had not submitted the certificate of registration u/s 12A. The appellant on the other hand has contended that it should be deemed to an entity eligible for claiming benefit of exemption u/s.11 of the Act, however, it is noticed that the Pune ITAT s order dated 30-12-2011 in appellant s own case, as is available on record and submitted by the appellant during the appellate proceedings relating to 80G exemption, has set aside the matter to the file, CIT. In the given circumstances and facts on record the appellant cannot presume that the eligibility u/s 12A will be available before issuance of certificate u/s 12A as such. The reliance placed by the appellant on the letter of the Hon. CCIT is not decisive in the fact of the present case and the appellant has without considering the legal position as applicable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant relates to the denial of exemption u/s 11 with respect to the donation of Rs. '3,05,16,500/- for A.Y. 2008-09 and ₹ 2,02,23,533/- for A.Y. 2009- 10 received by the appellant trust which has been held by the Assessing Officer to have been taken against management quota seats and that the donations were not voluntary and hence were in violation of provisions of sec 11 (1)(d). The Assessing Officer during the assessment proceedings found that the appellant had received total donations of ₹ 3,07,42,484/- during A.Y. 2008-09 and the same had been claimed to be towards corpus of the trust. The details of the donations towards corpus fund is as under: 1. Donations against management quota admissions (Donation to Permanent Fund) : Rs.3,05,16,500/- 2. Fellowship of Member : Rs.1,33,500/- 3. Shri Anirudha Upasana Kendra Pune 5 Willingly Fund and other Pratishthan : Rs.9,484/- Total Rs.3,07,42,484/- The Assessing Officer also noticed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uently had claimed before the Assessing Officer that the refunds were for bonafide personal reasons of the donors, however, the A.O. though has not discussed the issue nor any finding has been given. The appellant in any case has not been able to substantiate the contention raised. Thus. the material brought on record by the Assessing Officer clearly indicate to the fact of the students being admitted in different courses against the donation collected by the appellant in the guise of corpus donations which, in fact, were paid in relation to the admission seats. The inference drawn by the Assessing Officer that the donations received could not be said to be voluntary or towards the corpus of the trust rather for pure commercial consideration prima facie appear to be correct and justified in the given set of facts of the case. The appellant has never denied to have taken donations against management qi.ota seats. The appellant had raised various objections including the fact that the Assessing Officer had not carried our proper fact verification and did not consider the denial of nexus between the receipt of the corpus donations and the admission process and, therefore, the matter w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein it was held that the donation given for material gain for securing admission could not be characterized as donation towards charitable purpose, and as such, the assessee is not entitled to have the benefit. In para 7 of the judgment, Hon Judge has said It must be noted that the nature of quality of the receipt has to be adjusted as at the time of receipt. The subsequent act of the assessee to enter the same under some head on receipt could alter the quality of the receipt. 6.4 The Assessing Officer has also reproduced the definition of the capitation fees as found in the. Maharashtra Educational Institution (Prohibition of capitation fee) Act, 1987 which was enacted to prohibit collection of capitation fee for admission of students in the educational institutions in the State of Maharashtra. The said enactment also refers to the National Policy of Education, 1986 which envisages' that' the commercialization of technical and professional education should be curbed and steps taken to prevent the establishment of institutions set up to commercialize education. Section 2(a) defines 'capitation fee' means any amount by whatever name called whether in cash or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplete and the assessee has not submitted any such working till date. He accordingly dismissed the ground raised by the assessee as premature in nature. 16. Aggrieved with such order of the CIT(A) the assessee is in appeal before us with the following grounds : 1. The learned CIT(A)-II, Pune erred in law and on facts in upholding the taxable income worked out by the learned AO at ₹ 10,15,45,927/- and corresponding tax liability amounting to ₹ 4,83,21,648/- on the appellant. The learned CIT(A)-II and the learned AO ought to have appreciated that the appellant is a bonafide Charitable Trust solely engaged in education. 2. The learned CIT(A)-Il, Pune erred in law and on facts in upholding AO s contention that the appellant is not eligible to claim exemption u/s 11 of the ITA, 1961 in the absence of 12A Registration certificate. The learned CIT(A)-II, Pune ought to have considered the genuine and bonafide cause of education for which the appellant exists for past many years; and; the presence of 80G Certificates granted to the appellant for the past many years till 31/03/2009. 3. The learned CIT(A)-II, Pune erred in holding that the appellant has violated sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03-2003. Referring to page 189 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to order passed by the CIT-I, Pune dated 23-04-2004 under Rule 11AA granting benefit of deduction u/s.80G for the above trust for the period from 01-04-2003 to 31-03-2006. Referring to page 190 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to order passed under section 11AA(4) by the CIT-II, Pune on 04-12-2007 granting exemption u/s.80G to the trust from 01-04-2006 to 31-03-2009. Referring to pages 191 and 192 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to order dated 18- 08-2014 passed u/s.80G(5)(vi) of the I.T. Act read with Rule 11AA, 1962 according to which the approval has been granted from 20-02- 2014 till it is withdrawn. Referring to page 193 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the certificate of registration granted u/s.12AA of the I.T. Act, 1961 read with Rule 17A of the I.T. Rules, 1962 on 31-12-2013 w.e.f, 01- 04-2013. Referring to page 237 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee trust Dr. Gajanan Ramakant Ekbote. Referring to the said affidavit he submitted that the Chairman-cum- Managing Trustee has clearly stated in the affidavit that the assessee trust has never accepted any donation for granting admission to any of the educational courses. The donors have given the donations voluntarily. Further, during the course of assessment proceedings the Managing Trustee had categorically stated that no management quota seat has been sold, auctioned, charged commercially. It was clarified that the donations are voluntarily given by the donors to the society and they are fully accounted for. Referring to to the letter addressed by the assessee trust to the AO vide letter dated 30-12-2010 a copy of which is placed at pages 88 to 90 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the following : 2. CORPUS DONATIONS : Following are the facts about donations accepted by the trust. A) The donations are voluntary in nature and no one is forced to give it. The donations are paltry in quantum and no any large amounts are received by the trust. All these amounts are received for the noble cause of the charity. Eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust. Referring to page 121 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the refund donation to permanent fund which was as per Board Resolution and specific request by the concerned donors. Further, the donations have been refunded by cheque. He submitted that no complaint has been lodged u/s.5 of the Maharastra Educational Institutions (Prohibition of Capitation Fee) Act, 1987 by any of the donors. The AO has also not lodged any complaint against the assessee before the competent authority if he was of the opinion that acceptance of donation is illegal. He submitted that donations are not banned as per Maharastra Educational Institutions (Prohibition of Capitation Fee) Act, 1987. 22. Referring to the decision of Hon ble Karnataka High Court in the case of Director of Income Tax (Exemptions) and another Vs. Sri Belimatha Mahasamsthana Socio Cultural and Educational Trust reported in 336 ITR 694 he submitted that the Hon ble High Court in the said decision has held that merely because the assessee is an institution which is running professional courses, it could not have been presumed that the amount of donation received to an extent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r alternate contention the Ld. Counsel for the assessee submitted that the assessee trust has received the corpus donation without any consideration. Therefore, it being a capital receipt, is not exigible to tax. For the above proposition, he relied on the decision of the Chennai Bench of the Tribunal in the case of ITO Vs. M/s. Pentafour Software Employees Welfare Foundation reported in 2008-ITS-3221 wherein it has been held that all the receipts of an assessee cannot be deemed to be income of the assessee for the purpose of income tax. Only those receipts which bear the nature of income can be made exigible to tax. The definition of the word income as given u/s.2(24) is inclusive and is not exhaustive. Donations towards corpus are not falling within the ambit of the definition of income. This is a capital receipt and not exigible to tax especially when the department did not doubt the nature or veracity of the receipt. 27. The Ld. Counsel for the assessee submitted that the assessee trust has been granted registration u/s.12AA w.e.f. 01-04-2013. The Ld.CCIT vide order dated 30-09-2015 passed u/s.10(23C) (vii) of the I.T. Act has granted approval for the said purpose. The rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. Departmental Representative on the other hand heavily relied on the order of the AO and the CIT(A). He submitted that there is a direct linkage between donation and admission. Even some of the donors are seeking refund. The AO as well as the CIT(A) has categorically mentioned the above fact. He accordingly submitted that the order of the CIT(A) be upheld and the grounds raised by the assessee be dismissed. 32. The Ld. Counsel for the assessee in his rejoinder submitted that in the case of Deccan Education Society 80G exemption was granted because of 10(23C). However, in the case of the assessee 10(23C) was never granted earlier. Therefore, it follows that 12A registration was granted earlier since granting of 12A registration is one of the pre-requisite for getting 80G deduction certificate. 33. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find in the instant case the trust is running various educational institutes. It filed its return of income declaring total income at Nil. The income and expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of approval u/s.80G for non submission of certificate of registration u/s.12A, held that assessee is not entitled to exemption u/s.11. It is an admitted fact that the assessee trust was getting approval u/s.80G from time to time in the past. From the various orders placed in the paper book we find that exemption u/s.80G of the I.T. Act was granted to the assessee trust vide order dated 31- 01-1998 for the period 01-04-1995 to 31-03-2000. The said order bearing No.Pn-165/T-44/95-96 dated 31-07-1995 is placed at page 187 of the paper book. Similarly from the order of the CIT granting exemption u/s.80G of the Act vide order No. Pn/T-II/80- G/P/141/2000-2001/425. dated 12-02-2001, a copy of which is placed at page 188 of the paper book, we find such exemption has been granted for the period from 01-04-2000 to 31-03-2003. We find from page 189 of the paper book that the CIT-I, Pune vide order under Rule 11AA bearing No.Pn/CIT-I/Renewal/80G/R-197/2004- 05/30 order dated 23-04-2004 has granted exemption u/s.80G for the period from 01-04-2003 to 31-03-2006. From the paper book page 190 we find the CIT-II, Pune vide order No. Pn/CITII/ Admn./12A/80G/23/33/2007-08 dated 04-12-2007 has gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as stated by the applicant. 04. In view of the facts of this case, I am directed to convey the CCIT, Pune desires that in the deserving cases, such as the one reported herein above, the production of certificate u/s.12A may not be pressed for. I am further directed to request that the CIT may take the appropriate action within the frame work of statue in this regard. Yours faithfully, Sd/- (Smt. S.S. Dandawate) Income Tax Officer (Tech.) For the Chief Commissioner of Income Tax, Pune 36. From the various documents furnished by the assessee in the paper book it is an admitted fact that the assessee trust has been granted deduction u/s.80G for last so many years. Granting of registration u/s.12A is one of the prerequisite for getting exemption u/s.80G. Unless such 12A certificate has been granted earlier by the department the assessee society could not have been granted deduction u/s.80G. Merely because the assessee trust has misplaced or lost the 12A registration certificate, the same in our opinion cannot be a ground to deny the benefit u/s.11 of the Act to the assessee society especially in absence of any material before the revenue that the assessee was ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances, the respondents are directed to decide the application of the petitioner for issuing duplicate certificate within a fortnight If it is found that by any inadvertence no order actually has been made on the application dated 11-1-1989, the same may now be considered and decided in accordance with law, also within this period. 38. Since in the instant case nothing has been brought on record that the certificate u/s.80G was not granted to the assessee in the past and since registration u/s.12A is one of the prerequisite for granting of certificate u/s.80G and the 80G certificates produced by the assessee for the past several years are not found to be false or untrue, therefore, it has to be held under the facts of the instant case that there is registration u/s.12A of the I.T. Act. The first issue on which the AO has denied the benefit of section 11 for non submission of 12A registration certificate is accordingly rejected. 39. The second issue on which the AO has denied the benefit of section 11 is due to violation of provisions of section 11(1)(d) since the assessee according to the AO has received donation of ₹ 3,05,16,500/- for A.Y. 2008-09 for giving adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion u/s.80G, a fact stated by Ld. Counsel for the assessee and not controverted by the Ld. Departmental Representative. Therefore, changing the stands after their wards completed their education from the institutions run by the assessee trust are contradictory. Further, it is also a fact that all donations received by the assessee trust are recorded in the books of account. There is no allegation by the Revenue that any part of such donation has been siphoned off for the benefit of any of the trustees or related persons. Nothing has been brought on record that any student has been denied admission for not giving donation. Merely because some of the donors stated that they have given the donation for admission the same in our opinion will not disentitle the society from getting exemption which is existing solely for educational purposes and which is otherwise entitled to the exemption. 67. We find a somewhat similar issue had come up before the Hon ble Rajasthan High Court in the case of Chief CIT and Another Vs. Geetanjali University Trust reported in 352 ITR 433. In that case the assessee-trust, for the assessment year 2008-09, filed an application seeking exemption of its inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the single judge. 68. We find the Pune Bench of the Tribunal in the case of Shikshana Prasaraka Mandali Vs. CIT Central Pune vide ITA Nos.1348 and 1349/PN/2010 order dated 27-03-2014 (where one of us Accountant Member is a party) while dealing with denial of registration u/s.12A for violation of The Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987 by accepting donations has observed as under: 8. We have considered the rival arguments made by both the sides, perused the order of the Ld.CIT and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find there is no dispute to the fact that the assessee trust is more than 100 years old and it runs more than 60 educational institutions imparting education to more than 70000 students in various fields. The trust was granted registration earlier u/s.12A. However, the Ld.CIT cancelled the registration granted earlier on the ground that the objects of the assessee trust are not genuine since the assessee trust is collecting huge donation from students for admission to the various institutes run by it in violation of the Maharashtr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 manner of collection of funds by the institutions. That alone, would not suffice to deny the exemption under Section 10(22) of the IT Act. There is in fact no material to show or a complaint that there has even been any coercive pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 charitable activities of another eligible Institution amounts to application of funds for charitable purposes. The law has made it very clear that the charitable activities may be carried out directly by an eligible Institution or through another elig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 of the assessee on irrelevant considerations which were beyond the scope of enquiry envisaged under section 12AA of the Act. We, therefore, deem it fit and proper to set aside the order of the Commissioner and restore the matter back to his file to be ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the previous year, even if such income is otherwise liable for exclusion under any of the clauses of s. 11 and s. 12 of the Act. 11.3 On due consideration of the rival arguments we can summarise the section of the Act governing the issue in hand. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 basic structure for which beneficial law is made and also be not in conflict with the general public utility. Naturally an institution if established to carry out an illegal activity or activities are causing any type of nuisance not in the interest of the pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 bothering us that nowhere he has taken any objection to the charitable and educational nature of the institution. In fact, the objects of the institution as declared in the trust deed, which are extracted earlier, does reflect that all are philanthropic or benevole ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 activities or that there is no element of public benefit. In the present appeal none of the above criteria for rejection of registration was in existence, however mainly confined to the finding that by charging donation the trust has infringed the rules of Prohib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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 or the institution. Under these circumstances, the withdrawal of registration granted under s. 12AA cannot be sustained in law. Learned CIT has extensively referred to as to why the assessee is not eligible for exemption under s. 11 as the activities of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that what purpose does it serve to Revenue by cancelling a registration if the activities are in public interest because in case of any breach of the laws the same is subject to tax under ss. 11 and 12 of IT Act. These two provisions and few other provisions are com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant 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 with the fees to find out the violation of prohibition of Capitation Fee Act. But on facts that too did not stand the test of those provisions since admittedly did not exceed the prescribed limit. 11.14 Facts of this appeal are peculiar, as already discussed in abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 69. Although the above decision was rendered in the context of denial of registration u/s.12A of the I.T. Act we find the issue there was also denial of registration u/s.12A on the ground that the institutions are accepting capitation fee in guise of voluntary donations and are being run on commercial lines with profit motive. Therefore, the ratio that whether the institutions are being run on commercial lines with profit motive due to acceptance of capitalisation fee in guise of donation will be applicable to the facts of the present case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of assessee collecting 'capitation fees' in guise of 'building fund or development fee-Further voluntary contributions received were for the specific purpose of 'building fund or development fee Further voluntary contributions received were for the specific purpose of building and assessee had applied such contributions towards object of trust Assessee had obtained the signatures of the parents of successful students in pre-printed letters before obtaining donation and shown instatement Assessee was entitled to exemption u/s.11 in respect of building fund as well as college development fund Assessee s appeal allowed. Held : In the present case, even if the fees collected were in violation of the norms subscribed by the State Government, the application of the funds were towards the objects of the assessee trust and as such, there was no violation of s.13 of the Act as ascribed by the Revenue, The assessee had obtained the signatures of the parents of the successful students in preprinted letters without giving the details of amounts' donated, date of contributions etc., but contained the donors' names and their addresses. However, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ird proviso was not under consideration, inasmuch as, the case before the Uttrakhand High Court pertained to Section 10(23C)(iiiad) of the Act. The third proviso to Section 10(23C)(vi) is not applicable to the cases falling within the purview of Section 10(23C)(iiiad). Secondly, the judgment rendered by the Uttarkhand High Court runs contrary to the provisions of Section 10(23C)(vi) of the Act including the provisos thereunder. Section 10(23C)(vi) of the Act is equivalent to the provisions of Section 10(22) existing earlier, which were introduced with effect from 1st April, 1999 and it ignores the speech of the Finance Minister made before the introduction of the said provisions, namely. Section 10(23C) of the Act [See observations in American Hotel and Lodging Association Educational Institute's case (supra)]. Thirdly, the Uttrakhand High Court has not appreciated correctly the ratio of the judgment rendered by Hon'ble the Supreme Court in the case of Aditanar Educational Institution(supra) and while applying the said judgment including the judgment which had been rendered by Hon'ble the Supreme Court in the case of Children Book Trust (supra), it lost sight of the ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been granted earlier and the assessments are complete with the finding that there is no contravention of the statutory provisions, need not be reopened. However, alter grant of approval if it comes to the notice of the prescribed authority that the conditions on which approval was given, have been violated or the circumstances mentioned in 13th proviso exists, then by following the procedure envisaged in 13th proviso, the prescribed authority can withdraw the approval. (3) The capital expenditure wholly and exclusively to the objects of education is entitled to exemption and would not constitute part of the total income. (4) The educational institutions, which are registered as a Society, would continue to retain their character as such and would be eligible to apply for exemption under Section 10(23C)(vi) of the Act. [See para 8.7 of the judgment-Aditanar Educational Institution case (supra)] (5) Where more than 15% of income of an educational institution is accumulated on or after 1st April, 2002, the period of accumulation of the amount exceeding 15% is not permissible beyond five years, provided the excess income has been applied or accumulated for application whol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... With the advancement of technology, no college or institution can afford to remain stagnant. The Income-tax Act 1961 does not condition the grant of an exemption under Section 10(23C) on the requirement that a college must maintain the status-quo, as it were, in regard to its knowledge based infrastructure. Nor for that matter is an educational institution prohibited from upgrading its infrastructure on educational facilities save on the pain of losing the benefit of the exemption under Section 10(23C). Imposing such a condition which is not contained in the statute would lead to a perversion of the basic purpose for which such exemptions have been granted to educational institutions. Knowledge in contemporary times is technology driven. Educational institutions have to modernise, upgrade and respond to the changing ethos of education. Education has to be responsive to a rapidly evolving society. The provisions of Section 10(23C) cannot be interpreted regressively to deny exemptions. So long as the institution exists solely for educational purposes and not for profit, the test is met. 25. We approve the judgments of the Punjab and Haryana, Delhi and Bombay High Courts. Since we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s other than education. Therefore, we are of the considered opinion that the assessee trust whose main object is imparting education, cannot be denied the benefit of provisions of section 10(23C)(iiiab) and (iiiac) merely on the basis of contradictory statements of a few donors. Neither any donor nor the Assessing Officer has lodged any complain before Government authorities for violation of the Act. Assessments of the trust have been completed in the past accepting the exemption u/s.10(23C) of the Act. Therefore, we find no reason to deviate in absence of any evidence brought on record for denying the exemption claimed u/s.10(23C) for the year. So far as the decision relied on by Ld. Departmental Representative is concerned, the same in our opinion is not applicable to the facts of the present case which was in context of section 10(23C)(iiiad). In view of our reasons given above we hold that the Ld.CIT(A) is not justified in denying the exemption u/s.10(23C) (iiiab) of the I.T. Act. We accordingly set aside the same and the grounds raised by the assessee are allowed. 41. Since in the instant case also nothing has been brought on record that the donations received from various ..... X X X X Extracts X X X X X X X X Extracts X X X X
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