2015 (2) TMI 681 - AT - Income Tax

Registration u/s 12AA rejected - Held that - The activities of the trust was not carried out in accordance with the object of the trust. The assessee trust administer and manage the so-called medical college in a commercial manner with profit motive. The assessee trust gone to the extent of entering into agreement for offering employment and admission for medical education and collects money. It is to be remembered that admission in any educational institution including medical college has to be made only on merit basis. Therefore, entering into agreement for admission in medical college after collecting money is not only inhuman but also against the scheme of the Constitution as held by the Apex Court in Miss Mohini Jain's case (1992 (7) TMI 330 - SUPREME COURT). This Tribunal is of the considered opinion that there is no genuineness in the activity of the assessee trust and it exist only for profit motive to administer and manage the medical college in a commercial manner, therefore, it is not entitled for registration as a charitable institution u/s 12AA of the Act. - Decided against assessee.

Issues:
1. Rejection of application for registration u/s 12AA of the Act by the Administrative Commissioner.
2. Discrepancy in the examination of trust deed and records by the Commissioner.
3. Allegations of financial irregularities and profit motive in the establishment of a medical college.
4. Collection of funds from the public without proper records and assurance of employment and admission in the medical college.
5. Failure to maintain books of account and commercial manner of operation by the assessee trust.
6. Interpretation of the purpose and activities of the trust in relation to charitable status under section 12AA of the Act.

Detailed Analysis:

1. The appeal was against the rejection of the assessee's application for registration under section 12AA of the Act by the Administrative Commissioner. The Tribunal noted that this was the second round of litigation, with the first round resulting in a remittance back to the Commissioner for reconsideration.

2. The Commissioner was directed to examine the trust deed and other records filed by the assessee. However, the Commissioner's re-examination did not align with the Tribunal's directions, leading to the rejection of registration based on financial irregularities.

3. The Department highlighted significant investments made without a clear source and the collection of funds before obtaining necessary approvals. The Commissioner found that the institution operated with a profit motive, collecting money in a commercial manner, leading to the rejection of registration.

4. The assessee admitted to collecting substantial funds from prospective employees and students for admission under NRI quota, with agreements for refunds if admissions were not granted. Lack of proper record-keeping and commercial collection practices were evident.

5. The Tribunal observed that the trust collected funds without recognition from relevant authorities and maintained inadequate books of account. The commercial nature of operations, including unaccounted cash payments, raised doubts about the charitable status of the institution.

6. Citing legal precedents, including Supreme Court judgments, the Tribunal emphasized the importance of genuine charitable activities for registration under section 12AA. The trust's profit-driven approach, agreements for admissions based on payments, and lack of adherence to educational norms led to the confirmation of the rejection.

In conclusion, the Tribunal upheld the rejection of registration, emphasizing the commercial and profit-oriented nature of the trust's operations, which were deemed incompatible with the charitable status sought under section 12AA of the Act.

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