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TMI Blog2012 (12) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee - ITA No.1041/Del./2012 - - - Dated:- 20-7-2012 - SHRI A.D. JAIN, AND SHRI B.C. MEENA, JJ. For the Appellant: Ms. Vibha Mahajan Seth, Advocate For the Respondent: Shri Satpal Singh, Senior DR ORDER PER B.C. MEENA, ACCOUNTANT MEMBER : This appeal filed by the assessee emanates from the order of Director of Income-tax (Exemptions), Delhi dated 10.02.2012 on the following grounds :- 1. The order of the Learned Director of Income Tax (E) is bad in Law and facts. 2. The Learned Director of Income Tax (E) has erred in Law and Facts in concluding that the Society is indulged in taking Forcible Donations. 3. The Learned Director of Income Tax (E) has erred in Law and Facts in concluding that the Income of the assessee (Society) is no longer exempt U/S 11 / 12 of the Income Tax Act. 4. The Learned Director of Income Tax (E) has erred in Law and Facts in concluding that the activities of the society are not Charitable in nature and thereby cancelling the Registration U/S 12A of the Society w.e.f. assessment year 2008-2009 onwards. 5. The Appellant craves leave to add, alter, amend or vary any of the above grounds of appeal at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by assessee were not in uniform pattern. Choice was given to the parents. This fact is evident from page 17, 25 and 43 of the paper book filed. This shows that these donations were voluntary. The proper receipts were duly issued to the donor parents and these amounts were duly accounted for in the books of account of the society under the head building funds . These donations were not received only at the time of admissions. She submitted that the donations were spread over the year and these were not related to the admissions in the schools. This fact is evident form pages 6 to 13 of the paper book. Ld. AR further pleaded that these donations constitute small percentage of the gross receipt of the society. This is evident from the following :- A.Y. 2008-09 (Rs.) A.Y. 2009-10 (Rs.) Gross Receipts 2,60,07,171.00 3,08,00,964.00 Donations 7,79,100.00 8,91,400.00 % age of donations to total gross receipts 3.03% 2.89% She also pleaded that the donations were also received from persons other than parents of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondly, the money collected over a prescribed fee/capitation fee were handed over to the Chairman and other persons of the society and that is not used for charitable purposes of education which debarred the assessee from exemption u/s 11 of the Income-tax Act, 1961. But, in the case under consideration of this assessee, all the receipts were duly accounted for in the books of account and used for the purpose of imparting education only. She also pleaded that in the case of Rajah Sir Aannamalai Chettiar Foundation vs. DIT (E) (ITA No.2927/Mds./2010), the issue was also related to exemption u/s 11 of the Income-tax Act, 1961. Further, in that case, the fee structure was itself contemplates element of profit in its activities and no free education was imparted/concession granted even to the downtrodden and deserving persons. In that case, the object of the trust was to establish number of educational institutions in a particular brand name and run them on commercial lines. Ld. AR pleaded that this judgment relied upon by the DIT (E) for cancelling the registration u/ 12AA(3) is not justified as facts are at variance. Ld. AR also submitted that the case of CIT vs. M.P. Anaj Tilha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affidavit to stop taking the donation from July, 2011. She also submitted that assessee has already offered these donations for taxation u/s 115BBC. She pleaded to set aside the order of DIT(E). 3. Ld. DR relied on the order of the DIT (E). 4. We have heard both the sides on this issue. The assessee is registered as society under the name Hans Raj Smarak Society. One of the objects of the society is also to establish and maintain the institutions for imparting education. At present, the assessee is running two schools. For the enhancement of the infrastructure on account of increase in the number of students, the assessee collected donations from various persons including the parents of the students. It is a fact that donations were not received from all the students who got admission during the relevant period in the schools run by the society. Further, these donations were of a small percentage of the total receipts of the society. The donations were also received from other members of the society under the head building funds . These donations were not being used for personal benefit by any of the person of the trust or members of the society. These donations were duly r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Income-tax Act. There was no apparent distinction between legal and illegal income under the provisions of the Income-tax Act. If the income was taxable, it should be taxed. If the assessee had not applied the capitation fees collected even in violation of the Prohibition Act for the purposes for which the trust was established, there was a case for the Department. I f the assessee had applied its entire income including capitation fees exclusively for the purposes for which it was established, the Department had no case. As far as application of funds was concerned, there was no case made out by the Department against the assessee. According to the details furnished by the assessee-trust, the assessee had spent its entire receipts for the purposes of creating infrastructure facilities to run its educational institutions. The registered office of the trust was the residence of the Trustees. Therefore, it was very premature to hold that the cash found in the registered office/residential houses amounted to diversion of funds. It was only a holding of funds and not application if diversion of funds. All the balance cash remained with different educational instit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 public at large should definitely lead to cancellation of registration. The scheme of the Act otherwise do not subscribe and allow a trust to take the benefit of the provisions of ss. 11 and i2 unless establish the prescribed utilization of the income, even if, at all the trust holds the registration in its hands. Therefore at the stage of granting registration the CIT is not expected to bother himself about the other provisions of the Act and supposed to confine himself to the procedure of registration as laid down therein. Nowhere the CIT has taken any objection to the charitable and educational nature of the institution. In fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se side of cancellation is that or; refusal of registration the entire receipts shall be subject to assessment without granting benefit of s. 11 and s. 12 to assess income which does not form part of total income though the factual position could be that major part might have been devoted towards achieving the objects i.e., imparting education, as in this case, but the AD shall be automatically forbidden to grant advantage of exemption consequent, upon the cancellation as is mandatory in statute. The outcome of the deliberation made in detail hereinabove is that percurian opinion is to debar the CIT to enter into the area of investigation of source of income and also application of income, so that the amount of correct exempt income be not prejudged. If the CIT had an information of some wrongful means of earning fees in the form of a donation or the information tells about excessive charging of fees; then the CIT in his rights can pass on the information to the concerned office bearers working under the Maharashtra Capitation Fees (Prohibition) Act. These authorities have enough power to deal with such nature of default, side by side the CIT is to limit his jurisdiction within the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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