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TMI Blog2016 (12) TMI 1076X X X X Extracts X X X X X X X X Extracts X X X X ..... pose other than education. In this regard, the ld.AR clarified that it was incurred for hiring of faculty members for running the institute. Therefore, the expenses incurred on advertisement for hiring talented faculty members cannot be said to have incurred for other than educational purpose. Therefore, the allegation made by the ld. CIT that the assessee incurred advertisement expenditure for procuring more admission of the students with sole motive of earning profit, is wrong. Thus we allow the appeal of assessee for registration u/s. 12AA of the IT Act. - Decided in favour of assessee For approval u/s. 80G the assessee should be given one more opportunity of hearing before the ld. CIT to put its case and comply with the notices issued to him before finally deciding the issue of approval u/s. 80G. - ITA Nos. 4172 & 4181/Del./2014 - - - Dated:- 13-12-2016 - Shri I. C. Sudhir, Judicial Member And Shri L. P. Sahu, Accountant Member Appellant by : Sh. Ashish Goel, Advocate Respondent by : Anupama Anand, CIT/DR ORDER Per L. P. Sahu, Accountant Member: These are two appeals filed by the assessee against the orders of the Commissioner of Income-tax, Rohtak, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Registration certificate dated 24.02.2009 issued by Registrar of Firms Societies, copy of memorandum Articles of Association and list of office bearers of the society and its PAN of society, income expenditure account, balance sheet along with audit reports in form No. 10B for F.Y. 2011-12, 2012-13 and 2013-14. Notices were issued for hearing. A report was called for from the Assessing Officer concerned as to whether the appellant fulfilled the conditions required for the grant of registration / approval applied for. In response, the JCIT and the Assessing Officer did not clearly recommend the case for registration u/s. 12AA and approval u/s. 80G and left the matter to be decided on merits. The ld. CIT referring to the definition of Charitable purpose rejected the applications of appellant by observing as under : 3. The definition of 'Charitable Purpose' as given in the Income Tax Act, 1961 is reproduced below :- Charitable purpose includes relief of the poor, education, medical relief, [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places of objects of artistic or historic interest,] and the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins in the hands of the members and also the crucial powers to transfer the assets of the society to any or many members of the office bearers, thereby, clearly allows the members to get the property of the society in question transferred in their names. This fact is also clearly shrouds in doubt and ambiguity whether in case of transfer of any of the leased asset back to its owner, any compensation or consideration will be obtained by the society in question from its owner or not? 5. On perusal of the income and expenditure account supplied by the assessee for the financial year 2011-12 it is noticed that the institution has made expenditure on advertisement amounting to ₹ 68,531 this expenditure is certainly not for the purpose of education the expenditure has been incurred to procure more admission with the sole motive of earning more profits and hence the condition that the expenditure should be incurred solely for the purpose of education is also not satisfied. Thus, the assessee society is profit oriented business entity and not a charity institute. Keeping in view of the above, the application of the assessee trust does not deserve for registration. Kee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Hon'ble Supreme Court in the case of Visvesvaraya Technological University vs. ACIT in Civil Appeal nos. 4361- 4366 of 2016, the above position has been reiterated, and the Court has held as under: There can, however, be no manner of doubt that the surplus accumulated over the years has been ploughed back for educational purposes. In such a situation, following the consistent principles laid down by this Court referred to earlier and specifically what has been said in paragraph 19 in Queen's Educational Society (supra), extracted above, it must be held that the first requirement of Section 10(23C) (iiiab), namely, that the appellant University exists solely for educational purposes and not for purposes of profit is satisfied. The exemption granted in respect of the University under Section 80G of the Act, qua the donations made to it also cannot be ignored in view of an inbuilt recognition in such exemption with regard to the charitable nature of the institution i.e. the appellant University 11. Without prejudice to the above, Ld. CIT has failed to consider that the aims and objectives and activities of the assessee Society are entirely in line with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trust (supra), it has been held, at the stage of granting or refusing registration, CIT is not required to examine as to what amount should form corpus of trust, in what manner accounts were maintained and what should appear in balance sheet. 9. In 'St. Don Bosco Educational Society' (supra), it has been held that mere charging of high fees is not no ground of refusing registration, where the CIT has not doubted the objects and genuineness of the assessee's activities. 10. In 'Surya Educational Charitable Trust' (supra) rendered by the jurisdictional High Court so far as regards the present assessee, it has been held that u/s 12AA of the Act, the CIT is only to examine the genuineness of the objects of the Trust and not the application of income for charitable purpose, which can be examined at the stage when the Trust files its return. 11. In 'Baba Gandha Singh Education Trust (supra), it has been held that merely because the assessee has generated surplus income after meeting expenditure on its educational activities, such activity cannot be regarded as 'education, trade and commerce in the name of education' so as to invite canc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or institution which is carrying on educational activities will fall within the ambit of charitable purpose under Section 2(15) even if it incidentally involves the carrying on of commercial activities. Thus, even if the assessee is charging the fees as being charged by the colleges running on commercial basis, still it would fall within the definition of 'charitable purpose as per the Circular of CBDT. However, the Revenue has not produced any evidence in support of its claim that the assessee is charging fees similar to commercial colleges. On the other hand, the assessee produced the evidence that it is charging the fees as approved by the prescribed relevant authorities of Government of Uttar Pradesh through their office orders every year. Therefore, the allegation of the Revenue, that the assessee is charging heavy fees or the fees is similar to being charged by commercial colleges, has neither been factually proved to be correct nor can be a basis legally in view of the Board's Circular for denying the registration of trust under Section 12A. As per Section 12AA, the CIT has to satisfy himself only about the object of the trust and the genuineness of activities. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 engaged in charitable activities and was not eligible for registration u/s 12AA of the Act However, the Hon'ble Supreme Court in the case of Queens' Educational Society Vs CIT 245 CTR 449 has held that mere earning of profit cannot be the reason for not allowing registration under the provisions of Section 12AA. The findings of Hon'ble Supreme Court as contained in para 19 are reproduced below: It is clear, therefore, that the Uttarakhand High Court has erred by quoting a non-existent 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT dismissed application for registration without any justified reason and by considering incorrect and irrelevant facts and the Id. CIT(A) has not brought any adverse finding on record to show that he objects of the Trust are not charitable or non genuine. At the same time, we note that the applicant successfully established that it was created with charitable objects and purposes, activities are genuine and in consonance with the charitable objects and all receipts/income surplus is being used for education purposes. Therefore, we set aside the impugned order and thus conclusion of the CIT is demolished. Consequently, the CIT is directed to grant registration under section 12A of the Act to the applicant trust. 15. The second allegation of the Learned CIT in Para 4 is that there are most of the members belong to the same family and therefore close to each other. This allegation of the Ld. CIT does not find any co-relation with the facts of the case. The members are not at all related to each other. Without prejudice to the same where the objects of the assessee are purely charitable in nature registration cannot be rejected merely because there would be perpetual succe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advantage either out of property of the trust or from income or application thereof not only for themselves, but for their relatives and associates. In any case, if later on it is found by the department that trustees or their relatives or their associates are deriving any direct or indirect pecuniary advantage out of trust property or its income and if any such property or income is applied for that purpose, then it will be contravention of the trust deed. Therefore, in our opinion, the simple fact that there is perpetual succession in the appointment of trustee, cannot disentitle the assessee institution from getting registration. Moreover, the trust deed has to be read as a whole according to well established law. It has been stated in clause 2(0) that if any of the first trustees resigned during his/her lifetime, the vacant seat will be filled by the Board of first trustees with 3/4th majority and, thus, nominated will also be called first trustee. Clause 2(iii) provides that the number of trustees could be increased by moving an amendment of the trust and getting approval of 3/4th number of first trustees, however, the total number of trustees cannot exceed 10. In view of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax Act, it was rejected on the ground that since the assessee is not registered u/s 12AA, assessee is not eligible u/s 80G(5)(vi) of the Act. 25. In this regard it is submitted that since the assessee is eligible for registration u/s 12AA, consequently 80G cannot be rejected. 5. The ld. DR relied on the order of the ld. CIT. He further submitted that the society has not undertaken any charitable activity. Drawing our attention to the balance sheet of the society for the assessment year 2012-13 and 2013- 14 and the income and expenditure account, it was submitted that the society is incurring only capital expenditure and not for any activity as per Rules and Regulations of the Society. 6. After hearing both the parties and perusing the materials available on record, we find no justification to support the orders of the ld. CIT refusing to grant registration u/s. 12A. It appears that the conclusion reached by the CIT that the assessee trust is profit oriented entity and not the charitable institute, is based only on the ground that the assessee would charge hefty fees from the students. The ld. CIT has failed to throw any light on the aims and objects of the society ..... X X X X Extracts X X X X X X X X Extracts X X X X
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