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TMI Blog2017 (1) TMI 443X X X X Extracts X X X X X X X X Extracts X X X X ..... single rupee distribution on account of profits to its members clearly entitling the society 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 decision, inter alia, from Hon'ble Supreme Court. That the appellant craves leave to add to and / or amend, modify or withdraw the grounds outlined above before or at the time of hearing of the appeal. 2. The brief facts of the case are that the Applicant filed an Application for registration u/s. 12A(a) dated NIL on 8.4.2013 before the Ld. CIT, Dehradun. Accordingly, the assessee was served the notice dated 25.4.2013 by the Ld. CIT for furnishing the following information / details on 6.5.2013. 1. Details regarding trust members where PAN is not available, Ward/Designation of the Assessing officer under whose jurisdiction assessee's address falls. 2. Copy of minutes of the last Board meeting of the trust. 3. Updated copy of bank account of the trust for the last 3 years or from the date of opening of the account where the accounts are less than three years old . 4. Names, addresses and PAN Nos. of the donors of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive of imparting education while correlating it with the spirit behind the Legislation granting exemptions which is bold and clear i.e. 'charity'. The activities of the society are commercial in character and not charitable precisely as concluded by the Hon'ble High Court of Uttarakhand on similar facts in the case of CIT Vs. Queens Education Society reported in 177 Taxman 321. 2.4 Further, 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 education cannot be said to be a charitable purpose. The Uttarakhand High Court 'held that the CIT was correct in rejecting the section 12AA application as the society was charging substantial fees, from the students and making huge' profits. To quote the Hon'ble High Court "The expression 'not involving carrying on of any activity for profit' cannot be read with expression 'education', but that does not make every kind of pure. commercial activity in the name of educatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming identical reasons for denial of registration u/s. 12A and the ITAT, Delhi decision dated 18.3.2016 passed in the case of Shree Balaji Educational Trust vs. CIT in ITA No. 877/14. We have also perused the true translated copy of aims and objectives of the assessee society and true copy of aims and objectives of Shree Balaji Educational trust as considered by the Coordinate Bench of ITAT in the case of Shree Balaji Educational Trust vs. CIT vide decision dated 18.3.2016 in ITA No. 877/14 under exactly identical circumstances. For the sake of convenience, we are reproducing Order of ITAT, Delhi in the case of Shree Balaji Trust vs. CIT dated 18.3.2016 in ITA No. 877/14 under exactly identical circumstances, as under:- 3. The Ld Counsel further pointed out that the CIT(E) has framed two reasons for refusing to grant registration under section 12A of the Act viz. first that the education should be given free of cost to some needy students and second the assessee is expending and increasing its receipts therefore not entitled for registration. The Ld Counsel of the assessee vehemently pointed out that as per amended provision of section 2(15) of the Act the expression charitable pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aritable. No other argument was submitted by the Ld DR. 6. Placing rejoinder to the above submissions of the revenue the Ld Counsel again placed his reliance on the recent decision of Hon'ble Apex Court in the case of Queens Educational Society Vs CIT (Supra) and submitted that the Hon'ble Supreme Court reversing the decision of Hon'ble Uttarakhand High Court has held that when a surplus is ploughed back for educational purposes then it cannot be said that 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 educational purposes and the same was used for other purposes beyond the objectives of the applicant trust. It is also pertinent to note that the reasons recorded by the CIT(E) that the education should be given free of cost to some needy s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f transactions have not been explained. The CIT while noticing that society was running a Polytechnic College further took into consideration that the society was earning profits for the last two year and had claimed exemption 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 Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as "the Tribunal") which has allowed the appeal of the society and has set aside the order passed by the CIT and directed that registration applied for by the appellant under Section 12AA of the Act be granted. The present appeal is directed against the said order and the following questions of law have been formulated by the revenue:- "1. Whether, in the facts and circumstances of the case, the Id. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h it may contemplate to undertake. The insertion of Sub Section 3 to section 12AA of the Act regarding the powers of the Commissioner to cancel the registration if the activities of the trust are not carried out in accordance with such objects was also noticed. 6. The Allahabad High Court in CIT Vs. Red Rose School [2007] 163 Taxman 19 has held that the jurisdiction of the Commissioner at the stage of processing application under Section 12AA of the Act is limited regarding whether the activities are genuine and in consonance with the objects of the trust or institution and where education is being 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 that registration should be granted to the respondent- society with the rider that the same cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that 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 under section 12A of the Act does not automatically make eligible the applicant for exemption under section 11 and other relevant provisions of the Act. During the assessment proceedings while considering such claim of assessee the AO is fully empowered to examine and verify these facts that whether the assessee/applicant has applied its receipts towards its charitable 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impugned order that the education should be given free of cost to some needy students and the second reason vide para no. 4 that the assessee is expanding and is increasing receipts, therefore, not entitled for exemption. We also note that Ld. CIT relied on the decision of the Uttarakhand High Court in the case of CIT vs. Queens Educational 177 Taxman 321 and another similar decision in the case of National Institute of Aeronautical Engineering Educational Scoeity vs. CIT 184 Taxman 264 which have been since been reversed by the Hon'ble Supreme Court vide decision in the case of Queens Educational Educational Society vs. CIT (2015) 372 ITR 699 (SC). In view of above, we are of the considered view that the present case is squarely covered by Coordinate Bench decision in the case of Shree Balaji Educational Trust vs. CIT dated 18.3.2016 in ITA No. 877/Del/2014 under exactly identical facts and circumstances. The Coordinate Bench in the Balaji's case (Supra) clearly concurred with the submission of the assessee to the effect that 'education' is per se a charitable object. Taking note of the fact that the decision as relied upon by the CIT have been reversed by the Supreme Court in its ..... 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