9911796707
TMI Blog2017 (3) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... lesale denial of exemption u/s.11 for violations of provisions of section 13(1)(c) and income which is subject matter of violation only can be brought to tax. Now having held so, we have to see the extent of violation yearwise. Expenditure on account of vehicle maintenance - Held that:- We find from the details furnished by the assessee that the Assessing Officer has disallowed expenditure of ₹ 21,850/- for A.Y. 2001-02, ₹ 1,43,893/- for A.Y. 2002-03, ₹ 2,24,077/- for A.Y. 2003-04 and ₹ 2,45,991/- for A.Y. 2004-05. It is an undisputed fact that Shri B.E. Avhad is a lawyer and is also attending to the various works of the trust. Apart from using his own car he has also used the vehicle of the trust. Therefore, disallowance of the entire expenditure on account of vehicle maintenance under the facts and circumstances of the case is not justified. Considering the totality of the facts of the case, we hold that 50% of the vehicle maintenance expenses can be held as for the objects of the trust and the balance 50% is to be disallowed and brought to tax. Depreciation on motor car is concerned an amount of ₹ 1,71,388/- for A.Y. 2002-03, ₹ 1,37,111 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerned, we find such interest does not relate to any of the years under appeal since nothing has been brought on record by the revenue that any such interest relate to any of the years under appeal. Even otherwise also, as held earlier there cannot be wholesale denial of exemption u/s.11. Expenditure incurred on account of credit card expenses of Shri B.E. Avhad - Held that:- We find the Assessing Officer disallowed the same on the ground that the credit card was used for meeting expenses of hotel bills at Mumbai and New Delhi and air tickets to Mumbai and Delhi etc. It is also his allegation that the assessee being a Senior Advocate is regularly appearing before the Bombay High Court and Supreme Court and therefore his personal expenses has been met through such credit card. It is an undisputed fact that the matter of the assessee has also gone before the Hon’ble Bombay High Court and Hon’ble Supreme Court. Therefore, it cannot be said that Shri B.E. Avhad had travelled to Bombay or Delhi only for his clients and not for the trust. However, in absence of full particulars given by the trust on account of each and every expenses we hold that 50% of such expenditure is for the obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respective assessment years under appeal are accordingly allowed. Addition on account of treating certain expenses as capital expenses - Held that:- We find although the assessee has raised the ground before the CIT(A) as per ground of appeal No.14, however, he has not given any decision on this issue. Further, treating the expenses as capital or revenue will not be material since the income in the case of a charitable trust has to be computed in a commercial manner as held by us in the preceding paragraph. Accordingly, the capital expenditure will also be considered as application of income. Accordingly, this ground by the assessee is allowed. However, the Assessing Officer is directed to make necessary verification and if there is double disallowance, make necessary correction. This ground is accordingly allowed for statistical purposes. Disallowance on account of income tax debited - Assessing Officer disallowed the above amounts on account of income tax debited in the books of MIMER college and DBSR hospital, Talegaon which is one of the constituent units of the assessee trust - Held that:- We find merit in the above submission of the Ld. Counsel for the assessee. Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the auditor has recasted the income and expenditure account of the assessee and arrived at surplus of ₹ 7,23,46,742/- for the year. According to the Ld. Counsel for the assessee this figure is incorrect since the auditor has recasted the surplus of ₹ 2,61,02,700/- in the recasted income and expenditure account for A.Y. 2004-05. According to him this typographical error needs to be corrected. In view of the above, we restore this issue to the file of the Assessing Officer with a direction to verify the records and if the contention of the assessee is correct then adopt the correct surplus of ₹ 2,61,05,700/- and not ₹ 7,23,46,742/-. This ground by the assessee is accordingly allowed for statistical purposes. - ITA Nos.915 to 920/PUN/2012 - - - Dated:- 10-2-2017 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Appellant : Shri Sunil Pathak and Shri Nikhil Pathak For The Respondent : Shri A.S. Singh ORDER PER R.K.PANDA, AM : The above batch of 6 appeals filed by the assessee are directed against the common order dated 29-02-2012 of the CIT(A)-III, Pune relating to Assessment Years 1999-2000 to 2004-05 respectively. Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he I.T. Act and such objections were disposed of by the Assessing Officer vide separate order dated 01-08-2008. 4. Subsequently, the Assessing Officer issued notice u/s.143(2) and 142(1) to which the assessee filed various details from time to time. The Assessing Officer noted the following irregularities as per pages 3 to 5 of his order which were noticed during the course of post survey enquiries conducted by the Investigation Wing of the Department and the enquiries done by him during the course of assessment proceedings : 1. The trust had taken donation for admission from various persons which is for reservation of seats under Management Quota prohibited under Maharashtra Educational Institutes (Prohibition of Capitation Fees) Act, 1987. 2. Major portion of donation was in cash and against many such donations there was no addresses. 3. Out of the cases wherein there was addresses, there were instances wherein donors denied to have given the donation. 4. There were instances wherein donation for a bigger amount obviously received in lieu of admission out of management quota was split into donations of smaller denominations and multiple receipts were issued to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was demanded and admission was denied for not fulfilling the demand E.g. Statement of Shri Bhivarao Dhamale discussed in order u/s.12AA(3) dtd. 31-10-2007. 11. The assessee has got donation receipt books printed on which even on blank pages it has put a stamp that the donation is on account of corpus and the donation is eligible for deduction u/s.80G of the I.T. Act, 1961. 12. There were violations of section 13 of I.T. Act, 1961. 5. The Assessing Officer further observed that the Ld.CIT Central, Pune while cancelling the registration u/s.12AA(3) of the Act has dealt with the above issues in detail. He noted that although the trust was constituted on 24-10-1983, it filed an application for registration u/s.12A(a) of the I.T. Act for the first time on 24-02-1999. The CIT-II, Pune had granted registration u/s.12A(1) of the I.T. Act, 1961 for the first time w.e.f.01-04-1998. The assessee trust had also applied for approval for exemption u/s.10(23C)(vi) of the I.T. Act, 1961 for A.Yrs. 1999-2000 to 2001-02 and the approval was granted vide order dated 09-03-2004. In view of the approval for exemption u/s.10(23C)(vi) granted by CBDT, New Delhi and the registration granted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blish the World Peace University/World Peace Centre and similar institutions singularly or jointly/at various places in India and all over the world. 8. The Assessing Officer noted that an application was moved to get the additional object regularised from the Charity Commissioner on 30- 08-1999. The trust applied for registration for the first time to the CIT-II, Pune on 24-02-1999. According to the Assessing Officer if the claim of the trust that the additional object approved vide resolution of managing committee on 20-07-1997 is true, then in that case, the assessee should have communicated to the CIT regarding the amendment of the object while applying for registration on 20-02-1999. No intimation was given to the CIT-II, Pune which is the authority granting registration u/s.12AA(1) of the I.T. Act. Therefore, he was of the opinion that the introduction of 13th object is after the grant of registration u/s.12AA(1) of the I.T. Act. He noted that the additional object was made operational even before filing the application before the Charity Commissioner to include this clause in the trust deed. From the books of account of the assessee, he observed that till 31-03-1999, i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Avhad is a trustee and so is his wife. His children were taken as volunteers for holding the conference on World Peace Centre at Geneva for 15 days. Further, he noted that no explanation was given as to how the foreign exchange of ₹ 4,40,000/- was spent outside India. In view of the above, the Assessing Officer held that this is a violation of section 13(1)(c) of the I.T. Act. b. The Assessing Officer further observed that the trust has extended several facilities to B.E. Avhad, President of the Trust by incurring substantial expenditure on account of the following : a. Expenses on Toyota Camry Car b. Credit cards expenses c. Visit to Foreign Countries d. Local visits e. Hiring of taxis 10. On being asked by the Assessing Officer to justify the incurrence of above expenditure, it was stated by the assessee trust that Shri B.E. Avhad has been carrying out lot of functions relating to the trust. However, the Assessing Officer observed from the statement recorded of Shri Avhad during the course of search u/s.132(4) that he is the Honorary President and not actively involved in the day to day activities of the trust. In the said statement he has admitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Mumbai and Delhi where High court and Supreme Court are located. He observed that the assessee has also debited the air fare expenses of Shri B.E. Avhad. Looking at the expenditure incurred for hiring the legal professionals and the statement of Shri B.E. Avhad and on account of failure of the assessee to produce tour-wise justification for hotel bills and travel bills he was of the opinion that the expenditure incurred as shown above cannot be said to have been incurred on/for the objects of the trust. He further noted that salary of ₹ 75,000/- was being paid to the President from 01-06-2006 which clearly indicates that the President was not involved in the day to day activities of the trust atleast prior to 01-01-2006. Similarly, he observed that the credit card expenses also included personal expenses like Insurance premium, purchase of clothes on various dates aggregating to ₹ 37,605/-. Like-wise other expenses like travelling expenses for hiring vehicles to Mumbai was also found to have been incurred by the trust for Shri B.E. Avhad. He, therefore, came to the conclusion that all these expenses clearly point to the inevitable conclusion that there are gross viola ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utilized was furnished during the course of assessment proceedings. The Assessing Officer further opined that since the daughter of the Managing Trustee stays in Australia, therefore, this tour was undertaken to meet her by her brother and father. This view of the Assessing Officer was further strengthened by the fact that no details of full stay and other arrangements etc were furnished by the assessee trust. He, therefore, concluded that this expenditure is also incurred in violation of section 13. 16. The Assessing Officer further noted on perusal of the accounts that expenditure of ₹ 29,022/- has been incurred for purchasing 5 days Euro Rail pass for Shri Vishwanath D. Karad. Managing Trustee which according to him is solely for site seeing purposes and cannot be said to have been incurred for the object of the trust. Therefore, this according to the Assessing Officer is also violation of provisions of section 13(1)(c). 17. The Assessing Officer noted that Shri Mangesh Karad and Smt. Sunita Karad have travelled to Europe from 25-11-2000 to 04-12-2000. The Expenditure pertaining to Shri Mangesh Karad was met by the trust. Visit of Smt. Sunita Karad was stated to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der trustees and other trustees and members of the managing committee who are constantly engaged in the overall development in day to day activities of the trust. According to the Assessing Officer although such policy of the trust is laudable, however, this is in violation of provisions of section 13(1)(c) of the I.T. Act. 21. The Assessing Officer observed that during the search operation it was found that the assessee was allegedly taking donations against admissions in many cases. Such instances have been brought out in the order passed by the CIT Central, Pune while cancelling registration granted u/s.12AA(1). Subsequent enquiries were also revealed names of other persons from whom donations were accepted. The Assessing Officer observed that 15 persons have admitted to have given donation for securing admission. The Assessing Officer analysed the donation received by the assessee trust for the last 10 years at pages 28 and 29 of the assessment order. He observed that there is sudden sharp decrease in the receipt of donation from ₹ 10,05,24,966/- in A.Y. 2006- 07 to ₹ 9,60,000/- in A.Y. 2007-08. According to the Assessing Officer this sudden reduction strikingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment in excess of ₹ 20,000/- amounting to ₹ 1,62,850/- and delayed payment of Provident Fund to the tune of ₹ 12,58,017/- the Assessing Officer made addition of the above 2 amounts u/s.40A(3) and 43B respectively. The Assessing Officer also made addition of ₹ 37,72,249/- on account of unexplained credits that appeared in the books of account. Thus, the Assessing Officer computed the total income of the assessee at ₹ 4,10,70,270/- for A.Y. 1999-2000. The Assessing Officer has similarly computed the income of the assessee for the other years which are as under : Asst. Year Assessed income 2000-2001 Rs.6,59,57,175/- 2001-2002 Rs.8,11,20,720/- 2002-2003 Rs.1,98,62,618/- 2003-2004 Rs.1,00,40,587/- 2004-2005 Rs.8,16,49,733/- 24. Before CIT(A) the assessee submitted that after the filing of the appeals for different assessment years, lot of developments have taken place. It was argued that the assessee is an oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, therefore, such exemption u/s.10(23C)(vi) is deemed to have been granted as no order is passed in respect of the aforesaid application. 26. Relying on various decisions it was argued that the provisions of 9th proviso to section 10(23C)(vi) and the provisions of section 12AA(2) are pari materia since both the provisions lay down that the necessary order either granting or rejecting the application made under the respective sections shall be passed within 12 months and 6 months respectively from the end of the month in which the applications were made. It was thus vehemently argued that in the light of the various legal precedents relied upon the limitation laid down in the 9th proviso to section 10(23C) will apply to both the aforesaid applications dated 24- 12-2002 and 22-02-2005 made under Ist proviso and the said applications having not been disposed of within the period of limitation laid down under the 9th proviso, the exemption u/s.10(23C)(vi) is deemed to have been granted. 27. It was submitted that the assessment order for A.Y. 2003-04 in the case of the trust has been passed u/s.143(3) of the Act after due enquiries relating to all the aspects of the income of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lous but also highly objectionable. 30. The assessee also stated that the provisions of section 13 are not at all applicable to an educational institution which is entitled to exemption u/s.10(23C)(vi) of the Act. It was contended that the exemption u/s.10(23C) is separate from and in addition to the exemption u/s.11, therefore, the assessee trust will be entitled to exemption u/s.10(23C)(vi) of the Act irrespective of the fact whether the trust is registered u/s.12AA of the Act or not. It was argued that the provisions of section 13 of the Act are applicable only when a trust is claiming the benefit under sections 11 and 12 of the Act and therefore the provisions of section 13 will not at all be applicable to an educational institution like that of the assessee. It was contended that as per Circular No.557 dated 19-03-1990 issued by the CBDT provisions of section 11 and 13 are not applicable to institutions covered under clause (iv) and (v) of section 10(23C) of the Act. 31. The assessee subsequently brought to the notice of the CIT(A), the order of the Tribunal, Pune Benches, Pune while deciding the appeal filed by the assessee against the order of the CIT Central, Pune dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee who made elaborate submissions on the issues raised by the Assessing Officer. After considering the submissions of the assessee, remand report of the Assessing Officer and rejoinder of the assessee to such remand report the Ld.CIT(A) not only dismissed the appeals filed by the assessee but also enhanced the income for A.Y. 1999-2000 to 2003-04. While doing so, the Ld.CIT(A) upheld the validity of reopening of assessment u/s.147 of the Act for the A.Yrs. 1999-2000 to 2004-05. The argument of the assessee that there was no tangible material before the Assessing Officer to come to the conclusion that there is escapement of income from assessment and the Assessing Officer has got no power to review the assessment and such reopening was merely made on the basis of change of opinion was rejected by the CIT(A) as not legally tenable. According to him no assessment was made either under u/s.143(3) or section 147 before issue of notice u/s.148 to the assessee for the years in A.Yrs. 1999-2000 to 2002-03 and A.Y. 2004-05. According to him under the proviso to section 147, where an assessment was made u/s.143(3) or u/s.147 for the relevant assessment year no action shall be taken u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame sets of facts. Therefore, for A.Y. 2003-04 also it cannot be said that the assessment was reopened on mere change of opinion. 36. So far as the assessment record for other years are concerned he noticed that more or less similar reasons were recorded by the Assessing Officer for A.Yrs 2000-01, 2002-03, 2003-04 and 2004-05. For the assessment year 1999-00, the assessment was reopened on the ground that the assessee was receiving rental income, which is to be taxed as income from house property/business income separately as the object of the assessee was not letting out the properties on rent. He observed that in the present case, as is evident from the reasons recorded, the Assessing Officer noticed from the material found during the survey and the post survey enquiries conducted by the department that the Trust was involved in commercialization of education and taking donations for admission into courses in the institutions run by the assessee and also charging capitation fees, which are Prohibited under Maharashtra Educational Institutions (prohibition Of Capitation Fees) Act. It was also found by the Assessing Officer that the assessee was deriving substantial rental incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r reopening but also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of assessment proceedings. According to him, reassessment proceedings are not confined to the grounds on which the assessment was reopened. Since in the instant case the assessment was reopened on valid grounds and in the course of assessment proceedings the Assessing Officer scrutinized the seized materials and other documents and other issues which came to his knowledge during such scrutiny were also considered and dealt with in the assessment order, therefore, the contention of the assessee is not legally tenable. Rejecting the various explanation given by the assessee and relying on various decisions, the Ld.CIT(A) dismissed the grounds relating to validity of reassessment proceedings. 39. So far as the objection raised by the assessee that the directions issued by the Assessing Officer for special audit u/s.142(2A) are illegal and without jurisdiction is concerned he also rejected the same on the ground that the reference u/s.142 (2A) was made by the Assessing Officer after duly recording the reasons and after considering these reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ives in violation of the provisions of section 13. According to him section 13 renders the entire income of the trust or charitable institution liable to tax even if only part of income is applied for the benefit of the specified persons. In such circumstances the Assessing Officer is justified in denying the exemption u/s.11 of the Act to the assessee trust and bringing its surplus income/profits to tax by treating the assessee like any other Association of Persons. 42. So far as issue relating to donations which were credited to the income and expenditure account and partly credited to various development funds and directly reflected in the balance sheet is concerned the Ld.CIT(A) noted that the post survey enquiries conducted by the Investigation wing of the department and the enquiries conducted by the Assessing Officer indicated that the assessee used to take donations in cash against admission in many cases. It was found that there is large number of donations where only names of donors were written either in incomplete address or no addresses. Therefore, in these cases, it is difficult to establish the identity of the donors. He observed that in the course of enquiries ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he donations claimed to have been received towards development funds is concerned he observed from the receipt books produced by the assessee before the Assessing Officer during the assessment proceedings for A.Y. 2001-02 that (a) all the donations were exactly for ₹ 10,000/- and there is a striking similarity in all the receipts (b) in all the receipts only the name of the so called donor is written, no address of the donor is given (c) all the donations are in cash only. He observed that the assessee also expressed its inability to provide the address or whereabouts of the persons whose name appears as donors. According to him when the assessee has received donations in cash of ₹ 10,000/- in each case it is very strange that the assessee does not note the address or whereabouts of the persons donating to it. This according to him clearly indicate that the donations are not voluntary and not towards corpus and not received by virtue of property held by the trust. Since the trust is to be assessed as any other entity he held that these are to be treated as revenue receipt and to be taxed in the hands of the trust like any other receipt since the provisions of section 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore the same cannot be said to be of a charitable nature. It is well settled that not only the objects of the Trust as mentioned in the Trust Deed but also its real activities should be examined before the trust is considered as charitable. This is not a case where surplus is only incidental to the charitable activity. (v) For the years under consideration, the appellant is not an approved institution by the prescribed authority as specified under sec. 10(23C)(vi). The approval granted earlier for A.Y.s 1999-00 to 2001-02 was since withdrawn by the prescribed authority. (vi) The appellant is therefore not entitled to the benefit of exemption either under sec. 11 or sec. 10(23C)(vi) and the action of the Assessing Officer in denying the exemption claimed under these sections in respect of its profits/surplus as shown in the recast income and expenditure account and donations received in cash or kind for the respective years under appeal is upheld. 45. So far as the disallowance of expenditure on account of World Peace Centre is concerned the Ld.CIT(A) held that such expenditure is not towards approved objects of the trust. He observed that the World Peace Centre act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.11 or section 10(23C)(vi) was denied to the assessee. He, therefore, issued a show cause notice u/s.251(2) of the I.T. Act calling upon the assessee to explain as to why the deduction claimed in respect of various expenditure should not be disallowed to the extent worked out in the show cause notice for the respective assessment years and why the income so determined by the Assessing Officer should not be enhanced. The assessment year-wise, quantification for such disallowance as worked out in the said show cause notice was as under : A.Y. Expenditure incurred on WPC Expenditure on providing facilities to Shri B.E. Avhad Expenditure on Foreign Tours Concessional Education Proportionate interest on loan given to Rahul Karad subsidy (scholarship) 1999-00 1,11,41,532 133891 671273 307845 2000-01 20,21,204 14259 0 213205 2001-02 42,80,000 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Education Proportionate interest on loan given to Rahul Karad subsidy Total Enhancement 1999-00 133891 671273 307845 1113009 2000-01 14259 0 213205 355734 2001-02 Nil 130492 62,320 1,92,812 2002-03 557847 24700 88680 671227 2003-04 640486 266154 91100 997740 2004-05 861844 357442 0 1219286 2005-06 888294 71325 0 959619 2006-07 906884 1057333 0 544797 2509014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Ld. Counsel for the assessee strongly objected to the order of the CIT(A). So far as validity of reopening of assessment is concerned, the Ld. Counsel for the assessee referring to page 2 of the assessment order for A.Y. 1999-2000 drew the attention of the Bench to the notice issued u/s.148 on 29-03-2006. Referring to page 249 of the paper book Vol.2 the Ld. Counsel for the assessee drew the attention of the Bench to the reasons recorded by the Assessing Officer for reopening of assessment u/s.147 which read as under : Return of income for A.Y.1999-2000 was filed 30-06-2000 declaring NIL income. The assessment was completed u/s.143(1) of the I.T. Act on 18-09-2000. On perusal of return of income it was seen that the assessee has filed the income and Expenditure Account and Balance Sheet along with return. The assessee has shown the income from other sources of ₹ 17,97,33,097/-, which includes rent income of ₹ 1,92,34,679/-. The object of the assessee trust is to run educational institute and not giving the properties on rent. The rent income is to be taxed as income form house property/business income separately. For the above reason there being escapement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If he intends to do so, a fresh notice u/s.148 is necessary. The power to assessee such other income is available only if income referred to in notice of reassessment has been assessed . 53. Referring to the decision of Hon ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. Vs. CIT reported in 336 ITR 137 he submitted that the Hon ble High Court in the said decision has held that the Assessing Officer cannot make addition on issues other than issues on which reassessment proceedings were initiated if such items of income said to have escaped assessment on which reassessment was proposed was not added to the total income of the assessee. 54. Referring to the decision of Hon ble Chattisgarh High Court in the case of ACIT Vs. Major Deepak Mehta reported in 346 ITR 641 he submitted that the Hon ble High Court in the said decision has held that when the income mentioned in the notice issued u/s.148 has not escaped assessment then in that case the reassessment proceedings are not valid. 55. Referring to the decision of the Pune Bench of the Tribunal in the case of ITO Vs. M/s. Shri Vishwakalyan Jivraksha Pratishthan and vice versa vide ITA No.2013/PN/2014 and CO No.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the paper book No.1 the Ld. Counsel for the assessee drew the attention of the Bench to the order passed by the Assessing Officer in which he has asked the assessee to get the accounts audited through the nominated auditor u/s.142(2A) of the Act. The Ld. Counsel for the assessee further submitted that in the original order the CIT and the Assessing Officer had not included A.Y. 2001-02 and they have passed separate order for A.Y. 2001-02, a copy of which is placed at pages 164 to 167 of the paper book. He submitted that for this year also the Assessing Officer has not given any opportunity of hearing to the assessee under the proviso to section 142(2A). 58. The Ld. Counsel for the assessee submitted that under the proviso to section 142(2A) the Assessing Officer has to give an opportunity of being heard to the assessee. However, in the instant case the CIT has given an opportunity but the Assessing Officer has not given any such opportunity. Referring to the decision of Hon ble Supreme Court in the case of Rajesh Kumar and others Vs. DCIT reported in 287 ITR 91 and the decision of Hon ble Bombay High Court in the case of Nikunj Eximp Enterprises Pvt. Ltd. Vs. ACIT reported in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 order dated 28-07-2009 wherein the Hon ble High Court allowed the contention of the assessee that exemption granted by the Board cannot be withdrawn by the DGIT. Referring to page 101 of the paper book he submitted that the Hon ble Supreme Court dismissed the SLP filed by the Department. Referring to page 103 of the paper book he submitted that the CBDT again withdrew the exemption on 30-01-2012 and the assessee has again gone in writ before the Hon ble High court which is still pending as on date. He accordingly submitted that as on date the assessee does not have 10(23C)(vi) approval and therefore this ground of appeal No.4 has to be decided against the assessee. 61. So far as ground of appeal No.5 is concerned he submitted that provisions of section 11 flows from registration u/s.12A. He submitted that after the search the registration granted earlier was cancelled vide order dated 31-10-2007 passed u/s.12AA(3). Referring to pages 35 to 83 of the paper book No.1 he submitted that the Tribunal vide ITA No.1669.PN/2007 order dated 08-09-2009 has restored the registration. Therefore, the CIT(A) was not justified in denying exemption u/s.11 to the assessee trust. 62. So far ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 63. The Ld. Counsel for the assessee submitted that it has taken donations which are duly accounted in the books of account and it is not a case that the donations are not accounted for. All these donations are credited to the earmarked funds account and has not routed the donation through income and expenditure account. Since the donors have given donations for specific purposes for construction of building, purchase of equipments etc., therefore, the donations are capital receipts and accordingly exempt u/s.11(1)(d). However, he admitted that the assessee has not been able to produce any letter from the donors to the effect that the donations are corpus donation. 64. The Ld. Counsel for the assessee without prejudice to the above submitted that even if the donations are treated as revenue receipts the assessee has spent substantial amounts every year on the objects of the trust and the expenditure is more than the amount of receipts and therefore the income being exempt u/s.11, there is no tax liability which is attracted for any of these years, i.e. A.Yrs. 1999-2000 to 2004-05. He submitted that the assessee has considered the capital expenditure incurred for these years as e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding to the Assessing Officer are relating to students who are given admission in the Management Quota. Referring to pages 1011 to 1013 of the paper book No. 5 which is the Government circular relating to granting of admission and charging of tuition fees under Management Quota, he submitted that the assessee is authorized to accept fee from the student admitted under the Management Quota to the extent of 5 times of the annual fees. Referring to the chart prepared by the Assessing Officer, copy of which is placed at page 1037 of the paper book No.5 he submitted that the same itself indicates that the fee including the donations does not exceed this figure in any case and therefore the assessee has not violated any law on this issue. Again referring to the copy of the order of the Tribunal in assessee s own case while restoring registration u/s.12AA he submitted that the Tribunal has elaborately discussed this issue and held that assessee has charged donations within the limit prescribed under Management Quota and there is no mis-utilisation of funds. Further, the CIT is not authorized to deal with such offences, if any, under the Anti Capitation Fee Act. Accordingly the Tribunal ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer while doing so further held that this object has been introduced in the trust deed by the assessee and assessee has not intimated the amended trust deed to the Assessing Officer. Further it is also his allegation that the assessee has incurred expenses abroad without permission from CBDT. 69. The Ld. Counsel for the assessee submitted that the objects of World Peace Centre is very much part of educational activities for which the assessee trust has been set up. Referring to pages 602 to 728 of Paper Book No.3 and pages 729 to 780 of Paper book No.4 he drew the attention of the Bench to various seminars and programmes arranged by the assessee on this topic, the list of wellknown speakers who addressed the participants, the appreciation by the Government of Maharashtra, the activities conducted and the guidelines by UGC for human rights education etc. He submitted that these documents clearly indicate that the World Peace studies form part of educational activities and even if the object was not introduced separately, still such activity could be a part of the objects of the assessee trust. He submitted that the assessee arranged seminars and sent its faculties, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dhi Educational Trust Vs. DIT (Exemptions) reported in 152 TTJ 673 he submitted that the Tribunal in the said decision has held that mere finding that the objects of the educational trust have been amended without the consent of department would not be sufficient to exercise power u/s.12AA(3) without giving a finding that the appellant s objects are no longer charitable. 73.1 Referring to the decision of Hon ble Madras High Court in the case of DIT Vs. Vallal M.D. Seshadri Trust reported in 79 CCH 443 he submitted that the Hon ble High Court in the said decision has held that as far as the amendment made to the trust deed is concerned it is not the concern of the assessing authority and only the civil court is empowered to decide the said issue and in any event that cannot be the reason for denying the charitable nature of the institution, if it is otherwise charitable. 74. Referring to the decision of Mumbai Bench of the Tribunal in the case of Gem and Jewellery Export Promotion Council Vs. ITO reported in 68 ITD 95 he submitted that the Tribunal in the said decision has held that assessee having applied the income for charitable purpose in India, the mere fact that the expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 242,566 279,298 178,264 Other Expenses - - - - - - Honorarium Paid - - - - - - Sub-total (1) 133,891 142,529 201,854 557,847 640,486 861,844 2 Expenditure on foreign tours (a) Addition by AO - - 152,930 - - - (b) Enhancement by CIT(A) 671,273 - 130,492 24,700 266,154 357,442 Sub-total (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this all the land matter concerning conveyance of land, conversion of the land, any assessment of the lands of the institution have been looked after by Shri B.E. Avhad. He submitted that Shri B.E. Avhad has used the facilities provided only for the official purposes of the trust. He was having his own car which was used for his personal work. The Assessing Officer nowhere in the assessment order has pointed out any instance where the facilities were used for personal purposes. He submitted that it is a regular practice to provide car facilities to the higher level authorities in every institution including Government offices. Therefore there should not be any objection for providing car facilities to the President of the trust for official work of the trust. Therefore, the allegation of the Assessing Officer is baseless and it does not lead to violation of section 13. 78. So far as legal expenses are concerned he submitted that the legal expenses also include court fees, stamp duty, fees of other lawyers on record etc. There were numerous litigations on different issues like land matters, labour matters, civil, criminal and revenue matters etc. for which the trust was benefitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... So far as the foreign tour of family members of Shri B.E. Avhad, President of the trust are concerned, he submitted that Shri B.E. Avhad has visited Geneva for attending World Philosophers Meet in the year 1999 and all the family members had accompanied him. The Assessing Officer had considered the amount incurred on airfare of ₹ 1,60,000/- and foreign currency expenses of ₹ 4,40,000/- as violation of section 13. He submitted that the representatives of the assessee trust were organizers and participants. The participation was in the official capacity as trustees, staff or as the students. Mr. B.E. Avhad and Mrs. Kamal Avhad represented the assessee trust as trustees. Mrs. Kamal Avhad attended the meeting as part of protocol. The students participants included 3 children of Mr. B.E. Avhad. He submitted that only the expenditure incurred in relation to meet was debited by assessee trust. No expenditure for the personal benefit was made from the funds of the assessee trust. He submitted that amounts involved on this issue are very small as compared to the volume of gross receipts of the assessee trust. 82. In his alternate submission he submitted that at the most the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, coolie charges and for the stay/food etc. There was no misuse of funds as alleged by the Assessing Officer. There was no personal expenditure incurred by the above 2 delegates. The sun glasses, perfumes or shirt etc. were received as gifts from relatives and friends and there was no connection with the amount spent out of the above-mentioned foreign currency. In his alternate submission he submitted that there cannot be wholesale denial of exemption u/s.11 and 12 in respect of the entire income of the assessee trust. The disallowance is to be restricted to the extent of so called violation. 86. So far as foreign tour of Mr. and Mrs. Mangesh Karad (i.e., related to A.Y. 2001-02 ₹ 1,30,492/-) is concerned he submitted that Mr. Mangesh Karad, Executive Director, Planning Development of the Trust visited Europe in F.Y. 2000-01 to attend UNESCO conference on World Peace and Human Security representing the assessee trust. His wife Sunita Karad accompanied him as a protocol. However, her expenditure was not borne by the trust. Attending such high level conference by Mr. Mangesh Karad would definitely enrich the knowledge which in turn can be shared with students and coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that out of the course fee of ₹ 27 lakhs for his Post Graduate Course at Harward Business School, Mass, USA, the trust had sanctioned a loan of ₹ 18 lakhs as per the loan agreement entered into on 05-01-2004. Referring to the said agreement, copy of which is placed at pages 888 and 889 of the paper book No.4, he submitted that there was an undertaking by Shri Rahul V. Karad to serve the trust for a period of 5 years. The loan was given to Shri Rahul V. Karad on his own merit and the course undergone by him has been of great help to the trust in the expansion of the management courses. He submitted that the entire loan amount along with compounding interest has been recovered from the salary of Shri Rahul V. Karad. He submitted that at the request of Shri Rahul V. Karad financial support of ₹ 5,44,797/- was sanctioned and paid in two instalments of ₹ 2,72,102/- on 12-01-2006 and ₹ 2,72,695/- on 31-03-2006. He used this amount for repayment of the loan and the amounts were repaid by cheque immediately thereafter. Referring to the loan account of Shri Rahul V. Karad he drew the attention of the Bench to the recovery of the same and submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1999-2000 for which addition of ₹ 37,72,248/- has been made and for A.Y. 2003-04 it is ₹ 17,58,354/-. He submitted that on account of certain missing credits in F.Y. 1997-98 the assessee passed a journal entry of ₹ 37,72,248/- for A.Y. 1999- 2000 which the Assessing Officer treated as income for A.Y. 1999-2000. The special auditor noted that an amount of ₹ 17,58,354/- was directly taken to balance sheet as on 01-04-2002 for which the Assessing Officer made the addition in A.Y. 2003-04. He relied on the submissions made on this behalf before the Assessing Officer and the CIT(A). In his alternate contention, he submitted that even if the amounts are added as income for A.Y. 1999-2000 and A.Y. 2003-04 the application of income in these two years is still higher than the receipts and therefore after granting exemption u/s.11 there is no taxable income in the hands of the assessee. 93. So far as disallowance u/s.43B, 40A(3) and 40A(7) as per Grounds of appeal No.10 is concerned the Ld. Counsel for the assessee submitted that the Assessing Officer while computing the income of the assessee trust had added various disallowances u/s.40A(3), 43B and 40A(7) on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of income for this year is still higher than the income receipts. 95. So far as disallowance of income tax as per ground of appeal No.9 for A.Y. 2002-03 and 2003-04 are concerned he submitted that Assessing Officer has disallowed an amount of ₹ 4,12,656/- and ₹ 4,42,920/- respectively for A.Y. 2002-03 and 2003-04 on account of income tax debited in the books. He submitted that according to the Assessing Officer these amounts were debited to income and expenditure account of MIMER college and DBSR hospital, Talegaon which is one of the constituent units of the assessee. Since these amounts were debited as income tax the Assessing Officer disallowed the same. He submitted that there is no discussion in the assessment order as well as the CIT(A) s order on this issue. He submitted that since the assessee is a charitable trust claiming exemption u/s.11, therefore, there was no question of payment of any income tax. The amounts were not paid towards income tax but towards TDS arrears of earlier year which is an allowable deduction. Secondly, the income in case of a charitable trust is to be computed in commercial manner and accordingly even income tax expenditure wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 98. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that search took place on the trustees of the assessee on 20-07-2005 and the survey action was conducted on the assessee trust on the same day. The 2nd survey on the assessee trust took place on 26-08-2005 during which cash amounting to ₹ 8 lakhs and various incriminating documents were found. The notice u/s.148 was issued on 20-03-2006 for the A.Y. 1999- 2000 which was received by the assessee on 01-04-2006. Referring to the decision of Hon ble Supreme Court in the case of ACIT Vs. Rajesh Javeri Stock Brokers Pvt. Ltd. reported in 291 ITR 508 he submitted that 143(1) order is not an order of assessment and therefore there being no assessment u/s.143(3) the question of change of opinion does not arise. Referring to the decision of Hon ble Supreme Court in the case of Raymond Woollen Mills Ltd. Vs. ITO reported in 236 ITR 34 he submitted that the Hon ble Supreme Court in the said has held that reassessment proceedings initiated on the basis of information obtained in assessment proceedings for a subsequent year is valid. He submitted that in the instant case the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the trust have been used for the personal use of the trustees. Therefore, in view of the violation of provisions of section 13(1)(c), the CIT(A) was fully justified in denying exemption u/s.11 to the assessee trust. He submitted that the assessee trust in the instant case has received donations in lieu of admission. Such donations were split into donations of smaller denominations and multiple receipts were issued to the donors who are not traceable. The assessee also expressed its inability to provide the address or whereabouts of the persons whose name appear as donors. The various instances brought on record by the Assessing Officer and CIT(A) clearly suggest that the assessee trust is running the institutions on commercial lines which indicates that the activity of the assessee is a commercial activity with profit motive and it does not exists solely for charity. Therefore, the CIT(A) was fully justified in denying the exemption u/s.10(23C)/section 11 of the I.T. Act. 102. So far as the corpus donation is concerned he submitted that the provisions of section 11(1)(d) are not applicable since the assessee could not give the details of whereabouts of the donors and the directi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer u/s.43B, 40A(7) and 40A(3) etc. and confirmed by the CIT(A) is concerned he submitted that since the income the assessee trust has been assessed like any other commercial organization such additions as per the findings of the special auditor is justified. 108. So far as enhancement of income by the CIT(A) as per Ground of appeal No.11 is concerned the Ld. Departmental Representative heavily relied on the order of the CIT(A). Referring to the decision of Hon ble Kerala High Court in the case of Agappa Child Centre Vs. CIT reported in 226 ITR 211 he submitted that the Hon ble High Court in the said decision has held that concession is not available where property of the trust has been made available for use of prohibited person. The property includes movable property. Since in the instant case the assessee has allowed the use of its motor car to one of the trustees and the trustees and their family members have undertaken foreign trips for which the funds of the assessee trust has been used and the children of the trustees and the employees were given concession in education the trust has violated provisions of section 13(1)(c). He accordingly submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under section 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the Assessing Officer could not make an assessment or reassessment on another issue which came to his notice during the proceedings. This interpretation will no longer hold the field after the insertion of Explanation 3 by the Finance Act (No. 2) of 2009. However, Explanation 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of section 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Section 147 has this effect that the Assessing Officer has to assess or reassess the income ( such income ) which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r : 17. Now, coming back to the interpretation which was given by the Bombay High Court to Sections 147 and 148 in view of the precedent on the subject. The Court held as under:- 11. Interpreting the provision as it stands and without adding or deducting from the words used by Parliament, it is clear that upon the formation of a reason to believe under Section 147 and following the issuance of a notice under Section 148, the Assessing Officer has the power to assess or reassess the income which he has reason to believe had escaped assessment and also any other income chargeable to tax. The words and also cannot be ignored. The interpretation which the Court places on the provision should not result in diluting the effect of these words or rendering any part of the language used by Parliament otiose. Parliament having used the words assess or reassess such income and also any other income chargeable to tax which has escaped assessment , the words and also cannot be read as being in the alternative. On the contrary, the correct interpretation would be to regard those words as being conjunctive and cumulative. It is of some significance that Parliament has not used the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during the course of the proceedings However, if after issuing a notice under Section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under Section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee. 18. We are in complete agreement with the reasoning of the Division Bench of Bombay High Court in the case of Jaganmohan Rao (supra). We may also note that the heading of Section 147 is income escaping assessment and that of Section 148 issue of notice where income escaped assessment . Sections 148 is supplementary and complimentary to Section 147. Sub-section (2) of Section 148 mandates reasons for issuance of notice by the Assessing Officer and sub-section (1) thereof mandates service of notice to the assessee before the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scussion as above, he would have been justified as per explanation 3 to reduce the claim of deduction under Section 80 HH and 80-I as well. 21. In view of our above discussions, the Tribunal was right in holding that the Assessing Officer had the jurisdiction to reassess issues other than the issues in respect of which proceedings are initiated but he was not so justified when the reasons for the initiation of those proceedings ceased to survive. Consequently, we answer the first part of question in affirmative in favour of Revenue and the second part of the question against the Revenue. 22. The present appeal is accordingly allowed. 113. We find the Pune Bench of the Tribunal in the case of M/s. Shri Vishwakalyan Jivraksha Pratishthan (supra) while deciding an identical issue, following the decision of Hon ble Bombay High Court in the case of Jet Airways India Ltd. (Supra) has held that when addition has been made for reasons different from what has been communicated to the assessee and no addition has been made on the ground for which the Assessing Officer had reason to believe for reopening of assessment, the reassessment proceedings are invalid. The various other de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the limitation for assessment could not be extended in view of the illegal order u/s.142(2A). It is also his submission that the assessments for A.Yrs. 1999-2000, 2000-01 and 2005-06 were getting time barred in view of second proviso to section 153(2) on 31-12-2007 whereas the assessment order is dated 08-08-2008. Therefore, such assessment orders are time barred and therefore are void. 117. We find merit in the above argument of the Ld. Counsel for the assessee. It is an admitted fact that the assessment order for A.Y. 2000-01 is dated 08-08-2008. It is also an admitted fact that the Assessing Officer while directing for special audit u/s.142(2A) has not given any opportunity of being heard to the assessee and the opportunity of being heard was granted only by the Ld. CIT Central who has passed a detailed order dated 05-12-2007 granting approval on the reference by the Assessing Officer for special audit u/s.142(2A). Under these circumstances we have to see where the Assessing Officer before sending a proposal for conducting special audit u/s.142(2A) of the Act has not given an opportunity of being heard to the assessee and in view of the proviso to section 142(2A) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chief Commissioner, then he can do so. However, the proviso inserted by the Finance Act, 2007 w.e.f. 01.06.2007 has very categorically provided that the Assessing Officer shall not direct the assessee to get the accounts so audited unless the assessee has been given an opportunity of being heard. In other words, the principles of natural justice that a person could not be condemned unheard, have been incorporated in section itself w.e.f. 01.06.2007. The Apex Court in Rajesh Kumar and Others Vs. DCIT (supra) had deliberated on the provisions of the Act before insertion of said proviso but had laid down the proposition that nobody could be unheard even at the stage of forming an opinion that in view of the nature and complexity of accounts and interest of revenue, special audit is to be conducted under section 142(2A) of the Act. The Apex Court in Sahara India (Firm) Vs. CIT and Another (supra) have upheld the said proposition laid down by the Hon'ble Supreme Court and has also taken note of the amendment w.e.f. 01.06.2007 and have held that the principles of natural justice have to be fulfilled even at the pre-decisional stage. In conclusion, the Apex Court directed that the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer. 41. Applying the principles laid down by the Apex Court in Sahara India (Firm) Vs. CIT and Another (supra), we hold that where no show cause notice was given to the assessee before making the order proposing conduct of special audit under section 142(2A) of the Act, in the present case and the CIT having approved the said proposal though after giving opportunity of hearing to the assessee is vitiated because of non-compliance with the principles of natural justice. Accordingly, the assessment order passed in the facts of present case is beyond the period of limitation and hence, the same is invalid and bad in law. 42. Another point raised by both the authorities was in respect of extension granted. We are not going into the said factual aspects, in view of our holding that the initial order at the pre-decisional stage passed by the Assessing Officer without show causing the assessee as to whether any special audit should be conducted in his case under section 142(2A) of the Act is bad in law. Hence, consequential orders of extension, if any become of no consequence. Since, we have decided the jurisdictional issue on merits, the other grounds of appeal becomes academ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 30-01-2012, copy of which is placed at pages 103 to 106 of the paper book No.1, withdrew the exemption for A.Yrs. 1999-2000 to 2001-02. Although the assessee has filed a writ petition before the Hon ble Bombay High Court, however, the same is pending as on date. Therefore, in absence of any approval u/s.10(23C)(vi) as on the date for the A.Yrs. 1999-2000 to 2001-02 and for subsequent assessment years we do not find any infirmity in the order of the CIT(A) in holding that the assessee trust is not entitled to exemption u/s.10(23C)(vi) of the I.T. Act. Accordingly, the ground raised by the assessee on this issue for all the years is dismissed. 124. Ground of appeal No.7 which is common for all the years relates to allowability of expenditure on World Peace Centre. 125. After hearing both the sides, we find the assessee has incurred various expenses on tour and travel of the trustees, officials, faculties of the trust for attending various seminars on World Peace activities abroad. Some of the seminars are arranged by the assessee trust also. According to the Assessing Officer this activity does not fall in the category of education for which the assessee trust was set up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of India/UNESCO, which have sanctioned grants for such programmes. The object of WPC is to promote the cause of protection of Human Rights, Culture of Peace and Democratic values through Value Based Education and Training to the students community including the students of the institutions run by the Trust and also the society at large. V. World Peace University It is worth noting that world over there are a large number of institutions and universities conducting various programmes in Peace Studies and Peace Research, Human Rights Education in addition to the education and research programmes in the fields of Arts, Science, Commerce, Engineering, Medical Management, Social Studies etc. To name a few Peace Universities in the world : (a) World Peace Research University Medical World Peace Research University Faculties Philosophy, Medical Sciences, Music, Musicology, etc. (b) World Peace University, Costa Rica, USA Under the UNESCO programme (c) United Nations Peace University, Sri Lankta (d) University of World Peace, Washington (e) European International University for World Peace (f) Global Open University for World Peace, Italy (g) Berkley C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nced Dr. Vishwanath Karad MIT World Peace University, Pune. Similarly, Higher Education Department of Government of Andhra Pradesh vide letter dated 23-11-2016 copy of which is placed at page1 1002 of paper book No.5 has accepted the proposal given by the Maharashtra Academy of Engineering and Educational Research to establish the proposed Greenfield Private University at Visakhapatnam. Although these documents are additional evidences filed by the Ld. Counsel for the assessee during the course of hearing, however, these evidences being Government documents of the recent past which were not available at the time of hearing of the appeal proceedings are admitted for which separate application is filed. These documents conclusively show that the activities of World Peace Centre is education in nature. From the various details furnished by the assessee in the paper book we find some of the seminars were even financed by the UGC. We, therefore, find merit in the submission of the Ld. Counsel for the assessee that the World Peace Studies conducted by the assessee constitute a part of education so far as the trust is concerned and the activities are charitable in nature. The Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e context of the objects of medical purpose and relief to poverty, the activities enumerated inter-alia, included:- aid and relief in kinds such as giving clothes, grains and free distribution of medicines or providing free medical aid. Subsequently, in the 1975 amendment, the activities of aid or relief in kind has been supplemented by enabling providing of loan and relief in cash also. 131. We find the Bangalore Bench of the Tribunal in the case of Kripanidhi Educational Trust Vs. DIT (Exemption) reported in 139 ITD 228 has held that mere finding that the objects of Educational Trust have been amended without the consent of department would not be sufficient to exercise power u/s.12AA(3) without giving a finding that the assessee s objects are initially charitable. 132. The Hon ble Madras High Court in the case of DIT Vs. Vallal M.D. Seshadri Trust reported in 79 CCH 443 has held that as far as amendment made to the trust deed is concerned, it is not the concern of the assessing authority and only the civil court is empowered to decide the said issue and in any event that cannot be the reason for denying the charitable nature of the institution if it is otherwise c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be held as not for objects of the trust and consequently exemption u/s.11 cannot be denied. 136.1 Ground of appeal No.7 is accordingly allowed. 137. The next issue that is common for all the years is regarding grounds of appeal No.5, 6, 8 and 11 wherein the assessee has challenged the order of the CIT(A) in denying exemption u/s.11 for violation of provisions of section 13(1)(c) and further holding that the activity of the assessee is a commercial activity with a profit motive and it does not exist solely for charity and therefore not eligible for exemption u/s.10(23C)/11. 138. After hearing both the sides we find the CIT Central vide order dated 31-10-2007 passed u/s.12AA(3) cancelled the registration granted earlier to the assessee trust on the basis of the Ist survey conducted u/s.133A on 20-07-2005 and the second survey on 26-08-2005 during which it was found that the assessee trust was accepting donation and capitation fee for admission though prohibited under Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987. We find the Tribunal in assessee s own case vide ITA No.1669/PN/2007 order dated 09-09-2009 restored the registration by obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT is appreciable. Every vigilant and law abiding citizen has to be fair in his conduct and should refrain from immoral activities. But existing blue laws are derived from the numerous extremely rigorous laws designed to regulate morals and conduct. These laws are enacted in such a fashion that if implemented correctly and efficiently then there is no scapegoat for an offender. We are tempted to write an idiomatic language due to the sensitivity of the issue, that a CIT cannot be allowed to hold a baton of morality in his hand to hit an immoral; but the statute has given him a flexible stick for inflicting tax on defaulter; that includes a trust or educational institution. The gist is that 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 ambits of provisions of the Act and expected to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes within the clutches of that Act but definitely not under s. 12AA(3) provisions. The third aspect is, that the donation plus fees do not exceed the prescribed limit of Anti Capitation Fee Act i.e., five times the normal fees; further that no evidence of misutilization other than the prescribed activity then no action can be suggested under s. 12AA(3). The assessee s case falls under the third category. With the result, totality of the circumstances thus warrants, in the light of the foregoing discussion, not to endorse the view of the learned CIT; consequence there upon reverse those findings. The order of cancellation of registration is hereby revoked. Grounds allowed. 139. Since the registration cancelled earlier has been restored by the Tribunal, therefore, the assessee is entitled to the exemption u/s.11 subject to fulfilment of other conditions 140. So far as the denial of exemption u/s.11 on the ground that the activity of the assessee is a commercial activity with profit motive and it does not exists solely for charity for which it is not eligible for exemption u/s.10(23C)/11 is concerned we have already held that in absence of approval u/s.10(23C)(vi) the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has complained to appropriate authority against the assessee for violation of Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987. It is also the submission of the Ld. Counsel for the assessee that if total expenditure including capital expenditure is considered as a whole there is deficit every year. However, the assessee does not have any surplus so as to treat the assessee trust as running on commercial activity with profit motive. 144. We find merit in the above submission of the Ld. Counsel for the assessee. There is no dispute to the fact that the assessee is a charitable trust running various educational institutions. It is the allegation of the revenue that the trust is collecting capitation fee in the garb of donation and was therefore running with a profit motive. However, we find neither the Assessing Officer nor any of the persons who have stated before the department that they have given donation for getting admission has complained to the Government or appropriate authority for any such violation under the Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987. Nothing has been brought on record that any student h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nations have been siphoned off by the trustees or the relatives. 147. We find somewhat similar issue had come up before the Tribunal in the case of Deccan Education Society. We find the Tribunal vide ITA No.1480/PN/2014 order dated 13-07-2015 from Para 66 onwards has observed as under : 66. The second question that arises for our consideration as to whether the trust is for profit motive. It is the allegation of the Revenue that the assessee trust was collecting the capitation fee in the garb of donation and was therefore running with a profit motive. We find the Assessing Officer has not reported the violation, if any, by the assessee trust to the Government of Maharashtra for taking any action for violation of The Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987. None of the persons who have deposed against the assessee by stating that they had given donation for the purpose of getting admission has complained to the Government for any such violation by the society. It is also to be noted that those persons have filled up the requisite proforma stating that they have given donation to the assessee voluntarily and not for seeking admission. Eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the case or the finding of the Chief Commissioner that on account of the defect in the admission procedure, assessee ceased to exist solely for educational purposes or it existed for the purposes of profit. Further, it was not the case of the Revenue that the students who were admitted were not imparted education in the college in which they were admitted or the admissions granted were fake or non-existent or that the income generated by admitting the students was not used for the purpose of the assessee. The emphasis on the part of the Chief Commissioner that the purpose of education would not be served if the education is for students who have been illegally admitted and the purpose of education as contemplated in the section would be served only if the students have been legally admitted and not otherwise, went beyond the requirements of the section. Of course, the requirement of an educational institution to provide admissions strictly in accordance with the prescribed rules, regulations and statute needs to be adhered to in letter and spirit, but violation could not lead to its losing the character as an entity existing solely for the purpose of education. Therefore, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged Capitation fee for giving admission which is in violation of the Maharashtra Educational Institutions (Prohibition of Capitation Fee Act) 1987. Even the CIT who is alleging that the assessee trust has collected huge donation for admission of students to various institutes run by it has not informed the Government of Maharashtra if he was serious about any such violation done by the society. The submission of the Ld. Counsel for the assessee that as against 70 Management Quota Seats it has collected donation from 9 students and such donation is within the permissible limit prescribed by the Government of Maharashtra and that all such receipts are reflected in the accounts could not be controverted by the Ld. Departmental Representative. 8.4. . . . . . . . . . . . . 8.5 . . . . . . . . . . . . 8.6 . . . . . . . . . . . . 8.7 We find the Hon ble Delhi High Court in the case of Shanti Devi Progressive Education Society (Supra) has observed as under : 26. We have considered all these opinions as well as the submissions made by learned counsel for the parties. We must at the inception itself note that the three components scrutinized by the Assessing Officer are the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of funds to the members of the Society. Similarly, the factum of construction being carried out by Ahluwalia Construction Co. (P) Ltd., stated to be a family concern of the President, was not material as there was no allegation of any inflated cost of construction or unreasonable profits being derived from the same by third parties as a mode of divergence of funds. 8.8 We find the Pune Bench of the Tribunal in the case of Dr. D.Y. Patil Education society (Supra) has observed as under : 13. Though the assessee has denied receipt of capitation fee/donations and running on commercial lines, however, without going into the merits of such plea, the pertinent question is the consequences of acceptance of capitation fee/donations by the assessee at the stage of examining assessee's application for registration under section 12AA of the Act. Somewhat similar situation arose 10 before the Mumbai Bench of the Tribunal in the case of Ramarao Adik Education Society (supra) wherein the Commissioner of income-tax was considering cancellation of registration on the basis of the plea that the assessee was accepting capitation fee/donations. Following discussion by our co-ordinate Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titution and how the income derived from the trust property is applied to charitable or religious purposes and not the nature of the activity by which the income was derived to the trust. 50. The above judgment proposes that what is to be looked into is the character of application of funds and the character of the activities carried out by an assessee and not the colour and nature of the sources out of which necessary funds were collected by the assessee. In other words, the source of funds is not an important ingredient in assessing the character of the activities carried on by a Charitable Institution. The Allahabad High Court in the case of CIT Vs. Red Rose School [163 Taxmann 19] has held that educational activities carried on by a Society are for charitable purposes and not against the public policy. Therefore, the activities carried on by the Assessee-Society in the present case cannot in any way held as opposed to public policy. The objection expressed by the Commissioner could at a maximum be attributed to the question of accepting capitation fees / donations. In this context, the Commissioner-DR has raised a contention that the donations received by the Assessee-Trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to express that earlier to this section there was no guidelines in the statute for refusal of registration, therefore it was considered eminent to introduce in the statute the said procedure. What bothered the Tribunals and High Courts in the recent past is the scope and the purpose of introduction of s. 12AA in the statute. All those judgments as listed above, in agreement have said that the activities ought to be in fulfilment of the objects for which a trust is created. Sentiments should be in line with the purpose for which the trust is created. The purpose should be philanthropic, charitable, or for public general utility. Service without profit has to be the motive. As in the present case the objects are to undertake, to run and to improve the educational institution for imparting education in divergent fields; deliberated upon ante. 11.2 In any case we have to examine the purpose of enactment of ss. 12A, 12AA and 12AA(3), viz-a-viz ss. 11 and 12. While reading several case laws as cited supra an important point of view of the Hon'ble Courts have come to our notice that mere registration under s. 12AA would not by itself be a ground for exclusion of such an inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f individuals. 11.4 In the recent past sub-s. (3) was inserted in s. 12AA w.e.f. 1st Oct., 2004 which gives power of cancellation of registration to the CIT, if he finds that the activities are not genuine or not being carried out in accordance with the object of the trust. The need for the enactment had arisen due to belief of some quarter that in the absence of explicit law the CIT cannot exercise the power of cancellation of registration. To overcome this hurdle this subsection is incorporated and now in operation. Naturally these powers are conferred with a view to ensure that if once a registration has been granted under s. 12AA, a trust or institution may not take any such liberty of misuse of the registration or the provisions by going haywire rather furthering the objects of the trust or genuinely not pursuing the activities for which it was established. 11.5 Considering the arguments and the facts of this case we have noted that the most important feature of s. 12AA is, as also referred to us in this appeal for our adjudication, that this section has only laid down the procedure of registration and this section nowhere speaks that while considering the application of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of this section it was gathered that at this initial stage there is no scope of any apprehension of misutilization of funds or to judge the taxability income. The scheme of the Act otherwise does not subscribe and allow a trust to take the benefit of the provisions of ss. 11 and 12 unless it establishes 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. For this view, we draw support from the order of the respected Co-ordinate Bench Tribunal, New Delhi pronounced in the case of Aggarwal Mitra Mandal Trust vs. Director of IT (Exemption) (supra), a portion reproduced below (p. 186 of paper book) : ............In this situation, if the registration applied for under s. 12A is not granted to it for violation of the provisions of s. 13(l)(b) and it is ultimately found that the assessee-trust actually accomplished the objects as indicated in clause No. 3(4) only for the benefit of public at large without there being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olkata pronounced in the case of Kalinga Institute of Industrial Technology (supra) and have found that almost on identical situation, as in the present appeal, it was held that consequence upon a search while the assessment proceedings are pending a cancellation of registration by invoking s. 12AA(3) is a premature action on the part of CIT, because it is expected from him to take precaution to let the assessment get completed, if possible expeditiously, instead of rushing to cancel the registration which shall effect and interrupt the other proceedings under the Act and so prematurely punish a person without judicious hearing as prescribed by the statute. Held portion is worth reproduction as did in para (xii) p. 35 ante. 11.9 We have also gone through a decision referred from the side of the Revenue namely the Jammu Kashmir Bank Priority Sector Asset Risk Fund vs. CIT (ITA No. 61/Asr/2006 order dt. 1st Sept., 2006) (supra); cited in support of the argument that firstly the CIT has been vested with the powers vide s. 12AA(3), inserted w.e.f. 1st Oct., 2004, to enquire about the genuineness of the activities of a trust and to satisfy himself that such activities are being car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It cannot be anybody's case that the processing of applications by itself has s commercial motive, or that fees for processing of applications is a fees collected for rendering of service of pollution control which is undisputed sole object of the assessee trust. Similarly, fees for testing charges and licence fees are not also towards rendering of any services of pollution control either. These are not the services with a profit motive but essentially only to recoup the cost of getting the samples tested or processing of licences. In any event, these activities, if these can be at all be construed as rendering of services, these are wholly subservient to the public utility objective of pollution control, and, it cannot be anyone's case that even though the State Pollution Boards like the assessee before us are set up under an Act of the Parliament, but, to use the words employed in the CBDT circular (supra) 'the object of' general public utility' will only be a mask or a device to hide the true purpose which is trade, commerce, or business or rendering of any service in relation to trade, commerce or business'. 19. In any event, as a plain reading of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h reality. The training process is either theoretical or practical but student has to be taught the essentials of the selected subjects so as to develop his skill and knowledge for the subjects studied by him. The appellant institute, admittedly, fulfils the requirements of imparting formal education by a systematic teaching and instructions. Since the question about the imparting of education has not been doubted or challenged by the Revenue therefore. In our considered opinion the impugned order passed by the respondent is unsustainable in law. Strange enough there is nothing on record to prove sightlessly that the purpose of imparting of education was not fulfilled by this institute thus the Revenue Department has hopelessly failed to establish that there was any illegal activity or infringement of any law so that to doubt the genuineness of the activities. If it was so then it can be held that the allegations of the Revenue as discussed above, remained unsupported thus deserves our dismissal. 11.12 Based upon the facts of this case, we now sum up above discussion; the sine qua non for cancellation of registration are two conditions prescribed in s. 12AA(3) needs to be satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mely rigorous laws designed to regulate morals and conduct. These laws are enacted in such a fashion that if implemented correctly and efficiently then there is no scapegoat for an offender. We are tempted to write an idiomatic language due to the sensitivity of the issue, that a CIT cannot be allowed to hold a baton of morality in his hand to hit an immoral; but the statute has given him a flexible stick for inflicting tax on defaulter; that includes a trust or educational institution. The gist is that 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 ambits of provisions of the Act and expected to give a finding on facts that either the objects are not for general public utility or not achieved as prescribed under law. However presently the situation is that the Revenue has not said about any immo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... five times the normal fees; further that no evidence of misutilization other than the prescribed activity then no action can be suggested under s. 12AA(3). The assessee's case falls under the third category. With the result, totality of the circumstances thus warrants, in the light of the foregoing discussion, not to endorse the view of the learned CIT; consequence there upon reverse those findings. The order of cancellation of registration is hereby revoked. Grounds allowed. 8.10 In view of the above cited decisions, we hold that the finding given by the Ld.CIT that the assessee was collecting huge donation for admission of students to various institutes run by it in violation of provisions of Maharashtra Educational institutions (Prohibition of Capitation Fee) Act, 1987 for which the activities of the assessee trust are illegal and therefore the activities are not genuine is not correct. Further, the conclusion of the Ld. CIT that the institutes are being run on commercial lines with profit motive due to the substantial surplus created year after year is also not correct since the assessee has accumulated its surplus which is within the permissible limit of 15% u/s.11 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etails of student wise donations collected by way of DDs and donation receipt books for admissions given during FYs 2005-06 and 2006-07 relating to fees and alleged donations collected from students who got admissions into the schools/college run by the assessee were impounded and statement of secretary of assessee was also recorded-AO observed that assessee was collecting voluntary contributions/building fund/development funds against admissions given under management quota in institutions run by assessee and was not entitled to claim deduction u/s.11(1)(a) and 11(1)(d) CIT(A) upheld findings of AO holding that there was a direct nexus between admissions granted under the management quota and voluntary contributions collected by assessee- Held, if educational institution has collected money in form of voluntary contributions from public and may be from parents of the students who are studying in institution and issued receipts acknowledging said amount towards building fund and made requisite entries in the books and deposited same in the bank, requirement of section 11(l)(d) is fulfilled- Assessee was running several Schools starting from nursery to PUC and said fact has been en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -Therefore action of the CIT in withdrawing the registration granted to the assessee under s. 12AA is not sustainable in law Held : It is found that the first ground pointed out by the CIT to cancel the registration granted to the assessee under s. 12A on the ground of accepting capitation fees is not sustainable in law. The CIT is not to conduct investigation into the sources of 72. We find the Hon ble Supreme Court in the case of M/s. Queen s Educational Society vs. CIT vide Civil Appeal No.5167/2008 order dated 16-03-2015 has approved the decision of the Hon ble Punjab and Haryana High Court in the case of Pine Grove International Charitable Trust Vs. Union of India reported in 327 ITR 73 has observed as under : 23. The Punjab and Haryana High Court, by the impugned judgment dated 29th January, 2010 expressed its dissatisfaction with the view taken by the Uttarakhand High Court in the case of Queen s Educational Society as follows: 8.8 We have not been able to persuade ourselves to accept the view expressed by the Division Bench of the Uttrakhand High Court in the case of Queens Educational Society (supra). There are variety of reasons to support our opinion. Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra). To decide the entitlement of an institution for exemption under Section 10(23C)(vi) of the Act, the test of predominant object of the activity has to be applied by posing the question whether it exists solely for education and not to earn profit [See 5-Judges Constitution Bench judgment in the case of Surat Art Silk Cloth Manufacturers Association (supra)]. It has to be borne in mind that merely because profits have resulted from the activity of imparting education would not result in change of character of the institution that it exists solely for educational purpose. A workable solution has been provided by Hon'ble the Supreme Court in para 33 of its judgment in American Hotel and Lodging Association's case (supra). Thus, on an application made by an institution, the prescribed authority can grant approval subject to such terms and conditions as it may deems fit provided that they are not in conflict with the provisions of the Act. The parameters of earning profit beyond 15% and its investment wholly for educational purposes may be expressly stipulated as per the statutory requirement. Thereafter the Assessing Authority may ensure compliance of those conditions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Anr., (2011) 53 DTR (Del) 130. Also in Tolani Education Society v. Deputy Director of Income Tax (Exemption) Ors., (2013) 351 ITR 184, the Bombay High Court has expressed a view in line with the Punjab and Haryana High Court view, following the judgments of this Court in the Surat Art Silk Manufacturers Association Case and Aditanar Educational Institution case as follows: ..The fact that the Petitioner has a surplus of income over expenditure for the three years in question, cannot by any stretch of logical reasoning lead to the conclusion that the Petitioner does not exist solely for educational purposes or, as that Chief Commissioner held that the Petitioner exists for profit. The test to be applied is as to whether the predominant nature of the activity is educational. In the present case, the sole and dominant nature of the activity is education and the Petitioner exists solely for the purposes of imparting education. An incidental surplus which is generated, and which has resulted in additions to the fixed assets is utilized as the balance-sheet would indicate towards upgrading the facilities of the college including for the purchase of library books and the improve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If they are not genuine, or are not being carried out in accordance with all or any of the conditions subject to which approval has been given, such approval and exemption must forthwith be withdrawn. All these cases are disposed of making it clear that revenue is at liberty to pass fresh orders if such necessity is felt after taking into consideration the various provisions of law contained in Section 10(23C) read with Section 11 of the Income Tax Act. 73. From the submission of the Ld. Counsel for the assessee we further find that out of more than 47000 students the assessee trust has collected donations from only 1217 students out of which only 23 persons had admitted to have given donations for admission. We find out of the above 23 persons only 6 were available for cross examination. We find the relatives or parents of the students have filled up the declaration stating that they have given voluntary donations to the institutions, even some of them claimed deduction u/s.80G also. Nothing has been brought on record that any such amount of donation has not been accounted for in the books of account or has been utilised by any of the trustees or their relatives or has not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tee, free admissions and fee concessions to relatives of the trustees, children of the employees. The details of such expenditure incurred by the trust for the benefit of the trustees and their family members which according to the Assessing Officer is violation of provisions of section 13(1)(c) are as under : MAHARASTRA ACADEMY OF ENGINEERING AND EDUCATINAL RESEARCH YEARWISE CHART SHOWING DETAILS OF EXPENSES CONSIDERED AS VIOLATION OF SECTION 13 Sr. No. Particulars Assessment year Total 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 1. Expenditure on providing facilities to B E Avhad -Vehicle Maintenance - - 21,850 143,893 224,077 245,991 635,811 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 88,680 91,100 - 630,550 Sub Total(b) 291,736 280,734 334,724 331,246 370,398 178,264 1,787,102 9 Expenditure on foreign tours which be taken on pro-rata basis -Mr. Mrs B E Avhad 2 childs- Geneva 600,000 - - - - - 600,000 -Mr. Mrs.Mangesh Karad- Europe - - 130,492 - - - 130,492 -Mr. Mrs.V D Karad- Australia - - 58,703 - - - 58,703 -Mr. Mrs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance should be restricted to the extent of the so called violation. 150. So far as free admissions and fee concessions to the children of the employees and relatives of the trustees are concerned it is the submission of the Ld. Counsel for the assessee that the children of the employees and founder members are given concession in fees as a policy of the trust and on the basis of merit only. It is also his submission that provisions of section 13(6) specifically provide that in an educational institution there would be no prohibition as regards fee concession is concerned. It is his alternate contention that there cannot be wholesale denial of exemption u/s.11 and 12 for violation of provisions of section 13. The disallowance may be restricted only to the extent of so called violation. 151. We find some merit in the above arguments of the Ld. Counsel for the assessee. So far as denial of exemption u/s.11 and 12 for violation of provisions of section 13(1)(c) are concerned the Pune Bench of the Tribunal in the case of Sinhgad Technical Education Society Vs. ACIT vide ITA No.320/PUN/2010 order dated 14-12-2016 has held that whenever there is violation of provisions of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de the said circular, it has been laid down in para. 28.6 that, where a trust contravenes Section 13(1)(d) of the Act, the maximum marginal rate of income-tax will apply only to that part of the income which has forfeited exemption under the said provision and not to the entire income. We may also add that in law, there is a vital difference between eligibility for exemption and withdrawal of exemption/forfeiture of exemption for contravention of the provisions of law. These two concepts are different. They have different consequences. It is interesting to note that although the Legislature withdrew Section 164(2) by the Direct Tax Laws (Amendment) Act, 1987, which provision was reintroduced by the Direct Tax Laws (Amendment) Act, 1989, the Legislature did not touch the proviso to Section 164(2) which has been on the statute book right from April 1, 1985. The said proviso was inserted by the Finance Act, 1984, The proviso specifically refers to violation of Section 13 (1)( d) and its consequences. In the circumstances, we find merit in the contention of the assessee that in the present case, the maximum marginal rate of tax will apply only to the dividend income from shares in Maf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on only can be brought to tax. Accordingly, additional ground No.3 by the assessee is allowed. 152. Following the above decision of Pune Bench of the Tribunal in the case of Sinhgad Technical Education Society (supra) (to which both of us are parties) we hold that there cannot be wholesale denial of exemption u/s.11 for violations of provisions of section 13(1)(c) and income which is subject matter of violation only can be brought to tax. 153. Now having held so, we have to see the extent of violation yearwise. So far as the issue relating to expenditure on account of vehicle maintenance is concerned we find from the details furnished by the assessee that the Assessing Officer has disallowed expenditure of ₹ 21,850/- for A.Y. 2001-02, ₹ 1,43,893/- for A.Y. 2002-03, ₹ 2,24,077/- for A.Y. 2003-04 and ₹ 2,45,991/- for A.Y. 2004-05. It is an undisputed fact that Shri B.E. Avhad is a lawyer and is also attending to the various works of the trust. Apart from using his own car he has also used the vehicle of the trust. Therefore, disallowance of the entire expenditure on account of vehicle maintenance under the facts and circumstances of the case is not just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prejudice to the provisions contained in sub-section (2) of section 12, in the case of a charitable or religious trust running an educational institution or a medical institution or a hospital, the exemption under section 11 or section 12 shall not be denied in relation to any income, other than the income referred to in sub-section (2) of section 12, by reason only that such trust has provided educational or medical facilities to persons referred to in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3). 157. From the above it is clear that there would be no prohibition as regards fee concession u/s.13(6) in case of an educational institution. We further find from the details given by the assessee that it is the policy of the trust to give concession in fee to the children of the employees. We also find merit in the argument of the Ld. Counsel for the assessee that provisions of section 13(1)(c) are not applicable to any concession in fee given to the relatives of the employees. However, the same in our opinion is not applicable to the relatives of the trustees as defined in explanation 1 to section 13. The Assessing Officer is accordingly di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tours by the trustees in our opinion is for the objects of the trust and cannot be held as not for the objects of the trust. In view of the above discussion the Assessing Officer is directed to compute the amount of disallowance that has to be brought to tax and there cannot be wholesale denial of exemption. The grounds of appeal No.5, 6, 8 and 11 are decided accordingly. 160. The next issue which is common for all the years is regarding disallowance u/s.43B, 40A(3) and 40A(7) etc. 161. Since in the instant case the Tribunal has restored the registration u/s.12A to the assessee trust, therefore, the income in our opinion has to be computed u/s.11. It has been held in various decisions that the income u/s.11 has to be computed in a commercial manner and not as per the provisions of I.T. Act. The various heads of income u/s.11 are not relevant in case of a charitable trust and therefore we find merit in the argument of the Ld. Counsel for the assessee that while computing the income u/s.11 the various disallowances/additions u/s.40A(3), 40A(7) and 43B etc. cannot be made u/s.28 to 43. 162. We find the Hon ble Madras High Court in the case of CIT Vs. Rao Bahadur Calavala Cunnan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome in the case of a charitable trust has to be computed in a commercial manner as held by us in the preceding paragraph. Accordingly, the capital expenditure will also be considered as application of income. Accordingly, this ground by the assessee is allowed. However, the Assessing Officer is directed to make necessary verification and if there is double disallowance, make necessary correction. This ground is accordingly allowed for statistical purposes. 167. The next issue that requires adjudication is ground of appeal No.9 for A.Y. 2002-03 and A.Y. 2003-04 on account of disallowance of ₹ 4,12,656/- for A.Y. 2002-03 and ₹ 4,42,920/- for A.Y. 2003-04 on account of income tax debited. 168. After hearing both the sides we find the Assessing Officer disallowed the above amounts on account of income tax debited in the books of MIMER college and DBSR hospital, Talegaon which is one of the constituent units of the assessee trust. According to the Ld. Counsel for the assessee it is a charitable trust claiming exemption u/s.11 and therefore there was no question of payment of any income tax. The amounts were not paid towards income tax but towards TDS arrears of earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l higher than the income/receipts and therefore after exemption u/s.11 there is no taxable income in the hands of the assessee. 172. Since we have already held that the assessee is entitled to exemption u/s.11, therefore, we restore this issue to the file of the Assessing Officer to find out as to whether after disallowance of the same the application of income is more than the receipt and if there is no taxable income in the hands of the assessee. The Assessing Officer will pass appropriate order. The ground is accordingly allowed for statistical purpose. 173. The next issue that requires adjudication is ground of appeal No.9 for A.Y. 2004-05 which relates to incorrect addition of ₹ 4,62,41,042/- by adopting wrong surplus. 174. After hearing both the sides, we find the Assessing Officer on page 29 of the assessment order for A.Y. 2004-05 has stated that the auditor has recasted the income and expenditure account of the assessee and arrived at surplus of ₹ 7,23,46,742/- for the year. According to the Ld. Counsel for the assessee this figure is incorrect since the auditor has recasted the surplus of ₹ 2,61,02,700/- in the recasted income and expenditure ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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