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TMI Blog2018 (10) TMI 377X X X X Extracts X X X X X X X X Extracts X X X X ..... cancel the registration viz. the activity of the Trust not being genuine or not being carried out in accordance with the objects of the Trust. The Tribunal was thus perfectly justified in coming to such a conclusion. Our view that we expressed gets force from the decision of Uttranchal High Court in case of Welham Boy's School. Society vs. Central Board of Direct Taxes and anr [2005 (10) TMI 66 - UTTARANCHAL HIGH COURT]. Tribunal had correctly examined the materials on record, agreed with the Trust's contentions that desire on part of the Trust was to acquire land which could be used for setting up educational institution. Agreement to purchase agriculture land was executed in name of the Managing trustee since obviously the Trust should not have even entered into an agreement to purchase agriculture land. Equally, merely because donations are received would not per say imply that the Trust was operating along commercial lines. Trust was running several self finance educational institutions. Collecting fees for such purpose would be part of the normal activities. Even for an educational institution, to retain a reasonable surplus out of its activities has never been frowned up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistered under the Public Trusts Act and is engaged in educational activities. The Trust runs various schools. The Trust was also granted registration under section 12A of the Income Tax Act, 1961 ('the Act' for short) by an order dated 21.03.1990 by the Commissioner of Income Tax, Ahmedabad. 4. The Director of Income Tax (Exemptions), Ahmedabad, issued a show cause notice dated 10.02.2011 proposing cancellation of registration of the Trust on three principal grounds which can be summarized as under: I. During the assessment proceedings for assessment year 2008-09, it was noticed that an amount of ₹ 4.50 crores was transferred by the Trust to one of its trustees and his sons who had in turn paid a sum of ₹ 3.50 crores to one Sonalben Jaksania towards agreement to purchase land from her. It was averred that no sale deed was executed so far. The transaction with the trustee Muktak Kapadiya and his son was not reflected in the Form-10B. According to the Director of Income Tax, the Trust has thus concealed the actual mode of transaction and transferred the funds to the trustee by violating the provisions of section 13(1)(c) of the Act. II. It was seen from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust as advance towards land purchase. In fact, the trustees had advanced money to the Trust. (IV) With respect to the donations received from the students or the parents, it was conveyed that the contributions were made with specific purpose; such as for construction of buildings, staff welfare fund, students' welfare fund etc. It was contended that the accounting treatment given by the Trust to such receipts was consistently followed by the Trust and was a recognized accounting method. In any case, this cannot be the ground for cancellation of the registration of the Trust. (V) It was also contended that the amended definition of the term charitable purpose contained in section 2(15) of the Act with effect from 01.04.2009 would have no application in the present case. None of the activities of the Trust are in the nature of commercial activities. The educational institute in question run by the Trust is a self-financed institution and does not depend on Government grant. 7. The Director of Income Tax however was unmoved. He passed an order dated 17.03.2011 canceling registration of the Trust from inception. He referred to the objects of the Trust contained in Trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture of ₹ 5.80 crores was made towards the educational activities. (iv) Commenting on section 12AA inserted in the Act w.e.f. 01.04.1997, the Tribunal was of the opinion that for the alleged violations of section 11(1)(d) or section 13(1)(c) of the Act, registration of the Trust cannot be cancelled in exercise of powers under section 12AA(3) of the Act. 10. Appearing for the Revenue, learned counsel Mrs. Bhatt vehemently contended that the Tribunal has committed an error in disturbing order of the Commissioner. Sizeable funds from the corpus of the Trust were transferred to the Managing trustee and his sons ostensibly to purchase agriculture land. Sale was not completed for years later on. The objects of the Trust did not permit the Trust to engage in agriculture activities. Donations were received from students in the nature of capitation fees. It was thus clear that the Trust was engaged in profiteering . The Commissioner was therefore perfectly justified in cancelling the registration. 11. On the other hand, learned counsel Mr Soparkar opposed the appeal contending that the Tribunal has correctly examined the relevant aspects emerging from the record. The Trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty holding under Trust wholly for charitable or religious purpose and the provisions of that section and section 13 shall apply accordingly. Section 12A prescribes the conditions for applicability of section 11 and 12. Under sub-section (1) of section 12A, one of the conditions is requirement of such trust or the educational institution being registered under section 12AA of the Act. Section 12AA of the Act in turn, prescribes the procedure for registration. Sub-section (3) which was added to section 12AA w.e.f. 01.10.2004 reads as under: ( 3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) [or has obtained registration at any time under section 12A [ as it stood before its amendment by the Finance (No.2) Act, 1996 (33 of 1996)] and subsequently the [Principal Commissioner or] Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried on along commercial lines. Both the conclusions, in our opinion, are completely incorrect. The Tribunal had examined the materials on record, agreed with the Trust's contentions that desire on part of the Trust was to acquire land which could be used for setting up educational institution. Agreement to purchase agriculture land was executed in name of the Managing trustee since obviously the Trust should not have even entered into an agreement to purchase agriculture land. Equally, merely because donations are received would not per say imply that the Trust was operating along commercial lines. The Tribunal noted that the Trust was running several self finance educational institutions. Collecting fees for such purpose would be part of the normal activities. Even for an educational institution, to retain a reasonable surplus out of its activities has never been frowned upon by judicial decisions. If at all this is getting more liberal. Prime requirement is that such surplus should not be diverted for any other purpose. It must be utilized for the objects of the Trust. Reference in this respect can be made to decision of Supreme Court in case of Queen's Educational Soci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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