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TMI Blog2019 (5) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... or not. In the case in hand, the Ld. CIT rejected the application substantially on the basis that the assessee has accumulated funds which are not been ploughed back for charitable purposes. The profits earned are invested in ever increasing FDRs to earn interest income instead of utilizing for charitable purposes. The explanation of the assessee for accumulating the funds is that it planned for future expansion of technical education in state. The assessee has also applied funds for constructing the hotels for boys and girls, auditorium with the sitting capacity of 3000, campus development to establish green campus. The assessee has also established UITs at Jhabua Shadol for which the capital expenditure will be approximately ₹ 100 crores. In our considered view, the Ld. CIT has not considered the explanation in the light of the binding precedents. Set aside the order of the Ld. CIT(E) and restore the issue of granting of registration to his file to re-consider the same - Decided in favour of assessee for statistical purposes. - ITA No.614/Ind/2018 - - - Dated:- 8-2-2019 - Shri Kul Bharat, Judicial Member And Shri Manish Borad, Accountant Member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e well connected with the main object of providing technical education. The concentration of the Ld. CIT on incidental objects is contrary to the ratio in Surat Art Silk s wherein the Supreme Court has that if the primary or dominant purpose of a trust is charitable another object which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent it from being valid charity. 6. That the test which has to be applied is whether the object which is said to be non charitable is the main or primary object of the trust or institution or its is ancillary or incidental to the dominant or primary object which is charitable and in the case of the appellant university the main object is clearly education which is charitable object as per section 2(15) of the Income Tax Act, 1961. 2. The facts giving rise to the present appeal are that an application for registration u/s 12AA of the Income Tax Act, 1961 (hereinafter called as the Act ) in form No.10A was submitted on 3.10.2017 to the Office of the Ld. Commissioner of Income Tax (Exemption). The said application was rejected by the Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Ld. Counsel for the assessee submitted that the submission of the Ld. CIT(DR) that no educational activity was carried out is patently wrong. He submitted that a detailed note of activity conducted by the assessee university in last 3 years as well as the purpose of fund accumulated was given to the CIT(Exemption) which has been conveniently ignored to be mentioned in the order. Ld. Counsel drew our attention to the statement of facts, wherein the contents of the notes placed before Ld. CIT is reproduced. Further, he submitted that the objection of the Ld. CIT(Exemption) that books are not audited is also patently false and perverse. He submitted that all the books are regularly maintained and show complete details of income and expenditure and balance at the end of the year. The accounts of a society are not required to adhere to section 145A of the Act are for business or professional income and are not applicable to societies and trusts, in fact the books have been scrutinized by C AG audit team and no discrepancies have been pointed out. 6. We have heard the rival submissions, perused the materials available on records and gone through the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:- (a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the [***] Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, [whichever is later and such trust or institution is registered under section 12AA ] : [Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,- (i) from the date of the creation of the trust or the establishment of the institution if the [***] Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h application is made.] [Provided that where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year: Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non registration of such trust or institution for the said assessment year: Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA.] Section 12AA: (1) The [Principal Commissioner or] Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.] [(4) Without prejudice to the provisions of sub-section (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 it is noticed that the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13, then, the Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution: Provided that the registration shall not be cancelled under this sub-section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner.] 8. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titution. If the Commissioner of Income-tax is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons ; . . . (b) Where the total income of the trust or institution as computed under this Act without giving effect to the provisions of sections 11 and section 12 exceeds fifty thousand rupees in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of the such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.' Section 12AA which was inserted by the Finance Act, 1996 with effect from 1st April, 1997 reads as under : '12AA. Procedure for registration.-(1) The Commissioner of Income-tax on receipt of an application for registration of a trust or institution made under cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. A careful reading of the relevant provisions would reveal that application for registration under section 12A has to be made in form No. 10A prescribed by rule 17A before the expiry of one year from the date of creation of the trust or establishment of the institution whichever is later. The application has to be made by a person in receipt of income of the trust. Thus while dealing with the application for registration the Commissioner of Income-tax has to examine whether the application is made in accordance with section 12A read with rule 17A and whether Form No. 10A has been properly filled up. He may also examine whether objects of the trust are charitable or not. Section 12AA nowhere provides that Commissioner of Income-tax while considering the application for registration is also required to examine whether the income derived by the trust is being spent for charitable purposes or the trust is earning profit. The language employed by the legislature in section 12AA only requires that activities of the trust or institution must be genuine which should be in consonance with the object of the trust. At this stage, the Commissioner of Income-tax is not required to examine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner is not to examine the application of income. All that he may examine is whether the application is made in accordance with the requirements of section 12A read with rule 17A and whether Form 10A has been properly filled up. He may also see whether the objects of the trust are charitable or not. At this stage, it is not proper to examine the application of income. 11. Further reliance is placed on the judgement of the Hon'ble High Court of Punjab Haryana, wherein the Hon'ble High Court followed the judgement of the other branch of the same High Court rendered in the case of CIT Vs. Surya Educational Charitable Trust, wherein the Hon'ble High Court held that the object of section 12AA of the Act, is to examine the genuineness of the objects of the Trust, but not the income of the Trust for charitable or religious purposes. The stage of application of income is when such Trust or Institution files its return. The Ld. Counsel has also placed reliance on the decision of the coordinate bench rendered in the case of Divine Siksha Samithi Vs. CIT in ITA No.1034/Ind/2016, where the coordinate bench of this Tribunal following the decision of the other coo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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