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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 ..... 'the Act') as claimed. As the stage of grant of registration under section 12A, learned Commissioner is supposed to examine only the objects of the society/trust and it is not appropriate on the part of the Commissioner to examine the aspect of application of income at the stage of granting registration under section 12AA, which is to be examined by the assessing officer on a year to year basis at the time of claiming exemptions under section 11 of the Income Tax Act. 4. That section 2(15) defines the term 'charitable purpose' in an inclusive manner and includes within its ambit relief of poor, education, medical relief and advancement of any other object of general public utility. Education per se is a charitable purpose just like relief of poor or medical relief and the appellant university also does not exist for profit as there is no clause for distribution of profits or net assets in case of dissolution to members as it is fully government owned. Thus the emphasis of the Ld. CIT on profits and FDR's was misplaced both on facts and in law in so far as deciding the application u/s 12AA was concerned. 5. That the Ld. Commissioner has picked up objects at s.no.(c)(d) and(e) fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any finding on the objectives of the assessee. He submitted that merely because the assessee is generating surplus should not be a ground for rejection of application and it cannot be the basis for inferring that assessee is not carrying out activities for charitable purposes. Ld. Sr. Counsel in support of the arguments relied upon various judgements, more particularly, judgement of the Hon'ble M.P. High Court rendered in the case of CIT Vs. DPR Charitable Trust (2011) 61 DTR (M.P.) (410). He submitted that the assessee is a government organization. It cannot be by any stretch of imagination inferred that the assessee is created for the purpose of making profit. Ld. Counsel for the assessee also placed reliance on the judgement of Hon'ble Allahabad High Court rendered in the case of Fifth Generation Education Society Vs. CIT (1990) 185 ITR 634 (Allahabad). 4. Per contra, Ld. CIT(DR) vehemently opposed the submissions and supported the order of the Ld. CIT(Exemption). Ld. D.R. submitted that from the facts available on records, it cannot be inferred that the assessee is carrying out any charitable activities, where it has accumulated huge surplus funds, which have not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause. x. The major activities do not come under purview of the term education as used in section 2(15) of the Act. In fact, major receipts are from such activities wherein huge profits have been generated consistently which show the commercial nature of activities. xi. There is negligible investment in fixed assets as compared to investments in FDRs or ploughing back into education or other charitable activity. xii. The major application of surplus so far has been to invest in FDRs and earn interest thereupon and such benefits are not being passed on to the students by reducing the fees that the applicant is collecting from students and educational institutions." 7. The moot question for our consideration is that whether application was rightly rejected seeking registration u/s 12AA of the Act on the basis of the reasons stated herein above. For the sake of clarity, relevant provision of law is reproduced herein below:- "Section 12A: "(1)] The 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 applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year], the accounts of the trust or institution for that year have been audited by an accountant as defined in the 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 such audit in the pres-cribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.] (c) [***] [(2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such 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 suc ..... 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[(3) Where a trust or an institution has been granted registration under clause (b) of 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 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitution 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 section 11 and section 12 shall apply in relation to the income of such trust or institution,- (i) From the date of creation of the trust or the establishment of the institution. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.' 8. Section 12A of the Act prescribes conditions for registration of the trust whereas section 12AA of the Act prescribes the procedure for registration. 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 inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon'ble High Court has held as under: "3. It is evident that at this stage, the Commissioner 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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