Progressive Education Society, Pune V. Additional Commissioner of Income-tax,

ITA 1166/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1958 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-11-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 02-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Depreciation; Search and seizure; Charitable institution; Maximum Marginal Rate; Earning of tax free income; Source of fund; Cost of acquisition; Competent authority; Capital receipt; Benefit of exemption; Cancellation of registration; Capital expenditure
• Section: 133A; 80G; 12A; 12AA; 131; 12; 11

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , ! , # $ BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1166 & 1167/PN/2014 #& & / ASSESSMENT YEARS : 2008-09 AND 2009-10 PROGRESSIVE EDUCATION SOCIETY, W.I.E., SPORTS COMPLEX, SHIVAJINAGAR, PUNE 411 005 PAN NO.AAATP5481C . / APPELLANT V/S ADDL.CIT (HQ) (COORD), PUNE . / RESPONDENT / ASSESSEE BY : SHRI ARVIND SHINDE SHRI KISHOR PHADKE / RESPONDENT BY : SHRI HITENDRA NINAWE / ORDER PER R.K. PANDA, AM : THE ABOVE 2 APPEALS FILED BY THE ASSESSEE ARE DIRECTED A GAINST THE COMMON ORDER DATED 08-01-2014 OF THE CIT(A)-II, P UNE RELATING TO ASSESSMENT YEARS 2008-09 AND 2009-10 RESPECTIVELY . SINCE IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE IN BO TH THE APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND ARE B EING DISPOSED OF BY THIS COMMON ORDER. ITA NO.1166/PN/2014 (A.Y. 2008-09) : 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE TR UST FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ON 16 -02-2009 / DATE OF HEARING :15.02.2016 / DATE OF PRONOUNCEMENT:15.04.2016 2 ITA NO.1166 & 1167/PN/2014 DECLARING TOTAL NIL INCOME. THE RETURN WAS ACCOMPANIED WITH AUDITED ACCOUNTS AND COMPUTATION OF INCOME. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE TO FILE COPIES OF REGISTRATION U/S.12A AND 80G OF THE I.T. ACT. IN RESPONS E TO THE SAID NOTICE, THE ASSESSEE SUBMITTED A COPY OF THE LATEST ORDE R UNDER RULE 11AA(4) FOR EXEMPTION GRANTED U/S. 80G UPTO 31-03-2009. HOWEVER, THE TRUST COULD NOT PRODUCE THE CERTIFICATE OF R EGISTRATION U/S.12A OF THE I.T. ACT, 1961. THE AO NOTED THAT THE CI T-II, PUNE VIDE LETTER DATED 14-05-2010 HAS ALSO NOT GRANTED THE APPROVAL U/S.80G SINCE THE ASSESSEE TRUST HAS NOT SUBMITTED THE CERTIFICATE OF REGISTRATION U/S.12A OF THE I.T. ACT. IN VIEW OF THE ABOV E, THE AO ISSUED A SHOW CAUSE NOTICE DATED 28-12-2010 ASKING THE ASSESSEE TO EXPLAIN AS TO WHY EXEMPTION U/S.11 SHOULD NOT BE DENIED A S THE ASSESSEE HAS FAILED TO PRODUCE THE CERTIFICATE OF REGISTRA TION U/S.12A OF THE I.T. ACT. 3. IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSE E TRUST IS CLAIMING EXEMPTION U/S.11 FROM A.Y. 1999-2000 OVER THE YEAR S AND PRIOR TO THAT THE INCOME OF THE SOCIETY WAS EXEMPT U/S.1 0(22). IT WAS SUBMITTED THAT ALL THE APPLICATIONS U/S.80G FOR CONTINUA NCE FOR THE APPROVAL MADE BY THE ASSESSEE TO THE CIT FROM 200 0 ONWARDS WERE ACCEPTED AND THE APPROVAL WAS GRANTED AFTER MAKI NG THE NECESSARY ENQUIRIES WITH THE TRUST ABOUT THE EXEMPTION OF ITS INCOME U/S.11 AS OTHERWISE THE APPROVAL COULD NOT HAVE BEEN GR ANTED. COPIES OF ALL PAST 80G CERTIFICATES FROM 1995 ONWARDS WERE PRODUCED BEFORE THE AO. IT WAS SUBMITTED THAT THE EARLIER CERTIFICA TES ARE NOT TRACEABLE SINCE THE RECORDS ARE VERY OLD. IT WAS FURTHE R SUBMITTED THAT FROM TIME TO TIME THE AO HAD ISSUED CERTIFICATE U/S.19 7(1) IN FAVOUR OF THE SOCIETY TO THE EFFECT THAT THE PAYERS WERE NOT REQUIRED 3 ITA NO.1166 & 1167/PN/2014 TO DEDUCT TDS ON THE PAYMENT OF RENT AND INTEREST REC EIVED BY THE SOCIETY. THIS OTHERWISE PROVES THAT THE SOCIETY HAD SAT ISFIED ALL THE CONDITIONS FOR EXEMPTION U/S.11 WHICH INCLUDED REGISTRATION U/S.12A. IT WAS SUBMITTED THAT THE SOCIETY IS ABOUT 75 YEARS OLD AND JUST BECAUSE IT IS NOT ABLE TO TRACE THE RECORD AN D PRODUCE REGISTRATION U/S.12A, IT DID NOT IMPLY THAT THE REGISTRATION WAS NOT GRANTED. IT WAS SUBMITTED THAT WITHOUT EXISTENCE OF 12A REGISTRATION THE DEPARTMENT WOULD NOT HAVE ISSUED 80G CERTIFICATES. T HEREFORE, IT IS INCORRECT TO ASSUME THAT 12A REGISTRATION DOES NOT E XIST IN THE CASE OF THE ASSESSEE. 4. REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIB UNAL IN THE CASE OF PHALTAN EDUCATION SOCIETY IT WAS ARGUED THA T THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT NON-AVAILABILITY OF 12A WITH THE ASSESSEE CANNOT BE FOUND FAULT WITH WHEN THE 80 G CERTIFICATES WERE GIVEN FOR PAST SO MANY YEARS. REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF POONA BLIND MENS ASSOCIATION IT WAS ARGUED THAT THE SAID TRUST ALSO COULD NOT PRODUCE REGISTRATION CERTIFICATE U/S.12A. CONSIDERING T HE PAST RECORDS AND FACTS THE CCIT DIRECTED THE CIT NOT TO PR ESS FOR PRODUCTION OF 12A CERTIFICATE. IT WAS ARGUED THAT THE CC IT HAS ALSO DIRECTED THE CONCERNED CITS UNDER HIS CHARGE THAT IN D ESERVING CASES SIMILAR APPROACH SHOULD BE ADOPTED. THE ASSESSEE FURTHER SUBMITTED IT IS PURELY AN EDUCATIONAL TRUST AND THERE IS NO OTHER ACTIVITY EXCEPT BONAFIDE EDUCATION WHICH IS UNDERTAKEN BY THE TRUS T. 5. HOWEVER, THE AO WAS NOT SATISFIED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE. ACCORDING TO HIM IN THE ABSE NCE OF REGISTRATION U/S.12A THE ASSESSEE IS NOT ENTITLED TO EXEM PTION U/S.11. REGISTRATION U/S.12A IS A MANDATORY REQUIREMENT. FURTHER 4 ITA NO.1166 & 1167/PN/2014 THE CIT ALSO HAS NOT GRANTED THE ASSESSEES APPLICATION FOR APPROVAL U/S.80G SINCE THE TRUST HAD NOT SUBMITTED THE CERTIFICATE OF REGISTRATION U/S.12A. IN VIEW OF THE ABOVE, THE AO HELD TH AT THE ASSESSEE TRUST IS NOT ELIGIBLE FOR EXEMPTION U/S.11 OF THE I .T. ACT. ACCORDINGLY, THE ASSESSEE HAS TO BE ASSESSED IN THE ST ATUS OF AN AOP. 6. THE AO FURTHER NOTED THAT THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED DONATION OF RS.3,07,42,484/- DURING THE YEAR, ALL OF WHICH HAVE BEEN CLAIMED TOWARDS THE CORPUS OF THE TRUST. FRO M THE BALANCE SHEET SUBMITTED BY THE ASSESSEE ALONG WITH THE RETURN OF INCOME THE AO NOTICED THAT THERE WAS A DEDUCTION FROM T HE HEAD CORPUS MENTIONED AS PAID DURING THE YEAR RS.2,29,300/- . THE AO, THEREFORE, ASKED THE ASSESSEE TO FURNISH THE DETAILS A ND PURPOSE OF RETURN OF SUCH DONATION FROM THE CORPUS OF THE TRUST. IN RESPONSE TO THE SAME, THE ASSESSEE VIDE REPLY DATED 26-11-2010 REPLIED AS UNDER : COPY OF LIST OF TRUST FUND PAID DURING THE YEAR OF R S.2,29,300/- IS ENCLOSED. THE AMOUNT PERTAINS TO AMOUNT REFUNDED ON ACCOUNT OF CANCELLATION OF ADMISSIONS OF STUDENTS, REFUND OF DEPOSIT S TO STUDENTS TAKE AS DONATION FOR ADMISSION, REFUND OF MEMBERSHIP FE ES, ETC. 7. FROM THE ABOVE, THE AO INFERRED THAT THE SOCIETY HAS TAKEN DONATIONS FOR ADMISSIONS. HE, THEREFORE, ASKED THE ASSESSE E TO FURNISH THE DETAILS OF THEIR STUDENTS WHO TOOK ADMISSION, C OURSES TAKEN, FEES PAID, DONATIONS PAID, DATE OF ADMISSION CANCELLED A ND ALL AMOUNT REFUNDED INCLUDING DONATIONS. 7.1 THE ASSESSEE SUBMITTED THAT THE REFUND OF RS.2,29,300/ - IS ON ACCOUNT OF REQUESTS MADE BY THE DONORS FOR THEIR PERSO NAL PROBLEMS ON ACCOUNT OF HEALTH/FINANCIAL PROBLEMS. IN SPECIAL CASES T HE 5 ITA NO.1166 & 1167/PN/2014 COMMITTEE HAS DECIDED TO REFUND THESE AMOUNTS BY WAY OF CROSSED ACCOUNT PAYEE CHEQUES. THE AO, THEREAFTER, ASKED THE A SSESSEE TO STATE CLEARLY WHEN THE DONATIONS WERE GIVEN AND SPECIFIC REASONS FOR RETURN IN EACH CASE. HE ALSO ASKED THE ASSESSEE TO CLEA RLY STATE THE DETAILS OF STUDENTS IN WHOSE CASES THE DONATIONS WERE RETURNED AND THE DATE ON WHICH THE ADMISSIONS WERE CANCELLED. HE ALSO ASKED THE ASSESSEE TO PRODUCE THE LIST OF ENTIRE CORPUS DONATIONS AND ITS LINK TO ADMISSIONS IF ANY. IN RESPONSE TO THE SAME, THE ASSES SEE VIDE LETTER DATED 22-12-2010 PROVIDED A LIST OF DONATIONS TOWA RDS CORPUS FUND, SUMMARY OF WHICH IS AS UNDER : 1. DONATIONS AGAINST MANAGEMENT QUOTA ADMISSIONS (DONATION TO PERMANENT FUND) : RS.3 ,05,16,500/- 2. FELLOWSHIP OF MEMBER : RS.1,33,500/- 3. SHRI ANIRUDHA UPASANA KENDRA PUNE 5 WILLINGLY FUND AND OTHER PRATISHTHAN : RS.92,484/- -------------------- RS.3,07,42,484/- -------------------- 8. ON VERIFICATION OF THE SUBMISSIONS THE AO NOTED THAT AR OUND 20% OUT OF THE SANCTIONED SEATS ARE UNDER MANAGEMENT QUOTA AND AGAINST EACH SEAT OF MANAGEMENT QUOTA, STANDARD DONATION AMOUN TS WERE MENTIONED IN THE LIST. THE TOTAL OF SUCH DONATIONS A GAINST MANAGEMENT SEATS COMES TO RS.3.05 CRORES. ADDITIONALLY, FELLO WSHIP OF RS.1,33,500/- AND WILLINGLY FUND OF RS.92,484/- HAS BEEN RECEIVED WHICH MAKES TOTAL OF RS.3,07,42,484/- WHICH IS EXACTLY THE S AME FIGURE OF DONATIONS TO PERMANENT FUND SHOWN IN THE BALANCE SHEET. IT WAS ALSO CATEGORICALLY ACCEPTED BY THE AUTHORISED RE PRESENTATIVE OF THE ASSESSEE THAT THE SOCIETY HAS TAKEN DONATIONS O F RS.3.05 CRORES FOR THE MANAGEMENT SEATS. THE AO NOTED FROM TH E RECEIPT BOOKS FOR THE DONATIONS THAT THE ENTIRE DONATION OF RS.3.7 0 CRORES 6 ITA NO.1166 & 1167/PN/2014 HAS BEEN ACCEPTED BY THE ASSESSEE IN CASH AND EACH R ECEIPT IS BELOW RS.20,000/-. THERE ARE 3542 DONORS/RECEIPTS. ON MANY D AYS MORE THAN ONE RECEIPT ARE ISSUED IN THE NAME OF A SINGLE PERSO N. ON BEING ASKED AS TO WHY THE RECEIPTS FOR DONATION TO PERM ANENT FUND WERE NOT IN THE NAMES OF STUDENTS TAKING ADMISSION UNDER MANAGEMENT QUOTA IT WAS SUBMITTED THAT THE RECEIPTS WERE MADE OUT IN THE NAMES GIVEN BY THE DONORS WITHOUT VERIFICATION. 9. AS REGARDS THE REFUND OF DONATION IT WAS SUBMITTED TH AT THERE ARE NO RECORDS WITH THE SOCIETY TO STATE WHICH ADMISSIO N WAS CANCELLED FOR REFUND OF DONATION. IN VIEW OF THE ABOVE, THE AO INFERRED THAT THE STUDENTS WERE ADMITTED IN DIFFERENT COUR SES AGAINST CONSIDERATION OF THE DONATIONS/CAPITATION FEE COLLECTED FROM THEM OR IN THE NAME OF OTHERS UNDER THE GUISE OF CORPUS DONATIO N. SUCH DONATIONS WERE PAID IN RELATION TO THE ADMISSION OF STUDENT S. UNDER NO CIRCUMSTANCES SUCH PAYMENTS COULD BE SAID TO BE EITH ER VOLUNTARY OR TOWARDS THE CORPUS OF THE TRUST. IT IS P URE COMMERCIAL CONSIDERATION FOR ADMISSION. THE AO REFERRED TO PROVISIONS OF SECTION 2(A) OF THE MAHARASHTRA EDUCATIONAL INSTITUTIONS (PR OHIBITION OF CAPITATION FEE) ACT, 1987 ACCORDING TO WHICH CAPITATION FE ES MEANS : SECTION 2(A) CAPITATION FEE MEANS ANY AMOUNT BY WHATEVER NAME CALLED, WHETHER IN CASH OR KIND PAID OR COLLECTED DI RECTLY OR INDIRECTLY, IN EXCESS OF THE PRESCRIBED OR, AS THE CASE MAY BE APPROVED RATES OF FEES REGULATED UNDER SECTION 4. 10. ACCORDING TO THE AO IN VIEW OF THE DEFINITION OF CAPITAT ION FEE AS ABOVE THERE NEED NOT BE A QUID-PRO-QUO FOR ADMISSION S OR THE ADMISSIONS NEED NOT BE FOR THE CONSIDERATION OF AND IN LIEU OF THE MONEY RECEIVED. IF AN IMPRESSION WAS CREATED BY THE MAN AGEMENT IN THE MINDS OF THE STUDENTS/PARENTS THAT ADMISSION WILL N OT BE 7 ITA NO.1166 & 1167/PN/2014 POSSIBLE BUT FOR THE DONATION, IT AMOUNTS TO CAPITATION FEE. THERE NEED NOT BE A DIRECT DEMAND AND DIRECT PAYMENT FROM TH E STUDENT ALSO. THESE ARE IN REALITY NOTHING BUT CAPITATION FEE, COLLECT ED IN THE GUISE OF CORPUS DONATION. IN VIEW OF THE ABOVE AND RELYIN G ON VARIOUS DECISIONS THE AO ISSUED A SHOW CAUSE NOTICE TO T HE ASSESSEE TO EXPLAIN AS TO WHY THE DONATIONS SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE TRUST AS THE SAME ARE RELATED T O ADMISSIONS AND ARE NON-VOLUNTARY IN NATURE AND THEREFORE WHY IT SH OULD NOT BE TREATED AS VIOLATION OF THE PROVISIONS OF SECTION 11(1)(D) OF THE I.T. ACT. HE ALSO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE INCOME OF THE SOCIETY SHOULD NOT BE ASSESSED AS AOP WITHIN THE M EANING OF SECTION 164 OF THE I.T. ACT. 11. THE ASSESSEE REPLIED THAT THE DONATIONS ARE VOLUNT ARY IN NATURE AND NO ONE IS FORCED TO GIVE THE DONATION. THE E NTIRE AMOUNT OF DONATION HAS BEEN RECEIVED FOR THE NOBLE CAUSE OF CHAR ITY. EVERY DONOR HAS BEEN GIVEN RECEIPT FOR THE CORPUS DONATION. ENTIRE AMOUNT RECEIVED BY WAY OF DONATION HAS BEEN DEPOSITED IN THE BANK ACCOUNT OF THE ASSESSEE. FURTHER SOCIETY HAS ALLOTTED 80% OF THE SEATS AS PER THE GOVERNMENT REGULATIONS AND NORMS AND ONLY 20% SEATS ARE FREE AS PER GOVERNMENT NORMS WHICH ARE REFER RED TO AS MANAGEMENT QUOTA. THE FEES FOR ALL SEATS WHETHER 80% G OVERNMENT QUOTA OR 20% MANAGEMENT QUOTA ARE SAME IN QUANTUM. H OWEVER, CONSIDERING THE COMPELLING EXPENSES ON INFRASTRUCTURE SUCH AS LIBRARY, HOSTEL BUILDING ETC. THE TRUST SOLICITS DONATION FOR THE NOBLE CAUSE. IT WAS FURTHER SUBMITTED THAT THERE IS NO SINGLE INSTANCE WHEREIN ANY OF THE MANAGEMENT QUOTA SEATS ARE CHARGED AT DIFFERENTIAL RATES. THERE IS NO FINDING AS TO ANY COMMERCIAL PURSUIT IN THE WHOLE PROCESS. 8 ITA NO.1166 & 1167/PN/2014 12. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. ACCORDING TO HIM THE ASSESSEE HAS NO T DENIED TO HAVE TAKEN DONATIONS FOR GIVING ADMISSION AGAINST MANAGEM ENT QUOTA AND THEREFORE THE DONATIONS ARE NOT VOLUNTARY. T HIS IS A CLEAR VIOLATION OF THE PROVISIONS OF SECTION 11(1)(D) AND THE TAKING OF DONATIONS/CAPITATION FEE IS AGAINST PUBLIC POLICY OR THE LAW OF THE LAND. HENCE, THE ACTIVITIES OF THE TRUST ARE NOT CHARITABLE IN NATURE AND ARE AGAINST THE STATED OBJECTS OF THE TRUST. HE, T HEREFORE, DENIED EXEMPTION U/S.11 OF THE I.T. ACT TO THE ASSESSEE. THE AO ACCORDINGLY DETERMINED THE TOTAL INCOME AT RS.10,15,45,927 /- BY MAKING ADDITION OF RS.3,05,16,500/- TO THE INCOME OF RS.7,10,29,427/- AS PER THE INCOME AND EXPENDITURE ACCOUNT. WHILE DOING SO, THE AO ALSO DENIED DEDUCTION U/S.54 FROM THE LONG TERM CAPITAL GAIN ON SALE OF FLAT AT VASI ON THE GROUND THAT THE SAME IS NOT ALLOWABLE TO ENTITIES OTHER THAN INDIVIDUALS AND HUF. 13. BEFORE CIT(A) THE ASSESSEE MADE ELABORATE SUBMISSIONS BASED ON WHICH LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. AFTER CONSIDERING THE REMAND REPORT OF THE AO AND COMMENT OF THE ASSESSEE TO SUCH REMAND REPORT THE LD.CIT(A) UPHELD TH E ACTION OF THE AO IN DETERMINING THE INCOME OF THE ASSESSEE AT RS.10,15,45,927/-. 13.1 SO FAR AS THE DENIAL OF EXEMPTION U/S.11 IN ABSENCE OF 12A REGISTRATION CERTIFICATE IS CONCERNED THE CIT(A) UPHELD THE ACTION OF THE AO BY OBSERVING AS UNDER : 3.4 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPE LLANT AND PERUSED MATERIAL ON RECORD. REGISTRATION IS ONE OF THE CONDITION PRECEDENT FOR AVA I LING OF EXEMPTION U/S 11 AND 12. AS PER SEE 12A(1)(AA) AS EFFECTIVE FROM . 1 - 4 - 2 0 07 , THE PROVISION OF SEC T ION 11 AND SECTION 12 SHALL NOT APPLY I N R ELA TI O N T O T HE INCOME OF ANY TRUST OR I NSTITUTION UNLESS THE PERSON IN RECEIPT OF T HE INCOME HAS M ADE AN 9 ITA NO.1166 & 1167/PN/2014 APPLICA T ION FO R R EG I STRATION OF THE TRUST OR INSTITUT I ON UN L E S S T HE PERSON I N REC E IPT OF THE INCOME HAS M A D E AN A PP L ICA T IO N FO R REG I S TRAT I ON O F THE TR US T O R I NST I TUTION ON OR AFTER 01 - 06 - 2007 IN THE PRESCRIBED FORM AND MANNE R T O T HE COMM I SSIONER AND SUCH TRUST OR INSTITUTION IS REGISTERED U/S 12AA. THE APEX COURT IN THE CASE OF UP FOREST CORP ORATION & ANR . VS DCIT (2008) 297 I TR 1 (SC) HELD T H AT FOR THE PURPOSE OF CLAIMING BENEFIT U/S 11(1)(A) REGISTRATION U/S 12A IS A CONDITIO N PRECEDENT . IT IS ALSO SEEN THAT THE CIT-II VIDE LETTER DATED 14-05 - 2010 HAS LODGED AND NOT GRANTED THE APPELLANT'S APPLICATION FOR APPROVAL U/S 80G AS T HE TRUST HAD NOT SUBMITTED THE CERTIFICATE OF REGISTRATION U/S 12A. THE APPELLANT ON THE O T HER HAND HAS CONTENDED THAT IT SHOULD BE DEEMED TO AN ENTITY ELIGIBLE FOR CLAIMING BENEFIT OF EXEMPTION U/S.11 OF THE ACT, HOWEVER, IT IS NOTICED THAT THE PUNE ITATS ORDER DATED 30-12-201 1 IN APPELLANTS OWN CASE, AS IS AVAILABLE ON RECORD AND SUBMITTED BY THE APPELLANT DURING THE APPELLATE PROCEEDINGS RELATING TO 80G EXE MPTION , HAS SET ASIDE THE MATTER TO THE F I LE , CIT. IN THE GIVEN CIRCUMSTANCES AND FACTS ON RECORD THE APPELLANT CANNOT PRESUME THAT THE ELIGIBI LITY U/S 12A WILL BE AVAILABLE BEFORE ISSUANCE OF CERTIFICATE U/S 12A AS SUCH . THE RELIANCE PLACED BY THE APPELLANT ON THE LETTER OF THE HON. C CIT IS NOT DECISIVE IN THE FACT OF THE PRESENT CASE AND THE APPELLANT HAS WIT HOUT CONSIDERING THE LEGAL POSITION AS APPLICABLE TO THE CASE HAS ASSUMED AVAILABILITY U/S 12A ON SOME ANALOGY. IN VIEW OF THE ABOVE FACT IN TH E ABSENCE OF THE REGISTRATION U/S 12A THE ACTION OF THE ASSESSING OFFICER IN DENYING EXEMPTION U/S 11 IS LIABLE TO BE UPHELD AND THE GROUN D OF APPEAL NO 2 RAISED BY THE APPELLANT IS DISMISSED FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION. 4. IN GROUND OF APPEAL NO 3 THE APPELLANT HAS CONTEST ED THAT THE ASSESSING OFFICER ERRED IN APPLYING THE MAXIMUM MARGINA L RATE TO THE TAXABLE INCOME OF THE ASSESSEE: IT HAS BEEN SUBMITTED BY THE APPELLANT THAT ITS STATUS OUGHT NOT HAVE BEEN ASSUMED AS AN AOP REA PING PROFITS AND INCOME IN SUCH A MANNER THAT THE MAXIMUM RATE OF TAX TO BE APPLIED. THE APPELLANT HAS STATED FURTHER THAT THE IM MEDIATE LOCATION OF CERTIFICATE U/S 12A IS A MATTER OF RECORDS, COMPLIANCE S AND THE SPIRIT WITH WHICH THE MAXIMUM MARGINAL RATE IS PROVIDED IS ONE WHEREIN SUCH AN ASSESSEE IS EXPECTED TO BE TREATED AT A HIGHEST POIN T OF TAXING STATUTE AND SUCH TREATMENT IS CONTRARY TO THE APPELLANT'S PURSU IT OF ENGAGING IN EDUCATION. 4.1 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPEL LANT AND PERUSED MATERIAL ON RECORD. THE APPELLANT HAD NOT RA ISED THIS GROUND BEFORE THE ASSESSING OFFICER, HOWEVER , TAXATION OF CHARITABLE TRUST IS GOVERNED BY SECTION 164(2) AND 164(3) . WHEN THE INCOME OF A CHARITABLE TRUST BECOMES TAXABLE, IT IS TAXED AT THE R ATE APPLICABLE TO AN AOP SUBJECT TO CERTAIN EXCEPTION WHEN IT IS CHARGEABL E AT MAXIMUM MARGINAL RATE. THE TAX IN THE CASE OF WHOLLY CHARITA BLE TRUST IS DETERMINED AS PER PROVISION OF SEC 1 64(2) AND (3). IN THE PRESENT CASE THE EXEMPTION U/S 11 HAS BEEN DENIED BY THE ASSESSING OF FICER AND WHICH HAS ALSO BEEN UPHELD WHILE ADJUDICATING GROUND OF APPEAL NO.2 AND IN SUCH A CIRCUMSTANCE THE APPLICABILITY OF THE T AXATION AT MAXIMUM MARGINAL RATE IS AN AUTOMATIC PROCESS UNDER THE LAW AN D THE CONTENTION RAISED BY THE APPELLANT IS NOT TENABLE. 4.3 IN VIEW OF THE ABOVE FACT THE GROUND OF APPEAL NO.3 RAISED BY THE APPELLANT IS DISMISSED FOR A.Y. 2008-09. 10 ITA NO.1166 & 1167/PN/2014 14. AS REGARDS THE DENIAL OF EXEMPTION U/S.11 BY THE AO FOR VIOLATION OF PROVISIONS OF SECTION 11(1)(D) OF THE I.T. ACT FOR AC CEPTING THE CORPUS DONATIONS FOR ADMISSIONS IS CONCERNED THE LD.C IT(A) ALSO UPHELD THE ACTION OF THE AO BY OBSERVING AS UNDER : 6.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPE LLANT AND PERUSED MATERIAL ON RECORD. THE ONLY ISSUE RAISED BY TH E APPELLANT RELATES TO THE DENIAL OF EXEMPTION U/S 11 WITH RESPECT TO THE DONATION OF RS. '3,05,16,500/- FOR A.Y. 2008-09 AND RS. 2,02,23,5 33/- FOR A.Y. 2009- 10 RECEIVED BY THE APPELLANT TRUST WHICH HAS BEEN HEL D BY THE ASSESSING OFFICER TO HAVE BEEN TAKEN AGAINST MANAGEMENT QUOTA SEATS AND THAT THE DONATIONS WERE NOT VOLUNTARY AND HENCE WERE IN VIOL ATION OF PROVISIONS OF SEC 11 (1)(D). THE ASSESSING OFFICER DURING THE ASSESSMEN T PROCEEDINGS FOUND THAT THE APPELLANT HAD RECEIVED TO TAL DONATIONS OF RS. 3,07,42,484/- DURING A.Y. 2008-09 AND THE SAME HAD B EEN CLAIMED TO BE TOWARDS CORPUS OF THE TRUST. THE DETAILS OF THE DONATIO NS TOWARDS CORPUS FUND IS AS UNDER: 1. DONATIONS AGAINST MANAGEMENT QUOTA ADMISSIONS (DONATION TO PERMANENT FUND) : RS.3,05,16,5 00/- 2. FELLOWSHIP OF MEMBER : RS.1,33,500/- 3. SHRI ANIRUDHA UPASANA KENDRA PUNE 5 : RS.9,484/- WILLINGLY FUND AND OTHER PRATISHTHAN ----------------------- TOTAL RS.3,07,42,484/- ----------------------- THE ASSESSING OFFICER ALSO NOTICED THAT THERE WAS A DEDUC TION FROM THE HEAD 'CORPUS' MENTIONED AS 'PAID DURING THE YEAR' IN THE BALANCE SHEET AND IN THE EXPLANATION SOUGHT BY THE ASSESSING OFFICER W ITH RESPECT TO THE NATURE AND PURPOSE OF THE RETURN OF DONATIONS FR OM THE CORPUS OF THE TRUST, IT WAS EXPLAINED VIDE LETTER DATED 26-11-2 010 THAT THE AMOUNT OF RS.2,29,300/- PERTAINED TO 'AMOUNT REFUNDE D ON ACCOUNT OF CANCELLATION OF ADMISSION OF STUDENTS, REFUND OF DEPOSIT TO STUDENTS TAKEN AS DONATION FOR ADMISSION, REFUND, OF MEMBERSHIP FEES ETC', THE ASSESSING OFFICER ON FURTHER ENQUIRY FOUND THAT AROUND 20% OUT OF ALL SANCTIONED SEATS WERE UNDER MANAGEMENT QUOTA AND AGAI NST EACH SEAT OF MANAGEMENT QUOTA, STANDARD DONATION AMOUNTS WERE M ENTIONED IN THE LIST OF MANAGEMENT QUOTA ADMISSION FOR F.Y. 2007-0 8 OF VARIOUS INSTITUTES UNDER THE APPELLANTS SOCIETY WHICH TOTALED TO ABOUT RS.3,05,16,500/-. THE LD. AR OF THE APPELLANT HAS AL SO IN CATEGORICAL TERMS ACCEPTED VIDE ORDER SHEET NOTING DATED 22-12-20 10 THAT THE APPELLANT SOCIETY HAD TAKEN DONATIONS OF RS. 3.05 CROR ES FOR THE MANAGEMENT SEATS DURING THE COURSE OF ASSESSMENT PROCEEDIN GS FOR AY 2008-09. HOWEVER, THE APPELLANT SUBSEQUENTLY CLAIMED THAT THE AR. WAS PRESSURIZED TO FURNISH INACCURATE FACTS ARID ACCORDINGL Y AN AFFIDAVIT HAS ALSO BEEN FILED. HOWEVER.JHE SAME CANNOT BE CONSIDERED AT THIS STAGE BECAUSE THE SAME OUGHT TO HAVE BEEN FILED DURING THE ASSESSMENT PROCEEDINGS BEFORE COMPLETION OF ASSESSMENT. THE ASSESSING O FFICER ON EXAMINATION OF THE RECEIPT BOOKS WHICH WERE PRODUCED FOR VERIFICATION FOUND THE ENTIRE DONATION TO HAVE BEEN RECEIVED IN CASH AND EACH RECEIPT WAS BELOW RS. 20,000/- AND THERE WERE 3542 DO NORS/RECEIPTS. THE ASSESSING OFFICER HAS CLEARLY MENTIONED THAT ON MANY DAYS MORE 11 ITA NO.1166 & 1167/PN/2014 THAN ONE RECEIPT WERE ISSUED IN THE NAME OF A SINGLE P ERSON AS FOUND BY HIM IN THE CASE OF THE DONOR DR. MRS. HAZRA S. THE A SSESSING OFFICER ALSO SOUGHT THE EXPLANATION REGARDING THE ISSUE OF RECEIPTS IN THE NAME OF DONORS AND NOT THE STUDENTS SEEKING ADMISSION AND THE A PPELLANT EXPLAINED THAT THE RECEIPTS WERE MADE OUT IN THE NAM ES GIVEN BY THE DONORS WITHOUT VERIFICATION. THE APPELLANT REGARDING THE REFUND OF DONATION STATED THAT THERE WERE NO RECORDS WITH THE SO CIETY TO SUBSTANTIATE AND FURNISH THE DETAILS WITH RESPECT TO THE ADMISSIONS CANCELLED FOR REFUND OF DONATION DURING THE ASSESSMENT PROCEEDINGS. HOWEVER, SUBSEQUENTLY HAD CLAIMED BEFORE THE ASSESSING OF FICER THAT THE REFUNDS WERE FOR BONAFIDE PERSONAL REASONS OF THE DONORS, HOWEVER, THE A.O. THOUGH HAS NOT DISCUSSED THE ISSUE NOR ANY FINDI NG HAS BEEN GIVEN. THE APPELLANT IN ANY CASE HAS NOT BEEN ABLE TO SUBSTANTIATE THE CONTENTION RAISED. THUS. THE MATERIAL BROUGHT ON REC ORD BY THE ASSESSING OFFICER CLEARLY INDICATE TO THE FACT OF THE ST UDENTS BEING ADMITTED IN DIFFERENT COURSES AGAINST THE DONATION COL LECTED BY THE APPELLANT IN THE GUISE OF CORPUS DONATIONS WHICH, IN F ACT, WERE PAID IN RELATION TO THE ADMISSION SEATS. THE INFERENCE DRAWN B Y THE ASSESSING OFFICER THAT THE DONATIONS RECEIVED COULD NOT BE SAID TO BE VOLUNTARY OR TOWARDS THE CORPUS OF THE TRUST RATHER FOR PURE COMME RCIAL CONSIDERATION PRIMA FACIE APPEAR TO BE CORRECT AND JUSTIFIED IN THE GIVEN SET OF FACTS OF THE CASE. THE APPELLANT HAS NEVER DENIE D TO HAVE TAKEN DONATIONS AGAINST MANAGEMENT QI.OTA SEATS. THE APPELLAN T HAD RAISED VARIOUS OBJECTIONS INCLUDING THE FACT THAT THE ASSESSING OFFICER HAD NOT CARRIED OUR PROPER FACT VERIFICATION AND DID NOT CO NSIDER THE DENIAL OF NEXUS BETWEEN THE RECEIPT OF THE CORPUS DONATIONS AND THE ADMISSION PROCESS AND, THEREFORE, THE MATTER WAS REFERRED BACK T O THE ASSESSING OFFICER FOR FURTHER VERIFICATION OF THE ISSUES RAISED B Y THE APPELLANT. IN THE REMAND REPORT DATED 28- 6-2013 THE ASSESSING OFFICE R HAS NOTED THAT SUMMONS U/S 131 WERE ISSUED TO, SOME OF THE PERSONS WHO HAD GIVEN DONATION TO THE APPELLANT TRUST AND ALSO RECORD ED THEIR STATEMENT AND WHICH REVEALED THAT MOST OF THE DONATIONS ARE GIV EN IN CASH AND IN FEW CASES THE DONORS HAD TAKEN BACK THE MONEY BY WAY O F CHEQUE. THE ASSESSING OFFICER IN ITS REPORT HAS ON VERIFICATION OF TH E RECEIPT BOOKS IMPOUNDED EARLIER HAS CATEGORICALLY MENTIONED THAT THERE WERE NAMES AND CLASS-OF EDUCATION WRITTEN ON THE BACK OF SOME O F THE RECEIPTS WHICH CLEARLY ESTABLISHED THE CONNECTION/NEXUS BETWEEN THE D ONATION RECEIVED BY THE APPELLANT AND THE ADMISSION GRANTED U NDER THE MANAGEMENT QUOTA ADMISSION. THUS THE CONTENTION RAISED BY THE APPELLANT THAT THE ASSESSING OFFICER ASSUMED- NEXUS BETWE EN THE CORPUS DONATIONS AND ADMISSION IS NOT FOUND TO BE TRUE AND , T ENABLE IN VIEW OF THE ABOVE FACT ON RECORD WHICH INDICATE THAT THE ASSE SSING OFFICER HAS CONCLUDED NOT ON ASSUMPTION BUT DERIVED THE CONCLUSION FROM THE FACTS BROUGHT ON RECORD. THE RELIANCE PLACED BY THE ASSESSING OFFICER ON THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF P.S. GOVINDASAMY NAIDU & SONS VS ACIT (2010) 324 ITR 44 (MADRAS) IS FOUND TO BE APPROPRIATE AND FITS INTO THE FACT OF THE PRESENT CASE. THE COURT HELD AS UNDER: '5. IT IS SEEN FROM THE ORDER OF THE ASSESSING AUTHORITY THAT ON EXAMINATION OF A RANDOM NUMBER OF PARENTS WHO ADMITT ED THE CHILDREN INTO THE COLLEGE, IF WAS FOUND THAT THE AMO UNT PAID WAS NOT TO THE CORPUS DONATION ACCOUNT BUT IT WAS COLLECT ED ONLY BY WAY OF CAPITATION FEE. THE ASSESSEE TREATED IT ON ITS OW N AS CORPUS DONATION AND ISSUED RECEIPTS AS CORPUS DONATION AN D CREDITED IT UNDER THE CORPUS DONATION. THE ASSESSING AU THORITY RIGHTLY HELD THAT IT IS IMMATERIAL HOW THE RECIPIENT , NAMELY THE ASSESSEE HEREIN, ACCOUNTED FOR THE SAME AND ISSUED RECEIPT S 12 ITA NO.1166 & 1167/PN/2014 TOWARDS CHARITABLE PURPOSE AT THE TIME OF RECEIPT OF THE INCOME. ADMITTEDLY, IT WAS TOWARDS CAPITATION FEE. IN SUCH CIRCUMSTANCES, THE ASSESSING AUTHORITY RIGHTLY REJECTED THE CONTENTION OF THE ASSESSEE THAT THE CONTRIBUTION BY THE PARENTS CREDITED UNDER THE HEAD 'CORPUS DONATION'. IT IS ALSO SEEN THAT THE ASSESSING AUTHORITY REFERRED TO THE DECISION OF ITAT B B ENCH, BOMBAY IN A SIMILAR CIRCUMSTANCE, WHEREIN IT WAS HELD THAT THE DONATION GIVEN FOR MATERIAL GAIN FOR SECURING ADMISSIO N COULD NOT BE CHARACTERIZED AS DONATION TOWARDS CHARITABLE P URPOSE, AND AS SUCH, THE ASSESSEE IS NOT ENTITLED TO HAVE THE BENE FIT. IN PARA 7 OF THE JUDGMENT, HON JUDGE HAS SAID IT MUST BE NOTED THAT THE NATURE OF QUALITY OF THE RECEIPT HAS TO BE ADJUSTED AS AT THE TIME OF RECEIPT. THE SUBSEQUENT ACT OF THE ASSESSEE TO ENTER THE SAME UNDER SOME HEAD ON RECEIPT COULD ALTER THE Q UALITY OF THE RECEIPT. 6.4 THE ASSESSING OFFICER HAS ALSO REPRODUCED THE DEFINI TION OF THE CAPITATION FEES AS FOUND IN THE. MAHARASHTRA EDUCATIO NAL INSTITUTION (PROHIBITION OF CAPITATION FEE) ACT, 1987 WHICH WAS ENACTED TO PROHIBIT COLLECTION OF CAPITATION FEE FOR ADMISSION OF STUDENTS IN THE EDUCATIONAL INSTITUTIONS IN THE STATE OF MAHARASHTRA. THE SAID ENAC TMENT ALSO REFERS TO THE NATIONAL POLICY OF EDUCATION, 1986 WHICH ENV ISAGES' THAT' THE COMMERCIALIZATION OF TECHNICAL AND PROFESSIONAL EDUCA TION SHOULD BE CURBED AND STEPS TAKEN TO PREVENT THE ESTABLISHMENT O F INSTITUTIONS SET UP TO COMMERCIALIZE EDUCATION. SECTION 2(A) DEFINES 'CAPITATION FEE' MEANS ANY AMOUNT BY WHATEVER NAME CALLED WHETHER IN CASH OR KIND PAID OR COLLECTED DIRECTLY OR INDIRECTLY IN EXCESS O F THE PRESCRIBED OR, AS THE CASE MAY BE APPROVED RATES OF FEES REGULATED U/S. 4 . THE ASSESSING OFFICER HAS THUS RIGHTLY HELD THAT THE APPELLANT HAD CREATED AN IMPRESSION IN THE MINDS OF STUDENTS/PARENTS THAT ADMISSION WILL NOT BE POSSIBLE BUT FOR DONATION, AMOUNT TO 'CAPITATION FEE' WHICH THE APPELLANT HAS COLLECTED IN THE GUISE OF CORPUS DONATION. THE DON ATION SHOWN TO HAVE RECEIVED AS CORPUS DONATION DO NOT APPEAR TO BE VOLUNTARY AND RELATED TO THE ADMISSION GRANTED TO THE STUDENTS WHICH IS A CLEAR VIOLATION OF THE PROVISIONS OF SECTION 11 (1)(D) AND H ENCE THE ASSESSING OFFICER HAS RIGHTLY ASSESSED THE INCOME OF THE APPELLAN T SOCIETY AS AN AOP AT MAXIMUM MARGINAL RATE. THE ACT OF THE APPEL LANT IS AGAINST PUBLIC POLICY AND THE ACTIVITIES OF THE TRUST CANNOT BE DESCRIBED AS OF CHARITABLE IN NATURE CONTRARY TO THE OBJECTS OF THE TRUST. THE DECISION RELIED UPON BY THE APPELLANT IN THE CASE OF CIT VS WI LLINGTON CHARITABLE TRUST (SUPRA) FOR THE PROPOSITION THAT ANY DONATIONS TA KEN FOR ADMISSION AND USED FOR CAUSE OF THE TRUST DOES NOT LEAD T O VIOLATION OF SECTION 11 BEING REASONABLE, BUT THE FACT IN THAT CASE RELATED TO ACQUISITION OF PROPERTY AND IN THE SAID CASE THE TRUST WAS REGISTERED U/S.12A(A). HOWEVER, IN THE PRESENT CASE THE FACTS REL ATE TO RECEIPT OF DONATION AND THE TRUST IS ALSO NOT REGISTERED U/S.12A. THE OTHER CASE LAWS RELIED UPON BY THE APPELLANT ARE ON DIFFERENT SE T OF FACTS AND HENCE THE SAME ARE NOT APPLICABLE TO THE PRESENT CASE. IN V IEW OF THE ABOVE FACTS, THE DETAILED AND WELL REASONED ORDER PASSED BY T HE ASSESSING OFFICER IS LIABLE TO BE UPHELD. 6.5 IN VIEW OF THE ABOVE FACTS THE GROUNDS OF APPEAL NO.1 & 5 FOR A.Y. 2008-09 AND FOR A.Y. 2009-10 GROUND OF APPEAL NO.1 & THE ADDITIONAL GROUND NO.6 RAISED BY THE APPELLANT ARE DISMISSED. 13 ITA NO.1166 & 1167/PN/2014 15. AS REGARDS THE ARGUMENT OF THE ASSESSEE THAT DEP RECIATION HAS BEEN CALCULATED AT COMMERCIAL RATES AND WITH RESPECT TO THE ORIGINAL COST OF ACQUISITION OF THE FIXED ASSETS THE LD.CIT(A) DISMISSE D THE GROUND HOLDING THAT SUCH ISSUE WAS NEVER RAISED BEFORE T HE AO DURING THE ASSESSMENT PROCEEDINGS. FURTHER, THE ASSESS EE HAS NOT BEEN ABLE TO SUBMIT THE DETAILS IN RESPECT OF WHICH THE SA ID GROUND OF APPEAL HAS BEEN RAISED. FURTHER, BY ITS OWN ADMISSION T HE ASSESSEE HAS STATED THAT THE WORKING OF THE ELIGIBLE DEP RECIATION ON ACTUAL COST IS INCOMPLETE AND THE ASSESSEE HAS NOT SUBM ITTED ANY SUCH WORKING TILL DATE. HE ACCORDINGLY DISMISSED THE GROUN D RAISED BY THE ASSESSEE AS PREMATURE IN NATURE. 16. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSE E IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE LEARNED CIT(A)-II, PUNE ERRED IN LAW AND ON FACTS IN UPHOLDING THE TAXABLE INCOME WORKED OUT BY THE LEAR NED AO AT RS. 10,15,45,927/- AND CORRESPONDING TAX LIABILITY AMOUN TING TO RS. 4,83,21,648/- ON THE APPELLANT. THE LEARNED CIT(A)- II AND THE LEARNED AO OUGHT TO HAVE APPRECIATED THAT THE APPELLANT IS A BONAFIDE CHARITABLE TRUST SOLELY ENGAGED IN EDUCATION. 2. THE LEARNED CIT(A)-IL, PUNE ERRED IN LAW AND ON FACTS IN UPHOLDING AOS CONTENTION THAT THE APPELLANT IS NOT E LIGIBLE TO CLAIM EXEMPTION U/S 11 OF THE ITA, 1961 IN THE ABSENCE OF 1 2A REGISTRATION CERTIFICATE. THE LEARNED CIT(A)-II, PUNE OUGHT TO H AVE CONSIDERED THE GENUINE AND BONAFIDE CAUSE OF EDUCATION FOR WHICH TH E APPELLANT EXISTS FOR PAST MANY YEARS; AND; THE PRESENCE OF 80G CERTIFIC ATES GRANTED TO THE APPELLANT FOR THE PAST MANY YEARS TILL 31/03/2009 . 3. THE LEARNED CIT(A)-II, PUNE ERRED IN HOLDING THA T THE APPELLANT HAS VIOLATED SECTION 11(1)(D) OF THE ITA, 1961 BY ACC EPTING CORPUS DONATIONS FOR ADMISSIONS. THE LEARNED CIT(A)-II AND THE LEARNED AO ERRED IN LAW AND ON FACTS IN HOLDING THAT DONATIONS H AVE BEEN RECEIVED FOR MANAGEMENT QUOTA SEATS, AND, THAT SUCH DONATIONS AR E CAPITATION FEES, AND AGAINST THE PUBLIC POLICY. 4. THE LEARNED CIT(A)-II, PUNE ERRED IN LAW AND ON FACTS IN DENYING EXEMPTION U/S 11 OF THE ITA, 1961 TO THE DONATIONS OF RS. 3,05,16,500/- RECEIVED BY THE TRUST ON THE ANALOGY THAT THE SAID DO NATIONS ARE NOT IN KEEPING WITH THE LAW. 5. ALTERNATIVELY AND WITHOUT PREJUDICE, THE LEARNED CIT(A)-II, PUNE ERRED IN NOT CALCULATING DEPRECIATION AT COMMERCIAL RATES AND W.R.T. THE ORIGINAL COST OF ACQUISITION OF THE FIXED ASSETS. 14 ITA NO.1166 & 1167/PN/2014 6. THE APPELLANT CRAVES LEAVE TO ADD/ MODIFY /ALTER / DELETE ALL / ANY OF THE GROUNDS OF APPEAL. 17. THE ASSESSEE HAS ALSO TAKEN THE FOLLOWING ADDITIONAL GROUND : 7. ALTERNATIVELY & WITHOUT PREJUDICE TO GROUNDS 1 T O 5, THE APPELLANT IS ENTITLED FOR EXEMPTION U/S.10(23C)(IIIAB ) SINCE THE APPELLANT IS EXISTING SOLELY FOR EDUCATIONAL PURPOSES A ND SUBSTANTIALLY FINANCED BY THE GOVERNMENT. 18. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY OBJECTE D TO THE ORDER PASSED BY THE CIT(A). HE SUBMITTED THAT THE ASSESSEE T RUST WAS ESTABLISHED IN 1934 UNDER THE BOMBAY PUBLIC TRUST ACT. I T IS OWNING AROUND 58 EDUCATIONAL INSTITUTIONS WITH ABOUT 4800 STUDENTS AND MORE THAN 3500 TEACHERS AND STAFF. THE ASSESSEE T RUST WAS HAVING REGISTRATION U/S.80G SINCE LAST SO MANY YEARS WHICH WAS GETTING RENEWED FROM TIME TO TIME. DURING THE IMPUGNED ASSESSMENT YEAR THE AO DENIED THE EXEMPTION U/S.11 ON THE GROUND THAT 12A CERTIFICATE WAS NOT PRODUCED AND THE ASSESSEE IS COLLECTING CAPITATION FEE IN THE GUISE OF CORPUS DONATION FROM VARIOUS PERSONS FOR GIVING ADMISSION. HE SUBMITTED THAT THE AO HAS ISSUED SUMMONS AND EXAMINED 21 DONORS WHO HAVE DENIED TO HAV E MADE ANY DONATION FOR ADMISSION. REFERRING TO PAGE 187 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF T HE BENCH TO THE ORDER OF THE CIT DATED 31-07-1995 GRANTING EXEMPT ION U/S.80G OF THE ACT FOR THE PERIOD FROM 01-04-1995 TO 31-03-00. REFERRING TO PAGE 188 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSE SSEE DREW THE ATTENTION OF THE BENCH TO THE ORDER OF CIT-II, PUNE DATED 12-02- 2001 GRANTING EXEMPTION U/S.80G OF THE I.T. ACT TO THE A SSESSEE TRUST FOR THE PERIOD FROM 01-04-2000 TO 31-03-2003. RE FERRING TO PAGE 189 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSE SSEE DREW THE ATTENTION OF THE BENCH TO ORDER PASSED BY THE CIT -I, PUNE DATED 15 ITA NO.1166 & 1167/PN/2014 23-04-2004 UNDER RULE 11AA GRANTING BENEFIT OF DEDUCTION U/S.80G FOR THE ABOVE TRUST FOR THE PERIOD FROM 01-04-2003 TO 3 1-03-2006. REFERRING TO PAGE 190 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO ORDER PAS SED UNDER SECTION 11AA(4) BY THE CIT-II, PUNE ON 04-12-2007 GRANT ING EXEMPTION U/S.80G TO THE TRUST FROM 01-04-2006 TO 31-0 3-2009. REFERRING TO PAGES 191 AND 192 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO OR DER DATED 18- 08-2014 PASSED U/S.80G(5)(VI) OF THE I.T. ACT READ WITH RULE 11AA, 1962 ACCORDING TO WHICH THE APPROVAL HAS BEEN GRANTED FROM 20-02- 2014 TILL IT IS WITHDRAWN. REFERRING TO PAGE 193 OF THE PAPE R BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF T HE BENCH TO THE CERTIFICATE OF REGISTRATION GRANTED U/S.12AA OF THE I. T. ACT, 1961 READ WITH RULE 17A OF THE I.T. RULES, 1962 ON 31-12-2013 W.E.F, 01- 04-2013. REFERRING TO PAGE 237 OF THE PAPER BOOK THE L D. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO OR DER DATED 30- 09-2015 PASSED U/S.10(23C)(VI) OF THE I.T. ACT, BY THE CCIT, PUNE GRANTING APPROVAL U/S.10(23C)(VI) TO THE ASSESSEE TRUST. 18.1 REFERRING TO PAGE 197 OF THE PAPER BOOK THE LD. COU NSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE LE TTER ADDRESSED BY CCIT TO THE CIT IN CASE OF THE POONA BLIND MENS ASSO CIATION WHEREIN HE HAS DIRECTED TO THE CONCERNED COMMISSIONERS THAT IN DESERVING CASES THE PRODUCTION OF CERTIFICATE U/S.12AA MA Y NOT BE PRESSED FOR. HE SUBMITTED THAT DESPITE SUCH A DIRECTION BY THE CCIT, THE AO AND THE CIT(A) IN THE INSTANT CASE HAVE NOT FOLLOWE D THE DIRECTION OF THE CCIT. REFERRING TO THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF ADIVASI KHETI VIKAS YOJANA REPOR TED IN 107 TAXMANN 445 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID 16 ITA NO.1166 & 1167/PN/2014 DECISION HAS DIRECTED THE DEPARTMENT TO DECIDE THE APPLIC ATION FOR ISSUING DUPLICATE CERTIFICATE SINCE THE CERTIFICATE OF REGISTRA TION U/S.12A SAID TO HAVE BEEN ISSUED TO THE ASSESSEE TRUS T IN THE PAST IS NOT TRACEABLE WITH THE ASSESSEE NOR THE ORDER IS TRA CEABLE WITH THE DEPARTMENT. 19. REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TR IBUNAL IN THE CASE OF PHALTAN EDUCATION SOCIETY VS. CIT REPORTED IN PUNE CHARTERED ACCOUNTANTS SOCIETY JOURNAL FOR APRIL 2009 HE S UBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT WHEN THE TRUST WAS GRANTED ALL THE BENEFITS SUCH AS EXEMPTION U/S.11, ELIGIB ILITY U/S.80G ETC. FOR PAST AS MANY AS 30 YEARS, MERELY FOR TH E REASON THAT ASSESSEE TRUST IS NOT ABLE TO PRODUCE THE AGE OLD REGISTRATION CERTIFICATE U/S.12AA THE DEPARTMENT CANNOT TAKE A STAND THAT TRUST WAS NOT GRANTED REGISTRATION U/S.12A FOR ALL THE PAST YE ARS. THE BURDEN IS ON THE REVENUE TO DEMONSTRATE THAT SUCH RE GISTRATION WAS NOT GRANTED EARLIER. HE ACCORDINGLY SUBMITTED THAT MERE LY BECAUSE THE 12A CERTIFICATE REGISTRATION IS NOT TRACEABLE, THE CIT(A ) WAS NOT JUSTIFIED IN DENYING THE EXEMPTION U/S.11 WHEN THE ASSESSE E TRUST WAS GRANTED 80G BENEFITS IN THE PAST SO MANY YEARS. HE SUBMITTED THAT 80G BENEFIT IS NOT AVAILABLE UNLESS REGISTRATION U/S.12A A IS THERE. 20. SO FAR AS DENIAL OF EXEMPTION U/S.11 DUE TO ACCEPTAN CE OF CAPITATION FEE IN THE GUISE OF DONATION FOR GIVING ADMISSION IS CONCERNED THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO PAGES 153 TO 156 OF THE PAPER BOOK AND DREW THE ATTENTION OF THE BE NCH TO THE AFFIDAVIT OF THE CHAIRMAN AND MANAGING TRUSTEE OF THE ASSE SSEE TRUST DR. GAJANAN RAMAKANT EKBOTE. REFERRING TO THE SAID AFFIDAVIT HE SUBMITTED THAT THE CHAIRMAN-CUM- MANAGING TRUSTEE H AS CLEARLY 17 ITA NO.1166 & 1167/PN/2014 STATED IN THE AFFIDAVIT THAT THE ASSESSEE TRUST HAS NEV ER ACCEPTED ANY DONATION FOR GRANTING ADMISSION TO ANY OF THE EDUCATIONAL C OURSES. THE DONORS HAVE GIVEN THE DONATIONS VOLUNTARILY. FURTHE R, DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE MANAGING TRUS TEE HAD CATEGORICALLY STATED THAT NO MANAGEMENT QUOTA SEAT HA S BEEN SOLD, AUCTIONED, CHARGED COMMERCIALLY. IT WAS CLARIFIED THAT THE DONATIONS ARE VOLUNTARILY GIVEN BY THE DONORS TO THE SOCIETY AND THEY ARE FULLY ACCOUNTED FOR. REFERRING TO TO THE LETTER ADDRESSED BY THE ASSESSEE TRUST TO THE AO VIDE LETTER DATED 30-12-2010 A COPY O F WHICH IS PLACED AT PAGES 88 TO 90 OF THE PAPER BOOK, THE LD. COU NSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE FOLLOWING : 2. CORPUS DONATIONS : FOLLOWING ARE THE FACTS ABOUT DONATIONS ACCEPTED BY THE TRUST. A) THE DONATIONS ARE VOLUNTARY IN NATURE AND NO ONE IS F ORCED TO GIVE IT. THE DONATIONS ARE PALTRY IN QUANTUM AND NO ANY LARGE AMOUNTS ARE RECEIVED BY THE TRUST. ALL THESE AMOUNTS ARE RECEIVED FOR THE NOBLE CAUSE OF THE CHARITY. EVERYONE IS GIVEN RECEIPT FOR THE CORPUS DONATION. NO ANY (NOT A SINGLE) DONATIONS/CONTRIBUTI ONS/FEES, ETC. ARE TAKEN WITHOUT GIVING A VALID RECEIPT. ENTIRE A MOUNT RECEIVED BY WAY OF DONATION IS IMMEDIATELY DEPOSITED IN BANK. B) THE SOCIETY HAS TO COMPULSORILY ALLOT 80% SEARS AS PER THE GOVERNMENT REGULATIONS AND NORMS WHEREAS, 20% SEATS, ARE FREE AS PER GOVERNMENT NORMS, WHICH ARE REFERRED TO AS MANAGE MENT QUOTA. C) THE FEES FOR ALL SEATS, WHETHER 80% GOVERNMENT QUOTA O R 20% MANAGEMENT QUOTA, ARE SAME IN QUANTUM. HOWEVER, CON SIDERING THE COMPELLING EXPENSES ON INFRASTRUCTURE SUCH AS LAB, HOSTE L BUILDING, ETC. THE TRUST SOLICITS DONATIONS FOR THE NOB LE CAUSE. KINDLY PERUSE THE AUDITED ACCOUNTS AS PER WHICH, LARGE CAPEX EXISTS FOR COLLEGE BUILDING DURING ALL THESE YEARS. D) THE OBJECTIONS CONTAINED IN PARA 3 OF YOUR GOODSELFS LETTER APPEAR RATHER SURPRISING AS THE TRUST ENDEAVOURS AND ENSURES THAT NO MANAGEMENT QUOTA SEATS ARE SOLD/AUCTIONED/CHARGED COMM ERCIALLY, ETC. ETC. THE ONLY PURSUIT OF THE TRUST IS TO EXPL ORE SOME HELP TO THE COMPELLING EXPENDITURES OF THE TRUST. E) YOUR GOODSELF WILL APPRECIATE, THERE IS NO SINGLE INSTA NCE WHEREIN, ANY OF THE MANAGEMENT QUOTA SEATS ARE CHARGED AT DIFF ERENTIAL RATES. THERE IS NO ANY FINDING AS TO ANY COMMERCIAL PURSUIT I N THE WHOLE PROCESS. 18 ITA NO.1166 & 1167/PN/2014 21. REFERRING TO THE STATEMENTS OF SOME OF THE DONORS RE CORDED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, COP IES OF WHICH ARE PLACED AT PAGES 157 TO 171 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NONE OF THE DO NORS HAS STATED THAT DONATIONS HAVE BEEN GIVEN FOR GETTING ADMIS SION. REFERRING TO PAGE 227 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADMISSION AS PER CHART IN ORDER U/S.143(3) VARIES FROM 1% TO 17%. IT IS ONLY 17% IN THE CA SE OF PRE- PRIMARY CURRICULUM AND 2% IN JUNIOR COLLEGE WHEREAS IN REMAIN ING COLLEGES IT IS ONLY 1% OR SOMETIMES LESS THAN THAT. HE SU BMITTED THAT THE ASSESSEE HAS UNIVERSALLY ASKED FOR DONATION AN D IS ACCEPTING DONATION. HE SUBMITTED THAT 14 PERSONS WERE SUMMONED BY AO WHOSE STATEMENTS WERE RECORDED AND THE COPIES OF WHICH ARE PLACED AT PAGES 198 TO 225 OF THE PAPER BOOK. REFERRING TO THE SAID AFFIDAVITS, HE SUBMITTED THAT NOBODY HAS STATED THAT HE OR SHE HAS GIVEN DONATION TO THE ASSESSEE TRUST AS A QUID-PRO-QUO IN LIEU OF GETTING ADMISSION IN THE INSTITUTIONS SET UP BY THE ASSESS EE TRUST. REFERRING TO PAGE 121 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE REFUND DONATION TO PERMANENT FUND WHICH WAS AS PER BOARD RESOLUTION AND S PECIFIC REQUEST BY THE CONCERNED DONORS. FURTHER, THE DONATIO NS HAVE BEEN REFUNDED BY CHEQUE. HE SUBMITTED THAT NO COMPLAINT HAS BEEN LODGED U/S.5 OF THE MAHARASTRA EDUCATIONAL INSTITUTIONS (P ROHIBITION OF CAPITATION FEE) ACT, 1987 BY ANY OF THE DONORS. THE AO HAS ALSO NOT LODGED ANY COMPLAINT AGAINST THE ASSESSEE BEFORE THE COMPETENT AUTHORITY IF HE WAS OF THE OPINION THAT ACCEPTANCE OF DON ATION IS ILLEGAL. HE SUBMITTED THAT DONATIONS ARE NOT BANNED AS PE R 19 ITA NO.1166 & 1167/PN/2014 MAHARASTRA EDUCATIONAL INSTITUTIONS (PROHIBITION OF CAPITATION FEE) ACT, 1987. 22. REFERRING TO THE DECISION OF HONBLE KARNATAKA HIGH COU RT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTIONS) AND ANOTH ER VS. SRI BELIMATHA MAHASAMSTHANA SOCIO CULTURAL AND EDUCATIONAL TRU ST REPORTED IN 336 ITR 694 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT MERELY BECAUSE THE ASSE SSEE IS AN INSTITUTION WHICH IS RUNNING PROFESSIONAL COURSES, IT COULD NOT HAVE BEEN PRESUMED THAT THE AMOUNT OF DONATION RECEIVED TO AN EXTENT OF RS.28.30 LAKHS WAS IN VIOLATION OF THE PROHIBITION OF CAPITATION FEE ACT, 1984 AND/ OR ATTRIBUTABLE TO ALLOTMENT OF SEATS. FUR THER, THE SUM OF RS.14,36,500/- WHICH WAS SHOWN AS CORPUS DONATION BY THE ASSESSEE, IF FOUND TO BE UTILIZED OR EXPENDED FOR CHARITABLE PURPOSES, WOULD BE ELIGIBLE FOR EXEMPTION U/S.11(1)(D) OF THE I.T. ACT. 23. REFERRING TO THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. KHALSA RURAL HOSPITAL AND NUR SING TRAINING INSTITUTE REPORTED IN 304 ITR 20 HE DREW THE A TTENTION OF THE BENCH TO PARA 7 AND 8 OF THE ORDER WHICH READS AS UNDER : 7. THE CONTENTIONS RAISED BY MR. PUTNEY ARE DEVOID OF ANY FORCE. THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSEE'S TRU ST WAS CHARGING ANY CAPITATION FEE. THERE IS NO ADMISSION OF THE RESPONDENT- TRUST ON RECORD. THE SO-CALLED VERBAL ADMISSION DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY THE MANAGING DIRECTOR OF THE T RUST CANNOT BE RELIED UPON. NEITHER IT CAN BE PRESUMED FROM MERE ASSU MPTIONS THAT BDS SEATS ARE ALLOTTED AFTER PAYMENT OF CAPITATION FE E IN THE ABSENCE OF ANY MATERIAL. EVEN OTHERWISE, THE ASSESSING OFFICER HAS N OT FOUND ANY IRREGULARITY IN THE ACCOUNTS OF THE TRUST. THERE IS NO DOCUMENT TO SHOW THAT THE TRUST IS BEING RUN FOR ANY PURPOSE OF PROFIT EXCEPT THAT FOR EDUCATIONAL PURPOSES. 8. IN VIEW OF THIS, NO INTERFERENCE IS CALLED FOR IN THE PURE FINDINGS OF FACT GIVEN BY THE TRIBUNAL. NO SUBSTANTIAL QUESTION O F LAW ARISES FROM THE ORDER OF THE TRIBUNAL. THUS, BOTH THE AFOREMENTI ONED APPEARS ARE DISMISSED BEING WITHOUT ANY MERIT. 20 ITA NO.1166 & 1167/PN/2014 24. HE ALSO RELIED ON THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. BALAJI EDUCATIONAL AND CHAR ITABLE PUBLIC TRUST REPORTED IN 48 SOT 281. 25. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT EVE N IF THE ASSESSEE HAS RECEIVED CAPITATION FEES, IF THE SAME IS APPLIED FOR CHARITABLE PURPOSES, THEN THE SAME IS NOT TAXABLE. FOR T HE ABOVE PROPOSITION HE RELIED ON THE FOLLOWING DECISIONS : 1. ACIT VS. M/S.PADANILAM WELFARE TRUST ITA NO.1766 TO 1772/MADRAS/2011 ORDER DATED 19-06-2012 FOR A.YRS. 20 02-03 TO 2008-09 2. SADVIDYA EDUCATIONAL INSTITUTION VS. ADDL.CIT REPORTE D IN (2014) 39 CCH 178 (BANG.) (TRIB.) 3. DECCAN EDUCATION SOCIETY VS. ADDL.CIT ITA NO.1480/ PN/2014 ORDER DATED 13-07-2015 4. QUEENS EDUCATIONAL SOCIETY VS. CIT REPORTED IN 55 TA XMANN.COM 255 26. IN ANOTHER ALTERNATE CONTENTION THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE TRUST HAS RECEIV ED THE CORPUS DONATION WITHOUT ANY CONSIDERATION. THEREFORE, IT BEING A C APITAL RECEIPT, IS NOT EXIGIBLE TO TAX. FOR THE ABOVE PROPOSITION , HE RELIED ON THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE C ASE OF ITO VS. M/S. PENTAFOUR SOFTWARE EMPLOYEES WELFARE FOUNDATION REPORTED IN 2008-ITS-3221 WHEREIN IT HAS BEEN HELD THA T ALL THE RECEIPTS OF AN ASSESSEE CANNOT BE DEEMED TO BE INCOME OF THE ASSESSEE FOR THE PURPOSE OF INCOME TAX. ONLY THOSE RE CEIPTS WHICH BEAR THE NATURE OF INCOME CAN BE MADE EXIGIBLE TO TAX. THE DEFINITION OF THE WORD INCOME AS GIVEN U/S.2(24) IS INCLUSIVE AND IS NOT EXHAUSTIVE. DONATIONS TOWARDS CORPUS ARE NOT FALLING WITHIN THE AMBIT OF THE DEFINITION OF INCOME. THIS IS A CAPITAL RECEIPT AN D NOT EXIGIBLE TO TAX ESPECIALLY WHEN THE DEPARTMENT DID NOT DO UBT THE NATURE OR VERACITY OF THE RECEIPT. 21 ITA NO.1166 & 1167/PN/2014 27. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE TRUST HAS BEEN GRANTED REGISTRATION U/S.12AA W.E.F. 01-04- 2013. THE LD.CCIT VIDE ORDER DATED 30-09-2015 PASSED U/S.10(2 3C) (VII) OF THE I.T. ACT HAS GRANTED APPROVAL FOR THE SAID PURPOSE. THE REVENUE SOUGHT TO REOPEN THE CASE FOR A.Y. 2007-08 ON THE GRO UND THAT ASSESSEE DOES NOT POSSESS CERTIFICATE OF REGISTRATION U/S .12AA OF THE I.T. ACT. HOWEVER, IN THE ORDER DATED 27-03-2015 PASS ED U/S.143(3) R.W.S.147, THE AO, AFTER CONSIDERING THE REPLY GIVEN BY THE ASSESSEE HAS DROPPED THE 147 PROCEEDINGS AND ACCEPTED THE RET URNED INCOME AT NIL. A COPY OF THE SAME IS PLACED AT PAGE 233 TO 236 OF THE PAPER BOOK. 28. THE LD. COUNSEL FOR THE ASSESSEE IN ANOTHER ALTERNAT E CONTENTION SUBMITTED THAT THE FIRST PROVISO TO SECTION 12 A ALSO APPLIES TO THE ASSESSEE. HE SUBMITTED THAT ACCORDING TO THE SAID PROVISION 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 12 SHALL APPLY IN RELATION TO T HAT INCOME OF SUCH TRUST OR INSTITUTION FROM THE DATE OF THE CREATIO N OF THE TRUST OR THE ESTABLISHMENT OF THE INSTITUTION IF THE PCIT OR CIT IS FOR THE REASONS TO BE RECORDED IN WRITING SATISFIED THAT THE PERS ON IN RECEIPT OF THE INCOME WAS PREVENTED FROM MAKING THE APPLICATION BE FORE THE EXPIRY OF THE PERIOD AFORESAID FOR SUFFICIENT REASONS. 29. REFERRING TO THE DECISION OF HONBLE GUJARAT HIGH COU RT IN THE CASE OF CIT VS. MAYUR FOUNDATION REPORTED IN 274 ITR 56 2 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISIO N HAS HELD THAT PROCEEDINGS BEFORE THE TRIBUNAL ARE MEANT TO CORRE CTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE. IF THIS BE SO, IT FOLLOWS THA T THE ASSESSMENT CANNOT BE SAID TO BE COMPLETE AND IS PENDING TILL THE 22 ITA NO.1166 & 1167/PN/2014 APPEAL IS HEARD AND DISPOSED OF BY THE TRIBUNAL AND THE O RDER OF THE TRIBUNAL IS GIVEN EFFECT TO BY THE ASSESSING AUTHORITY BY COMPUTING THE CORRECT TAX LIABILITY OF AN ASSESSEE. IN OTHER WORDS , WHETHER AN ASSESSEE IS REQUIRED TO PAY TAX OR BECOMES ENTITLED TO A REFUND, WOULD BE ASCERTAINED BY THE ASSESSING AUTHORITY AFTER GIV ING EFFECT TO THE ORDER OF THE TRIBUNAL. 30. SO FAR AS THE ADDITIONAL GROUND IS CONCERNED THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE MEMORANDUM EXPLAINING T HE FINANCE BILL 2014 AND THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF DECCAN EDUCATION SOCIETY VIDE ITA NO.1480/PN/2014 ORDER DATED 13-07-2015 FOR A.Y. 2008-09 SUBMITTED THAT THE SAME IS DECIDED IN FAVOUR OF THE ASSES SEE. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE S ET ASIDE AND THE GROUNDS RAISED BY THE ASSESSEE BE ALLOWED. 31. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE AO AND THE CIT(A). HE SUBMITTED THAT THERE IS A DIRECT LINKAGE BETWEEN DONATION AND ADMIS SION. EVEN SOME OF THE DONORS ARE SEEKING REFUND. THE AO AS WELL AS THE CIT(A) HAS CATEGORICALLY MENTIONED THE ABOVE FACT. HE ACCORDING LY SUBMITTED THAT THE ORDER OF THE CIT(A) BE UPHELD AND THE GROUNDS RAISED BY THE ASSESSEE BE DISMISSED. 32. THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOINDER SU BMITTED THAT IN THE CASE OF DECCAN EDUCATION SOCIETY 80G EXEMP TION WAS GRANTED BECAUSE OF 10(23C). HOWEVER, IN THE CASE OF THE A SSESSEE 10(23C) WAS NEVER GRANTED EARLIER. THEREFORE, IT FOLLOWS THAT 12A REGISTRATION WAS GRANTED EARLIER SINCE GRANTING OF 12A REG ISTRATION IS ONE OF THE PRE-REQUISITE FOR GETTING 80G DEDUCTION CERTIFICATE. 23 ITA NO.1166 & 1167/PN/2014 33. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE THE TRUST IS RUNNING VARIOUS EDUCATIONAL INSTITUTES. IT FILED ITS RETURN O F INCOME DECLARING TOTAL INCOME AT NIL. THE INCOME AND EXPENDITURE A CCOUNT FURNISHED BY THE ASSESSEE SHOWS SURPLUS OF RS.7,10,29,427.89 . WE FIND THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS DENIED EXEMPTION U/S.11 ON 2 GROUNDS (A) THE ASSESSEE DID NOT PR ODUCE THE CERTIFICATE OF REGISTRATION U/S.12A OF THE I.T. ACT AND (B) TH E ASSESSEE HAS RECEIVED CAPITATION FEE IN THE GUISE OF DONATION FOR GIV ING ADMISSION AGAINST MANAGEMENT QUOTA SEATS AND THAT THE DONATIONS ARE NOT VOLUNTARY. THEREFORE, THERE IS A CLEAR VIOLATION OF PROVISIONS OF SECTION 11(1)(D) OF THE I.T. ACT. WE FIND THE LD.CIT(A) UPHE LD THE ACTION OF THE AO WHICH HAS ALREADY BEEN REPRODUCED IN TH E PRECEDING PARAGRAPHS. 34. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESS EE THAT SINCE THE ASSESSEE TRUST WAS GRANTED DEDUCTION U/S.80G IN THE PAST SO MANY YEARS AND HAS NEVER CLAIMED EXEMPTION U/S.10(23 C), THEREFORE, MERELY BECAUSE THE ASSESSEE COULD NOT SUBMIT THE12A REGISTRATION CERTIFICATE CANNOT BE A GROUND TO DENY BENE FIT OF DEDUCTION U/S.11 SINCE WITHOUT SUCH CERTIFICATE, THE DEPART MENT COULD NOT HAVE AND WOULD NOT HAVE GRANTED DEDUCTION U/ S.80G. SIMILARLY, THE ALLEGATION OF THE AO THAT ASSESSEE HAS RECEIV ED CAPITATION FEES IN THE GUISE OF DONATIONS FOR GIVING ADMISSIONS UNDER THE MANAGEMENT QUOTA AND THEREFORE THERE IS COMPLETE V IOLATION OF SECTION 11(1)(D) IS ALSO WITHOUT ANY MERIT SINCE THE ENTIRE AMOUNT OF CORPUS DONATION HAS BEEN ACCOUNTED FOR IN THE BOOKS O F ACCOUNT 24 ITA NO.1166 & 1167/PN/2014 AND HAS BEEN UTILIZED FOR THE PURPOSE OF CHARITY, I.E. EDUCAT ION AND THAT NO PART OF THE MONEY HAS BEEN SIPHONED OFF BY ANY OF THE TRUSTEES AND NO COMPLAINT HAS BEEN FILED EITHER BY ANY OF THE DONOR OR THE AO HIMSELF BEFORE THE COMPETENT AUTHORITY FOR VIOLAT ION OF THE MAHARASHTRA EDUCATIONAL INSTITUTIONS (PROHIBITION OF CAPITATIO N FEE) ACT, 1987. IT IS ALSO THE ALTERNATE CLAIM OF THE LD. CO UNSEL FOR THE ASSESSEE THAT THE ASSESSEE TRUST IS ENTITLED FOR EX EMPTION U/S.10(23C)(IIIAB) SINCE THE ASSESSEE IS EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND SUBSTANTIALLY FINANCED BY THE GOVERNMENT. 35. WE FIND MERIT IN THE ABOVE ARGUMENTS OF THE LD. COUN SEL FOR THE ASSESSEE. AS REGARDS THE DENIAL OF EXEMPTION U/S.11 FOR NON FURNISHING OF THE REGISTRATION GRANTED U/S.12A OF THE I.T. ACT IS CONCERNED WE FIND THE ASSESSEE BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS SUBMITTED THAT THE SAME IS NOT TRACEABLE. WE FIND THE AO BASED UPON THE ORDER OF THE C IT FOR NON GRANTING OF APPROVAL U/S.80G FOR NON SUBMISSION OF CERTIFICATE OF REGISTRATION U/S.12A, HELD THAT ASSESSEE IS NOT ENTITLED TO EXEMPTION U/S.11. IT IS AN ADMITTED FACT THAT THE ASSESSEE TRUST WAS GETTING APPROVAL U/S.80G FROM TIME TO TIME IN THE PAST. FROM THE VARIOUS ORDERS PLACED IN THE PAPER BOOK WE FIND THAT EXEMPTION U /S.80G OF THE I.T. ACT WAS GRANTED TO THE ASSESSEE TRUST VIDE O RDER DATED 31- 01-1998 FOR THE PERIOD 01-04-1995 TO 31-03-2000. THE SAID ORDER BEARING NO.PN-165/T-44/95-96 DATED 31-07-1995 IS PL ACED AT PAGE 187 OF THE PAPER BOOK. SIMILARLY FROM THE ORDER OF T HE CIT GRANTING EXEMPTION U/S.80G OF THE ACT VIDE ORDER NO. PN/T -II/80- G/P/141/2000-2001/425. DATED 12-02-2001, A COPY OF WHIC H IS PLACED AT PAGE 188 OF THE PAPER BOOK, WE FIND SUCH EXEMP TION HAS 25 ITA NO.1166 & 1167/PN/2014 BEEN GRANTED FOR THE PERIOD FROM 01-04-2000 TO 31-03-2 003. WE FIND FROM PAGE 189 OF THE PAPER BOOK THAT THE CIT-I, PUN E VIDE ORDER UNDER RULE 11AA BEARING NO.PN/CIT-I/RENEWAL/80G/R-197/ 2004- 05/30 ORDER DATED 23-04-2004 HAS GRANTED EXEMPTION U/S.80G FOR THE PERIOD FROM 01-04-2003 TO 31-03-2006. FROM THE PA PER BOOK PAGE 190 WE FIND THE CIT-II, PUNE VIDE ORDER NO. PN/CIT - II/ADMN./12A/80G/23/33/2007-08 DATED 04-12-2007 HAS GRANTED BENEFIT OF SECTION 80G TO THE ASSESSEE TRUST FOR THE PERIOD FROM 01-04-2006 TO 31-03-2009. WE FIND FOR DENIAL OF EXEM PTION U/S.80G BY THE CIT FOR WANT OF PRODUCTION OF CERTIFICATE U /S.12A THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL AND THE TRIBUN AL VIDE ITA NO.915/PN/2010 ORDER DATED 30-12-2011 RESTORED T HE MATTER TO THE FILE OF THE CIT DIRECTING HIM TO EXAMINE THE ISSUE. WE FIND THE CIT-II, PUNE VIDE ORDER NO. PN/CIT-II/HQ/80G/PESCS/201 4- 15/1453 DATED 18-08-2014 GRANTED BENEFIT OF DEDUCTION U /S.80G OF THE I.T. ACT FROM 20-02-2014 TILL IT IS WITHDRAWN. WE FIND T HE CIT- II, PUNE VIDE ORDER NO. PN/CIT-II/TECH/12A/2013-14/31 31 DATED 31-12-2013 HAS GRANTED REGISTRATION U/S.12AA TO THE AS SESSEE TRUST W.E.F. 01-04-2013 BEING THE FIRST DAY OF THE FINANCIAL YEAR IN WHICH THE APPLICATION HAS BEEN MADE. 35.1 WE FURTHER FIND THE CCIT, PUNE VIDE ORDER NO. PN/CC/TECH/FWD/804/2009-10/1145 DATED 05-06-2009 IN THE CASE OF POONA BLIND MENS ASSOCIATION HAS DIRECTED THE CO NCERNED CITS UNDER HIS JURISDICTION THAT IN DESERVING CASES THE P RODUCTION OF CERTIFICATION U/S.12A MAY NOT BE PRESSED FOR. THE RELEVANT ORDER OF THE CCIT IS REPRODUCED AS UNDER : TO THE COMMISSIONER OF INCOME TAX-I/II/V, PUNE 26 ITA NO.1166 & 1167/PN/2014 SIR, SUB : GRANT OF RENEWAL OF EXEMPTION U/S.80G REG. KINDLY REFER TO THE ABOVE. 02. IN THIS MATTER, I AM DIRECTED TO INFORM THAT THI S OFFICE HAS RECEIVED A PETITION FROM THE POONA BLIND MENS ASSOCIA TION, PUNE A RENOWNED ORGANIZATION OF PUNE, WHICH IS FUNCTIONING SINCE 1952 AND REGISTERED UNDER BOMBAY PUBLIC TRUST ACT AND SOCIETIE S REGISTRATION ACT. THE SAID ORGANIZATION IS STATED TO HAVE BEEN REC EIVING I.T. EXEMPTION U/S.80G AND PRESENTLY HOLDS REGISTRATION U/S. 80G UPTO 31- 03-2001. IT HAS ALSO RECEIVED I.T. EXEMPTION U/S.35AC . 03. THE SAID ORGANIZATION HAS APPROACHED THIS OFFICE W ITH A REQUEST THAT SINCE THE REGISTRATION CERTIFICATE U/S.12A IS NOT TRACEABLE, THE DUPLICATE CERTIFICATE MAY BE ISSUED TO IT FOR RECORD PURPOSE. FROM THE FACTS OF THE CASE, IT IS SEEN THAT SINCE THE ORGANIZATI ON IS RECEIVING EXEMPTION U/S.80G CONTINUOUSLY FOR LAST 54 YEARS AND ON E OF THE DOCUMENT REQUIRED TO BE SUBMITTED FOR GRANT OF CONTI NUANCE OF 80G(5)(VI) IS COPY OF REGISTRATION GRANTED U/S.12A, IT IS OBVIOUS THAT THE SAID ORGANIZATION ACTUALLY HOLDS REGISTRATION U/S.12A A ND THE FACT HOLDS GROUND THAT IT IS REGISTERED U/S.12A AND THE SAME IS PR ESENTLY NOT TRACEABLE, AS STATED BY THE APPLICANT. 04. IN VIEW OF THE FACTS OF THIS CASE, I AM DIRECTED T O CONVEY THE CCIT, PUNE DESIRES THAT IN THE DESERVING CASES, SUCH AS THE ONE REPORTED HEREIN ABOVE, THE PRODUCTION OF CERTIFICATE U/S.12A MAY NOT BE PRESSED FOR. I AM FURTHER DIRECTED TO REQUEST THAT THE CIT MAY TAKE THE APPROPRIATE ACTION WITHIN THE FRAME WORK OF STATUE I N THIS REGARD. YOURS FAITHFULLY, SD/- (SMT. S.S. DANDAWATE) INCOME TAX OFFICER (TECH.) FOR THE CHIEF COMMISSIONER OF INCOME TAX, PUNE 36. FROM THE VARIOUS DOCUMENTS FURNISHED BY THE ASSESS EE IN THE PAPER BOOK IT IS AN ADMITTED FACT THAT THE ASSESSEE TRU ST HAS BEEN GRANTED DEDUCTION U/S.80G FOR LAST SO MANY YEARS. GRANT ING OF REGISTRATION U/S.12A IS ONE OF THE PREREQUISITE FOR GETTING EXEMPTION U/S.80G. UNLESS SUCH 12A CERTIFICATE HAS BEEN GRANTED EA RLIER BY THE DEPARTMENT THE ASSESSEE SOCIETY COULD NOT HAVE BE EN GRANTED DEDUCTION U/S.80G. MERELY BECAUSE THE ASSESSEE TRUST HAS MISPLACED OR LOST THE 12A REGISTRATION CERTIFICATE, THE SAME IN OUR OPINION CANNOT BE A GROUND TO DENY THE BENEFIT U/S.11 OF THE ACT TO 27 ITA NO.1166 & 1167/PN/2014 THE ASSESSEE SOCIETY ESPECIALLY IN ABSENCE OF ANY MATERIA L BEFORE THE REVENUE THAT THE ASSESSEE WAS NEVER GRANTED EXEMPTIO N U/S.80G OF THE ACT OR THAT THE 80G CERTIFICATES PRODUCED BY THE A SSESSEE ARE FALSE OR UNTRUE. FURTHER, IN VIEW OF THE DIRECTION OF THE C CIT, PUNE IN THE CASE OF POONA BLIND MENS ASSOCIATION THE REVENUE AUTHORITIES SHOULD NOT HAVE INSISTED FOR PRODUCTION OF 12A CERTIFICATE FOR GETTING DEDUCTION U/S.11 IN DESERVING CASES SUCH AS THE CASE O F THE ASSESSEE. 37. WE FIND THE HONBLE GUJARAT HIGH COURT IN THE CASE O F ADIVASI KHETI VIKAS YOJANA (SUPRA) HAS DIRECTED THE DEPARTMENT T O DECIDE THE APPLICATION OF THE PETITIONER FOR ISSUING DUPLICATE CERTIFICA TE WITHIN A FORTNIGHT BY OBSERVING AS UNDER : 2. HEARD THE LEARNED COUNSELS FOR THE PARTIES. THE SH ORT ISSUE RAISED BY THE PETITIONER CLAIMING TO BE A PUBLIC CHARITABL E TRUST IS THAT IT APPLIED FOR REGISTRATION UNDER THE PROVISIONS OF THE I NCOME-TAX ACT, 1961 UNDER SECTION 12A ON 11-1-1989. ANOTHER TRUST, N AMELY, ADIVASI PRAGATI MANDAL, MEGHRAJ, HAVING THE SAME MANAGEMENT, WHICH IS ALSO A REGISTERED PUBLIC CHARITABLE TRUST, ALSO APPLIED FOR T HE REGISTRATION UNDER SECTION 12A ON THE SAME DATE. ACCORDING TO THE PETITIONER, ON 31- 7-1989, BOTH THE TRUSTS WERE GRANTED REGISTRATION UNDE R SECTION 12A. WHILE THE OTHER TRUST, ADIVASI PRAGATI MANDAL, HAS ITS REGISTRATION CERTIFICATE IN ITS POSSESSION, THE REGISTRATION CERTIFIC ATE IN THE CASE OF THE PETITIONER IS NOT TRACEABLE. THE DIFFICULTY FACED BY THE PETITIONER IS THAT THEY HAVE FILED RETURNS OF THEIR INCOME FOR THE ASSESSME NT YEARS 1991- 92 TO 1994-95 AND CLAIMED EXEMPTION UNDER SECTIONS 11 TO 13 OF THE ACT AND WHICH HAVE BEEN ACCEPTED BY THE REVENUE. HO WEVER, FOR THE ASSESSMENT YEAR 1995-96, THE ITO DEMANDED PRODUCTION OF THE CERTIFICATE OF REGISTRATION UNDER SECTION 12A. AS THE SAME IS NOT TRACEABLE, THE PETITIONER HAS APPLIED FOR ISSUE OF DUP LICATE CERTIFICATE. HOWEVER, NO RESPONSE HAS BEEN RECEIVED FROM THE REVENU E. 3. THE LEARNED COUNSEL FOR THE REVENUE URGES THAT, T HOUGH THE APPLICATION DATED 11-1-1989 IS ON RECORD, THE ORDER MADE THEREON IS NOT TRACEABLE WITH THEM EITHER. IN THESE CIRCUMSTANCES, ASSE SSMENT FOR THE ASSESSMENT YEAR 1995-96 HAS BEEN COMPLETED BY TREATING A S IF THERE IS NO REGISTRATION AND THE CLAIM TO EXEMPTION HAS BEEN REJECTED FOR WHICH AN APPEAL AGAINST THAT ORDER HAS BEEN FILED. HOWEVER, IN THE ABSENCE OF REGISTRATION CERTIFICATE, THE SAME DIFFICULTY IS LIKE LY TO BE FACED BY THE PETITIONER IN APPEAL. 4. IN THE CIRCUMSTANCES, THE RESPONDENTS ARE DIRECTED TO DECIDE THE APPLICATION OF THE PETITIONER FOR ISSUING DUPLICATE C ERTIFICATE WITHIN A FORTNIGHT IF IT IS FOUND THAT BY ANY INADVERTENCE NO ORDER ACTUALLY HAS 28 ITA NO.1166 & 1167/PN/2014 BEEN MADE ON THE APPLICATION DATED 11-1-1989, THE SA ME MAY NOW BE CONSIDERED AND DECIDED IN ACCORDANCE WITH LAW, ALSO W ITHIN THIS PERIOD. 38. SINCE IN THE INSTANT CASE NOTHING HAS BEEN BROUGHT ON RECORD THAT THE CERTIFICATE U/S.80G WAS NOT GRANTED TO THE ASS ESSEE IN THE PAST AND SINCE REGISTRATION U/S.12A IS ONE OF THE PRERE QUISITE FOR GRANTING OF CERTIFICATE U/S.80G AND THE 80G CERTIFICATES PRO DUCED BY THE ASSESSEE FOR THE PAST SEVERAL YEARS ARE NOT FOUND TO BE FALSE OR UNTRUE, THEREFORE, IT HAS TO BE HELD UNDER THE FACTS OF T HE INSTANT CASE THAT THERE IS REGISTRATION U/S.12A OF THE I.T. ACT. THE FIRST ISSUE ON WHICH THE AO HAS DENIED THE BENEFIT OF SECTION 11 FOR N ON SUBMISSION OF 12A REGISTRATION CERTIFICATE IS ACCORDINGLY REJECTED. 39. THE SECOND ISSUE ON WHICH THE AO HAS DENIED THE BE NEFIT OF SECTION 11 IS DUE TO VIOLATION OF PROVISIONS OF SECTION 11(1)(D) SINCE THE ASSESSEE ACCORDING TO THE AO HAS RECEIVED DONATION OF RS.3,05,16,500/- FOR A.Y. 2008-09 FOR GIVING ADMISSION AGAINST MANAGEMENT QUOTA SEATS AND THAT THE DONATIONS ARE NO T VOLUNTARY AND HENCE WERE IN VIOLATION OF PROVISIONS OF SECTION 11(1)(D). IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE T RUST IS NOT BEING RUN ON COMMERCIAL LINES. THE SUBMISSION OF LD. COUNSEL FOR THE ASSESSEE THAT THE MONEY COLLECTED FROM STUDENTS TO WARDS FEES AND DONATIONS ARE SPENT ONLY FOR THE PURPOSE OF EDUCAT ION AND NO PART OF THE FUNDS OF THE TRUST HAS BEEN DIVERTED FOR THE PERSONAL BENEFIT OF ANY OF THE TRUSTEES COULD NOT BE CONTROVERTE D BY THE LD. DEPARTMENTAL REPRESENTATIVE. THERE IS NOTHING ON RECORD THAT ANY PERSON HAS BEEN DENIED ADMISSION FOR NON PAYMENT OF DONA TION OR ANY STUDENT OR PARENT HAS MADE ANY COMPLAINT TO THE A PPROPRIATE AUTHORITY FOR VIOLATION OF THE MAHARASHTRA EDUCATIONAL IN STITUTIONS (PROHIBITION OF CAPITATION FEE) ACT, 1987. THE AO HAS ALSO N OT 29 ITA NO.1166 & 1167/PN/2014 COMPLAINED TO THE GOVERNMENT AUTHORITIES FOR VIOLATION OF TH E MAHARASHTRA EDUCATIONAL INSTITUTIONS (PROHIBITION OF CAPITATIO N FEE) ACT, 1987. 40. WE FIND A SOMEWHAT SIMILAR ISSUE HAD COME UP BEFORE TH IS BENCH OF THE TRIBUNAL IN THE CASE OF DECCAN EDUCATION SOC IETY VS. ACIT VIDE ITA NO.1480/PN/2014 FOR A.Y. 2008-09. WE FIND TH E TRIBUNAL VIDE ORDER DATED 13-07-2015 (TO WHICH BOTH OF U S ARE PARTIES) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE B Y HOLDING THAT ASSESSEE IS ENTITLED TO EXEMPTION U/S.10(23C). THE RE LEVANT OBSERVATION OF THE TRIBUNAL FROM PARA 66 TO 73 ARE AS UNDER : 66. THE SECOND QUESTION THAT ARISES FOR OUR CONSIDERATI ON AS TO WHETHER THE TRUST IS FOR PROFIT MOTIVE. IT IS THE ALL EGATION OF THE REVENUE THAT THE ASSESSEE TRUST WAS COLLECTING THE CAPITATION FEE IN THE GARB OF DONATION AND WAS THEREFORE RUNNING WITH A PROFIT MOT IVE. 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 H AVE DEPOSED AGAINST THE ASSESSEE BY STATING THAT THEY HAD GIVEN DONAT ION FOR THE PURPOSE OF GETTING ADMISSION HAS COMPLAINED TO THE GOVE RNMENT FOR ANY SUCH VIOLATION BY THE SOCIETY. IT IS ALSO TO BE NO TED THAT THOSE PERSONS HAVE FILLED UP THE REQUISITE PROFORMA STATING T HAT THEY HAVE GIVEN DONATION TO THE ASSESSEE VOLUNTARILY AND NOT FOR SEEKING ADMISSION. EVEN SOME OF THEM CLAIMED DEDUCTION U/S.80G , A FACT STATED BY LD. COUNSEL FOR THE ASSESSEE AND NOT CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE. THEREFORE, CHANGING TH E STANDS AFTER THEIR WARDS COMPLETED THEIR EDUCATION FROM THE INSTIT UTIONS RUN BY THE ASSESSEE TRUST ARE CONTRADICTORY. FURTHER, IT IS ALSO A F ACT THAT ALL DONATIONS RECEIVED BY THE ASSESSEE TRUST ARE RECORDED IN THE BOOKS OF ACCOUNT. THERE IS NO ALLEGATION BY THE REVENUE THAT ANY PART OF SUCH DONATION HAS BEEN SIPHONED OFF FOR THE BENEFIT OF ANY OF THE TRUSTEES OR RELATED PERSONS. NOTHING HAS BEEN BROUGHT ON RECORD T HAT ANY STUDENT HAS BEEN DENIED ADMISSION FOR NOT GIVING DONATION. ME RELY BECAUSE SOME OF THE DONORS STATED THAT THEY HAVE GIVEN THE DO NATION FOR ADMISSION THE SAME IN OUR OPINION WILL NOT DISENTITLE T HE SOCIETY FROM GETTING EXEMPTION WHICH IS EXISTING SOLELY FOR EDUCATI ONAL PURPOSES AND WHICH IS OTHERWISE ENTITLED TO THE EXEMPTION. 67. WE FIND A SOMEWHAT SIMILAR ISSUE HAD COME UP BEFORE THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CHIEF CIT AND ANOTHER VS. GEETANJALI UNIVERSITY TRUST REPORTED IN 352 ITR 433. IN THAT CASE THE ASSESSEE-TRUST, FOR THE ASSESSMENT YEAR 2008-09, FILED AN AP PLICATION SEEKING EXEMPTION OF ITS INCOME UNDER SECTION 10(23C)( VI) OF THE INCOME-TAX ACT, 1961. AFTER EXCHANGE OF SEVERAL LETT ERS BETWEEN THE ASSESSEE AND THE AUTHORITIES WHEREBY SEVERAL QUERIES WERE RAISED AND 30 ITA NO.1166 & 1167/PN/2014 ANSWERED, THE APPLICATION OF THE ASSESSEE TRUST WAS REJECT ED ON THE GROUND THAT THE ASSESSEE TRUST DID NOT SATISFY THE ESSENTIAL CONDITIONS FOR EXEMPTION UNDER SECTION 10(23C). FOR THE ASSESSMENT YEAR 2010-11 AND ONWARDS, THE ASSESSEE WAS GRANTED APPROVAL UNDER SECTI ON 10(23C)(VI). ON A WRIT PETITION THE SINGLE JUDGE ALL OWED THE WRIT PETITION BY SETTING ASIDE THE ORDER PASSED BY THE CHIE F COMMISSIONER UNDER SECTION 10(23C) AND DIRECTED THE AUTHORITY TO DECIDE AFRESH THE PROCEEDINGS FOR THE ASSESSMENT YEAR 2008-09 AND ONWARDS T ILL THE ASSESSMENT YEAR 2010-11 BY PASSING AFRESH SPEAKING ORDER AF TER AFFORDING OPPORTUNITY OF HEARING TO THE ASSESSEE. ON AP PEAL THE HONBLE HIGH COURT HELD AS UNDER (HEAD NOTES): HELD, DISMISSING THE APPEAL, THAT UNDER SECTION 10 (23C)(VI) AND (VIA), WHAT IS REQUIRED FOR THE PURPOSE OF SEEKING APPROVAL IS THAT THE UNIVERSITY OR MOTHER EDUCATIONAL INSTITUTION SHOULD EXIST ''SOLEL Y FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT'. IT WAS NOWHERE 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 EDUC ATIONAL 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 NO T IMPARTED EDUCATION IN THE COLLEGE IN WHICH THEY WERE ADMITTED OR THE A DMISSIONS GRANTED WERE FAKE OR NON-EXISTENT OR THAT THE INCOME GENERATED B Y ADMITTING THE STUDENTS WAS NOT USED FOR THE PURPOSE OF THE ASSESSEE. THE E MPHASIS ON THE PART OF THE CHIEF COMMISSIONER THAT THE PURPOSE OF EDUCATIO N WOULD NOT BE SERVED IF THE EDUCATION IS FOR STUDENTS WHO HAVE BEEN ILLE GALLY 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 REQ UIREMENT OF AN EDUCATIONAL INSTITUTION TO PROVIDE ADMISSIONS STRIC TLY 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 LOS ING THE CHARACTER AS AN ENTITY EXISTING SOLELY FOR THE PURPOSE OF EDUCATION. THERE FORE, THERE, WAS NO INTERFERENCE WITH THE ORDER OF THE SINGLE JUDGE. 68. WE FIND THE PUNE BENCH OF THE TRIBUNAL IN THE C ASE OF SHIKSHANA PRASARAKA MANDALI VS. CIT CENTRAL PUNE VIDE ITA NOS.1 348 AND 1349/PN/2010 ORDER DATED 27-03-2014 (WHERE ONE OF U S ACCOUNTANT MEMBER IS A PARTY) WHILE DEALING WITH DENIAL OF REGI STRATION U/S.12A FOR VIOLATION OF THE MAHARASHTRA EDUCATIONAL INSTITUTIONS (PROHIBITION OF CAPITATION FEE) ACT, 1987 BY ACCEPTING DONATIONS HAS OBSERVED AS UNDER: 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDER OF THE LD.CIT AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECI SIONS CITED BEFORE US. WE FIND THERE IS NO DISPUTE TO THE FACT THAT THE AS SESSEE TRUST IS MORE THAN 100 YEARS OLD AND IT RUNS MORE THAN 60 EDUCATIONAL INSTITUTIONS IMPARTING EDUCATION TO MORE THAN 70000 STUDENTS IN VARIOUS FI ELDS. THE TRUST WAS GRANTED REGISTRATION EARLIER U/S.12A. HOWEVER, THE LD.CIT CANCELLED THE REGISTRATION GRANTED EARLIER ON THE GROUND THAT THE OBJECTS OF THE ASSESSEE TRUST ARE NOT GENUINE SINCE THE ASSESSEE TRUST IS C OLLECTING HUGE DONATION FROM STUDENTS FOR ADMISSION TO THE VARIOUS INSTITUT ES RUN BY IT IN VIOLATION OF THE MAHARASHTRA EDUCATIONAL INSTITUTIONS (PROHIBITI ON OF CAPITATION FE) ACT, 1987. THE COLLECTION OF SUCH DONATIONS ACCORDING T O HIM IS ILLEGAL AND THEREFORE THE ACTIVITIES OF THE SAID SOCIETY ARE NO T GENUINE. HE FURTHER OBSERVED THAT THE INSTITUTES ARE BEING RUN ON COMME RCIAL LINES WITH PROFIT MOTIVE. HE ALSO HELD THAT THE ASSESSEE TRUST HAS V IOLATED PROVISIONS OF SECTION 11(5) R.W.S. 13(1)(D) BY INVESTING IN SHARE S OF COOPERATIVE BANKS. 31 ITA NO.1166 & 1167/PN/2014 8.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.3 NOW COMING TO THE FIRST ISSUE ON WHICH THE LD.C IT HAS CANCELLED THE REGISTRATION U/S.12A, I.E. THE ASSESSEE SOCIETY IS COLLECTING HUGE DONATION FROM STUDENTS FOR ADMISSION TO VARIOUS INSTITUTES WHICH IS IN CLEAR VIOLATION OF THE MAHARASHTRA EDUCATIONAL INSTITUTIONS (PROHIB ITION OF CAPITATION FEE) ACT, 1987, WE FIND THERE IS NO SUCH COMPLAIN BEFORE THE GOVERNMENT OF MAHARASHTRA OR AICTE OR ANY OTHER GOVERNMENT DEPART MENT EITHER BY THE INCOME TAX DEPARTMENT OR BY ANY OF THE STUDENT/PARE NTS STATING THAT THE ASSESSEE SOCIETY HAS CHARGED CAPITATION FEE FOR GIV ING ADMISSION WHICH IS IN VIOLATION OF THE MAHARASHTRA EDUCATIONAL INSTITU TIONS (PROHIBITION OF CAPITATION FEE ACT) 1987. EVEN THE CIT WHO IS ALLE GING THAT THE ASSESSEE TRUST HAS COLLECTED HUGE DONATION FOR ADMISSION OF STUDENTS TO VARIOUS INSTITUTES RUN BY IT HAS NOT INFORMED THE GOVERNMEN T OF MAHARASHTRA IF HE WAS SERIOUS ABOUT ANY SUCH VIOLATION DONE BY THE SO CIETY. 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 COU LD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE. 8.4. . . . . . . . . . . . . 8.5 . . . . . . . . . . . . 8.6 . . . . . . . . . . . . 8.7 WE FIND THE HONBLE DELHI HIGH COURT IN THE CAS E 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 A SSESSING OFFICER ARE THE ADMISSION FEE, CORPUS FUND AND THE LOANS TAKEN FROM PARENTS. THUS IT REALLY CAN'T BE DISPUTED THAT EVEN THE SOURCE OF FU NDS IS RELATABLE TO THE ACTIVITY OF EDUCATION. IT MAY BE NOTICED THAT THERE ARE FACTUAL FINDINGS ON THE LOANS HAVING BEEN AVAILED OF BY THE ASSESSEE FROM A NATIONALIZED BANK FOR THE PURPOSE OF CREATING ADDITIONAL INFRASTRUCTURE/S CHOOLS AND THE THREE SETS OF AMOUNTS HAVE BEEN ADDRESSED ONLY TOWARDS THE O BJECT OF CREATING ADDITIONAL INFRASTRUCTURE AND EASING THE LIABILITY OF THE ASSESSEE TOWARDS THE INTEREST BURDEN OF LOAN REPAYMENT. WHAT IS PERTINEN T TO BE TAKEN NOTE OF IS THAT THERE IS NO FINDING OR ALLEGATION OF ANY DIVER SION OF THESE FUNDS FOR THE PURPOSE OTHER THAN CARRYING ON EDUCATIONAL ACTIVITY . THERE IS NO DIVERSION OF FUNDS TO THE INDIVIDUAL MEMBERS OR TAKING AWAY OF P ROFITS FOR SOME OTHER ACTIVITY. IT DOES APPEAR TO US THAT THE ASSESSING A UTHORITY APPEARS TO HAVE BEEN WEIGHED DOWN BY THE FACTUM OF SOME QUESTIONS B EING RAISED IN THE PARLIAMENT ABOUT THE MANNER OF COLLECTION OF FUNDS BY THE INSTITUTIONS. THAT ALONE, WOULD NOT SUFFICE TO DENY THE EXEMPTION UNDE R SECTION 10(22) OF THE IT ACT. THERE IS IN FACT NO MATERIAL TO SHOW OR A C OMPLAINT THAT THERE HAS EVEN BEEN ANY COERCIVE PROCESS TO RECOVER THESE AMO UNTS. 27. IT CANNOT BE LOST SIGHT OF THAT IF AN INSTITUTI ON HAS TO EXPAND, ADDITIONAL INFRASTRUCTURE HAS TO BE CREATED, QUALITY EDUCATION HAS TO BE IMPARTED, ALL THESE ACTIVITIES REQUIRE FUNDS. THERE MAY BE AN ORI GINAL CORPUS OF THE SOCIETY BUT THEREAFTER THE CORPUS FOR SUCH ACTIVITY CAN BE CREATED ONLY THROUGH VOLUNTARY DONATIONS EITHER FROM ANY PHILANT HROPIST OR THROUGH COLLECTION OF FUNDS IN THE PROCESS OF ADMISSION. WE ARE NOT CONCERNED WITH THE MORALITY OF THE ISSUE WHILE DECIDING WHETHER EX EMPTION HAS TO BE GRANTED. PERSONAL PREJUDICES SEEM TO HAVE STEPPED I N WHEN ALLEGATIONS 32 ITA NO.1166 & 1167/PN/2014 WERE MADE WITHOUT ANY MATERIAL AGAINST CERTAIN MEMB ERS (WHICH HAVE RIGHTLY BEEN STRUCK OFF BY THE MAJORITY OPINION OF TRIBUNAL) ALLEGING THAT THESE MEMBERS WERE WELL KNOWN FOR MAKING PROFIT THROUGH E DUCATIONAL INSTITUTIONS. WE ALSO FAIL TO APPRECIATE THE DOUBTS CAST OR THE POSSIBILITIES EXPRESSED ABOUT THERE BEING SOMETHING MORE TO IT IN VIEW OF THE FUNDS BEING DEPOSITED IN PRIVATE BANKS. THE OPINION IS CO MPLETELY BASED ON SURMISES AND CONJECTURES AS IT SEEMS TO SUGGEST THA T MERELY BECAUSE FUNDS WERE IN A PRIVATE BANK, THERE MAY HAVE BEEN D IVERGENCE OF FUNDS TO THE MEMBERS OF THE SOCIETY. SIMILARLY, THE FACTUM O F 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 P ROFITS BEING DERIVED FROM THE SAME BY THIRD PARTIES AS A MODE OF DIVERGENCE O F FUNDS.' 8.8 WE FIND THE PUNE BENCH OF THE TRIBUNAL IN THE C ASE OF DR. D.Y. PATIL EDUCATION SOCIETY (SUPRA) HAS OBSERVED AS UNDER : 13. THOUGH THE ASSESSEE HAS DENIED RECEIPT OF CAPI TATION FEE/DONATIONS AND RUNNING ON COMMERCIAL LINES, HOWEVER, WITHOUT G OING INTO THE MERITS OF SUCH PLEA, THE PERTINENT QUESTION IS THE CONSEQUENC ES OF ACCEPTANCE OF CAPITATION FEE/DONATIONS BY THE ASSESSEE AT THE STA GE OF EXAMINING ASSESSEE'S APPLICATION FOR REGISTRATION UNDER SECTI ON 12AA OF THE ACT. SOMEWHAT SIMILAR SITUATION AROSE 10 BEFORE THE MUMB AI BENCH OF THE TRIBUNAL IN THE CASE OF RAMARAO ADIK EDUCATION SOCI ETY (SUPRA) WHEREIN THE COMMISSIONER OF INCOME-TAX WAS CONSIDERING CANC ELLATION OF REGISTRATION ON THE BASIS OF THE PLEA THAT THE ASSE SSEE WAS ACCEPTING CAPITATION FEE/DONATIONS. FOLLOWING DISCUSSION BY O UR CO-ORDINATE BENCH IS RELEVANT: '48. NOW THE QUESTION IS THE LEGAL CONSEQUENCE OF T HE ASSESSEE ACCEPTING CAPITATION FEES / DONATIONS FROM STUDENTS SEEKING A DMISSION TO VARIOUS COURSES OFFERED BY THE INSTITUTIONS RUN BY THE ASSE SSEE-TRUST. EVEN IN THE MATTER OF CAPITATION FEES / DONATIONS, THE COMMISSI ONER OF INCOME TAX HAS NO CASE THAT THE FUNDS COLLECTED BY THE ASSESSEE- T RUST THROUGH CAPITATION FEES / DONATIONS HAVE BEEN USED FOR THE PURPOSES OT HER THAN RUNNING THE INSTITUTIONS MANAGED BY THE ASSESSEE TRUST. IT IS T O BE SEEN THAT ALL THE INSTITUTIONS RUN AND MANAGED BY THE ASSESSEE TRUST ARE CARRYING ON THE ACTIVITIES ENVISAGED IN THE MEMORANDUM OF ASSOCIATI ON THE ASSESSEE- TRUST. IT IS STATED BY THE COMMISSIONER IN HIS ORDE R ITSELF THAT THE MONEYS COLLECTED BY THE ASSESSEE-TRUST BY WAY OF CAPITATIO N FEES / DONATIONS ARE USED FOR THE PURPOSE OF NOT ONLY BY THE ASSESSEE-TR UST BUT ALSO FOR OTHER INSTITUTIONS OF SIMILAR NATURE IT IS TO BE SEEN THA T APPLICATION OF FUNDS FOR THE CHARITABLE ACTIVITIES OF ANOTHER ELIGIBLE INSTITUTI ON AMOUNTS TO APPLICATION OF FUNDS FOR CHARITABLE PURPOSES. THE LAW HAS MADE IT VERY CLEAR THAT THE CHARITABLE ACTIVITIES MAY BE CARRIED OUT DIRECTLY B Y AN ELIGIBLE INSTITUTION OR THROUGH ANOTHER ELIGIBLE INSTITUTION FOR THAT MATTE R. THEREFORE, THOSE OBSERVATIONS OF THE COMMISSIONER STATED TO BE ADVER SE TO THE ASSESSEE- TRUST ARE NOT IN FACT PREJUDICIAL TO THE CASE OF TH E ASSESSEE-TRUST. 49. THE KARNATAKA HIGH COURT IN THE CASE OF SANJEEV AMMA HANUMANTHE GOWDA CHARITABLE TRUST VS. DIRECTOR OF INCOME TAX ( EXEMPTION) [285 ITR 327] HAS CONSIDERED THAT IN MATTERS OF REGISTRATION AND EXEMPTION OF CHARITABLE INSTITUTIONS, THE SATISFACTION OF THE CO MMISSIONER SHOULD BE REGARDING THE APPLICATION OF THE INCOME OF THE TRUS T FOR THE SPECIFIED PURPOSES, WHICH ONLY ENTITLES THE ASSESSEE TO CLAIM EXEMPTION. THE COURT OBSERVED THAT FOR ARRIVING AT SUCH SATISFACTION PRI MARILY HE HAS TO LOOK AT THE OBJECT OF THE TRUST, WHEN THE SAME IS REDUCED INTO WRITING IN THE FORM OF TRUST DEED. IF ON THE DATE OF THE APPLICATION THE TRUST H AS RECEIVED INCOME FROM ITS PROPERTY, THEN FIND OUT HOW THE SAID INCOME HAS BEE N EXPENDED, AND 33 ITA NO.1166 & 1167/PN/2014 WHETHER IT CAN BE SAID THAT THE INCOME IS UTILIZED TOWARDS CHARITABLE AND RELIGIOUS PURPOSES. THEREFORE, FOR THE PURPOSES OF REGISTRATION U/S. 12AA OF THE ACT, WHAT THE AUTHORITIES HAVE TO SATISFY IS TH E GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION AND HOW THE INCOME DERIVED FROM THE TRUST PROPERTY IS APPLIED TO CHARITABLE OR RELIGIOU S PURPOSES AND NOT THE NATURE OF THE ACTIVITY BY WHICH THE INCOME WAS DERI VED 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 ASSESSE E. IN OTHER WORDS, THE SOURCE OF FUNDS IS NOT AN IMPORTANT INGREDIENT IN A SSESSING THE CHARACTER OF THE ACTIVITIES CARRIED ON BY A CHARITABLE INSTITUTI ON. THE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RED ROSE SCHOOL [163 T AXMANN 19] HAS HELD THAT EDUCATIONAL ACTIVITIES CARRIED ON BY A SOCIETY ARE FOR CHARITABLE PURPOSES AND NOT AGAINST THE PUBLIC POLICY. THEREFO RE, THE ACTIVITIES CARRIED ON BY THE ASSESSEE-SOCIETY IN THE PRESENT CASE CANN OT IN ANY WAY HELD AS OPPOSED TO PUBLIC POLICY. THE OBJECTION EXPRESSED B Y 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 TH E ASSESSEE-TRUST ARE NOT VOLUNTARY AND THAT FACT ALSO SHOULD BE CONTRIBU TED TO JUSTIFY THE CANCELLATION OF THE REGISTRATION.' ON THE BASIS OF THE AFORESAID DECISION OF THE TRIBUNAL, WHICH HAS BEEN RENDERED AFTER CONSIDE RING THE JUDGMENTS OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE 11 OF SANJEVAMMA HANUMANTHE GOWDA CHARITABLE TRUST (SUPRA) AND THAT OF THE ALLAHABAD HIGH COURT IN THE CASE OF CIT V RED ROSE SCHOOL 163 TAXMANN 19 (AIL), IT IS QUITE CLEAR THAT THE OBJECTION RAISED BY THE COM MISSIONER WITH REGARD TO THE RECEIPT OF CAPITATION FEE/DONATIONS ARE FACTORS TO BE CONSIDERED AT THE TIME OF ASSESSMENTS WHILE EXAMINING THE ELIGIBILITY OF THE ASSESSEE TRUST FOR THE BENEFIT OF SECTION 11 & 12 AND THE SAME DO NOT COME INTO PLAY IN THE COURSE OF THE EXAMINATION BY THE COMMISSIONER FOR T HE PURPOSES OF GRANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT. 14. IN VIEW OF THE AFORESAID DISCUSSION, IN OUR CON SIDERED OPINION, THE COMMISSIONER HAS EXAMINED THE APPLICATION OF THE AS SESSEE ON IRRELEVANT CONSIDERATIONS WHICH WERE BEYOND THE SCOPE OF ENQUI RY ENVISAGED UNDER SECTION 12AA OF THE ACT. WE, THEREFORE, DEEM IT FIT AND PROPER TO SET ASIDE THE ORDER OF THE COMMISSIONER AND RESTORE THE MATTE R BACK TO HIS FILE TO BE EXAMINED AFRESH STRICTLY IN TERMS OF THE SCOPE OF T HE ENQUIRY ENVISAGED UNDER SECTION 12AA(1) OF THE ACT. 8.9 WE FIND THE PUNE BENCH OF THE TRIBUNAL IN THE C ASE OF MAHARASHTRA ACADEMY OF ENGINEERING & EDUCATIONAL RESEARCH (MAEE R) VS. CIT REPORTED IN (2010) 133 TTJ (PUNE) 706 WHILE ADJUDIC ATING CANCELLATION OF REGISTRATION U/S.12AA FOR TAKING DONATION AND CAPIT ATION FEE HAS OBSERVED AS UNDER : (VI) CONCLUSION : 11. IN THE RECENT PAST THE QUESTION OF INTERPRETATION O F NEWLY INSERTED S. 12AA (W.E.F. 1ST APRIL, 1997) HAS ALWAYS BEEN PEREN NIAL TEASER NOT ONLY TO THE TRUST OR INSTITUTIONS BUT ALSO TO THE REVENUE D EPARTMENT AS ALSO FACED BY THE JUDICIARY. TO GET THE ANSWER WE HAVE HEARD B OTH THE SIDES AT LENGTH, CAREFULLY PERUSED THE IMPUGNED ORDER AND ALSO SEVER AL CORRESPONDENCES FILED IN THE COMPILATION IN THE LIGHT OF THE CASE L AWS CITED. 11.1 THE LAW NOW INTRODUCED IS TO STREAMLINE THE 'PROCED URE FOR REGISTRATION' AND BY SAYING SO WE DO NOT WANT TO EN TER INTO THE CONTROVERSY WHETHER THE APPLICABILITY OF S. 12AA(3) WAS RETROSP ECTIVE OR PROSPECTIVE IN NATURE. RATHER WE CAN MAKE AN OBSERVATION THAT THIS ISSUE STOOD ANSWERED BY CO-ORDINATE BENCHES. WE WANT TO EXPRESS THAT EAR LIER TO THIS SECTION 34 ITA NO.1166 & 1167/PN/2014 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 T HAT THE ACTIVITIES OUGHT TO BE IN FULFILMENT OF THE OBJECTS FOR WHICH A TRUS T IS CREATED. SENTIMENTS SHOULD BE IN LINE WITH THE PURPOSE FOR WHICH THE TR UST 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; DELIBE RATED UPON ANTE. 11.2 IN ANY CASE WE HAVE TO EXAMINE THE PURPOSE OF ENACT MENT OF SS. 12A, 12AA AND 12AA(3), VIZ-A-VIZ SS. 11 AND 12. WHILE READING SEVERAL CASE LAWS AS CITED SUPRA AN I MPORTANT 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 EXCLUSI ON OF SUCH AN INCOME FROM THE TOTAL INCOME OF A TRUST. TO OUR UNDERSTAND ING, ALSO ACKNOWLEDGED IN THE PRECEDENTS; THE PROVISIONS OF S. 12AA PRESCR IBES CONDITIONS FOR REGISTRATION OF A TRUST AND THEREFORE IN THE ABSENC E OF REGISTRATION DISENTITLES ANY TRUST FROM CLAIMING ANY BENEFIT OF THE PROVISIO NS OF S. 11 AND S. 12 OF THE ACT IN RELATION TO ITS INCOME. THEREFORE THE CO NCLUSION IS THAT S. 12AA PRESCRIBES CERTAIN CONDITIONS FOR THE REGISTRATION OF A TRUST AND THEREUPON OBLIGATES A TRUST OR AN INSTITUTION TO SEEK, RATHER OBTAIN, A REGISTRATION UNDER S. 12AA IF SUCH TRUST INTENDS TO HAVE THE BENEFITS OF THE EXEMPTION AS PRESCRIBED UNDER SS. 11 AND 12 OF THE ACT. IT IS NO T THE OTHER WAY ROUND THAT THE BENEFIT OF SS. 11 AND 12 SHALL BE AUTOMATIC ONC E THE REGISTRATION IS GRANTED. THUS THE OUTCOME IS THAT THESE PROVISIONS MAKE IT CLEAR THAT IF THE TRUST IS NOT REGISTERED UNDER S. 12AA IT WOULD NOT BE ABLE TO CLAIM ANY EXEMPTION OR EXCLUSION OF ITS INCOME FROM THE TOTAL INCOME OF THE PREVIOUS YEAR, EVEN IF SUCH INCOME IS OTHERWISE LIA BLE FOR EXCLUSION UNDER ANY OF THE CLAUSES OF S. 11 AND S. 12 OF THE ACT. 11.3 ON DUE CONSIDERATION OF THE RIVAL ARGUMENTS WE CAN SUMMARISE THE SECTION OF THE ACT GOVERNING THE ISSUE IN HAND. THE PURPOSE OF FRAMING THE 'CONDITIONS FOR APPLICABILITY OF SS. 11 AND 12' I.E ., S. 12A AND FRAMING THE RULES OF 'PROCEDURE FOR REGISTRATION' I.E., S. 12AA IS BASICALLY MEANT TO OPEN THE DOOR TO A TRUST TO ENTER INTO THE FRAMEWORK OF THE PROVISIONS OF THE STATUTE, IN A WAY; AN ENTITLEMENT TO ENTER INTO A R OOM WHERE THE ELIGIBILITY OF EXEMPTIONS IS KEPT FOR ADJUDICATION. THUS IN A CASE OF REFUSAL OF REGISTRATION, THE TRUST WOULD EVEN NOT BE ALLOWED TO ENTER THE RO OM TO SEEK A CLAIM OF SUCH EXCLUSION OF A RECEIPT FROM THE TOTAL INCOME. IN SIMPLE WORDS; IN CASE OF NO REGISTRATION A TRUST IS DEBARRED BY LAW TO CL AIM EXEMPTION. THIS IS THE FIRST STEP TO CLIMB TO THE LEVEL WHERE THE EXEMPTIO NS ARE PLACED. AT THIS FIRST STEP THE CIT IS CONFERRED WITH THE POWERS TO CALL F OR SUCH DOCUMENTS AND INFORMATION IN ORDER TO SATISFY HIMSELF ABOUT THE G ENUINENESS OF THE ACTIVITIES AND ALSO TO ENQUIRE THAT THOSE GENUINE A CTIVITIES ARE AS PER THE OBJECTS OF THE TRUST FOR WHICH IT IS SEEKING REGIST RATION. THE OBJECTS AND ACTIVITIES SHOULD BE PHILANTHROPIC AND NOT AGAINST THE PUBLIC INTEREST MUST BE FOR THE BENEFIT AT LARGE INSTEAD FOR THE BENEFIT OF PARTICULAR INDIVIDUAL OR GROUP OF 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 REGISTRAT ION TO THE CIT, IF HE FINDS THAT THE ACTIVITIES ARE NOT GENUINE OR NOT BEING CA RRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TRUST. THE NEED FOR THE ENAC TMENT HAD ARISEN DUE TO BELIEF OF SOME QUARTER THAT IN THE ABSENCE OF EXPLI CIT LAW THE CIT CANNOT EXERCISE THE POWER OF CANCELLATION OF REGISTRATION. TO OVERCOME THIS HURDLE THIS SUB-SECTION IS INCORPORATED AND NOW IN OPERATI ON. 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 PROVIS IONS BY GOING HAYWIRE 35 ITA NO.1166 & 1167/PN/2014 RATHER FURTHERING THE OBJECTS OF THE TRUST OR GENUI NELY NOT PURSUING THE ACTIVITIES FOR WHICH IT WAS ESTABLISHED. 11.5 CONSIDERING THE ARGUMENTS AND THE FACTS OF THI S CASE WE HAVE NOTED THAT THE MOST IMPORTANT FEATURE OF S. 12AA IS, AS A LSO 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 REGISTRATION, THE CI T SHALL ALSO LOOK INTO THE PROCEDURE OF EARNING OF INCOME AND SOURCES FROM WHE RE RECEIPTS ARE DERIVED. THE ARGUMENT WAS, IT ALSO DOES NOT SPEAK A NYWHERE THAT WHILE CONSIDERING THE REGISTRATION THE CIT SHALL ALSO SEE THE MANNER IN WHICH THE RECEIPTS OR THE INCOME IS BEING SPENT BY THE TRUST. TO OUR HUMBLE UNDERSTANDING OF VARIOUS RELATED PROVISIONS, THE PO WER OF ENQUIRY, IN RESPECT OF SOURCES OF RECEIPTS AND THE UTILIZATION OF INCOME IS ENTRUSTED IN SEPARATE SECTIONS AS ALREADY DISCUSSED ANTE. THE LA NGUAGE THUS USED IN THIS SECTION ONLY CONFINES TO ENQUIRE ABOUT THE ACT IVITIES OF THE TRUST AND ITS GENUINENESS, WHICH MEANS, IN CONSONANCE WITH THE OB JECTS FOR WHICH CREATED AND THOSE OBJECTS AS ALSO ACTIVITIES SHOULD NOT BE A CAMOUFLAGE BUT PURE, SINCERE, CHARITABLE AND FOR PUBLIC UTILITY AT LARGE. WHAT IS IMPLICIT IS THAT THE CIT HAS TO SINCERELY EXAMINE THAT THE OBJECTS A S ALSO THE ACTIVITIES SHOULD NOT BE PRIMA FACIE AGAINST THE BASIC STRUCTU RE FOR WHICH BENEFICIAL LAW IS MADE AND ALSO BE NOT IN CONFLICT WITH THE GE NERAL PUBLIC UTILITY. NATURALLY AN INSTITUTION IF ESTABLISHED TO CARRY OU T AN ILLEGAL ACTIVITY OR ACTIVITIES ARE CAUSING ANY TYPE OF NUISANCE NOT IN THE INTEREST OF THE PUBLIC AT LARGE SHOULD DEFINITELY LEAD TO CANCELLATION OF REG ISTRATION. THEREFORE, THIS IS THE FIRST REQUISITE OF THE STATUTE TO MANDATE FOR T HE REGISTRATION AND IN THE ABSENCE OF SUCH REGISTRATION DISENTITLEMENT OF EXEM PTION. SO WHAT IS EXPLICIT IS THAT THOUGH AN INSTITUTION MAY BE DOING CHARITAB LE ACTIVITIES AS PRESCRIBED BUT IN THE ABSENCE OF REGISTRATION CANNOT BE ENTITL ED FOR THE EXEMPTIONS OR BENEFITS OF SS. 11 AND 12 OF THE ACT. IT IS ALSO EX PLICIT THAT REGISTRATION IPSO FACTO DOES NOT NECESSARILY ENTITLE AN INSTITUTION T O GET THE RECEIPTS EXCLUDED FROM THE INCOME OR EXEMPTION BE GRANTED AUTOMATICAL LY BY JUST SHOWING THE REGISTRATION CERTIFICATE TO THE REVENUE AUTHORITIES . IN NO WAY THE REGISTRATION CERTIFICATE IS A LICENSE TO DO ANY TYPE OF ACTIVITY AND TO GET AWAY FROM THE AMBITS OF THE TAX. AN INSTITUTION HAS TO FOLLOW THE NORMS AS LAID DOWN IN OTHER RELATED SECTIONS FOR AVAILING PRESCRIBED BENE FITS. 11.6 PROCEDURE OF REGISTRATION IS A FIRST STEP AND A PRELIMINARY STAGE WHERE THE CIT SHALL RESTRICT THE ENQUIRIES AS TO WHETHER THE TRUST IS ACTUALLY AND WHOLE HEARTEDLY PERFORMING ALL THE DUTIES AND ACTIV ITIES FOR WHICH IT WAS CREATED. ON CAREFUL READING OF THIS SECTION IT WAS GATHERED THAT AT THIS INITIAL STAGE THERE IS NO SCOPE OF ANY APPREHENSION OF MISU TILIZATION 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 UTILIZA TION OF THE INCOME, EVEN IF, AT ALL THE TRUST HOLDS THE REGISTRATION IN ITS HAND S. THEREFORE AT THE STAGE OF GRANTING REGISTRATION THE CIT IS NOT EXPECTED TO BO THER 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 MAND AL TRUST VS. DIRECTOR OF IT (EXEMPTION) (SUPRA), A PORTION REPRODUCED BEL OW (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 O F PUBLIC AT LARGE WITHOUT THERE BEING ANY ACTIVITY UNDERTAKEN AS PER OBJECT C LAUSE NOS. 3(1) AND 3(2), IT WOULD BE DEPRIVED OF ANY BENEFITS WHICH OTHERWIS E WERE AVAILABLE TO IT UNDER S. 11 OR S. 12. THIS CERTAINLY IS NOT THE LEG ISLATIVE INTENTION AS REFLECTED IN THE SCHEME LAID DOWN IN SS. 11, 12, 12 A, 12AA AND 13. ON THE CONTRARY, THE PHRASEOLOGY OF S. 13, AS ALREADY DISC USSED, MAKES IT EXPLICITLY 36 ITA NO.1166 & 1167/PN/2014 CLEAR THAT THE SAID PROVISIONS BECOME OPERATIVE OR RELEVANT ONLY AT THE STAGE OF ASSESSMENT WHEN THE AO IS REQUIRED TO EXAMINE TH E CLAIM OF THE ASSESSEE FOR BENEFITS UNDER S. 11 OR S. 12 WHILE CO MPUTING THE TOTAL INCOME OF THE ASSESSEE OF THE RELEVANT PREVIOUS YEAR. THE APPLICATION OF S. 13 THUS FALLS WITHIN THE EXCLUSIVE DOMAIN OF THE AO AND THE PROVISIONS CONTAINED THEREIN CAN BE INVOKED BY HIM WHILE FRAMING THE ASS ESSMENT AND NOT BY THE CIT WHILE CONSIDERING THE APPLICATION FOR REGISTRAT ION UNDER S. 12AA.' 11.7 AN ANOTHER FEATURE OF THE IMPUGNED ORDER OF TH E LEARNED CIT IS IN FACT BOTHERING US THAT NOWHERE HE HAS TAKEN ANY OBJECTIO N TO THE CHARITABLE AND EDUCATIONAL NATURE OF THE INSTITUTION. IN FACT, THE OBJECTS OF THE INSTITUTION AS DECLARED IN THE TRUST DEED, WHICH ARE EXTRACTED EAR LIER, DOES REFLECT THAT ALL ARE PHILANTHROPIC OR BENEVOLENT IN NATURE, PRECISEL Y FOR THE PURPOSE OF IMPARTING EDUCATION. STRANGE ENOUGH THERE IS NO FIN DING RECORDED BY THE LEARNED CIT CONTRARY TO THIS FACT. BE THAT AS IT MA Y, THE REAL AND THE ONLY SUBSTANTIAL OBJECTION FOR REFUSAL OF REGISTRATION W AS THAT THE INSTITUTION HAS COLLECTED DONATIONS THUS ADOPTED SOME WRONG MEANS O F COLLECTION OF FEES. BUT WHETHER AT THIS PRELIMINARY STAGE HE HAD THE RI GHT TO DRAW AN ADVERSE INFERENCE SO AS TO REFUSE REGISTRATION OR ALTERNATI VELY CONFINE HIMSELF TO THE ENQUIRY ABOUT THE OBJECTS AND THE ACTIVITIES OF THE TRUST AS PER THE LIMITS OF THE JURISDICTION OF S. 12AA OF THE ACT. RATHER THIS IS ALSO NOT THE CASE OF THE LEARNED CIT THAT THE INSTITUTION IS DOING SOME OTHE R ACTIVITY OF EARNING PROFIT OTHER THAN THE ACTIVITY OF RUNNING EDUCATIONAL INST ITUTIONS. THE ESTABLISHED FACTUAL POSITION IS THAT THE INSTITUTION IS NOT DOI NG IN ANY OTHER ACTIVITY EXCEPT RUNNING EDUCATIONAL INSTITUTIONS. IN SUCH CIRCUMSTA NCES, CAN WE UPHOLD THE ACTION OF CANCELLATION OF REGISTRATION ? ANSWER IS OBVIOUS NO. 11.8 WHILE READING THE PRECEDENTS CITED FROM THE SI DE OF THE APPELLANT WE COME ACROSS A DECISION OF A RESPECTED CO-ORDINATE B ENCH TRIBUNAL, KOLKATA PRONOUNCED IN THE CASE OF KALINGA INSTITUTE OF INDU STRIAL TECHNOLOGY (SUPRA) AND HAVE FOUND THAT ALMOST ON IDENTICAL SITUATION, AS IN THE PRESENT APPEAL, IT WAS HELD THAT CONSEQUENCE UPON A SEARCH WHILE TH E ASSESSMENT PROCEEDINGS ARE PENDING A CANCELLATION OF REGISTRAT ION BY INVOKING S. 12AA(3) IS A PREMATURE ACTION ON THE PART OF CIT, B ECAUSE IT IS EXPECTED FROM HIM TO TAKE PRECAUTION TO LET THE ASSESSMENT G ET COMPLETED, IF POSSIBLE EXPEDITIOUSLY, INSTEAD OF RUSHING TO CANCEL THE REG ISTRATION WHICH SHALL EFFECT AND INTERRUPT THE OTHER PROCEEDINGS UNDER THE ACT A ND SO PREMATURELY PUNISH A PERSON WITHOUT JUDICIOUS HEARING AS PRESCR IBED 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 SE CTOR ASSET RISK FUND VS. CIT (ITA NO. 61/ASR/2006 ORDER DT. 1ST SEP T., 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., 2 004, TO ENQUIRE ABOUT THE GENUINENESS OF THE ACTIVITIES OF A TRUST AND TO SAT ISFY HIMSELF THAT SUCH ACTIVITIES ARE BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. SECONDLY IN CASE OF DISSATISFACTION HE IS EMPOWERED TO CANCEL THE ALREADY GRANTED REGISTRATION. THIRDLY IN CASE IT IS FOUND T HAT THE ACTIVITIES ARE NOT IN CONFORMITY WITH THE OBJECT THAT TOO IS THE GOOD REA SON FOR CANCELLATION OF REGISTRATION. FOURTHLY THE SWEEP OF THE SECTION IS WIDE ENOUGH TO EMPOWER THE CIT TO EXAMINE THE NATURE OF THE OBJECT WHETHER FOR GENERAL PUBLIC UTILITY AND PHILANTHROPIC IN NATURE. IN OUR CONSCIENTIOUS V IEW THERE IS NO DISAGREEMENT ABOUT THE ABOVE-MENTIONED FOUR LEGAL P ROPOSITION AS ERUDITELY LAID DOWN BY THE RESPECTED AMRITSAR BENCH . UNDISPUTEDLY WE HAVE ALSO TO DECIDE THIS APPEAL MORE OR LESS WITHIN THES E PARAMETERS. BUT THE BASIC QUESTION IS THAT BEFORE STEPPING TOWARDS THE CANCELLATION OF REGISTRATION THE HEAVY BURDEN IS ON THE LEARNED CIT TO CONCLUSIVELY DEMONSTRATE THAT ALL HAD GONE HAYWIRE I.E., OBJECTS ARE MEANT FOR PERSONAL BENEFITS; THAT ENGAGED IN IMMORAL ACTIVITIES OR THA T THERE IS NO ELEMENT OF PUBLIC BENEFIT. IN THE PRESENT APPEAL NONE OF THE A BOVE CRITERIA FOR REJECTION OF REGISTRATION WAS IN EXISTENCE, HOWEVER MAINLY CO NFINED TO THE FINDING THAT 37 ITA NO.1166 & 1167/PN/2014 BY CHARGING DONATION THE TRUST HAS INFRINGED THE RU LES OF PROHIBITION OF CAPITATION FEE ACT. 11.10 BEFORE WE PART WITH IT IS WORTH TO CITE AN ANOTHER LATEST DECISION PRONOUNCED BY RESPECTED CO-ORDINATE BENCH OF CHANDI GARH IN THE CASE OF HIMACHAL PRADESH ENVIRONMENT PROTECTION AND POLLUTI ON CONTROL BOARD VS. CIT (ITA NO. 74/CHD/2009) [REPORTED AT (2009) 125 T TJ (CHD) 98 : (2009) 28 DTR (CHD)(TRIB) 289ED.] WHEREIN THE WORTH NOTIN G OBSERVATIONS WERE AS FOLLOWS : '17. ON A PERUSAL OF THESE OBJECTIVES, AS SANCTIONE D BY THE STATUTE, IT IS OBVIOUS THAT THE ACTIVITIES PERFORMED BY THE ASSESS EE TRUST ARE REGULATORY FUNCTIONS FOR THE PUBLIC GOOD, AND ANY COLLECTION F OR FEES OR CHARGES, IN THE COURSE OF DISCHARGING THESE REGULATORY FUNCTIONS, C ANNOT BE VIEWED AS A CONSIDERATION OF RENDERING THESE SERVICES OF POLLUT ION CONTROL MEASURES. WE ARE UNABLE TO SEE ANY SUBSTANCE IN LEARNED CIT'S ST AND THAT THE INCOME EARNED BY ASSESSEE AS LICENCE FEES, CONSENT FEES AN D TESTING CHARGES ARE RECEIPTS IN CONSIDERATION OF RENDERING THE SERVICES TO TRADE, COMMERCE OR BUSINESS. WHAT IS TERMED AS CONSENT FEES IS IN FACT FEES ACCOMPANYING THE APPLICATION FOR OBTAINING CONSENT (I.E., PERMISSION ) OF THE ASSESSEE BOARD TO SET UP A NEW UNIT. 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 S ERVICE OF POLLUTION CONTROL WHICH IS UNDISPUTED SOLE OBJECT OF THE ASSESSEE TRU ST. SIMILARLY, FEES FOR TESTING CHARGES AND LICENCE FEES ARE NOT ALSO TOWAR DS 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 G ETTING THE SAMPLES TESTED OR PROCESSING OF LICENCES. IN ANY EVENT, THESE ACTI VITIES, IF THESE CAN BE AT ALL BE CONSTRUED AS RENDERING OF SERVICES, THESE AR E WHOLLY SUBSERVIENT TO THE PUBLIC UTILITY OBJECTIVE OF POLLUTION CONTROL, AND, IT CANNOT BE ANYONE'S CASE THAT EVEN THOUGH THE STATE POLLUTION BOARDS LI KE 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 O F' GENERAL PUBLIC UTILITY' WILL ONLY BE A MASK OR A DEVICE TO HIDE THE TRUE PU RPOSE WHICH IS TRADE, COMMERCE, OR BUSINESS OR RENDERING OF ANY SERVICE I N RELATION TO TRADE, COMMERCE OR BUSINESS'. 19. IN ANY EVENT, AS A PLAIN READING OF S. 12AA(3) WOULD INDICATE THAT A REGISTRATION GRANTED UNDER S. 12AA CAN ONLY BE WITH DRAWN WHEN THE CIT IS SATISFIED THAT (A) THE ACTIVITIES OF THE TRUST OR T HE INSTITUTION ARE NOT 'GENUINE'; OR (B) THE ACTIVITIES OF THE ASSESSEE ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR THE INSTITUTION. T HERE CANNOT BE ANY OTHER LEGALLY SUSTAINABLE REASON FOR CANCELLING OR WITHDR AWING THE REGISTRATION GRANTED UNDER S. 12AA. BY NO STRETCH OF LOGIC, THE ACTIVITIES OF THE ASSESSEE CAN BE SAID TO BE NOT GENUINE AND THE ASSESSEE IS A DMITTEDLY PURSUING THE OBJECTS FOR WHICH IT WAS ESTABLISHED. WHEN THE ASSE SSEE IS ENGAGED IN BONA FIDE ACTIVITIES, WITH THE FRAMEWORK OF LAW, TO PURSUE ITS OBJECTIVES, IT CANNOT BE SAID THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT GENUINE. LEARNED CIT HAS ALSO NOT BROUGHT ON RECORD ANY MATERIAL TO DEMONSTRATE ACTIVITIES OF THE ASSESSEE ARE NOT BEING CARRIED OUT IN ACCORDANC E WITH THE OBJECTS OF THE TRUST OR THE INSTITUTION. UNDER THESE CIRCUMSTANCES , THE WITHDRAWAL OF REGISTRATION GRANTED UNDER S. 12AA CANNOT BE SUSTAI NED IN LAW. LEARNED CIT HAS EXTENSIVELY REFERRED TO AS TO WHY THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION UNDER S. 11 AS THE ACTIVITIES OF THE ASSE SSEE CANNOT BE SAID TO BE FOR 'CHARITABLE PURPOSES' DEFINED UNDER S. 2(15) , BUT THEN THIS ASPECT OF THE MATTER IS RELEVANT FOR THE ASSESSMENT PROCEEDIN GS AND NOT IN THE CONTEXT OF EXERCISE OF CIT'S POWERS UNDER S. 12AA(3 ). THE IMPUGNED ORDER PASSED BY THE LEARNED CIT IS THUS VITIATED IN LAW O N THIS COUNT AS WELL. 38 ITA NO.1166 & 1167/PN/2014 20. FOR THE DETAILED REASONS SET OUT ABOVE, WE QUAS H THE ORDER OF THE LEARNED CIT AND HOLD THAT THE LEARNED CIT DID NOT H AVE ANY GOOD REASONS, SUSTAINABLE IN LAW, TO WITHDRAW THE REGISTRATION. T HE IMPUGNED ORDER IS ACCORDINGLY SET ASIDE.' ON READING THE ABOVE VERDICT IT IS GATHERED THAT IF THE OBJECTS AS PERMISSIBLE IN THE EYES OF LAW ARE CARRIED OUT LEGALLY AND THE OBJECT OF ADVANCEMENT OF EDUCATION AS ALSO THE OBJECT OF GENERAL PUBLIC UTIL ITY ARE CARRIED OUT WITH DUE SINCERITY THEN THE CLAIM OF REGISTRATION IS WITHIN THE AMBIGUITY OF S. 12A OF THE ACT. 11.11 AS FAR AS THE OBJECTIVE OF THE APPELLANT IS CONCERN ED THIS IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE WAS NOT IMPAR TING EDUCATION. AS WE KNOW THE TERM EDUCATION MEANS TO TEACH SUBJECTS TO STUDENTS FOR THE DEVELOPMENT OF HIS MIND AND ALSO TO EQUIP STUDENTS TO DEAL WITH REALITY. THE TRAINING PROCESS IS EITHER THEORETICAL OR PRACTICAL BUT STUDENT HAS TO BE TAUGHT THE ESSENTIALS OF THE SELECTED SUBJECTS SO A S TO DEVELOP HIS SKILL AND KNOWLEDGE FOR THE SUBJECTS STUDIED BY HIM. THE APPE LLANT INSTITUTE, ADMITTEDLY, FULFILS THE REQUIREMENTS OF IMPARTING F ORMAL EDUCATION BY A SYSTEMATIC TEACHING AND INSTRUCTIONS. SINCE THE QUE STION ABOUT THE IMPARTING OF EDUCATION HAS NOT BEEN DOUBTED OR CHAL LENGED BY THE REVENUE THEREFORE. IN OUR CONSIDERED OPINION THE IMPUGNED O RDER PASSED BY THE RESPONDENT IS UNSUSTAINABLE IN LAW. STRANGE ENOUGH THERE IS NOTHING ON RECORD TO PROVE SIGHTLESSLY THAT THE PURPOSE OF IMP ARTING OF EDUCATION WAS NOT FULFILLED BY THIS INSTITUTE THUS THE REVENUE DE PARTMENT HAS HOPELESSLY FAILED TO ESTABLISH THAT THERE WAS ANY ILLEGAL ACTI VITY OR INFRINGEMENT OF ANY LAW SO THAT TO DOUBT THE GENUINENESS OF THE ACTIVIT IES. IF IT WAS SO THEN IT CAN BE HELD THAT THE ALLEGATIONS OF THE REVENUE AS DISC USSED ABOVE, REMAINED UNSUPPORTED THUS DESERVES OUR DISMISSAL. 11.12 BASED UPON THE FACTS OF THIS CASE, WE NOW SUM UP AB OVE DISCUSSION; THE SINE QUA NON FOR CANCELLATION OF REGISTRATION A RE TWO CONDITIONS PRESCRIBED IN S. 12AA(3) NEEDS TO BE SATISFIED ARE : (A) THAT ACTIVITIES OF THE TRUST/INSTITUTION ARE NO T GENUINE. (B) THAT ACTIVITIES OF THE TRUST ARE NOT CARRIED OU T IN ACCORDANCE WITH THE OBJECTS OF THE TRUST/INSTITUTION. THUS THE FINDINGS OF THE LEARNED CIT HAS NOT TO BE ONLY CONCEPTUAL OR CONTEXTUAL BUT SHOULD BE WITHIN THE FOUR CORNERS OF LAW SO THAT NOT SURPASSING THE POWER, AS LISTED ABOVE, GRANTED IN S UB-S. (3) OF S. 12AA. BUT UNFORTUNATELY THE FALLACY IS WRIT LARGE AS GATHERED ON PERUSING THE IMPUGNED ORDER. WE CAN HOLD THAT THE CIT'S APPROACH FOR DECI DING THE ELIGIBILITY OF REGISTRATION OF A TRUST SHOULD BE DIFFERENT FROM TH E ANGLE BY WHICH AN ASSESSMENT OF AN INCOME IS MADE BY THE AO. WE ARE A FRAID ABOUT THE RAMIFICATION IF WE APPROVE THE ACTION OF LEARNED CI T BECAUSE IN THAT CASE IT MAY ADVERSELY AFFECT THE IMPARTING OF EDUCATION ESP ECIALLY WHEN THE REVENUE HAS NOT MADE OUT A CASE THAT THE VERY PURPO SE FOR CREATION OF THE TRUST WAS DEFEATED. RATHER WE WONDER THAT WHAT PURP OSE DOES IT SERVE TO REVENUE BY CANCELLING A REGISTRATION IF THE ACTIVIT IES ARE IN PUBLIC INTEREST BECAUSE IN CASE OF ANY BREACH OF THE LAWS THE SAME IS SUBJECT TO TAX UNDER SS. 11 AND 12 OF IT ACT. THESE TWO PROVISIONS AND F EW OTHER PROVISIONS ARE COMPETENT ENOUGH TO TACKLE FIRMLY A DEFAULTER OF PH ILANTHROPIC APPLICATION OF INCOME OR FUNDS OF THE TRUST. THE OTHER ADVERSE SID E OF CANCELLATION IS THAT ON REFUSAL OF REGISTRATION THE ENTIRE RECEIPTS SHAL L BE SUBJECT TO ASSESSMENT WITHOUT GRANTING BENEFIT OF S. 11 AND S. 12 OF IT A CT TO ASSESS INCOME WHICH DO NOT FORM PART OF TOTAL INCOME THOUGH THE FACTUAL POSITION COULD BE THAT MAJOR PART MIGHT HAVE BEEN DEVOTED TOWARDS ACHIEVIN G THE OBJECTS I.E., IMPARTING EDUCATION, AS IN THIS CASE, BUT THE AO SH ALL BE AUTOMATICALLY FORBIDDEN TO GRANT ADVANTAGE OF EXEMPTION CONSEQUEN T UPON THE CANCELLATION AS IS MANDATORY IN STATUTE; RELEVANT S ECTION ALREADY REPRODUCED ANTE. THE OUTCOME OF THE DELIBERATION MADE IN DETAI L HEREINABOVE IS THAT 39 ITA NO.1166 & 1167/PN/2014 PERCURIAN OPINION IS TO DEBAR THE CIT TO ENTER INTO THE AREA OF INVESTIGATION OF SOURCE OF INCOME AND ALSO APPLICATION OF INCOME, SO THAT THE AMOUNT OF CORRECT EXEMPT INCOME BE NOT PREJUDGED. 11.13 THE ASPECT OF MORALITY AS TOUCHED BY THE LEARNED CI T IS APPRECIABLE. EVERY VIGILANT AND LAW ABIDING CITIZEN HAS TO BE FA IR IN HIS CONDUCT AND SHOULD REFRAIN FROM IMMORAL ACTIVITIES. BUT EXISTIN G BLUE LAWS ARE DERIVED FROM THE NUMEROUS EXTREMELY RIGOROUS LAWS DESIGNED TO REGULATE MORALS AND CONDUCT. THESE LAWS ARE ENACTED IN SUCH A FASHI ON THAT IF IMPLEMENTED CORRECTLY AND EFFICIENTLY THEN THERE IS NO SCAPEGOA T FOR AN OFFENDER. WE ARE TEMPTED TO WRITE AN IDIOMATIC LANGUAGE DUE TO THE S ENSITIVITY OF THE ISSUE, THAT A CIT CANNOT BE ALLOWED TO HOLD A BATON OF MOR ALITY IN HIS HAND TO HIT AN IMMORAL; BUT THE STATUTE HAS GIVEN HIM A FLEXIBLE S TICK FOR INFLICTING TAX ON DEFAULTER; THAT INCLUDES A TRUST OR EDUCATIONAL INS TITUTION. THE GIST IS THAT IF THE CIT HAD AN INFORMATION OF SOME WRONGFUL MEANS O F EARNING FEES IN THE FORM OF A DONATION OR THE INFORMATION TELLS ABOUT E XCESSIVE CHARGING OF FEES; THEN THE CIT IN HIS RIGHTS CAN PASS ON THE INFORMAT ION TO THE CONCERNED OFFICE BEARERS WORKING UNDER THE MAHARASHTRA CAPITA TION FEES (PROHIBITION) ACT. THESE AUTHORITIES HAVE ENOUGH POWER TO DEAL WI TH SUCH NATURE OF DEFAULT, SIDE BY SIDE THE CIT IS TO LIMIT HIS JURIS DICTION WITHIN THE AMBITS OF PROVISIONS OF THE ACT AND EXPECTED TO GIVE A FINDIN G ON FACTS THAT EITHER THE OBJECTS ARE NOT FOR GENERAL PUBLIC UTILITY OR NOT A CHIEVED AS PRESCRIBED UNDER LAW. HOWEVER PRESENTLY THE SITUATION IS THAT THE RE VENUE HAS NOT SAID ABOUT ANY IMMORAL ACTIVITY OF THE APPELLANT OR THE COLLEC TION OF FEES WAS BY WRONGFUL MEANS; HENCE DEREGISTRATION SANS OUR APPRO VAL. NEVERTHELESS THE LIST OF FIFTEEN CASES, AS HIGHLIGHTED BY LEARNED CI T, LACK DESIRED POSITIVE FINDING AS IT WAS LEFT BLANK ON THE EXCUSE THAT EVE N THE OTHER AUTHORITIES COULD NOT LAY THEIR HANDS ON ALLEGED DEFAULTS SO IT WAS ALSO DIFFICULT FOR THE REVENUE AUTHORITIES TO TRACE THE CORRECT POSITION. WHILE DEALING WITH THE FACTS ANTE, IT WAS FOUND THAT AFTER EXHAUSTIVE ENQU IRY FEW INSTANCES; FIFTEEN IN NUMBERS; WERE NOTICED BY THE REVENUE AUTHORITIES WHEREIN IT WAS ALLEGED TO BE THE INFRINGEMENT OF CAPITATION FEE ACT. BUT T HE IRONY IS THAT IN THE SAME BREATH THE LEARNED CIT HAS ACCEPTED THE STAND OF THE ASSESSEE THAT IT CAN CHARGE FIVE TIMES THE NORMAL FEES IN CASE OF AD MISSION IN THE DEFINED MANAGEMENT QUOTA. THEREUPON THERE WAS A CIRCUMVENT IN THE APPROACH OF THE LEARNED CIT THAT THE AMOUNT OF DONATION BE CONS IDERED TOGETHER WITH THE FEES TO FIND OUT THE VIOLATION OF PROHIBITION O F CAPITATION FEE ACT. BUT ON FACTS THAT TOO DID NOT STAND THE TEST OF THOSE PROV ISIONS SINCE ADMITTEDLY DID NOT EXCEED THE PRESCRIBED LIMIT. 11.14 FACTS OF THIS APPEAL ARE PECULIAR, AS ALREADY DISCU SSED IN ABOVE PARAS IN DETAIL AND THEREUPON CAN COMMENT THAT PRIM A FACIE NO CASE WAS MADE OUT BY THE LEARNED CIT SO AS TO EVEN VAGUELY D EMONSTRATE THAT THE ACTIVITIES OF THE APPELLANT WERE NOT GENUINE OR ACT IVITY OF IMPARTING OF EDUCATION, FOR WHICH THE TRUST WAS CREATED, WERE NO T CARRIED OUT. EVEN THE LEARNED CIT HAS FAILED TO ESTABLISH THAT ANY PART O F THE INCOME/RECEIPT OF THE TRUST WAS IN ANY MANNER MISUTILIZED BY THE TRUSTEES FOR THEIR PERSONAL BENEFIT I.E., NOT IN FULFILLMENT OF THE OBJECT OF THE TRUST . OTHERWISE ALSO THERE ARE THREE WAYS TO LOOK AT THIS PROBLEM. ONE IS, THAT TH E DONATIONS ARE RAISED BUT NOT UTILIZED FOR ACHIEVING THE OBJECTS I.E., TOWARD S IMPARTING EDUCATION; THEN SUCH AN INSTITUTION MUST BEAR THE CONSEQUENCE OF CA NCELLATION OF REGISTRATION SINCE IPSO FACTO INFRINGED S. 12AA(3) CONDITION. SECOND ASPECT IS, THAT THOUGH THE DONATIONS RECEIVED ARE MEANT TO FULFILL THE OBJECTS BUT TOGETHER WITH FEES HAVE INFRINGED ANTI CAPITATION P ROHIBITION ACT; THEN COMES WITHIN THE CLUTCHES OF THAT ACT BUT DEFINITEL Y 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 OT HER THAN THE PRESCRIBED ACTIVITY THEN NO ACTION CAN BE SUGGESTED UNDER S. 1 2AA(3). THE ASSESSEE'S CASE FALLS UNDER THE THIRD CATEGORY. WITH THE RESUL T, TOTALITY OF THE CIRCUMSTANCES THUS WARRANTS, IN THE LIGHT OF THE FO REGOING DISCUSSION, NOT TO ENDORSE THE VIEW OF THE LEARNED CIT; CONSEQUENCE TH ERE UPON REVERSE 40 ITA NO.1166 & 1167/PN/2014 THOSE FINDINGS. THE ORDER OF CANCELLATION OF REGIST RATION 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 VIOL ATION OF PROVISIONS OF MAHARASHTRA EDUCATIONAL INSTITUTIONS (PROHIBITION O F CAPITATION FEE) ACT, 1987 FOR WHICH THE ACTIVITIES OF THE ASSESSEE TRUST ARE ILLEGAL AND THEREFORE THE ACTIVITIES ARE NOT GENUINE IS NOT CORRECT. FUR THER, THE CONCLUSION OF THE LD. CIT THAT THE INSTITUTES ARE BEING RUN ON COMMER CIAL LINES WITH PROFIT MOTIVE DUE TO THE SUBSTANTIAL SURPLUS CREATED YEAR AFTER YEAR IS ALSO NOT CORRECT SINCE THE ASSESSEE HAS ACCUMULATED ITS SURP LUS WHICH IS WITHIN THE PERMISSIBLE LIMIT OF 15% U/S.11 AND 12. 8.11 SO FAR AS THE 2 DECISIONS RELIED ON BY LD.CIT ARE CONCERNED WE FIND THE LD. COUNSEL FOR THE ASSESSEE HAS DISTINGUISHED THE SAME. WE FULLY AGREE WITH HIS ARGUMENTS. IN ANY CASE SINCE 2 VIEW S ARE POSSIBLE ON THIS ISSUE, THE VIEW IN FAVOUR OF THE ASSESSEE HAS TO BE ADOPTED IN VIEW OF THE SETTLED PROPOSITION OF LAW. IN THIS VIEW OF THE MA TTER, WE HOLD THAT THE LD. CIT IS NOT JUSTIFIED IN CANCELLING THE REGISTRATION U/S.12A OF THE I.T. ACT, 1961. WE ACCORDINGLY SET-ASIDE THE ORDER OF THE LD .CIT AND DIRECT HIM TO GRANT REGISTRATION U/S.12A OF THE INCOME TAX ACT. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE AR E ACCORDINGLY ALLOWED. 69. ALTHOUGH THE ABOVE DECISION WAS RENDERED IN THE C ONTEXT OF DENIAL OF REGISTRATION U/S.12A OF THE I.T. ACT WE FIN D THE ISSUE THERE WAS ALSO DENIAL OF REGISTRATION U/S.12A ON THE GROUND THAT THE INSTITUTIONS ARE ACCEPTING CAPITATION FEE IN GUISE OF VOLUNTARY D ONATIONS AND ARE BEING RUN ON COMMERCIAL LINES WITH PROFIT MOTIVE. T HEREFORE, THE RATIO THAT WHETHER THE INSTITUTIONS ARE BEING RUN ON COMMER CIAL LINES WITH PROFIT MOTIVE DUE TO ACCEPTANCE OF CAPITALISATION FE E IN GUISE OF DONATION WILL BE APPLICABLE TO THE FACTS OF THE PRESENT CASE. 70. WE FIND THE BANGALORE C BENCH OF THE TRIBUNAL IN THE CASE OF SADVIDYA EDUCATIONAL INSTITUTION VS. ADD.CIT WHILE DE CIDING AN IDENTICAL ISSUE WHERE ASSESSEE TRUST WAS COLLECTING VOLUNTARY CONTRIB UTIONS, DONATIONS AGAINST BUILDING FUND, DEVELOPMENT FUND AG AINST ADMISSIONS UNDER MANAGEMENT QUOTA FOR WHICH EXEMPTION U/S.11 WA S DENIED BY THE ASSESSING OFFICER HAS HELD AS UNDER (HEAD NOTES) : CHARITABLE OR RELIGIOUS TRUSTEXEMPTION U/S 11ASS ESSEE-TRUST WAS A REGISTERED SOCIETY AND RAN SEVERAL EDUCATIONAL INST ITUTIONS IN CITY OF MYSORE STARTING FROM NURSERY TO PUCASSESSEE TRUST WAS ALS O REGISTERED U/S 12AA AND HAD ALSO OBTAINED EXEMPTION U/S 11 AND 12 SOME OF THE EDUCATIONAL INSTITUTIONS RUN BY ASSESSEE WERE AIDED INSTITUTIONS, AND AS PER NORMS FIXED BY STATE GOVERNMENT, ASSESSEE WAS ENTIT LED TO GIVE 50% OF ADMISSIONS UNDER MANAGEMENT QUOTA IN RESPECT OF PU COURSEASSESSEE FILED ITS RETURNS OF INCOME, ADMITTING 'NIL' INCOME FOR AYS 2006-07 & 2008- 09 AND DECLARING A LOSS FOR AY 2007-08 AFTER CLAIMI NG EXEMPTION U/S 11(1)(A) AND 11(1)(D)IN MEANWHILE, SURVEY WAS COND UCTED U/S 133A IN ASSESSEE'S PREMISES AND CERTAIN BOOKS AND DOCUMENTS CONTAINING DETAILS OF STUDENT WISE DONATIONS COLLECTED BY WAY OF DDS A ND DONATION RECEIPT BOOKS FOR ADMISSIONS GIVEN DURING FYS 2005-06 AND 2 006-07 RELATING TO FEES AND ALLEGED DONATIONS COLLECTED FROM STUDENTS WHO GOT ADMISSIONS INTO THE SCHOOLS/COLLEGE RUN BY THE ASSESSEE WERE I MPOUNDED AND STATEMENT OF SECRETARY OF ASSESSEE WAS ALSO RECORDE DAO OBSERVED THAT ASSESSEE WAS COLLECTING VOLUNTARY CONTRIBUTIONS/BUI LDING FUND/DEVELOPMENT FUNDS AGAINST ADMISSIONS GIVEN UNDER MANAGEMENT QUO TA IN INSTITUTIONS RUN BY ASSESSEE AND WAS NOT ENTITLED TO CLAIM DEDUC TION 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 MANAGEME NT QUOTA AND VOLUNTARY CONTRIBUTIONS COLLECTED BY ASSESSEE- HELD , IF EDUCATIONAL 41 ITA NO.1166 & 1167/PN/2014 INSTITUTION HAS COLLECTED MONEY IN FORM OF VOLUNTAR Y 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 DE POSITED SAME IN THE BANK, REQUIREMENT OF SECTION 11(L)(D) IS FULFILLED ASSESSEE WAS RUNNING SEVERAL SCHOOLS STARTING FROM NURSERY TO PUC AND SA ID FACT HAS BEEN ENDORSED BY AONO QUESTION OF ASSESSEE COLLECTING ' CAPITATION FEES' IN GUISE OF 'BUILDING FUND OR DEVELOPMENT FEEFURTHER VOLUNTARY CONTRIBUTIONS RECEIVED WERE FOR THE SPECIFIC PURPOSE OF 'BUILDING FUND OR DEVELOPMENT FEE FURTHER VOLUNTARY CONTRIBUTIONS RECEIVED WERE FOR THE SPECIFIC PURPOSE OF BUILDING AND ASSESSEE HAD APPLIED SUCH CONTRIBUTI ONS TOWARDS OBJECT OF TRUST ASSESSEE HAD OBTAINED THE SIGNATURES OF THE PARENTS OF SUCCESSFUL STUDENTS IN PRE-PRINTED LETTERS BEFORE OBTAINING DO NATION AND SHOWN INSTATEMENT ASSESSEE WAS ENTITLED TO EXEMPTION U/ S.11 IN RESPECT OF BUILDING FUND AS WELL AS COLLEGE DEVELOPMENT FUN D ASSESSEES APPEAL ALLOWED. HELD : IN THE PRESENT CASE, EVEN IF THE FEES COLLECTED WER E IN VIOLATION OF THE NORMS SUBSCRIBED BY THE STATE GOVERNMENT, THE APPLICATION OF THE FUNDS WERE TOWARDS THE OBJECTS OF THE ASSESSEE TRUST AND AS SU CH, THERE WAS NO VIOLATION OF S.13 OF THE ACT AS ASCRIBED BY THE REV ENUE, THE ASSESSEE HAD OBTAINED THE SIGNATURES OF THE PARENTS OF THE SUCCE SSFUL STUDENTS IN PRE- PRINTED LETTERS WITHOUT GIVING THE DETAILS OF AMOUN TS' DONATED, DATE OF CONTRIBUTIONS ETC., BUT CONTAINED THE DONORS' NAMES AND THEIR ADDRESSES. HOWEVER, THE ASSESSING AUTHORITY HAD CHOSEN NOT TO CROSS-EXAMINE SUCH PARENTS WHO HAVE ADMITTED THEIR CHILDREN TO THE INS TITUTION OF THE ASSESSEE TO VERIFY THE VERACITY OF THE ASSESSEE'S CLAIM. 71. WE FIND THE CHENNAI BENCH OF THE TRIBUNAL IN TH E CASE OF PADANILAM WELFARE TRUST VS. DY.CIT REPORTED IN 10 ITR 479 HAS OBSERVED AS UNDER (HEAD NOTES) : CHARITABLE INSTITUTIONREGISTRATION UNDER S.12AAC IT WITHDRAWING REGISTRATION ALLEGING THAT CAPITATION FEES WAS COLL ECTED BY THE TRUSTEES AND THERE WAS DIVERSION AND MISUSE OF FUNDSVIOLATION O F PROHIBITION OF CAPITATION FEES ACT CANNOT BE A GROUND TO TAKE AWAY THE REGISTRATION OF A CHARITABLE ORGANIZATIONCAPITATION FEE PER SE IS NO T IN THE NATURE OF ILLEGAL INCOME-THERE IS NOTHING TO SHOW IN THE SEIZED MATER IALS THAT THE ASSESSEE HAD MADE ANY PROFIT OUT OF THE ACTIVITIES CARRIED O N BY IT AND ANY PORTION OF THAT PROFIT HAS BEEN ENJOYED BY ANY OF THE TRUSTEES OR THE RELATIVES. SURPLUS FUNDS OF THE ASSESSEE-TRUST YEAR TO YEAR HAVE BEEN USED ONLY FOR THE PURPOSES OF FURTHERING THE OBJECTS OF THE ASSESSEE- TRUSTTHERE IS NO DISTRIBUTION OF PROFIT OR SUCH OTHER BENEFITS TO TH E TRUSTEES OR RELATIVES OF THE ASSESSEE-TRUSTTHEREFORE ACTION OF THE CIT IN WITHD RAWING THE REGISTRATION GRANTED TO THE ASSESSEE UNDER S. 12AA IS NOT SUSTAI NABLE IN LAW HELD : IT IS FOUND THAT THE FIRST GROUND POINTED OUT BY TH E CIT TO CANCEL THE REGISTRATION GRANTED TO THE ASSESSEE UNDER S. 12A O N 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 HONBLE SUPREME COURT IN THE CASE OF M/S. QUEENS EDUCATIONAL SOCIETY VS. CIT VIDE CIVIL APPEAL NO.516 7/2008 ORDER DATED 16-03-2015 HAS APPROVED THE DECISION OF THE HONBLE P UNJAB AND HARYANA HIGH COURT IN THE CASE OF PINE GROVE INTERNA TIONAL CHARITABLE TRUST VS. UNION OF INDIA REPORTED IN 327 ITR 73 HAS OB SERVED AS UNDER : 42 ITA NO.1166 & 1167/PN/2014 23. THE PUNJAB AND HARYANA HIGH COURT, BY THE IMPU GNED JUDGMENT DATED 29TH JANUARY, 2010 EXPRESSED ITS DISSATISFACT ION 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 H IGH COURT IN THE CASE OF QUEENS EDUCATIONAL SOCIETY (SUPRA). THERE ARE VA RIETY OF REASONS TO SUPPORT OUR OPINION. FIRSTLY, THE SCOPE OF THE THIR D PROVISO WAS NOT UNDER CONSIDERATION, INASMUCH AS, THE CASE BEFORE THE UTT RAKHAND HIGH COURT PERTAINED TO SECTION 10(23C)(IIIAD) OF THE ACT. THE THIRD PROVISO TO SECTION 10(23C)(VI) IS NOT APPLICABLE TO THE CASES FALLING WITHIN THE PURVIEW OF SECTION 10(23C)(IIIAD). SECONDLY, THE JUDGMENT REND ERED BY THE UTTARKHAND HIGH COURT RUNS CONTRARY TO THE PROVISIONS OF SECTI ON 10(23C)(VI) OF THE ACT INCLUDING THE PROVISOS THEREUNDER. SECTION 10(23C)( VI) OF THE ACT IS EQUIVALENT TO THE PROVISIONS OF SECTION 10(22) EXIS TING EARLIER, WHICH WERE INTRODUCED WITH EFFECT FROM 1ST APRIL, 1999 AND IT IGNORES THE SPEECH OF THE FINANCE MINISTER MADE BEFORE THE INTRODUCTION OF TH E SAID PROVISIONS, NAMELY. SECTION 10(23C) OF THE ACT [SEE OBSERVATION S IN AMERICAN HOTEL AND LODGING ASSOCIATION EDUCATIONAL INSTITUTE'S CAS E (SUPRA)]. THIRDLY, THE UTTRAKHAND HIGH COURT HAS NOT APPRECIATED CORRECTLY THE RATIO OF THE JUDGMENT RENDERED BY HON'BLE THE SUPREME COURT IN T HE CASE OF ADITANAR EDUCATIONAL INSTITUTION(SUPRA) AND WHILE APPLYING T HE SAID JUDGMENT INCLUDING THE JUDGMENT WHICH HAD BEEN RENDERED BY H ON'BLE THE SUPREME COURT IN THE CASE OF CHILDREN BOOK TRUST (SUPRA), I T LOST SIGHT OF THE AMENDMENT WHICH HAD BEEN CARRIED OUT WITH EFFECT FR OM 1ST APRIL, 1999 LEADING TO THE INTRODUCTION OF THE PROVISIONS OF SE CTION 10(23C) OF THE ACT. LASTLY, THAT VIEW IS NOT CONSISTENT WITH THE LAW LA ID DOWN BY HON'BLE THE SUPREME COURT IN AMERICAN HOTEL AND LODGING ASSOCIA TION EDUCATIONAL INSTITUTE (SURPA). IT THEN SUMMED UP ITS CONCLUSIONS AS FOLLOWS: 8.13 FROM THE AFORESAID DISCUSSION, THE FOLLOWING PRINCIPLES OF LAW CAN BE SUMMED UP: (1) IT IS OBLIGATORY ON THE PART OF THE CHIEF COMMI SSIONER OF INCOME TAX OR THE DIRECTOR, WHICH ARE THE PRESCRIBED AUTHORITIES, TO COMPLY WITH PROVISO THIRTEEN (UN-NUMBERED). ACCORDINGLY, IT HAS TO BE A SCERTAINED WHETHER THE EDUCATIONAL INSTITUTION HAS BEEN APPLYING ITS PROFI T WHOLLY AND EXCLUSIVELY TO THE OBJECT FOR WHICH THE INSTITUTION IS ESTABLISHED . MERELY BECAUSE AN INSTITUTION HAS EARNED PROFIT WOULD NOT BE DECIDING FACTOR TO CONCLUDE THAT THE EDUCATIONAL INSTITUTION EXISTS FOR PROFIT. (2) THE PROVISIONS OF SECTION 10(23C)(VI) OF THE AC T ARE ANALOGOUS TO THE ERSTWHILE SECTION 10(22) OF THE ACT, AS HAS BEEN LA ID DOWN BY HON'BLE THE SUPREME COURT IN THE CASE OF AMERICAN HOTEL AND LOD GING ASSOCIATION (SUPRA). TO DECIDE THE ENTITLEMENT OF AN INSTITUTIO N FOR EXEMPTION UNDER SECTION 10(23C)(VI) OF THE ACT, THE TEST OF PREDOMI NANT 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 CONS TITUTION BENCH JUDGMENT IN THE CASE OF SURAT ART SILK CLOTH MANUFA CTURERS ASSOCIATION (SUPRA)]. IT HAS TO BE BORNE IN MIND THAT MERELY BE CAUSE PROFITS HAVE RESULTED FROM THE ACTIVITY OF IMPARTING EDUCATION W OULD NOT RESULT IN CHANGE OF CHARACTER OF THE INSTITUTION THAT IT EXISTS SOLE LY 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 AS SOCIATION'S CASE (SUPRA). THUS, ON AN APPLICATION MADE BY AN INSTITU TION, THE PRESCRIBED AUTHORITY CAN GRANT APPROVAL SUBJECT TO SUCH TERMS AND CONDITIONS AS IT MAY DEEMS FIT PROVIDED THAT THEY ARE NOT IN CONFLICT WI TH 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 43 ITA NO.1166 & 1167/PN/2014 REQUIREMENT. THEREAFTER THE ASSESSING AUTHORITY MAY ENSURE COMPLIANCE OF THOSE CONDITIONS. THE CASES WHERE EXEMPTION HAS BEE N GRANTED EARLIER AND THE ASSESSMENTS ARE COMPLETE WITH THE FINDING THAT THERE IS NO CONTRAVENTION OF THE STATUTORY PROVISIONS, NEED NOT BE REOPENED. HOWEVER, ALTER GRANT OF APPROVAL IF IT COMES TO THE NOTICE O F THE PRESCRIBED AUTHORITY THAT THE CONDITIONS ON WHICH APPROVAL WAS GIVEN, HA VE BEEN VIOLATED OR THE CIRCUMSTANCES MENTIONED IN 13TH PROVISO EXISTS, THE N BY FOLLOWING THE PROCEDURE ENVISAGED IN 13TH PROVISO, THE PRESCRIBED AUTHORITY CAN WITHDRAW THE APPROVAL. (3) THE CAPITAL EXPENDITURE WHOLLY AND EXCLUSIVELY TO THE OBJECTS OF EDUCATION IS ENTITLED TO EXEMPTION AND WOULD NOT CO NSTITUTE PART OF THE TOTAL INCOME. (4) THE EDUCATIONAL INSTITUTIONS, WHICH ARE REGISTE RED AS A SOCIETY, WOULD CONTINUE TO RETAIN THEIR CHARACTER AS SUCH AND WOUL D BE ELIGIBLE TO APPLY FOR EXEMPTION UNDER SECTION 10(23C)(VI) OF THE ACT. [SE E PARA 8.7 OF THE JUDGMENT-ADITANAR EDUCATIONAL INSTITUTION CASE (SUP RA)] (5) WHERE MORE THAN 15% OF INCOME OF AN EDUCATIONAL INSTITUTION IS ACCUMULATED ON OR AFTER 1ST APRIL, 2002, THE PERIOD OF ACCUMULATION OF THE AMOUNT EXCEEDING 15% IS NOT PERMISSIBLE BEYOND FIVE YEARS, PROVIDED THE EXCESS INCOME HAS BEEN APPLIED OR ACCUMULATED FOR A PPLICATION WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EDUCATION. (6) THE JUDGMENT OF UTTRAKHAND HIGH COURT RENDERED IN THE CASE OF QUEENS EDUCATIONAL SOCIETY (SUPRA) AND THE CONNECTED MATT ERS, IS NOT APPLICABLE TO CASES FALL WITHIN THE PROVISION OF SECTION 10(23C)( VI) OF THE ACT. THERE ARE VARIOUS REASONS, WHICH HAVE BEEN DISCUSSED IN PARA 8.8 OF THE JUDGMENT, AND THE JUDGMENT OF ALLAHABAD HIGH COURT RENDERED I N THE CASE OF CITY MONTESSORI SCHOOL (SUPRA) LAYS DOWN THE CORRECT LAW . AND FINALLY HELD: 8.15 AS A SEQUEL TO THE AFORESAID DISCUSSION, THES E PETITIONS ARE ALLOWED AND THE IMPUGNED ORDERS PASSED BY THE CHIEF COMMISS IONER OF INCOME TAX WITHDRAWING THE EXEMPTION GRANTED UNDER SECTION 10( 23C)(IV) OF THE ACT ARE HEREBY QUASHED. HOWEVER, THE REVENUE IS AT LIBERTY TO PASS ANY FRESH ORDERS, IF SUCH A NECESSITY IS FELT AFTER TAKING INTO CONSIDERATION THE VARIOUS PROPOSITIONS OF LAW CULLED OUT BY US IN PARA 8.13 AND VARIOUS OTHER PARAS. 8.16 THE WRIT PETITIONS STAND DISPOSED OF IN THE A BOVE TERMS. 24. THE VIEW OF THE PUNJAB AND HARYANA HIGH COURT H AS BEEN FOLLOWED BY THE DELHI HIGH COURT IN ST. LAWRENCE EDUCATIONAL SO CIETY (REGD.) V. COMMISSIONER OF INCOME TAX & ANR., (2011) 53 DTR (D EL) 130. ALSO IN TOLANI EDUCATION SOCIETY V. DEPUTY DIRECTOR OF INCO ME 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, F OLLOWING THE JUDGMENTS OF THIS COURT IN THE SURAT ART SILK MANUFACTURERS A SSOCIATION 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 STRE TCH 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 APPLIE D 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 EDUCATI ON AND THE PETITIONER EXISTS SOLELY FOR THE PURPOSES OF IMPARTING EDUCATI ON. AN INCIDENTAL SURPLUS WHICH IS GENERATED, AND WHICH HAS RESULTED IN ADDIT IONS TO THE FIXED ASSETS IS UTILIZED AS THE BALANCE-SHEET WOULD INDICATE TOW ARDS UPGRADING THE 44 ITA NO.1166 & 1167/PN/2014 FACILITIES OF THE COLLEGE INCLUDING FOR THE PURCHAS E OF LIBRARY BOOKS AND THE IMPROVEMENT OF INFRASTRUCTURE. WITH THE ADVANCEMENT OF TECHNOLOGY, NO COLLEGE OR INSTITUTION CAN AFFORD TO REMAIN STAGNAN T. THE INCOME-TAX ACT 1961 DOES NOT CONDITION THE GRANT OF AN EXEMPTION U NDER SECTION 10(23C) ON THE REQUIREMENT THAT A COLLEGE MUST MAINTAIN THE STATUS-QUO, AS IT WERE, IN REGARD TO ITS KNOWLEDGE BASED INFRASTRUCTURE. NO R FOR THAT MATTER IS AN EDUCATIONAL INSTITUTION PROHIBITED FROM UPGRADING I TS INFRASTRUCTURE ON EDUCATIONAL FACILITIES SAVE ON THE PAIN OF LOSING T HE BENEFIT OF THE EXEMPTION UNDER SECTION 10(23C). IMPOSING SUCH A CONDITION WH ICH IS NOT CONTAINED IN THE STATUTE WOULD LEAD TO A PERVERSION OF THE BASIC PURPOSE FOR WHICH SUCH EXEMPTIONS HAVE BEEN GRANTED TO EDUCATIONAL INSTITU TIONS. KNOWLEDGE IN CONTEMPORARY TIMES IS TECHNOLOGY DRIVEN. EDUCATIONA L INSTITUTIONS HAVE TO MODERNISE, UPGRADE AND RESPOND TO THE CHANGING ETHO S OF EDUCATION. EDUCATION HAS TO BE RESPONSIVE TO A RAPIDLY EVOLVIN G SOCIETY. THE PROVISIONS OF SECTION 10(23C) CANNOT BE INTERPRETED REGRESSIVE LY TO DENY EXEMPTIONS. SO LONG AS THE INSTITUTION EXISTS SOLELY FOR EDUCAT IONAL PURPOSES AND NOT FOR PROFIT, THE TEST IS MET. 25. WE APPROVE THE JUDGMENTS OF THE PUNJAB AND HARY ANA, DELHI AND BOMBAY HIGH COURTS. SINCE WE HAVE SET ASIDE THE JUD GMENT OF THE UTTARAKHAND HIGH COURT AND SINCE THE CHIEF CITS OR DERS CANCELLING EXEMPTION WHICH WERE SET ASIDE BY THE PUNJAB AND HA RYANA HIGH COURT WERE PASSED ALMOST SOLELY UPON THE LAW DECLARED BY THE UTTARAKHAND HIGH COURT, IT IS CLEAR THAT THESE ORDERS CANNOT STAND. CONSEQUENTLY, REVENUES APPEALS FROM THE PUNJAB AND HARYANA HIGH COURTS JU DGMENT DATED 29.1.2010 AND THE JUDGMENTS FOLLOWING IT ARE DISMIS SED. WE REITERATE THAT THE CORRECT TESTS WHICH HAVE BEEN CULLED OUT IN THE THREE SUPREME COURT JUDGMENTS STATED ABOVE, NAMELY, SURAT ART SILK CLOT H, ADITANAR, AND AMERICAN HOTEL AND LODGING, WOULD ALL APPLY TO DETE RMINE WHETHER AN EDUCATIONAL INSTITUTION EXISTS SOLELY FOR EDUCATION AL PURPOSES AND NOT FOR PURPOSES OF PROFIT. IN ADDITION, WE HASTEN TO ADD T HAT THE 13TH PROVISO TO SECTION 10(23C) IS OF GREAT IMPORTANCE IN THAT ASSE SSING AUTHORITIES MUST CONTINUOUSLY MONITOR FROM ASSESSMENT YEAR TO ASSESS MENT YEAR WHETHER SUCH INSTITUTIONS CONTINUE TO APPLY THEIR INCOME AN D INVEST OR DEPOSIT THEIR FUNDS IN ACCORDANCE WITH THE LAW LAID DOWN. FURTHER , IT IS OF GREAT IMPORTANCE THAT THE ACTIVITIES OF SUCH INSTITUTIONS BE LOOKED AT CAREFULLY. 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 LIBE RTY TO PASS FRESH ORDERS IF SUCH NECESSITY IS FELT AFTER TAKING INTO CONSIDERAT ION THE VARIOUS PROVISIONS OF LAW CONTAINED IN SECTION 10(23C) READ WITH SECTI ON 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 WHI CH ONLY 23 PERSONS HAD ADMITTED TO HAVE GIVEN DONATIONS FOR ADMISSI ON. 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 VOLU NTARY DONATIONS TO THE INSTITUTIONS, EVEN SOME OF THEM CLAIMED DEDUCTION U/S.80G ALSO. NOTHING HAS BEEN BROUGHT ON RECORD THAT ANY SUCH AMOU NT 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 EN UTILISED FOR PURPOSES OTHER THAN EDUCATION. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE TRUST WHOSE MAIN OBJECT IS IMPA RTING EDUCATION, CANNOT BE DENIED THE BENEFIT OF PROVISION S OF SECTION 10(23C)(IIIAB) AND (IIIAC) MERELY ON THE BASIS OF CON TRADICTORY 45 ITA NO.1166 & 1167/PN/2014 STATEMENTS OF A FEW DONORS. NEITHER ANY DONOR NOR THE ASSESSING OFFICER HAS LODGED ANY COMPLAIN BEFORE GOVERNMENT AU THORITIES FOR VIOLATION OF THE ACT. ASSESSMENTS OF THE TRUST HAVE BE EN COMPLETED IN THE PAST ACCEPTING THE EXEMPTION U/S.10(23C) OF THE A CT. THEREFORE, WE FIND NO REASON TO DEVIATE IN ABSENCE OF ANY EVIDENCE BROUGHT ON RECORD FOR DENYING THE EXEMPTION CLAIMED U/S.10(23C) FOR TH E YEAR. SO FAR AS THE DECISION RELIED ON BY LD. DEPARTMENTAL REPRESENTA TIVE IS CONCERNED, THE SAME IN OUR OPINION IS NOT APPLICABLE TO THE FACT S OF THE PRESENT CASE WHICH WAS IN CONTEXT OF SECTION 10(23C)(IIIAD). IN V IEW OF OUR REASONS GIVEN ABOVE WE HOLD THAT THE LD.CIT(A) IS NOT JUSTIFI ED IN DENYING THE EXEMPTION U/S.10(23C) (IIIAB) OF THE I.T. ACT. WE A CCORDINGLY SET ASIDE THE SAME AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWE D. 41. SINCE IN THE INSTANT CASE ALSO NOTHING HAS BEEN BROUG HT ON RECORD THAT THE DONATIONS RECEIVED FROM VARIOUS PERSONS HAS NOT BEEN ENTERED THE BOOKS OF THE ASSESSEE OR HAS BEEN UTILIZED BY ANY OF THE TRUSTEES OR THEIR RELATIVES OR HAS BEEN UTILIZED FOR P URPOSES OTHER THAN EDUCATION AND SINCE NEITHER ANY OF THE DONOR NOR T HE AO HAS LODGED ANY COMPLAINT BEFORE THE GOVERNMENT AUTHORITIES FOR VIOLATION OF THE ACT, THEREFORE, THE REVENUE AUTHORITIES IN OUR OPINIO N ARE NOT JUSTIFIED IN DENYING THE EXEMPTION U/S.11 OF THE I.T. ACT TO THE ASSESSEE ON THE GROUND OF VIOLATION OF PROVISIONS OF SECTION 11(1)(D) OF THE I.T. ACT. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ALLOW THE CLAIM OF EXEMPTION U/S.11 OF THE I.T. ACT. GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 42. SINCE THE ASSESSEE SUCCEEDS ON THE GROUNDS OF APPE AL NO.1 TO 4, GROUND NO.5 AND THE ADDITIONAL GROUND RAISED BY THE ASSESSEE BEING ACADEMIC IN NATURE ARE NOT BEING ADJUDICATED. ITA NO.1167/PN/2014 (A.Y. 2009-10) : 43. GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1. THE LEARNED CIT(A)-II, PUNE ERRED IN LAW AND O N FACTS IN UPHOLDING THE TAXABLE INCOME WORKED OUT BY THE LEAR NED AO AT RS. 9,44,98,180/- AND CORRESPONDING TAX LIABILITY AMOUNT ING TO RS. 4,49,67,903/- ON THE APPELLANT. THE LEARNED CIT(A)- II AND THE LEARNED AO OUGHT TO HAVE APPRECIATED THAT THE APPELLANT IS A BONAFIDE CHARITABLE TRUST SOLELY ENGAGED IN EDUCATION. 46 ITA NO.1166 & 1167/PN/2014 2. THE LEARNED CIT(A)-II, PUNE ERRED IN LAW AND ON FACTS IN UPHOLDING AO'S CONTENTION THAT THE APPELLANT IS NOT E LIGIBLE TO CLAIM EXEMPTION U/S 11 OF THE ITA, 1961 IN THE ABSENCE OF 12A REGISTRATION CERTIFICATE. THE LEARNED CIT(A)-II, PUNE OUGHT TO H AVE CONSIDERED THE GENUINE AND BONAFIDE CAUSE OF EDUCATION FOR WHICH TH E APPELLANT EXISTS FOR PAST MANY YEARS; AND; THE PRESENCE OF 80G CERTIFIC ATES GRANTED TO THE APPELLANT FOR THE PAST MANY YEARS TILL 31/03/2009 . 3. THE LEARNED CIT(A)-II, PUNE ERRED IN HOLDING THA T THE APPELLANT HAS VIOLATED SECTION 11(1)(D) OF THE ITA, 1961 BY ACC EPTING CORPUS DONATIONS FOR ADMISSIONS. THE LEARNED CIT(A)-IL AND THE LEARNED AO ERRED IN LAW AND ON FACTS IN HOLDING THAT DONATIONS H AVE BEEN RECEIVED FOR MANAGEMENT QUOTA SEATS, AND. THAT SUCH DONATIONS AR E CAPITATION FEES, AND AGAINST THE PUBLIC POLICY. 4. THE LEARNED CIT(A)-II, PUNE ERRED IN LAW AND ON FACTS IN DENYING EXEMPTION U/S 11 OF THE ITA, 1961 TO THE DONATIONS OF RS. 2,02,23,533/- RECEIVED BY THE TRUST ON THE ANALOGY THAT THE SAID DO NATIONS ARE NOT IN KEEPING WITH THE LAW. 5. THE LEARNED CIT(A)-II, PUNE ERRED ON FACTS IN NOT PROVIDING OPPORTUNITY TO CROSS EXAMINE THE STATEMENTS RECORDED D URING THE COURSE OF ASSESSMENT PROCEEDINGS AND FAILED TO SEEK APPELL ANT'S SAY IN THE MANNER. 6. THE APPELLANT CRAVES LEAVE TO ADD / MODIFY / ALTE R / DELETE ALL / ANY OF THE GROUNDS OF APPEAL. 44. AFTER HEARING BOTH THE SIDES WE FIND THE GROUNDS RAISE D BY THE ASSESSEE IN THE IMPUGNED APPEAL ARE IDENTICAL TO THE GROU NDS OF APPEAL NO. IN ITA NO.1166/PN/2014. WE HAVE ALREADY DECIDE D THE ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE HAVE BEE N ALLOWED. FOLLOWING THE SAME REASONING THE ABOVE GROUNDS BY THE A SSESSEE ARE ALLOWED. 45. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15-04-2016. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE ; DATED : 15 TH APRIL, 2016. 47 ITA NO.1166 & 1167/PN/2014 ) *#,! -! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A ) - II, PUNE 4. 5. 6. THE CIT-II, PUNE $ ''(, (, / DR, ITAT, B PUNE; - / GUARD FILE. / BY ORDER , // TRUE COPY // // $ ' //TRUE C / /0 ' ( / SR. PRIVATE SECRETARY (, / ITAT, PUNE