DR. D.Y. PATIL EDUCATION SOCIETY, Kolhapur V. CIT CENTRAL, Pune

ITA 1280/PUN/2007

• Counselvise Citation: 128024514 RSA 2007
• Duration Of Justice: 3 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-06-2011
• Assessment Year: misc
• Appeal Filed On: 05-10-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HARESHWAR SHARMA; TEJINDER SINGH
• Keywords: Charitable institution; Source of fund; Retrospective amendment; Reasonable cause; Condonation of delay; Cancellation of registration
• Section: 80G; 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO 1280/PN/07 D.Y. PATIL EDUCATION SOCIETY, .. APPELLANT 2126, E TARABAI PARK, KOLHAPUR VS. COMMISSIONER OF INCOME-TAX (CENTRAL), RE SPONDENT PUNE APPELLANT BY: SHRI M K KULKARNI RESPONDENT BY: SHRI TEJINDERSINGH (CIT) & HARESHWAR SHARMA (CIT) ORDER PER G.S. PANNU, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME-TAX (CENTRAL), PUNE (IN SHORT THE COMMISSIONER) DATED 29.08.2007 PASSED UNDER SECTION 12AA OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), REJECTING THE ASSESSEES APPLICATION FOR REGISTRATIO N UNDER SECTION 12A(A) OF THE ACT. 2. VIDE APPLICATION DATED 01.06.2011, THE LEARNED CO UNSEL FOR THE ASSESSEE HAS FILED THE FOLLOWING CONCISED GROUNDS OF APPEAL: 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD CIT (CENTRAL) PUNE WAS NOT JUSTIFIED IN REFUSING THE REGISTRATION U/S 12AA TO THE APPELLANT-SOCIETY WITHOUT CONSIDERING THE EXHAUSTIVE WRITTEN SUBMISSI ONS SUPPORTED BY PRECEDENTS PLACED BEFORE HIM. THE ORDER PASSED BY LD CIT (CENT RAL) IS NOT A SPEAKING ORDER AND RUNS COUNTER TO THE PROVISIONS OF LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF HE CASE AND IN LAW ESPECIALLY WHEN LD CIT (CENTRAL) HAVING RECORDED A FINDING THAT THERE IS NO DOUBT THAT THE TRUST IS RUNNING EDUCATIONAL INSTITUTIONS INESCAPABLE CONCL USION SHOULD HAVE BEEN GRANT OF REGISTRATION AS PRAYED FOR AFTER CONDONATION OF DELAY. THE APPELLANT-TRUST FOR A LONGER PERIOD OF 20 YEARS OR SO REMAINED UNDER BONA FIDE IMPRESSION THAT IT WAS DULY REGISTERED U/S 12A(A) OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW AND SINCE ON THE BASIS OF THE BONA FIDE THINKING THAT IT WAS DULY RE GISTERED U/S 12A(A) BUT THE REGISTRATION CERTIFICATE WAS NOT TRACEABLE ALL THE WHILE SUCH REQUEST TO THAT EFFECT WAS MADE TO LD CIT, PUNE. SINCE THE LD. CITS FINDI NG THAT THE TRUST IS RUNNING EDUCATIONAL INSTITUTIONS THEN IT WAS ENTITLED TO RE GISTRATION UNDER SEC. 12AA AS PRAYED FOR. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD CITS ORDER DATED 29.8.2007 IS VITIATED IN LAW SINCE HE FAILED TO APPRECIATE THE LEGAL POSITION THAT SOURCE OF FUNDS IS NOT IMPORTANT BUT APPLICATI ON OF FUNDS TOWARDS OBJECTS OF THE TRUST WHICH ARE CHARITABLE IN NATURE IS REQUI RED TO BE CONSIDERED IN ORDER TO DECIDE THE GENUINITY OF THE ACTIVITIES OF THE TRUST . THE MAIN REASON RELIED UPON BY THE LD CIT IS THAT THE APPELLANT TRUST IS COLLECTIN G CAPITATION FEES, SANS ANY FINDING THAT THE SUCH FUNDS HAVE BEEN USED FOR THE PURPOSE OTHER THAN RUNNING THE INSTITUTIONS. IN MATTER OF REGISTRATION THE LAW IS WELL SETTLED THAT THE SATISFACTION OF THE COMMISSIONER SHOULD E REGARDING THE APPLICAT ION OF THE TRUST FOR THE SPECIFIED PURPOSES WHICH ONLY ENTITIES THE ASSESSEE TO CLAIM EXEMPTION. IN HE ABSENCE OF SUCH SATISFACTION THE ORDER OF THE LD CI T IS CONTRARY TO THE PROVISIONS OF LAW AND PRECEDENTS. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE TRUST BEING AN EDUCATIONAL INSTITUTION AND UNDISPUTEDLY IMPARTING EDUCATION, THEREFORE, IT WAS NOT JUSTIFIABLE ON THE PART OF THE LD CIT TO DENY THE R EGISTRATION. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE SCOPE AND NATURE OF ENQUIRIES AT THE STAGE OF GRANT OF REGIST RATION ARE PRESCRIBED UNDER SECTION 12AA. THUS, CIT HAS NO JURISDICTION TO COND UCT ENQUIRIES WHICH FALL BEYOND THE PALE OF SUCH STATUTORY PRESCRIPTION. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE BENEFIT OF THE PRINCIPLES OF PROMISSORY ESTOPPEL CANNOT BE DENIE D TO THE ASSESSEE HAVING ENJOYED THE EXEMPTION FOR THE LAST SO MANY YEARS UN DER THE SAME FACTS AND CIRCUMSTANCES. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD CIT REFUSED GRANTING OF REGISTRATION SIMPLY ON THE BASIS OF AO S REPORT DT 13.8.2007 THAT INCOME EARNED BY SOCIETY WAS TOTALLY ON COMMERCIAL LINES AND SOCIETY IS NOT RUN FOR CHARITABLE PURPOSES. THE LD CIT OUGHT TO HAVE A PPLIED HIS MIND AND COULD NOT HAVE BASED HIS DECISION SIMPLY ON THE REPORT OF AO. 3. THE RELEVANT FACTS, IN BRIEF, LEADING TO THE DISPU TE ARE THAT THE ASSESSEE TRUST FILED AN APPLICATION FOR REGISTRATION UNDER SECTIO N 12A(A) OF THE ACT ON 12.02.2007 ACCOMPANIED BY A LETTER DATED 5.02.2007 W RITTEN ON THE SUBJECT RE- APPLICATION OF REGISTRATION UNDER SECTION 12A AND CONDON ATION OF DELAY. IT WAS STATED THAT THE ASSESSEE HAS BEEN GRANTED CERTIFICATE UND ER SECTION 80G OF THE ACT AND THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FO R THE ASSESSMENT YEAR 1999-2000, THE ASSESSING OFFICER DISALLOWED THE CLAI M OF THE TRUST FOR 3 EXEMPTION OF ITS INCOME UNDER SECTION 11 OF THE ACT FOR THE REASON THAT THE ASSESSEE WAS UNABLE TO PRODUCE REGISTRATION CERTIFICATE UND ER SECTION 12A OF THE ACT. IT WAS CLAIMED THAT THE ASSESSEE MISPLACED THE CERTIFICA TION OF REGISTRATION AND COULD NOT PRODUCE IT BECAUSE THE CERTIFICATE WAS GI VEN 20 YEARS BACK AND FURTHER THAT SUCH CERTIFICATE ISSUED UNDER SECTION 12A MUST BE AVAILABLE ON THE RECORD OF THE COMMISSIONER OF INCOME-TAX, PUNE. IT WAS ALSO PLEADED IN THE ALTERNATIVE THAT THE ASSESSEE BE GRANTED REGISTRATION W ITH RETROSPECTIVE EFFECT. I.E. FROM THE DATE OF CREATION OF THE TRUST AND THE DELAY MAY BE CONDONED. IN ORDER TO VERIFY THE ABOVE FACTS, THE COMMISSIONER OF INCOME-TAX CA LLED FOR A REPORT FROM THE ASSESSING OFFICER WHICH WAS CONFRONTED TO THE ASSESSEE. T HE ASSESSEE FILED DETAILED WRITTEN ARGUMENTS. 4. AFTER CONSIDERING THE DETAILED SUBMISSIONS OF THE ASSE SSEE, THE COMMISSIONER OF INCOME-TAX OBSERVED THAT THE ASSESSEE KNOWN AS D. Y. PATIL EDUCATIONAL SOCIETY, KOLHAPUR, IS DULY REGISTERED UNDER THE BOMBAY PUBLIC TRUSTS ACT, 1950 ON 13.3.1987 AND THE TRUST CAME INTO BEING FROM 23.11.196 AS PER TRUST DEED. HE FURTHER OBSERVED THAT THERE IS NO DOUBT THAT THE TRUST IS RUNNING EDUCATIONAL INSTITUTIONS . ACCORDING TO THE COMMISSIONER OF INCOME-TAX, RIGHT FROM THE DATE OF INCEPTION, THE TRUST DID NOT FILE AN Y RETURN OF INCOME AND THE RETURNS WERE FILED FOR THE FIRST TIME AFTER ISSUE OF NO TICE UNDER SECTION 148/153C OF THE ACT. THE MAIN PLEA OF THE ASSESSEE BEFORE THE COMMI SSIONER OF INCOME-TAX WAS THAT SINCE THE TRUST HAS BEEN GRANTED 80G CERTIFICATE BEARING NO 165/D- 88/0F 89-90 DATED 09.06.1989 IN RESPONSE TO APPLICATIO N DATED 23.4.1989 FROM 1.11.1988 TO 31.3.1992, THE TRUST MUST HAVE BEEN REG ISTERED BY THE COMMISSIONER OF INCOME-TAX. AS PER THE COMMISSIONER OF INCOME-TAX, HOWEVER, THE RELEVANT SECTION 80G(5)(VI) AND THE RELEVANT RUL E 11AA(2) OF THE INCOME TAX RULES,1962 ACCORDING TO WHICH AN APPLICATION SHALL BE A CCOMPANIED BY A COPY OF REGISTRATION GRANTED UNDER SECTION 12A OR COPY OF NOTI FICATION ISSUED UNDER SECTION 10(23) OR 10(23C) OF THE ACT WAS APPLICABLE POST 1992. ACCORDING TO THE COMMISSIONER OF INCOME-TAX, THERE WAS NO PRESUMPTION TH AT THE ASSESSEE HAS 4 BEEN REGISTERED UNDER SECTION 12A(A) MERELY BY FILING A CERTIFICATE UNDER SECTION 80G ISSUED BY THE COMMISSIONER OF INCOME-TAX ON 09.06.19 89 ON THE BASIS OF APPLICATION DATED 23.4.1989 BECAUSE AT THAT TIME IT W AS PURELY ADMINISTRATIVE PROCEDURE. THE COMMISSIONER OF INCOME-TAX FURTHER HELD THAT THE ASSESSEE FAILED TO DISCHARGE ITS PRIMARY ONUS THAT IT EVER APPLIED FOR REGISTRATION UNDER SECTION 12A(A) OF THE ACT AND HAD ALSO ATTACHED IT WHILE FILIN G APPLICATION UNDER SECTION 80G. HE ACCORDINGLY REJECTED SUCH PLEA OF THE ASSESSEE. T HE COMMISSIONER OF INCOME-TAX FURTHER REJECTED ASSESSEES REQUEST FOR CONDONAT ION OF DELAY OBSERVING THAT HE WAS NOT SATISFIED WITH THE REASON THA T REGISTRATION WAS ALREADY ALLOWED AND SINCE THE PAPERS ARE LOST, THE DELAY SHOULD BE CONDONED. FURTHER, IT WAS OBSERVED BY THE COMMISSIONER OF INCOME-TAX THAT ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNT IN THE NORMAL COURSE OF BUSIN ESS OF THE TRUST AND HAS NOT BEEN GETTING ITS ACCOUNT BOOKS AUDITED WHICH WAS MA NDATORY. IN THE ABSENCE OF ANY RETURN OF INCOME HAVING BEEN FILED BY T HE ASSESSEE, THE COMMISSIONER OF INCOME-TAX HELD THAT THE ASSESSEE HAS DELI BERATELY PREVENTED THE DEPARTMENT FROM VISITING ITS ACTIVITIES AND, THEREF ORE, THE ASSESSEE DID NOT DESERVE CONDONATION OF DELAY. 5. THE COMMISSIONER OF INCOME-TAX THEREAFTER PROCEEDED TO CONSIDER AS TO WHETHER THE ASSESSEE WAS ENTITLED TO REGISTRATION WITH E FFECT FROM 12.2.2007, I.E. THE DATE ON WHICH THE APPLICATION WAS RECEIVED. AFTER M AKING DETAILED ENQUIRY ON ALL ASPECTS OF THE MATTER, THE COMMISSIONER OF INCOME-TA X REJECTED THE APPLICATION FOR REGISTRATION UNDER SECTION 12A(A) OF T HE ACT BY HOLDING AS UNDER: 13.2 WHILE GRANTING REGISTRATION, THE ASSESSEE HAS NOT COME WITH CLEAN HANDS. I HAVE ALSO TO SEE THE PAST CONDUCT OF THE ASSESSEE. FOR 1 9 YEARS, THE ASSESSEE HAS NOT FILED ITS RETURN OF INCOME. IT HAS NOT ALLOWED THE DEPARTMENT TO EXAMINE EITHER THE VERACITY OF THE ACCOUNTS OR TO FIND OUT WHETHER THE ASSESSEE HAS CO MPLIED WITH THE PROVISIONS OF SECTION 13 OF THE IT ACT 1961. THE ASSESSEE HAS FILED AN AP PLICATION FOR REGISTRATION. BUT THIS APPLICATION FOR REGISTRATION HAS TO BE HANDLED WITH UTMOST CARE. THIS IS STATEDLY BECAUSE OF THE STAND THAT THE APPLICATION FOR REGISTRATION U/S 12AA IS BASED UPON WRITTEN STATEMENT THAT SINCE THE ASSESSEE HAS BEEN GRANTED DEDUCTION U/S 80G IT MUST HAVE BEEN REGISTERED U/S 12AA OF THE IT ACT, 1961, WHICH HAS BEEN FOUND TO BE . THEREFORE IS NO GUARANTEE THAT AFTER GRANTING OF REGISTRATION THE A SSESSEE WILL COME CLEAN. 14. IN THE RESULT, I HAVE NO HESITATION IN CONCLUDI NG THAT A) THE ASSESSEE HAS NEVER APPLIED FOR REGISTRATION AS HAS BEEN CONTENDED. 5 B) THE ASSESSEE WAS NEVER ALLOWED REGISTRATION U/S 12AA OF THE I.T. ACT. C) NO CASE HAS BEEN MADE OUT TO CONDONE THE DELAY O F 19 YEARS 2 MONTHS 23 DAYS OR FOR THAT MATTER FOR ANY PERIOD. 15. THE APPLICATION FOR REGISTRATION U/S 12A(A) OF THE IT ACT, 1961 IS REJECTED BECAUSE WHILE FILING THIS APPLICATION THE ASSESSEE HAS NOT COME WITH CLEAN HANDS AND IN VIEW OF THE PROVISIONS CONTAINED IN SECTION 12AA(1)(B(II) B ECAUSE I AM NOT SATISFIED ABOUT THE GENUINENESS OF HE ACTIVITIES OF THE TRUST. 6. BEING AGGRIEVED BY THE AFORESAID ORDER OF THE COMMI SSIONER, ASSESSEE IS IN APPEAL BEFORE US. 7. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS VEH EMENTLY ARGUED THAT THE COMMISSIONER HAS DECLINED REGISTRATION TO THE A SSESSEE UNDER SECTION 12AA OF THE ACT WITHOUT CONSIDERING THE RELEVANT FACT ORS, WHICH WERE PLEADED BEFORE HIM. IT IS POINTED OUT THAT THOUGH THE COMMISSI ONER HAS ACCEPTED THAT ASSESSEE WAS ENGAGED IN CARRYING OUT EDUCATIONAL ACTIVITIE S, YET THE REGISTRATION HAS BEEN DENIED ON IRRELEVANT CONSIDERATIONS. IT IS FURT HER POINTED OUT THAT THE COMMISSIONER HAS WRONGLY HELD THAT ASSESSEE WAS COLLECTING ANY CAPITATION FEES AND IN ANY CASE, IT IS STRONGLY URGED THAT AT THE STAGE OF GRANT OF REGISTRATION IT IS NOT IMPORTANT TO EXAMINE THE SOURCE OF FUNDS BUT WHA T IS IMPORTANT IS TO EXAMINE WHETHER THE APPLICATION OF FUNDS IS TOWARDS THE OBJECT S WHICH ARE CHARITABLE IN NATURE. IN THIS CASE, IT IS CLAIMED THAT ALL THE FUNDS O F THE TRUST ARE BEING UTILIZED FOR THE PURPOSES OF RUNNING THE EDUCATIONAL INSTITUTI ONS AND, THEREFORE, THE APPLICATION IS FOR THE OBJECTS OF THE TRUST. IT IS ALSO PO INTED OUT THAT IT WAS WRONG ON THE PART OF THE COMMISSIONER TO HOLD THAT THE ACTIVITI ES OF THE TRUST WERE BEING CARRIED OUT ON COMMERCIAL LINES AND THAT SUCH AN OBSERVA TION IS BASED PURELY ON THE REPORT OF THE ASSESSING OFFICER AND THERE HAS BEEN NO INDEPENDENT APPLICATION OF MIND BY THE COMMISSIONER. FURTHER, THE LEARNED COUNSEL SUBMITTED THAT ASSESSEE WAS UNDER A BONA FIDE BELIEF THA T IT WAS DULY REGISTERED UNDER SECTION 12A(A) FOR THE LAST 20 YEARS OR SO, BUT SIN CE THE RELEVANT REGISTRATION CERTIFICATE WAS NOT TRACEABLE, IT REQUESTED THE COMMISSIONER TO GET THE OLD RECORDS VERIFIED OR THAT THE REGISTRATION BE GRANTED WITH RETROSPECTIVE EFFECT CONSIDERING THE AFORESAID BONA FIDE IMPRESSION AS A REA SONABLE CAUSE FOR THE UNINTENDED DELAY IN SEEKING REGISTRATION. 6 8. IN THE COURSE OF HIS SUBMISSIONS, THE LEARNED COUNSEL HAS RELIED UPON THE FOLLOWING DECISIONS: (I) SANJEEVAMMA HANUMANTHE GOWDA CHARITABLE TRUST V. DIT (EXEMPTION) 285 ITR 327 (KAR); (II) RAMA RAO ADIK EDUCATION SOCIETY, MUMBAI V. CIT C EN.1, MUMBAI, VIDE ITA NO 5742/MUM/07 DATED 11.02.2008 (III) SAINT KABIR EDUCATIONAL TRUST V. CIT 41 DTR (A SR)(TRIB) 267; AND, (IV) CHURCH OF OUR LADY GRACE V. CIT 9 ITR (TRIB) 50 5 (MUM) 9. ON THE OTHER HAND, THE LD CIT-DEPARTMENTAL REPRE SENTATIVE, APPEARING FOR THE REVENUE, HAS DEFENDED THE ORDER OF THE COMMISSIO NER ON ALL THE POINTS BY POINTING OUT THAT THE PLEAS OF THE ASSESSEE HAVE BEEN E XAMINED BY THE COMMISSIONER OF INCOME-TAX ON RELEVANT CONSIDERATIONS AND FOUND UNACCEPTABLE. IT WAS POINTED OUT THAT MERELY BECAUSE THE ASSESSEE WAS GR ANTED RECOGNITION UNDER SECTION 80G VIDE CERTIFICATE DATED 09.06.1989 WOU LD NOT LEAD TO A PRESUMPTION THAT IT WAS REGISTERED UNDER SECTION 12A(A) OF THE ACT, INASMUCH AS AT THE RELEVANT POINT OF TIME THE REQUIREMENT OF FU RNISHING A COPY OF THE REGISTRATION CERTIFICATE UNDER SECTION 12A AT THE TIME O F SEEKING CERTIFICATE UNDER SECTION 80G, WAS NOT APPLICABLE. THE SAID REQUIREMENT HA S BEEN INTRODUCED BY WAY OF SECTION 80G(5)(VI) READ WITH RULE 11AA(2) OF T HE INCOME-TAX RULES, 1962 ONLY WITH EFFECT FROM 21.9.1992 AND, THEREFORE, WHEN THE CERTIFICATE UNDER SECTION 80G DATED 9.06.1989 WAS ISSUED BY THE COMMISSIONER, IT WAS NOT MANDATORY THAT THE ASSESSEE OUGHT TO HAVE BEEN REGISTERED UNDER SE CTION 12A OF THE ACT. THEREFORE, ACCORDING TO THE CIT-DEPARTMENTAL REPRESENT ATIVE, THE ASSESSEE HAS FAILED TO ESTABLISH THAT IT ENJOYED REGISTRATION UNDER SECTION 12A(A) OF THE ACT WITH THE COMMISSIONER ON AN EARLIER DATE. SECONDLY, EVEN W ITH REGARD TO THE MERITS OF THE APPLICATION SEEKING REGISTRATION, IT WAS POINTED OUT THAT THE COMMISSIONER HAS REFERRED TO THE REPORT OF THE ASSESSING OFFICER SPECIFI CALLY IN PARAS 12.2 TO 12.3 WHEREIN IT IS OBSERVED THAT INCOME EARNED BY THE SOCIET Y IS TOTALLY ON COMMERCIAL LINES AND THE SOCIETY IS NOT BEING RUN FOR CH ARITABLE PURPOSES. IT WAS UNDER THESE CIRCUMSTANCES THE COMMISSIONER HAS CONCLUDED THAT THE ACTIVITIES OF 7 THE ASSESSEE WERE NOT CARRIED OUT IN GENUINE MANNER AND HE REJECTED REGISTRATION UNDER SECTION 12AA OF THE ACT, IN THE ALTERNATIVE IT W AS CONTENDED THAT IF THE ASSESSEE WAS TO SUCCEED IN ITS PLEA SEEKING REGISTRATION, THER E WAS NO JUSTIFICATION FOR THE DELAY OF MORE THAN 19 YEARS IN MAKING THE APPLICATION AND, THEREFORE, THE ASSESSEES PLEA FOR REGISTRATION WITH RE TROSPECTIVE EFFECT IS UNTENABLE. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. IN THIS CASE, THE APPELLANT IS A SOCIETY INCORPORATED ON 23.11.1986 AND IS DULY REGISTERED UNDER THE BOMBAY PUBLIC TRUSTS ACT 1950 ON 13.3.1987. IT ALSO EMERGES FROM THE IMPUGNED ORDER OF THE COMMISSIONER THAT THE ASSESSEE IS EN GAGED IN RUNNING EDUCATIONAL INSTITUTIONS. ON 12.2.2007, ASSESSEE APPLIED FOR REGISTRATION UNDER SECTION 12AA OF THE ACT. THE ASSESSEE ALSO ADDRESSED A COMM UNICATION DATED 5.2.2007 TO THE COMMISSIONER STATING THAT IT HAD ALREA DY BEEN GRANTED REGISTRATION UNDER SECTION 12A IN THE PAST, BUT SUCH CE RTIFICATE WAS NOT TRACEABLE BECAUSE OF THE TIME LAPSE OF 20 YEARS OR SO. THE ASSESSEE R EQUESTED THE COMMISSIONER TO CALL FOR THE RELEVANT RECORD. IN SUPPOR T OF THE PLEA THAT IT WAS GRANTED REGISTRATION EARLIER, ASSESSEE REFERRED TO A CERT IFICATE OF RECOGNITION UNDER SECTION 80G DATED 09.06.1989 ISSUED BY THE COMMISSIONER FOR THE PERIOD 1.11.1988 TO 31.3.1992. ON THIS BASIS, THE CASE MADE OUT WAS THAT SINCE THE RECOGNITION UNDER SECTION 80G OF THE ACT WAS GRANTED, TH E ASSESSEE WOULD HAVE ENJOYED THE REGISTRATION UNDER SECTION 12AA OF THE ACT ALSO. IN THE ALTERNATIVE, THE PLEA OF THE ASSESSEE WAS THAT THE AFORESAID IMPRESSION OF THE ASSESSEE BE TREATED A REASONABLE CAUSE FOR THE DELAY IN APPROACHIN G THE COMMISSIONER FOR REGISTRATION AND, THEREFORE, THE REGISTRATION BE GRAN TED WITH RETROSPECTIVE EFFECT, I.E. FROM THE DATE OF INCORPORATION OF THE SOCIETY AN D THE DELAY BE CONDONED. THE COMMISSIONER HAS DENIED THE REGISTRATION. HENCE THE ASSESSE E IS IN APPEAL BEFORE US. 8 11. ONE OF THE CONDITIONS FOR CLAIMING EXEMPTION UN DER SECTIONS 11 & 12 OF THE ACT IN RESPECT OF INCOME OF A CHARITABLE OR RELIGIO US TRUST OR INSTITUTION IS THAT THE PERSON IN RECEIPT OF INCOME SHALL MAKE AN APPLICATI ON FOR REGISTRATION OF THE TRUST OR INSTITUTION IN THE PRESCRIBED FORM AND IN THE PRESCRIBED MANNER TO THE COMMISSIONER WITHIN THE SPECIFIED TIME. SECTION 12AA PR OVIDES FOR A PROCEDURE TO BE FOLLOWED BY THE COMMISSIONER FOR THE GRANT OF R EGISTRATION TO A TRUST OR AN INSTITUTION. ACCORDING TO THIS PROCEDURE, THE COMMISSION ER SHALL CALL FOR DOCUMENTS AND INFORMATION AND CONDUCT ENQUIRIES TO SATISF Y ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTIO N. AFTER THE COMMISSIONER IS SATISFIED ABOUT THE CHARITABLE OR RELIGIOUS NATURE OF THE OBJECTS AND GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION, HE WILL PASS AN ORDER GRANTING REGISTRATION. IF HE IS NOT SO SATISFIED, THE PROVISIONS OF SECTION 12AA REQUIRE HIM TO PASS AN ORDER REFUSING SUCH REGISTRATION. QUITE CLEARLY, T HE PHRASEOLOGY OF SECTION 12AA OF THE ACT PRESCRIBES THE SCOPE AND AMBIT OF THE ENQ UIRY THAT THE COMMISSIONER IS AUTHORIZED TO CARRY OUT AT THE TIME OF GRANT OF REGISTRATION TO A TRUST OR INSTITUTION. THE SCOPE AND AMBIT OF THE ENQUIR Y REVOLVES AROUND THE NATURE OF THE OBJECTS BEING CHARITABLE OR RELIGIOUS, A ND THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION. THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SANJEVAMMA HANUMANTHE GOWDA CHA RITABLE TRUST (SUPRA) HAS BEEN RELIED UPON BY THE ASSESSEE FOR THE PROPOSITION THAT FOR THE PURPOSES OF REGISTRATION UNDER SECTION 12A THE AUTHORITIES HAVE TO BE SATISFIED ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION AND HOW THE INCOME DERIVED FROM THE TRUST PROPERTY IS APPLIED TO CHARITAB LE OR RELIGIOUS PURPOSE AND NOT THE NATURE OF THE ACTIVITY BY WHICH THE INCOME I S BEING DERIVED BY THE TRUST. 12. IN THIS BACKGROUND, WE MAY NOW EXAMINE THE REASONS P UT-FORTH BY THE COMMISSIONER TO DENY REGISTRATION TO THE ASSESSEE UNDER SECT ION 12AA OF THE ACT. THE SUM AND SUBSTANCE OF THE PLEA OF THE COMMISSION ER IS THAT THE ASSESSEE HAS NOT COME WITH CLEAN HANDS . ACCORDING TO THE COMMISSIONER, ASSESSEE NEVER APPLIED FOR REGISTRATION EARLIER, ALTHOUG H IT WAS INCORPORATED ON 9 23.11.1986 AND ITS CLAIM OF HAVING APPLIED FOR REGISTR ATION EARLIER HAD REMAINED UNSUBSTANTIATED. ACCORDING TO THE COMMISSIONER, THERE IS NO GUARANTEE THAT AFTER GRANTING OF REGISTRATION THE ASSESSEE WILL COME CLE AN . IN OUR CONSIDERED OPINION, NO DOUBT THE ASSESSEE COULD NOT SUBSTANTIATE ITS PLEA THAT IT WAS GRANTED REGISTRATION ON AN EARLIER DATE, AND IN OUR VIEW, TH E ONUS IN THIS REGARD WAS CLEARLY ON THE ASSESSEE WHICH IT FAILED TO ESTABLISH. SO, HOWEVER , WHILE EXAMINING MERITS OF THE APPLICATION DATED 12.2.2007 PREFERRED BY THE ASSESSEE TO SEEK REGISTRATION UNDER SECTION 12AA, THE AFORESAID IS NOT A RELEVANT FACT OR. THE SECOND REASON WHICH EMERGES FROM THE ORDER OF THE COMMISSIONER IS TO T HE EFFECT THAT THE ASSESSEE SOCIETY IS SAID TO BE RUNNING ON COMMERCIAL LINES AN D NOT FOR CHARITABLE PURPOSES. IN THIS REGARD, THE COMMISSIONER HAS RELIED UP ON THE REPORT OF THE ASSESSING OFFICER WHEREIN TWO INSTANCES HAVE BEEN BROUGHT OUT TO SHOW THAT THE ASSESSEE WAS CHARGING CAPITATION FEES. SUCH DETAILS ARE CONTA INED IN PARA 12.2 OF THE IMPUGNED ORDER. THE EXPLANATION OF THE ASSESSEE HAS ALSO BEEN REPRODUCED BY THE COMMISSIONER IN PARA 12.4 OF HIS ORD ER. HOWEVER, THE COMMISSIONER WAS NOT SATISFIED WITH THE EXPLANATION FUR NISHED. ON THIS ASPECT, FOR THE PRESENT, WE DO NOT DWELL ON THE MERITS OF THE RIVAL STANDS WHICH WE WOULD DO A LITTLE LATER. PERTINENTLY, IT IS NOT DISPUTED BY THE COMMISSIONER AND RATHER IT IS AN ACCEPTED POSITION THAT THAT THE ASSESSEE SOCIETY IS ENGA GED IN RUNNING EDUCATIONAL INSTITUTIONS. IN FACT, IT IS ALSO EMERGING FROM THE ORDER OF THE COMMISSIONER THAT THERE IS NEITHER AN ASSERTION OF A VI EW THAT THE ABOVE ACTIVITIES CARRIED ON BY THE ASSESSEE ARE NOT GENUINE AND NOR IT I S THE CASE OF THE COMMISSIONER THAT THE ACTIVITIES CARRIED ON BY THE ASSESSEE ARE NOT IN CONSONANCE WITH ITS OBJECTS. 13. THOUGH THE ASSESSEE HAS DENIED RECEIPT OF CAPITATION FEE/DONATIONS AND RUNNING ON COMMERCIAL LINES, HOWEVER, WITHOUT GOING I NTO THE MERITS OF SUCH PLEA, THE PERTINENT QUESTION IS THE CONSEQUENCES OF ACCEPTANCE OF CAPITATION FEE/DONATIONS BY THE ASSESSEE AT THE STAGE OF EXAMINING ASSESSEES APPLICATION FOR REGISTRATION UNDER SECTION 12AA OF THE ACT. SOMEWHA T SIMILAR SITUATION AROSE 10 BEFORE THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF RAMARAO ADIK EDUCATION SOCIETY (SUPRA) WHEREIN THE COMMISSIONER OF INCOME-TAX W AS CONSIDERING CANCELLATION OF REGISTRATION ON THE BASIS OF THE PLEA T HAT THE ASSESSEE WAS ACCEPTING CAPITATION FEE/DONATIONS. FOLLOWING DISCUSSION BY OUR CO-ORDINATE BENCH IS RELEVANT: 48. NOW THE QUESTION IS THE LEGAL CONSEQUENCE OF THE ASSESSEE ACCEPTING CAPITATION FEES / DONATIONS FROM STUDENTS SEEKING ADMISSION TO VARIOUS COURSES OFFERED BY THE INSTITUTIONS RUN BY THE ASSESSEE-TRUST. EVEN IN THE MATTER OF CAPITATION FEES / DONATIONS, THE COMMISSIONER OF INCOME TAX HAS NO CASE THAT THE FUNDS COLLECTED BY THE ASSESSEE- TRUST THROUGH CAPITATION FEES / DONATIONS HAVE BEEN USED FOR THE PURPOSES OTHER THAN RUNNING THE INSTITUTIONS MANAGED BY THE ASSESSEE TR UST. IT IS TO BE SEEN THAT ALL THE INSTITUTIONS RUN AND MANAGED BY THE ASSESSEETRUST A RE CARRYING ON THE ACTIVITIES ENVISAGED IN THE MEMORANDUM OF ASSOCIATION THE ASSE SSEE-TRUST. IT IS STATED BY THE COMMISSIONER IN HIS ORDER ITSELF THAT THE MONEYS CO LLECTED BY THE ASSESSEE-TRUST BY WAY OF CAPITATION FEES / DONATIONS ARE USED FOR THE PUR POSE OF NOT ONLY BY THE ASSESSEE-TRUST BUT ALSO FOR OTHER INSTITUTIONS OF SIMILAR NATURE I T IS TO BE SEEN THAT APPLICATION OF FUNDS FOR THE CHARITABLE ACTIVITIES OF ANOTHER ELIGIBLE INSTI TUTION AMOUNTS TO APPLICATION OF FUNDS FOR CHARITABLE PURPOSES. THE LAW HAS MADE IT VERY CLEAR THAT THE CHARITABLE ACTIVITIES MAY BE CARRIED OUT DIRECTLY BY AN ELIGIBLE INSTITUTION OR THROUGH ANOTHER ELIGIBLE INSTITUTION FOR THAT MATTER. THEREFORE, THOSE OBSERVATIONS OF THE COMMIS SIONER STATED TO BE ADVERSE TO THE ASSESSEE-TRUST ARE NOT IN FACT PREJUDICIAL TO THE C ASE OF THE ASSESSEE-TRUST. 49. THE KARNATAKA HIGH COURT IN THE CASE OF SANJEE VAMMA HANUMANTHE GOWDA CHARITABLE TRUST VS. DIRECTOR OF INCOME TAX (EXEMPT ION) [285 ITR 327] HAS CONSIDERED THAT IN MATTERS OF REGISTRATION AND EXEMPTION OF CH ARITABLE INSTITUTIONS, THE SATISFACTION OF THE COMMISSIONER SHOULD BE REGARDING THE APPLICATIO N OF THE INCOME OF THE TRUST FOR THE SPECIFIED PURPOSES, WHICH ONLY ENTITLES THE ASSESSE E 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 HAS RECEIVED INCOME FROM ITS PROPERTY, THEN FIND OUT HOW THE SAID INCOME HAS BEEN EXPENDED, AND WHETHER IT CAN BE SAI D THAT THE INCOME IS UTILIZED TOWARDS CHARITABLE AND RELIGIOUS PURPOSES. THEREFOR E, FOR THE PURPOSES OF REGISTRATION U/S. 12AA OF THE ACT, WHAT THE AUTHORITIES HAVE TO SATIS FY IS THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION AND HOW THE INCOME DERIVED FROM THE TRUST PROPERTY IS APPLIED TO CHARITABLE OR RELIGIOUS PURPOSES AND NOT THE NATURE OF THE ACTIVITY BY WHICH THE INCOME WAS DERIVED TO THE TRUST. 50. THE ABOVE JUDGMENT PROPOSES THAT WHAT IS TO BE LOOKED INTO IS THE CHARACTER OF APPLICATION OF FUNDS AND THE CHARACTER OF THE ACTIV ITIES CARRIED OUT BY AN ASSESSEE AND NOT THE COLOUR AND NATURE OF THE SOURCES OUT OF WHICH N ECESSARY FUNDS WERE COLLECTED BY THE ASSESSEE. IN OTHER WORDS, THE SOURCE OF FUNDS IS NO T AN IMPORTANT INGREDIENT IN ASSESSING THE CHARACTER OF THE ACTIVITIES CARRIED ON BY A CHA RITABLE INSTITUTION. 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. THEREFORE, THE ACTIVITIES CARRIE D ON BY THE ASSESSEE-SOCIETY IN THE PRESENT CASE CANNOT IN ANY WAY HELD AS OPPOSED TO P UBLIC POLICY. THE OBJECTION EXPRESSED BY THE COMMISSIONER COULD AT A MAXIMUM BE ATTRIBUTED TO THE QUESTION OF ACCEPTING CAPITATION FEES / DONATIONS. IN THIS CONT EXT, THE COMMISSIONER-DR HAS RAISED A CONTENTION THAT THE DONATIONS RECEIVED BY THE ASSES SEE-TRUST ARE NOT VOLUNTARY AND THAT FACT ALSO SHOULD BE CONTRIBUTED TO JUSTIFY THE CANC ELLATION OF THE REGISTRATION. ON THE BASIS OF THE AFORESAID DECISION OF THE TRIBUNAL, WHICH HAS BEEN RENDERED AFTER CONSIDERING THE JUDGMENTS OF THE HONBLE KARNAT AKA HIGH COURT IN THE CASE 11 OF SANJEVAMMA HANUMANTHE GOWDA CHARITABLE TRUST (SUPR A) AND THAT OF THE ALLAHABAD HIGH COURT IN THE CASE OF CIT V RED ROSE S CHOOL 163 TAXMANN 19 (ALL.), IT IS QUITE CLEAR THAT THE OBJECTION RAISED BY THE COMMISSIONER WITH REGARD TO THE RECEIPT OF CAPITATION FEE/DONATIONS ARE FACTOR S TO BE CONSIDERED AT THE TIME OF ASSESSMENTS WHILE EXAMINING THE ELIGIBILITY OF THE A SSESSEE TRUST FOR THE BENEFIT OF SECTION 11 & 12 AND THE SAME DO NOT COME INTO PLAY I N THE COURSE OF THE EXAMINATION BY THE COMMISSIONER FOR THE PURPOSES OF GRA NT OF REGISTRATION UNDER SECTION 12AA OF THE ACT. 14. IN VIEW OF THE AFORESAID DISCUSSION, IN OUR CONSIDERED OPINION, THE COMMISSIONER HAS EXAMINED THE APPLICATION OF THE ASSESSEE ON IRRELEVANT CONSIDERATIONS WHICH WERE BEYOND THE SCOPE OF ENQUIRY EN VISAGED UNDER SECTION 12AA OF THE ACT. WE, THEREFORE, DEEM IT FIT AND PROP ER TO SET ASIDE THE ORDER OF THE COMMISSIONER AND RESTORE THE MATTER BACK TO HIS FILE TO BE EXAMINED AFRESH STRICTLY IN TERMS OF THE SCOPE OF THE ENQUIRY ENVISAGED UN DER SECTION 12AA(1) OF THE ACT. 15. IN SO FAR AS THE ASSESSEES PLEA FOR CONDONATION OF DELAY FOR FILING OF THE APPLICATION IS CONCERNED, THE SAME IN OUR VIEW ALSO DESE RVES TO BE REVISITED BY THE COMMISSIONER IN THE LIGHT OF THE DECISION OF OUR CO- ORDINATE BENCH IN THE CASE OF CHURCH OF OUR LADY GRACE (SUPRA). WE MAY HASTEN TO ADD HERE THAT OUR DECISION TO REMAND THE ISSUE OF CONDONATION OF DELAY BACK TO THE FILE OF THE COMMISSIONER IS NO REFLECTION ON THE MERITS WHICH THE CO MMISSIONER SHALL ADJUDICATE APPROPRIATELY IN ACCORDANCE WITH LAW. 16. IN SO FAR AS THE PLEA OF THE ASSESSEE THAT IT HAD BEE N GRANTED REGISTRATION EARLIER, THE SAME IN OUR VIEW HAS BEEN RIGHTLY REJECTED BY THE COMMISSIONER AND NO FAULT CAN BE FOUND WITH THE ACTION OF THE COMMISSIO NER. THE COMMISSIONER SHALL EXAMINE THE ASSESSEES CLAIM OF REGISTRATION ON MERI TS AS CONTAINED IN THE APPLICATION DATED 12.2.2007 ON THE BASIS THAT THE ASSESSEE DID NOT ENJOY ANY REGISTRATION UNDER SECTION 12A(A) OF THE ACT ON AN EARL IER DATE. NEEDLESS TO SAY, 12 THE COMMISSIONER SHALL GIVE A REASONABLE OPPORTUNITY O F BEING HEARD TO THE ASSESSEE IN THIS REGARD, AND THEREAFTER ADJUDICATE IN ACCOR DANCE WITH LAW. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. DECISION PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF SEPTEMBER, 2011. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G.S. P ANNU) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE, DATED: 27 TH SEPTEMBER, 2011 B COPY TO:- 1) APPELLANT 2) RESPONDENT 3) THE CIT(CENTRAL) PUNE 4) DR, A BENCH, ITAT, PUNE. 5) GUARD FILE BY ORDER TRUE COPY ASST. REGISTRAR, I.T.A.T., PUNE