Shikshana Prasaraka Mandali, Pune V. CIT(Central), Pune

ITA 1348/PUN/2010

• Counselvise Citation: 134824514 RSA 2010
• Duration Of Justice: 3 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 24-06-2013
• Assessment Year: 2010-2011
• Appeal Filed On: 18-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: SUDHIR KUMAR JHA
• Keywords: Gift; Business income; Search and seizure; Document seized; Charitable institution; Principle of natural justice; Earning of tax free income; Source of fund; Benefit of exemption; Cancellation of registration; Documents seized
• Section: 12A; 12AA; 131; 6; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI R.K. PANDA, ACCOUNTANT MEMBER. ITA.NOS.1348 AND 1349/PN/2010 (ASSESSMENT YEARS : 2010-11 & 2011-12) SHIKSHANA PRASARAKA MANDALI, SHARADA SABHAGRIHA, S.P. COLLEGE CAMPUS, PUNE 411030 .. APPELLANT PAN NO.AABTS7821G VS. CIT CENTRAL, PUNE .. RESPONDENT ASSESSEE BY : SHRI SUDHIR KUMAR JHA & SHRI KETAN SHAH REVENUE BY : SHRI S.K. SINGH, CIT DATE OF HEARING : 26-03-2014 DATE OF PRONOUNCEMENT : 27-03-2014 ORDER PER R.K. PANDA, AM : ITA NO.1349/PN/2010 FILED BY THE ASSESSEE IS DIREC TED AGAINST THE ORDER DATED 17-09-2010 OF THE CIT CENTRAL, PUNE CAN CELLING THE REGISTRATION U/S.12A. ITA NO.1348/PN/2010 FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 20-09-2010 OF THE CIT CENTRAL PUNE REJECTING THE RENEWAL OF APPROVAL U/S.80G OF THE I.T. ACT. FOR THE SAKE OF CONVENIENCE BOTH THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO.1349/PN/2010 (A.Y. 2011-12): 2. FACTS OF THE CASE, IN BRIEF, ARE THAT SHIKSHANA PRASARAKA MANDALI IS A SOCIETY REGISTERED UNDER THE BOMBAY PUBLIC TRUSTS A CT, 1950 AND UNDER THE 2 SOCIETY REGISTRATION ACT. IT WAS GRANTED REGISTRAT ION U/S.12A OF THE INCOME TAX ACT BY THE CIT, PUNE VIDE CERTIFICATE OF REGIST RATION DT.17-09-1973. THE OBJECTS OF THE SOCIETY AS PER ITS CONSTITUTION ARE AS UNDER : I. TO IMPART POPULAR AND REASONABLY AFFORDABLE EDUC ATION IN INDIA & ABROAD. II. TO START PRIVATE SCHOOLS. III. TO TAKE THE EXISTING ONES UNDER ITS SUPERVISIO N. IV. TO ENCOURAGE MARATHI LITERATURE. V. TO FOUND MARATHI INSTRUCTION ON SOUNDER FOOTING. VI. TO EDUCATE HANDICAPPED, DEAF AND DUMB PUPILS. VII. TO ENCOURAGE SOCIAL & SCIENTIFIC RESEARCH AND DEVELOPMENT ACTIVITIES. VIII. TO INVEST ANY SURPLUS FUNDS OF THE S.P. MANDA LI AS PER THE SECTION 11(5) OF THE INCOME TAX ACT, 1961 ONLY IN M ODES SPECIFIED IN THAT SECTION. IX. AND TO ADOPT SUCH OTHER MEASURES AS MIGHT SEEM DESIRABLE FOR CARRYING OUT ABOVE MENTIONED OBJECTS. 2.1 THE SOCIETY RUNS A NUMBER OF EDUCATIONAL INSTIT UTIONS. THERE WAS A SEARCH AT THE PREMISES OF THE SOCIETY AT THERAPEUTI C DRUG MONITORING LABORATORY, 194, SCHEME NO.6, ROAD NO.15, SION KOLI WADA, SION EAST, MUMBAI-22 O 21-07-2008. 2.2 AFTER CONSIDERING THE EVIDENCES GATHERED DURING AND AFTER THE SEARCH, THE CIT CENTRAL PUNE WAS OF THE VIEW THAT THE ACTIV ITIES OF THE SOCIETY WERE NOT GENUINE AND WERE NOT BEING CARRIED OUT IN ACCOR DANCE WITH THE OBJECTS OF THE SOCIETY. ACCORDINGLY, A SHOW CAUSE NOTICE W AS ISSUED TO THE SOCIETY ON 26-08-2009 REQUESTING THE ASSESSEE SOCIETY TO SH OW CAUSE AS TO WHY THE REGISTRATION SHOULD NOT BE CANCELLED. IN THE SAID NOTICE, IT WAS EMPHASISED THAT THE ACTIVITIES OF THE MANDALI ARE NOT GENUINE AND THE ACTIVITIES ARE NOT BEING CARRIED OUT WITH THE OBJECTS OF THE MANDALI. IT WAS NOTED BY THE LD.CIT IN THE SHOW CAUSE NOTICE THAT THE ASSESSEE W AS COLLECTING DONATIONS FROM STUDENTS FOR ADMISSION TO RUIA AND PODDAR COL LEGES. IT WAS 3 EMPHASISED THAT THE COLLECTION OF CAPITATION FEE/DO NATION IS ILLEGAL IN TERMS OF THE MAHARASHTRA EDUCATIONAL INSTITUTIONS (PROHIB ITION OF CAPITATION FEES) ACT, 1987. ACCORDING TO THE LD.CIT THE ACTIVITY TH AT IS ILLEGAL CANNOT BE THE GENUINE ACTIVITY. THUS, THE ACTIVITIES OF THE SOCI ETY ARE NOT GENUINE. IT WAS FURTHER NOTED BY THE LD.CIT THAT THE ASSESSEE HAS I NVESTED IN SHARES OF COOPERATIVE SOCIETY WHICH IS NOT THE ONE OF THE SPE CIFIED MODES OF SECTION 11(5) OF THE I.T. ACT. THUS, THE ACTIVITY OF THE M ANDALI IS NOT IN ACCORDANCE WITH THE OBJECTS. 2.3 THE ASSESSEE SOUGHT ADJOURNMENTS ON VARIOUS OCC ASIONS ON DIFFERENT GROUNDS. SUBSEQUENTLY, THE SUCCESSOR CIT AGAIN ASKE D THE ASSESSEE TO EXPLAIN AS TO WHY THE REGISTRATION GRANTED U/S.12A SHOULD NOT BE CANCELLED IN VIEW OF THE SHOW CAUSE NOTICE ISSUED EARLIER DAT ED 26-08-2009. IN THE SAID LETTER, IT WAS FURTHER STATED BY THE LD.CIT TH AT THE REGISTRATION GRANTED EARLIER U/S.12A ALSO REQUIRED TO BE WITHDRAWN/CANCE LLED AS THERE IS CONSTRUCTIVE FRAUD ON THE PART OF THE INSTITUTION AS THE INSTITUTION IS CHARGING HUGE DONATIONS FOR ADMISSION TO THE STUDEN TS IN THE COLLEGES/SCHOOLS AS DISCUSSED IN THE SAID SHOW CAUS E NOTICE. THUS, THERE IS VIOLATION OF TRUST AND CONFIDENCE PUT IN THE INSTIT UTION WHILE GRANTING REGISTRATION U/S.12A. RELYING ON THE DECISION OF HO NBLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT VS. NATIONAL INSTITUTE OF AERONAUTICAL ENGINEERING SOCIETY REPORTED IN 181 TAXMAN (UTTARAKHAND) AND IN THE CASE OF CIT VS. QUEENS EDUCATION SOCIETY REPORTED IN 223 CTR 395 T HE LD.CIT WAS OF THE OPINION THAT THE ASSESSEE SOCIETY IS RUNNING INSTIT UTIONS ON COMMERCIAL LINES WHICH AMOUNTS TO TRADE AND COMMERCE IN EDUCATION AN D THEREFORE THE SAME CANNOT BE SAID TO BE A CHARITABLE PURPOSE. HE ACCO RDINGLY ASKED THE 4 ASSESSEE TO EXPLAIN AS TO WHY THE REGISTRATION GRAN TED EARLIER SHOULD NOT BE CANCELLED. 3. THE ASSESSEE STRONGLY CHALLENGED THE ABOVE PROPO SAL OF THE LD.CIT. IT WAS SUBMITTED THAT THE ASSESSEE IS AN INSTITUTE OF REPUTE WITH A STANDING OF MORE THAN 100 YEARS. THE OBJECTS OF THE ASSESSEE I S TO SPREAD EDUCATION AT AFFORDABLE COST. IT IS RUNNING 52 INSTITUTES CATER ING TO MORE THAN 50,000 STUDENTS. RELYING ON THE DECISION OF THE PUNE BENC H OF THE TRIBUNAL IN THE CASE OF BHARATI VIDYAPEETH VS. ITO REPORTED IN 28 S OT 32 IT WAS SUBMITTED THAT SINCE THE TRUST WAS GRANTED REGISTRA TION U/S.12A, THE CIT HAS NO POWER TO CANCEL THE REGISTRATION U/S.12AA(3). I T WAS SUBMITTED THAT THE POWER IN SECTION 12AA(3) FOR CANCELLATION OF THE RE GISTRATION CAN BE INVOKED IF THE ACTIVITIES OF THE TRUST ARE NOT GENU INE OR THE ACTIVITIES ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. HOWEVER, THE ASSESSEE IS EXISTING SOLELY FOR EDUCATION PURPOSES WHICH IS EVIDENCED BY THE FACT THAT IT IS RUNNING SEVERAL EDUCATIONAL INSTITU TES. FURTHER, IT WAS APPROVED U/S.10(23C)(VI) AND HAS BEEN GRANTED APPRO VAL U/S.80G(5). 3.1 THE ASSESSEE DENIED THE ALLEGATION THAT THE SOC IETY IS ACCEPTING DONATIONS FOR ADMISSION AND THAT THE CASH OF 12 LAK HS SEIZED DURING THE SEARCH IS OUT OF SUCH DONATIONS. IT WAS SUBMITTED THAT SHRI ANAND MATE HAS ALREADY STATED THAT A SUM OF RS.8 LAKHS OUT OF SEIZ ED CASH OF RS.12 LAKHS BELONG TO HIM IN HIS PERSONAL CAPACITY. 3.2 AS REGARDS THE STATEMENT OF THE PARENTS OF SOME OF THE STUDENTS THAT DONATIONS WERE PAID TO THE SOCIETY FOR SECURING ADM ISSION, IT WAS SUBMITTED THAT THE DONATIONS ARE ALWAYS VOLUNTARY AND WERE NO T GIVEN FOR SECURING 5 ADMISSIONS. IT WAS ARGUED THAT THE INSTITUTES ARE NOT RUNNING ON COMMERCIAL LINES AND IT HAS NOT VIOLATED THE PROVISIONS OF THE MAHARASHTRA EDUCATIONAL INSTITUTIONS (PROHIBITION OF CAPITATION FEES) ACT, 1987. 3.3 AS REGARDS THE ALLEGATION OF THE LD.CIT THAT IN VESTMENTS MADE IN SHARES OF COOPERATIVE BANK ARE IN VIOLATION OF PRO VISIONS OF SECTION 11 R.W.S. 13(1)(D) IS CONCERNED IT WAS ARGUED THAT THE ASSESSEE REQUIRED FUNDS FOR CARRYING ON ITS EDUCATIONAL ACTIVITIES AND THER EFORE IT HAD AVAILED LOAN FROM COOPERATIVE BANK. UNDER RULES OF THE COOPERAT IVE BANK, THE BORROWER HAS TO BECOME MEMBER OF THE COOPERATIVE BANK BY BEC OMING A SHAREHOLDER OF THE REQUISITE AMOUNT. IT WAS ARGUED THAT THE PU RCHASE OF THE SHARES OF THE COOPERATIVE BANK IS NOT AN INVESTMENT. IT WAS ALSO SUBMITTED THAT THE INVESTMENT IN SHARES WAS NOT OUT OF SURPLUS FUND OF THE ASSESSEE WHICH WAS ACCUMULATED U/S.11(2) (B) OF THE I.T. ACT AND THERE FORE THE PRESCRIBED MODES OF INVESTMENTS U/S.11(5) ARE NOT APPLICABLE T O IT. IT WAS ACCORDINGLY ARGUED THAT CANCELLING REGISTRATION U/S.12A IS UNCA LLED FOR. 4. HOWEVER, THE LD.CIT WAS NOT SATISFIED WITH THE E XPLANATION GIVEN BY THE ASSESSEE. AS REGARD THE PRELIMINARY OBJECTION OF THE ASSESSEE THAT THE LD.CIT DOES NOT HAVE POWER U/S.12AA(3) TO CANCEL RE GISTRATION GRANTED U/S.12A HE HELD THAT IN VIEW OF THE AMENDMENT OF SU B-SECTION (3) OF SECTION 12AA THE CIT HAS POWER TO CANCEL THE REGISTRATION G RANTED EARLIER U/S.12A. HE ACCORDINGLY HELD THAT THE VARIOUS DECISIONS RELI ED ON BY THE ASSESSEE ARE NOT APPLICABLE. HE ACCORDINGLY REJECTED THE ABOVE OBJECTION OF THE ASSESSEE. 6 4.1 SO FAR AS THE GENUINENESS OF THE ACTIVITIES OF THE TRUST ARE CONCERNED HE OBSERVED THAT THERE WAS A SEARCH AT THE PREMISES OF THE SOCIETY AT THERAPEUTIC DRUG MONITORING LABORATORY, 194, SCHEME NO.6, ROAD NO. 15, SION KOLIWADA, SION EAST, MUMBAI-22 ON 21/07/2008. DURING THE COURSE OF THE SEARCH, A WRITING PAD CONTAINING PAGE NO. 1 TO 19 MARKED AS ANNEXURE A3 WAS SEIZED FROM THE PREMISES OF THE MANDALI. NOT ED IN THIS WRITING PAD WERE VARIOUS NAMES AGAINST WHICH CERTAIN PERCENTAGE S AND SOME OTHER FIGURES WERE WRITTEN. IN HIS STATEMENT RECORDED U/ S. 132(4) DURING THE COURSE OF THE SEARCH ON 21/07/2008, SHRI ANANT NILK ANT MATE, VICE CHAIRMAN OF THE ASSESSEE SOCIETY STATED THAT THE NA MES NOTED IN THE WRITING PAD WERE OF THE STUDENTS/PARENTS WHO HAD VISITED HI M FOR ADMISSION TO THE INSTITUTES RUN BY THE SOCIETY NAMELY RUIA COLLEGE, PODDAR COLLEGE AND WELINGKAR INSTITUTE. THE PERCENTAGE NOTED AGAINST T HE NAMES INDICATED THE PERCENTAGE OF MARKS AND THE OTHER FIGURE INDICATED THE DONATION TO BE PAID BY THEM FOR GETTING THE ADMISSION. THERE WAS, THUS, A CLEAR ADMISSION BY SHRI ANANT NILKANT MATE THAT THE SOCIETY WAS COLLEC TING DONATION FOR GIVING ADMISSION TO THE STUDENTS. AS ALREADY MENTIONED AB OVE, AS PER THE ENTRIES IN THE SEIZED DOCUMENTS THE TOTAL DONATION COLLECTE D/TO BE COLLECTED DURING A SHORT PERIOD IN F.Y. 2008-09 CAME TO A HUGE SUM OF RS.296 LACS. 4.2 HE OBSERVED THAT THE COLLECTION OF DONATION BY THE ASSESSEE SOCIETY FOR GRANTING ADMISSION WAS FURTHER CONFIRMED BY THE STATEMENT OF A NUMBER OF PARENTS RECORDED BY THE ADIT (INV) 5(1), MUMBAI AS PER DETAILS GIVEN BELOW : SR. NO. NAME OF THE PERSON WHOSE STATEMENT U/S.131 RECORDED AMOUNT OF DONATION NAME OF STUDENT WHO SOUGHT ADMISSION REMARKS 1 SHRI PRAMOD N. KARLEKAR RS. 5 LACS SHRI MANDAR FOR ADMISSION IN 11 TH STANDARD IN RUIA COLLEGE NO RECEIPT 7 4.3 HE OBSERVED THAT IN THE STATEMENTS, THE PARENTS NOT ONLY CONFIRMED THE PAYMENT OF DONATION TO THE ASSESSEE SOCIETY BUT THEY ALSO CATEGORICALLY STATED THAT THE DONATIONS WERE DEMANDED FOR ADMITTI NG STUDENTS TO THE INSTITUTES RUN BY THE SOCIETY AND WERE GIVEN ONLY F OR THE PURPOSE OF OBTAINING THE ADMISSIONS. 4.4 HE OBSERVED THAT DURING THE COURSE OF THE SEARC H, CASH OF RS.12,12,730/- WAS FOUND AT THE PREMISES OF THE SOC IETY. SHRI ANANT MATE ADMITTED THAT OUT OF THIS RS.12 LACS REPRESENTED DO NATION RECEIPTS FOR ADMISSION TO RUIA AND PODDAR COLLEGES. HE REFERRED TO THE RELEVANT QUESTION AND ANSWER FROM THE STATEMENT OF SHRI ANAN T MADE DATED 21-07- 2008 WHICH ARE AS UNDER : 'Q.5 IN REPLY TO Q.29 OF PRELIMINARY STATEMENT RECOR DED U/S. 132(4) ON 21.07.08. YOU HAVE STATED THAT THERE IS RS. 10 LAKHS AP PROXIMATELY CASH AT TDM LABORATORY MUMBAI. IS THIS CASH REFLECTED IN BO OKS OF ACCOUNTS OF SPM ? 2 SMT. LEENA S. DHARNE RS. 4.25 LACS SHRI ADITYA FO R ADMISSION IN 11 TH STANDARD IN RUIA COLLEGE NO RECEIPT 3 SHRI TAPASKUMAR CHOUDHARY RS.65,000/- SHRI SUVRADIP TAPAS CHJOUDHARY FOR ADMISSION IN F.Y. BSC (COMPUTER) NO RECEIPT 4 SHRI ASHOK C. THAKKAR RS.1.50 LACS MISS UNNATI TH AKKAR FOR ADMISSION IN F.Y. J.C. (COMMERCE) IN PODDAR COLLEGE NO RECEIPT 5 SHRI VIJAY A. THAKKAR RS.1.5 LACS MISS TWINKLE V. THAKKAR FOR ADMISSION IN F.Y.J.C. (COMMERCE) IN PODDAR COLLEGE NO RECEIPT 6 MRS. ZENOBIA VIRAF MOTIWALA RS. 1 LAC MISS KARISHMA V. MOTIWALA FOR ADMISSION IN 11 TH STANDARD IN PODDAR COLLEGE NO RECEIPT 7 SHRI SUNIL SETHI RS.1.5 LAC MISS SHRUTI S. SETHI FOR ADMISSION IN 11 TH STANDARD IN PODDAR COLLEGE NO RECEIPT 8 SHRI Z. RAHIMAN I. PARKAR RS.50,000/- MR. MANI R. PARKAR FOR ADMISSION IN 11 TH STANDARD IN RUIA COLLEGE NO RECEIPT 9 MR. DINESH C. DHAMANI RS.70,000/- SHRI SUNNY D. D HAMANI FOR ADMISSIIONIN 11 TH STANDARD (COMMERCE) IN PODDAR COLLEGE NO RECEIPT 8 ANS THIS CASH BELONGS TO SPM THE CASH WAS COLLECTED IN CONNECTION WITH DONATION FOR ADMISSION IN RUIA & PODAR COLLEGES. THE C ASH WAS COLLECTED AS DONATION FOR ADMISSION IN RUIA & PODAR COLLEGES FRO M THE FOLLOWING PERSONS : 1. TAPAS CHOUDHARI RS.1.50 LACS 2. SHAH PUJA RS.1.00 LACS 3. THAKKAR RS.1.50 LACS 4. MOTIVALA RS.0.50 LACS THE BALANCE CASH OUT OF RS. 10 LAKHS ABOVE HAS BEEN REC EIVED FROM DIFFERENT STUDENTS FOR ADMISSION IN RUIA AND PODAR COLLEGE, THE N AMES WHERE OF I DO NOT RECOLLECT RIGHT NOW, AND I WILL TELL YOU SHORTLY . THE ABOVE MENTIONED CASH HAS NOT BEEN ENTERED IN BOOKS OF ACCOUNTS OF SPM. SINCE IT HAS BEEN RECEIVED TODAY ONLY. Q.6 HAVE YOU ISSUED ANY RECEIPTS/VOUCHERS FOR THE RECEI PT OF THE CASH RECEIVED BY SPM (BY YOU IN THE CAPACITY AS VICE CHAI RMAN OF SPM) AS STATED BY YOU IN ANSWER TO QUESTION NO. 5 ABOVE. IF YES, PLEA SE PRODUCE THE SAME? ANS. NO, WE HAVE NOT ISSUED ANY VOUCHER/RECEIPT. Q. 12 IN THE COURSE OF PHYSICAL SEARCH OF PREMISES OF SPM AT TDM LABORATORIES SION, MUMBAI CASH OF RS. 12,12,730/- HAS B EEN FOUND. DO YOU CONFIRM THE SAME? ANS. YES, L CONFIRM THE SAME. Q.13 PLEASE EXPLAIN THE SOURCE OF THE CASH RECEIVED? ANS. I HAVE ALREADY EXPLAINED IN REPLY TO Q. NO. 5 TO 11 ABOVE THAT CASH HAS BEEN RECEIVED AS DONATION FOR ADMISSION IN RUIA AND PO DAR COLLEGES. THE SAME HAS NOT BEEN ENTERED IN THE BOOKS OF ACCOUNTS AND NO RECEIPTS HAVE ISSUED FOR THE SAME AND THE SAME IS THEREFORE UNACCOUNTE D. OUT OF THIS ONLY RS. 12,730/- IS ACCOUNTED FOR IN THE CASH BOOK OF TDM LABORATORY. 4.5 HE ACCORDINGLY OBSERVED THAT DURING THE COURSE OF THE SEARCH SHRI ANANT MATE VERY CLEARLY ADMITTED THAT THE CASH FOUN D WAS OUT OF THE DONATION RECEIPTS FOR ADMISSION. IN HIS SUBSEQUENT COMMUNICATION HOWEVER, SHRI ANANT MATE RETRACTED AND CLAIMED THAT OUT OF RS. 12 LACS, RS. 8 LACS BELONGED TO HIM. HE REFERRED TO ANSWER OF MR . MATE TO Q.NO.28 WHICH READS AS UNDER : Q.28 IN YOUR REPLY TO SHOW CAUSE NOTICE DTD 02.09.20 08 YOU HAVE WRITTEN THAT CASH OF RS.8 LAKHS BELONGS TO YOU. PLEASE EXPLAIN T HE SOURCE THEREOF? ANS: I CANNOT GIVE THE ANSWER. 9 4.6 HE OBSERVED THAT AN ATTEMPT HAS BEEN MADE TO DE LINK THE DONATIONS FROM ADMISSIONS. HOWEVER, HE OBSERVED THAT THE QUES TIONS AND ANSWERS FROM THE STATEMENT OF SHRI ANANT MATE DT. 13/09/200 8 ( I.E. AFTER ALMOST 2 MONTHS OF THE SEARCH) MAKE IT VERY CLEAR THAT THE T RUE STATE OF AFFAIRS IS WHAT SHRI ANANT MATE HAD STATED ON THE DATE OF THE SEARCH. Q.23 AS PER THE REPLY TO Q.4 TO Q. 12 OF YOUR STATEM ENT DTD 11.09.2008 AND AS PER THE REPLY OF Q.3 TO Q.I2 OF YOUR STATEMENT DTD 13.09.2008, YOU HAVE ADMITTED THAT DIFFERENT PERSONS MENTIONED IN PAGE NO. I TO 19 OF YOUR NOTE PAD (ANNEXURE A-3) APPROACHED YOU FOR ADMISSION IN RU IA/PODAR COLLEGE. YOU HAVE FURTHER ADMITTED THAT YOU ASKED THEM ABOUT THE PAYMENT OF DONATION TO BE RECEIVED FROM THEM BY SP MANDALI. FU RTHER IN REPLY TO Q.22 ABOVE YOU HAVE STATED THAT THERE ARE HARDLY ONE OR T WO PERSONS WHO APPROACHED FOR DONATION TO SP MANDALI WHILE YOUR VI SITS AT TDM THE DETAILS WHEREOFYOU ARE NOT ABLE TO SUBMIT. IN THE BACKGROUND OF THESE FACTS PLEASE EXPLAIN AS TO WHETHER THE DONATIONS TO BE RECEIVED BY SP MANDALI FROM DIFFERENT PARENTS/STUDENTS AS PER YOUR NOTE PAD (ANNEXU RE A-3) ARE FOR GETTING ADMISSION IN RUIA/PODAR COLLEGE. ANS: I CANNOT ANSWER RIGHT NOW, Q. 24 I AM SHOWING YOU STATEMENTS OF SHRI BIPIN MAGANL AL SHETH, PRAMOD N. KARLEAR, LEENA S. DHARNE, CAPT. RAHUL R. BHIVUADKAR SHRI TAPASKUMAR CHOUDHURI, VIJAY A THAKKAR, ZENOBIA V. MOTIVALA, VE EPIN S. THOKAL, SUNIL SETHI, Z. RAHIMAN IBRAHIM PARKAR, DINESH C. DHAMANI RELEVANT EXTRACTS THEREOF HAVE ALREADY BEEN INCORPORATED IN THE SHOW C AUSE NOTICE ISSUED TO YOU ON 02.09.2008 AS WELL AS TO PRINCIPAL TRUSTEE SPM ON THE SAME DATE. FROM THESE STATEMENTS, IT IS QUITE CLEAR THAT SP MANDAL I DOES NOT GIVE ADMISSIONS FROM, MANAGEMENT QUOTA WITHOUT DONATION AND SP MANDALI IS AN INSTITUTION PRIMARILY ENGAGED IN PROFITABLE ACTIV ITIES. FURTHER THE CONDITIONS MENTIONED U/S. 11 TO 12AA FOR GETTING EXEM PTION FROM INCOME TAX HAS ALSO BEEN VIOLATED. FURTHER YOU YOURSELF ACCEP TED IN YOUR STATEMENT DTD 21.07.2008 THAT SP MANDALI HAS RECEIVED DONATION S FOR ADMISSION IN RUIA AND PODAR COLLEGES IN CASH AS WELL AS THROUGH DD. PLEASE EXPLAIN? ANS: I CANNOT TELL YOU ANYTHING RIGHT NOW. Q.25 PLEASE EXPLAIN HOW THE DONATIONS RECEIVED FROM DIFFERENT PERSONS IN ANNEXURE A-3 HAVE BEEN ENTERED INTO THE BOOKS OF ACC OUNT OF SP MANDALI? ANS: I AM NOT ABLE TO EXPLAIN. Q. 26 IN YOUR REPLY TO SHOW CAUSE NOTICE DTD 02.09. 2008 YOU HAVE STATED THAT DONATIONS RECEIVED ARE VOLUNTARY AND YOU HAVE A LSO DENIED THE CLAIMS MADE BY DIFFERENT PARENTS WHOSE STATEMENTS HAVE BEEN R ECORDED IN THIS OFFICE. FURTHER YOU HAVE STATED THAT ALL THE DD/ CHE QUES OF DONATIONS ARE PROPERLY DEPOSITED IN THE BOOKS OF SP MANDALI. FURTHE R YOU HAVE NEGATIVE (SIC) THE STATEMENT OF MR. SHAH INVOLVING IN DONATIO N OF RS.4 LAKHS. ALL THESE STATEMENTS ARE QUITE CONTRARY TO YOUR STATEMENT DTD 21 .07.2008 WHEREIN YOU HAVE ACCEPTED IN CLEAR CUT TERMS THAT SP MANDALI IS GIVING ADMISSIONS OUT OF MANAGEMENT QUOTA IN RUIA AND PODAR COLLEGES F OR DONATIONS. FURTHER YOUR STATEMENT REGARDING DONATION RECEIVED FROM MR. TAPAS CHOUDHURI, 10 THAKKAR, MOTIVALA HAVE BEEN CONFIRMED BY THEM AND T HEY HAVE ACCEPTED THAT DONATIONS HAVE BEEN GIVEN FOR ADMISSIONS ONLY. MO REOVER, YOU HAVE NOT BEEN ABLE TO PRODUCE ANY BOOKS OF ACCOUNTS SHOWING TH E DEPOSIT OF ABOVE MENTIONED DONATIONS. PLEASE EXPLAIN. ANS: I CANNOT EXPLAIN RIGHT NOW. THE ACCOUNTANT OF SPM IS ON LEAVE AND I CANNOT VERIFY THE ENTRY IN THE BOOKS OF ACCOUNTS RIGH T NOW.' 4.7 AS REGARDS THE OBJECTION OF THE ASSESSEE QUEST IONING THE RELIANCE BEING PLACED ON XEROX COPIES OF DOCUMENTS SEIZED DU RING THE COURSE OF THE SEARCH IN VIEW OF THE LOSS OF THE ORIGINAL SEIZED D OCUMENTS HE OBSERVED THAT THE ORIGINAL SEIZED DOCUMENTS ARE MISSING FROM THE OFFICE OF THE AO. IT IS QUITE LIKELY THAT THERE IS SOME FOUL PLAY INV OLVED IN THIS AND IT IS ANYBODY'S GUESS AS TO WHO COULD HAVE HAD AN INTERES T IN SEEING TO IT THAT THE RECORDS ARE LOST. THE DEPARTMENT HAS OBTAINED X EROX COPIES OF THE SEIZED DOCUMENTS FROM THE ADIT(LNV), WHO HAD MADE T HESE XEROX COPIES FROM THE ORIGINALS BEFORE THE ORIGINALS WERE FORWAR DED TO THE A.O AND I HAVE RELIED ON THESE XEROX COPIES. IT IS NOT THE AS SESSEE'S CASE THAT THE XEROX COPIES WHICH ARE RELIED ON ARE FABRICATED AND ARE NOT TRUE COPIES OF THE ORIGINALS. THE OBJECTION HAS, THEREFORE, NO SUB STANCE. HE NOTED THAT THE DEPARTMENT HAS LODGED A POLICE COMPLAINT REGARD ING THE LOSS OF THE ORIGINAL SEIZED DOCUMENTS AND THE POLICE IS INVESTI GATING THE CASE. 4.8 AS REGARDS THE CONTENTION OF THE ASSESSEE THAT EVEN IF SHRI ANANT MATE HAS BEEN ENGAGED IN SUCH ACTIVITIES, THE SOCIE TY CANNOT BE FAULTED FOR THE SAME HE HELD THAT THIS ARGUMENT CANNOT BE ACCEP TED. ACCORDING TO LD.CIT, THE SOCIETY FUNCTIONS ONLY THROUGH ITS OFFI CE BEARERS. SHRI ANANT MATE WAS THE VICE CHAIRMAN OF THE MANAGING COUNCIL OF THE ASSESSEE SOCIETY AND WAS ACTING ON BEHALF OF THE SOCIETY WHI LE ADMITTING STUDENTS TO THE VARIOUS INSTITUTES RUN BY THE SOCIETY. THE ASSE SSEE SOCIETY CANNOT THEREFORE, WASH ITS HANDS OF RESPONSIBILITY OF ACTI ONS OF SHRI ANANT MATE. 11 4.9 IN VIEW OF THE ABOVE, HE OBSERVED THAT THE ASSE SSEE HAS BEEN COLLECTING HUGE DONATION FOR ADMISSION OF STUDENTS TO THE VARIOUS INSTITUTES RUN BY IT WHICH IS IN CLEAR VIOLATION OF THE PROVIS IONS OF THE MAHARASHTRA EDUCATIONAL INSTITUTIONS (PROHIBITION OF CAPITATION FEE ACT, 1987). THE COLLECTION OF SUCH DONATIONS IS THUS ILLEGAL. IT CA NNOT THEREFORE, BE SAID THAT THE ACTIVITIES OF THE SOCIETY ARE GENUINE. 4.10 HE FURTHER OBSERVED THAT THE INSTITUTES ARE BE ING RUN ON COMMERCIAL LINES WITH PROFIT MOTIVES WHICH IS FURTHER STRENGTH ENED BY THE SUBSTANTIAL SURPLUS CREATED YEAR AFTER YEAR. HE OBSERVED FROM THE CONSOLIDATED INCOME AND EXPENDITURE ACCOUNT FOR F.Y. 2004-05 TO 2007-08 THAT THE SURPLUS FOR DIFFERENT YEARS ARE AS UNDER : SR.NO. F.Y. SURPLUS 1 2004 - 05 2,96,86,643/ - 2 2005 - 06 3,05,55,568/ - 3 2006 - 07 7,33,98,517/ - 4 2007 - 08 8,87,22,809/ - ACCORDING TO HIM THE SURPLUS IS NOT NOMINAL BY ANY STANDARD. AT THE END OF THE F.Y. 2007-08 ACCUMULATED SURPLUS WAS RS.32,20,7 1,791/-. THEREFORE, THE GENERATION OF SUCH HUGE SURPLUS YEAR AFTER YEAR FROM THE ACTIVITIES OF THE SOCIETY, IS A CLEAR INDICATION THAT THE ACTIVITIES OF THE SOCIETY ARE RUNNING ON COMMERCIAL LINES AND ARE NOT CHARITABLE IN NATURE. 4.11 THE LD.CIT FURTHER OBSERVED THAT THE ASSESSEE HAD INVESTED SHARES IN THE COOPERATIVE BANK FROM WHICH IT HAS OBTAINED LOA NS. ACCORDING TO HIM AS PER THE PROVISIONS OF SECTION 13(1)(D) IF ANY FU NDS OF THE SOCIETY ARE INVESTED OR DEPOSITED OTHERWISE THAN IN ANY ONE OR MORE OF THE FORMS OR MODES SPECIFIED IN SUB-SECTION(5) OF SECTION 11 THE SOCIETY LOSES THE 12 BENEFITS U/S.11 AND 12. THIS STIPULATION COVERED O N ALL FUNDS AND NOT ONLY FUNDS ACCUMULATED U/S.11(2)(B). THERE IS NO EXCEPT ION PROVIDED IN SECTION 13(1)(D). THEREFORE, HE HELD THAT THE INVESTMENT I N THE SHARES OF COOPERATIVE BANK ARE CLEARLY IN VIOLATION OF THE SA ID OBJECT CLAUSE. HE ACCORDINGLY HELD THAT THE ACTIVITIES OF THE ASSESSE E ARE NOT GENUINE AND WAS NOT BEING CARRIED OUT IN ACCORDANCE WITH ITS OBJECT S AND THEREFORE THE REGISTRATION GRANTED TO THE ASSESSEE IS LIABLE TO B E CANCELLED UNDER SUB- SECTION(3) OF SECTION 12AA OF THE I.T. ACT. HE ACC ORDINGLY CANCELLED REGISTRATION GRANTED EARLIER TO THE ASSESSEE U/S.12 A. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT THE ASSESSE E IS IN APPEAL BEFORE WITH THE FOLLOWING GROUNDS : THE FOLLOWING GROUNDS ARE TAKEN WITHOUT PREJUDICE T O EACH OTHER. ON FACT AND IN LAW, 1. THE LEARNED CIT ERRED IN CANCELLING THE REGISTR ATION GRANTED TO THE APPELLANT EDUCATIONAL SOCIETY U/S 12 A OF THE INCOME TAX ACT, 1961. THE ORDER U/S 12 AA(3) IS BAD IN LAW. 2. ACTIVITIES OF THE APPELLANT SOCIETY ARE GENUINE AND THE OBJECTS ARE CHARITABLE AND HENCE, THERE WAS NO REASON FOR WITHDRAWING REGIST RATION U/S 12A. 3. THE LEARNED CIT ERRED IN HOLDING THAT : A. THE APPELLANT SOCIETY WAS CHARGING DONATIONS FOR GRANTING ADMISSIONS IN ITS EDUCATIONAL INSTITUTIONS. B. THE NOTE PAD FOUND DURING THE SEARCH INDICATED T HAT THE DIFFERENT INSTITUTIONS OF THE SOCIETY WERE RECEIVING DONATIONS FOR ADMISSIONS. C. THE APPELLANT SOCIETY IS RUNNING THE ORGANIZATI ON FOR THE PROFITABLE PURPOSES AS THE ADMISSIONS ARE GRANTED AGAINST THE DONATIONS AND THE APPELLANT SOCIETY'S ACTIVITIES ARE NOT GENUINE AS I T HAS VIOLATED THE MAHARASHTRA EDUCATIONAL INSTITUTIONS (PROHIBITION O F CAPITATION FEE) ACT,1987. D. THE APPELLANT SOCIETY DID NOT ACCOUNT FOR THE DO NATIONS RECEIVED. E. THE APPELLANT SOCIETY IS NOT A CHARITABLE ORGAN IZATION AND THE INCOME OF WHICH IS NOT EXEMPT U/S 11 OR SECTION 10(23C). 13 F. IT HAS MADE INVESTMENTS IN SHARES OF THE CO-OPERATI VE BANK THEREBY VIOLATING THE PROVISIONS OF SECTION 11(5) AND SECTION 1 3. G. THE APPELLANT SOCIETY HAS OBTAINED REGISTRATION U/ S.12A BY PRACTISING FRAUD. 4. THE LEARNED CIT FAILED TO APPRECIATE THAT : A. THE APPELLANT SOCIETY WAS NOT COLLECTING ANY DONA TIONS FOR ADMISSIONS. B. THE TRUSTEE SHRI. MATE HAD ADMITTED IN HIS STATEM ENT THAT THE CASH FOUND WITH HIM WAS HIS OWN AND NOT BELONGING TO THE SO CIETY. C. THE APPELLANT SOCIETY HAD NOT RECEIVED ANY DONAT IONS FOR ADMISSIONS AND WHATEVER DONATIONS WERE RECEIVED FOR THE CHARITABLE PURPOSE WERE DULY ACCOUNTED FOR. D. THE CHARGE OF ALLEGED UNACCOUNTED DONATIONS OF R S.296 LAKHS WAS TOTALLY BASED ON SURMISES AND PRESUMPTIONS . E. JUST BECAUSE OF SOME SURPLUS IN SOME EDUCATIONAL INSTI TUTIONS, IT WAS GROSSLY INCORRECT TO HOLD THAT THE APPELLANT SOCIET Y WAS EXISTING FOR PROFITS AND WAS NOT A CHARITABLE ORGANIZATION. F. THE APPELLANT SOCIETY AS PER THE BYELAWS OF THE CO-OP. BANK HAD TO PURCHASE THE SHARES THEREOF FOR OBTAINING THE LOAN REQ UIRED FOR ITS EDUCATIONAL ACTIVITIES AND HENCE, THE SHARES WAS NOT AN INVESTMENT BUT THE SHARES WAS AN EXPENDITURE ON THE OBJECTS OF THE TRU ST. G. THE APPELLANT SOCIETY IS GRANTED THE EXEMPTION U/ S. 10 (23 C)/11 OVER THE YEARS AND JUST BECAUSE OF THE ABOVE INCIDENT, THE SOCIETY DOES NOT CEASE TO BE A CHARITABLE ORGANIZATION AND IT CAN NOT BE HELD THAT THE SOCIETY IS NOT ENTITLED TO THE EXEMPTION U/S.10 (23C)/ 11. H. THE SURPLUS CANNOT BE LOOKED INTO IN ISOLATION BUT HAS TO BE SEEN IN LIGHT OF GROSS COLLECTION OF THE INSTITUTE BEFORE CONC LUDING WHETHER THESE SURPLUSES ARE NOMINAL OR HUGE. SIMILARLY, ACCUMUL ATED SURPLUS OF RS. 32,20,71,791/- CANNOT BE CLAIMED OR COMMENTED UP ON AS HUGE AS IT IS LEGACY OF THE 100 YEARS/120 YEARS OF SHIKSHANA P RASARAKA MANDALI, PUNE. I. THE QUESTION OF ACCUMULATED HUGE SURPLUS WAS NOT R ELEVANT FOR THE PURPOSE OF REGISTRATION OF THE CHARITABLE TRUST. 5. THE APPELLANT SUBMITS THAT REGISTRATION ALREADY GRA NTED TO THE APPELLANT U/S 12A SHOULD BE CONTINUED & SHOULD NOT BE CANCELLED. 6. WITHOUT PREJUDICE, THE CANCELLATION OF REGISTRATI ON U/S 12AA(3) BE NOT HELD RETROSPECTIVE. 7. THE APPELLANT REQUESTS FOR ADMISSION OF ADDITIONAL E VIDENCES, IF ANY, REQUIRED IN SUPPORT OF ASSESSEE'S APPEAL. 8. THE APPELLANT CRAVES LEAVE TO ADD, ALTER .AMEND O R DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 14 6. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY OBJECT ED TO THE ACTION OF THE AO. HE SUBMITTED THAT THE ASSESSEE TRUST IS 12 5 YEARS OLD AND RUNS 63 EDUCATIONAL INSTITUTIONS WHEREIN 70000 STUDENTS ARE ENROLLED. ONLY 6 OUT OF 63 INSTITUTIONS ARE HIGHER EDUCATION, DEGREE, POSTG RADUATE COLLEGES AND REST ARE PRIMARY, SECONDARY SCHOOLS/INSTITUTIONS. HE SU BMITTED THAT IT ALSO RUNS SCHOOLS FOR DEAF AND DUMB AND INTUITIONS FOR BLIND. MOST OF THE INSTITUTIONS ARE LOCATED IN INTERIOR MAHARASHTRA AND FEW IN PUNE AND MUMBAI. HE SUBMITTED THAT THERE ARE SCHOOLS EXCLUSIVELY FOR GI RLS WHERE NO FEES ARE CHARGED AND NEARLY 50% OF THE INSTITUTIONS ARE RUN ON DEFICIT. HE SUBMITTED THAT 19 INSTITUTIONS ARE AIDED AND REST ARE UNAIDED . THE INSTITUTES IN SURPLUS TRANSFER THE FUNDS TO INSTITUTES IN DEFICIT. HE SU BMITTED THAT THE TRUST IS BEING RUN BY A DEMOCRATICALLY ELECTED BODY OF TRUST EES FOR A TERM OF FOUR YEARS AND HEADED BY THE PRESIDENT. THE FUNCTIONING OF THE INSTITUTIONS RUN BY THE MEMBERS ARE MONITORED BY EDUCATION DEPARTMEN T OF GOVERNMENT OF MAHARASHTRA, UNIVERSITY OF PUNE, MUMBAI AND KOLHAPU R AND ALSO BY AICTE AND RATING AGENCIES. HE SUBMITTED THAT THE ENTRY LEVEL ADMISSION IN COLLEGES RUN BY THE TRUST IS BY CENTRALISED ADMISSI ON PROCESS OF THE GOVERNMENT WHERE THE TRUST HAS NO SAY. THE TRUST HA S SAY IN ONLY 5% SEATS IN 5 COLLEGES UNDER MANAGEMENT QUOTA AT ENTRY LEVEL ADMISSION AND TOTAL SUCH SEATS ARE ABOUT 200 OUT OF 70000 SEATS IN VARI OUS SCHOOLS AND COLLEGES. THE TUITION FEES IS MONITORED BY SHIKSHAN SHULKA SA MITI OF GOVERNMENT OF MAHARASHTRA AND NO COMPLIANT HAS EVER BEEN FILED BY ANYBODY UNDER THE MAHARASHTRA EDUCATIONAL INSTITUTIONS (PROHIBITION O F CAPITATION FEES) ACT, 1987. HE SUBMITTED THAT A SEARCH ACTION WAS CONDUC TED AGAINST SHRI A.N. MATE AND OTHER MEMBERS OF THE TRUST AND AT ONE OF T HE PREMISES OF THE TRUST, (I.E. TDP LABORATORY) IN MUMBAI ON 21-07-2008. SHR I A.N. MATE HAD BEEN 15 TRUSTEE AND VICE CHAIRMAN OF THE TRUST. AN AMOUNT OF RS. 12 LAKH ALONG WITH CERTAIN HAND WRITTEN NOTES IN WRITING PADS WER E SEIZED FROM THE PREMISES AND STATEMENT U/S.132(4) OF THE ACT OF MR. MATE WAS RECORDED DURING THE SEARCH. HE SUBMITTED THAT THE SEIZED PAP ERS DEPICTED NAMES, AMOUNTS AND PERCENTAGE AGAINST EACH NAME. TOTAL 12 1 NAMES WERE THERE AND THE TOTAL AMOUNT WAS RS.296 LAKHS. IT WAS CLAR IFIED BY MR. MATE IN HIS STATEMENT THAT NAMES RECORDED BY HIM WERE OF STUDEN TS/PARENTS WHO VISITED HIM FOR ENTRY LEVEL ADMISSION TO PODDAR COLLEGE, MUMBAI AND RUIA COLLEGE THROUGH MANAGEMENT QUOTA. HE ALSO CLARIFIE D THAT PERCENTAGE NOTED WAS PERCENTAGE OF MARKS OF THE ADMISSION SEEK ERS AND AMOUNT NOTED WAS OF DONATION OFFERED. VARYING AMOUNT OF DONATIO N WAS BECAUSE OF CAPACITY TO PAY AND PERCENTAGE OF THE MARKS. IT WA S THEREFORE INFERRED THAT CASH FOUND WAS AGAINST DONATIONS RECEIVED. 6.1 HE SUBMITTED THAT MR. MATE HAD CLARIFIED IN HIS STATEMENT RECORDED ON 21-08-2008 AS WELL AS LETTER ADDRESSED TO ADI ON 12-09-2008 (A COPY OF WHICH IS PLACED AT PAGE 57 OF THE PAPER BOOK) THAT DONATIONS WERE NOT LINKED FOR ADMISSION AND THAT THEY WERE VOLUNTARY A ND THAT ALL THE DONATIONS WERE FULLY ACCOUNTED FOR AND RECEIPTS WERE DULY ISS UED TO DONORS BY THE TRUST OFFICE IN PUNE. HE SUBMITTED THAT THE SEARCH ACTION DID NOT RESULT IN ANY SEIZURE OF EVIDENCE THAT MR.MATE OR ANY TRUSTEE OR OFFICIAL OF THE TRUST HAS DIVERTED THE FUNDS OF THE TRUST OR DONATION COL LECTED FOR PERSONAL USE OR FOR ANY USE OTHER THAN THE USE OF EDUCATIONAL OBJEC TS OF THE TRUST. NO SUCH FINDING HAS BEEN GIVEN BY THE LD.CIT THAT DONATION/ FUND OF THE TRUST HAS BEEN DIVERTED FOR USE OF NON-EDUCATIONAL PURPOSES. THEREFORE, IT IS AN ADMITTED FACT THAT THE DESTINATION OF DONATION IS F OR EDUCATION. HE SUBMITTED THAT OUT OF THE TOTAL 121 NAMES APPEARING IN THE SE IZED PAPER OF ADMISSION 16 SEEKERS ONLY 9 STUDENTS/ PARENTS CONFIRMED TO HAVE GIVEN DONATION FOR ADMISSION THROUGH MANAGEMENT QUOTA AND THIS IS AFTE R DETAILED POST SEARCH ENQUIRY BY THE DEPARTMENT. HE SUBMITTED THAT ALL T HE DONATIONS SO RECEIVED ARE PROPERLY ACCOUNTED FOR IN THE BOOKS OF THE TRUS T AND THE DONORS WERE GIVEN RECEIPTS FOR THE DONATION. 6.2 HE SUBMITTED THAT THE CIT HAS CANCELLED THE REG ISTRATION BASICALLY ON 2 GROUNDS, I.E. (A) THE ASSESSEE HAS BEEN COLLECTIN G HUGE DONATION FOR ADMISSION OF STUDENTS TO THE VARIOUS INSTITUTES RUN BY IT WHICH IS A CLEAR VIOLATION OF THE PROVISIONS OF THE MAHARASHTRA EDUC ATIONAL INSTITUTIONS (PROHIBITION OF CAPITATION FEE) ACT, 1987. THE COL LECTION OF SUCH DONATION IS ILLEGAL AND THEREFORE THE ACTIVITIES OF THE SOCI ETY ARE NOT GENUINE. FURTHER, THE INSTITUTES ARE RUN ON COMMERCIAL LINES WITH PRO FIT MOTIVE SINCE SUBSTANTIAL SURPLUS IS CREDITED YEAR AFTER YEAR AND (B) THE TRUST HAS ALSO VIOLATED THE PROVISIONS OF SECTION 11(5) R.W.S. 13( 1)(D) SINCE IT HAS INVESTED IN SHARES OF A COOPERATIVE BANK. 6.3 ARGUING THE 2 ND ISSUE FIRST, THE LD. COUNSEL FOR THE ASSESSEE REFE RRED TO THE DETAILS OF LOAN OUTSTANDING AND INVESTMENT I N SHARES OF THE COOPERATIVE BANK UNDER COMPULSION FOR A.Y. 2006-07 TO 2009-10. REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF BHARATI VIDYAPEETH MEDICAL FOUNDATION VS. ACIT REPO RTED IN 144 ITD 510 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT WHERE PURCHASE OF SHARES OF THE COOPERATIVE BANK WAS MADE UNDER COMPULSION FOR OBTAINING LOAN FROM SAID BANK AND ASSESSEE WAS STIL L ENJOYING THE OVERDRAFT FACILITIES FROM THE SAID BANK THERE WAS NO VIOLATIO N OF PROVISIONS OF SECTION 11(5) R.W.S. 13(1)(D). HE SUBMITTED THAT IN THE IN STANT CASE THE LOAN AMOUNT 17 OUTSTANDING IS MORE THAN RS.33 CRORES AND THE INVES TMENT IN SHARES WAS DUE TO COMPULSION BY THE BANK. THEREFORE, IN VIEW OF T HE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF BHARATI VIDYAP EETH MEDICAL FOUNDATION (SUPRA) THERE IS NO VIOLATION AT ALL. H E ACCORDINGLY SUBMITTED THAT REGISTRATION U/S.12A CANNOT BE CANCELLED ON TH IS GROUND. 6.4 NOW COMING TO THE FIRST ISSUE, I.E. BY CHARGING HUGE DONATION FOR ADMISSION FROM STUDENTS TO VARIOUS INSTITUTES THE A SSESSEE HAS VIOLATED THE PROVISIONS OF THE MAHARASHTRA EDUCATIONAL INSTITUTI ONS (PROHIBITION OF CAPITATION FEE) ACT, 1987 AND THAT INSTITUTES ARE B EING RUN ON COMMERCIAL LINES WITH PROFIT MOTIVE HE SUBMITTED THAT THERE IS NO VIOLATION OF THE MAHARASHTRA EDUCATIONAL INSTITUTIONS (PROHIBITION O F CAPITATION FEE) ACT, 1987 AS NO COMPLAIN HAS EVER BEEN FILED AGAINST ANY OF THE INSTITUTE OF THE ASSESSEE TRUST. HE SUBMITTED THAT EVEN THE INCOME TAX DEPARTMENT OR ITS INVESTIGATION WING WHICH CONDUCTED THE SEARCH HAS N OT FILED ANY COMPLAINT AFTER THE SEARCH WITH THE GOVT. OF MAHARASHTRA FOR ANY SUCH VIOLATION. REFERRING TO SECTION 3(2) OF PROHIBITION OF CAPITAT ION FEE ACT, 1987 HE SUBMITTED THAT THE SAID ACT PERMITS EDUCATIONAL INS TITUTIONS TO TAKE DONATIONS FOR ITS EDUCATIONAL ACTIVITIES AND THE ON LY RIDER IS THAT THERE SHOULD NOT BE PRIOR RESERVATION OF SEATS IN THE IN STITUTION FOR ADMISSION. THE LD. CIT HAS NOT ADDUCED ANY EVIDENCE OF PRIOR R ESERVATION OF SEATS. HE SUBMITTED THAT EVEN AFTER IN DEPTH ENQUIRY THE D EPARTMENT COULD LOCATE ONLY 9 SUCH STUDENTS WHOSE NAMES ARE LISTED IN THE ORDER. HE SUBMITTED THAT THE DONATIONS GIVEN BY THEM ARE VOLUNTARY AND PROPE R RECEIPTS HAVE BEEN ISSUED TO THEM AND THE ENTIRE MONEY HAS BEEN ACCOUN TED FOR IN THE BOOKS OF THE TRUST. HE SUBMITTED THAT THE GOVT. ALLOWS 5% S EATS UNDER MANAGEMENT QUOTA AND THE TRUST HAS FULL DISCRETION IN THE ADM ISSION SUBJECT TO 18 FULFILMENT OF CERTAIN CONDITIONS REGARDING MARKS AN D THEY CAN CHARGE EVEN HIGHER FEES UPTO 5 TIMES OF THE NORMAL FEES. AS RE GARD THE ALLEGATION OF THE LD. CIT THAT HUGE SURPLUS OF FUNDS ARE ACCUMULATED YEAR AFTER YEAR HE SUBMITTED THAT UNDER SECTION 11 OF THE I.T. ACT THE CHARITABLE TRUST HAS TO SPEND 85% OF ITS INCOME ON ITS OBJECTS AND CAN ACCU MULATE 15% OF THE INCOME. REFERRING TO THE WORKING OF SURPLUS/DEFICI T AS PER INCOME & EXPENDITURE ACCOUNT OF VARIOUS YEARS, HE SUBMITTED THAT THE THE ASSESSEE TRUST HAS SPENT MORE THAN 90% OF ITS INCOME EVERY Y EAR AND SURPLUS IS MUCH LESS THAN THE PERMISSIBLE LIMIT OF 15%. 6.5 AS REGARDS THE ALLEGATION OF THE LD.CIT THAT TH E ACTIVITIES OF THE ASSESSEE TRUST ARE NOT GENUINE AND THAT THEY ARE NO T BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TRUST HE SUBMITTE D THAT THE LD.CIT HERSELF HAS ADMITTED THAT THE TRUST IS RUNNING MANY EDUCATI ONAL INSTITUTIONS SINCE LAST 100 YEARS, THEREFORE, IT IS WRONG SAY ON THE PART OF THE LD.CIT THAT THE ACTIVITIES OF THE TRUST ARE NOT GENUINE ESPECIALLY WHEN THERE IS NOTHING ON RECORD TO SHOW THAT THE INSTITUTIONS ARE FAKE OR TH AT THERE IS NO EDUCATIONAL ACTIVITY. HE SUBMITTED THAT THE CHIEF COMMISSIONER OF INCOME TAX, PUNE HAS EXAMINED THE GENUINENESS OF THE ACTIVITIES OF T HE TRUST DURING 2007 AND HAS HELD THAT THE INSTITUTIONS ARE SOLELY FOR EDUCA TION AND NOT FOR PROFIT WHEN NOTIFICATION U/S.10(23C)(VI) WAS ISSUED VIDE O RDER DATED 06-08-2007. REFERRING TO THE DECISION OF THE TRIBUNAL IN ASSESS EES OWN CASE FOR A.YRS. 2003-04, 2004-05 AND 2005-06 ORDER DATED 24-05-2012 HE SUBMITTED THAT THE AO IN THOSE YEARS TAXED THE SURPLUS OF THE INS TITUTES OF THE TRUST NAMELY RUIA COLLEGE, PODDAR COLLEGE, WELLINGKAR COLLEGE AN D TDM LABORATORY AS BUSINESS INCOME, THEREFORE, DENIED EXEMPTION U/S.11 OR 10(23C) (IIIAB). WHILE DOING SO, THE ASSESSING OFFICER HAD HELD THAT THESE INSTITUTIONS WERE 19 CHARGING INFLATED FEES ON COMMERCIAL LINE DISREGARD ING THE PREVALENT RULES SET BY MUMBAI UNIVERSITY. THE HON. ITAT UPHELD THE ORDER OF THE CIT(A) DELETING THE ADDITION. WHILE DOING SO, THE TRIBUNA L AT PARA 10 OF THE ORDER HELD THAT THE AO ERRED IN SELECTIVELY CONSIDERING S URPLUS OF FEW INSTITUTES AND THAT TOO FEW SPECIFIC ACCOUNTS IGNORING LOSSES BY OTHERS. THE HON. ITAT ALSO HELD IN PARA 9 OF THE ORDER THAT THE ASSE SSEE SHOULD BE CONSIDERED AS A WHOLE AS A SINGLE CHARITABLE ENTITY AND THAT P ROFIT & LOSS CANNOT BE CONSIDERED IN RESPECT OF FEW INSTITUTIONS. THE ITAT ALSO HELD IN PARA 10 OF THE ORDER THAT THERE WAS NO VIOLATION OF ANY RULE A ND THAT THE SURPLUS OF THE INSTITUTES CANNOT BE TAXED AND THAT EXEMPTION U/S. 11 IS AVAILABLE AS ACTIVITY WAS PURELY EDUCATIONAL. HE SUBMITTED THAT IN THE P RESENT APPEAL ALSO THE CIT HAS CONSIDERED TWO UNITS NAMELY RUIA COLLEGE AN D PODDAR COLLEGE OUT OF THE 63 UNITS AND THAT TOO IN A VERY NARROW COMPA SS OF ADMISSION UNDER THE MANAGEMENT QUOTA. HE SUBMITTED THAT IN VIEW OF THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE THE ORDER OF CIT CA NCELLING REGISTRATION U/S.12A SHOULD BE SET-ASIDE. 6.6 REFERRING TO THE DECISION OF THE MUMBAI BENCH O F THE TRIBUNAL IN THE CASE OF BOMBAY PRESIDENCY GOLF CLUB VS. DIT(EXEMPTI ONS) HE SUBMITTED THAT IN THIS CASE, DIT (E), MUMBAI HAS CANCELLED RE GISTRATION U/S. 12AA(3)OF THE ACT ON THE GROUND THAT SIZABLE INCOME WAS BEING EARNED BY THE ASSESSEE ON BUSINESS LINES. THE ASSESSEE THOUGH A PREMIERE CLUB WAS DERIVING INCOME FROM HOARDING, CATERING, RUNNING A BAR, ETC. AND THUS THE ACTIVITIES WERE NOT FULLY IN ACCORDANCE WITH THE OB JECTS OF THE CLUB. THE TRIBUNAL HELD THAT CANCELLATION CANNOT BE DONE MERE LY ON THE BASIS OF OBSERVED COMMERCIAL ACTIVITY. SEC. 12AA(3) WILL GET ATTRACTED AS PER THE 20 TWO CONDITIONS GIVEN UNDER THAT SECTION REGARDING G ENUINENESS OF ACTIVITIES AND THE OBJECTS OF THE TRUST. 6.7 REFERRING TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DDIT VS. SHANTI DEVI PROGRESSIVE EDUCATION SOCIE TY REPORTED IN 340 ITR 320 HE SUBMITTED THAT THE APPEAL BEFORE HON. DE LHI HIGH COURT WAS IN CONNECTION WITH SEC. 10(22) OF THE ACT (NOW DELETED ). HOWEVER, THE FINDINGS OF THE HON. HIGH COURT SUPPORTS THE CASE O F THE ASSESSEE. THE ASSESSEE IN THE CITED CASE WAS RUNNING EDUCATIONAL INSTITUTION AND ITS EXEMPTION CLAIMED U/S 10(22) WAS DENIED ON THE BASI S OF ALLEGED PROFIT MOTIVE AND THE INSTITUTION WAS SEEN COLLECTING MONE Y FROM STUDENTS WHILE GIVING ADMISSION. HOWEVER, THE HONBLE HIGH COURT ALLOWED THE CLAIM OF THE ASSESSEE AFTER RECORDING THAT THERE IS NO MATER IAL TO SHOW OR COMPLAINT THAT THERE HAS BEEN ANY COERCIVE PROCESS TO RECOVER DONATIONS. 6.8 REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF DR. D.Y. PATIL EDUCATION SOCIETY VS. CIT CE NTRAL PUNE VIDE ITA NO.1280/PN/2007 ORDER DATED 27-09-2011 HE SUBMITTED THAT THE REGISTRATION WAS DENIED IN THIS CASE SINCE ASSESSEE WAS SEEN TAKING CAPITATION FEE, THE TRIBUNAL AFTER ELABORATE DISCU SSION AND FOLLOWING THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF RAMARAVO ADIK EDUCATION SOCIETY HAS SET-ASIDE THE ORDER OF T HE CIT(A) AND DIRECTED HIM TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE DIRECTIONS GIVEN THEREIN. HE ACCORDINGLY SUBMITTED THAT SINCE THE ASSESSEE HA S NOT VIOLATED ANY OF THE PROVISIONS, THEREFORE, THE LD.CIT WAS NOT JUSTIFIED IN CANCELLING THE REGISTRATION U/S.12AA OF THE I.T. ACT. 21 6.9 SO FAR AS THE DECISION OF HONBLE UTTARAKHAND H IGH COURT IN THE CASE OF CIT VS. NATIONAL INSTITUTE OF AERONAUTICAL ENGIN EERING EDUCATION SOCIETY REPORTED IN 315 ITR 428 AND THE DECISION IN THE CASE OF CIT VS. QUEENS EDUCATIONAL SOCIETY REPORTED IN 319 ITR 160 ARE CONCERNED HE SUBMITTED THAT THE FACTS IN THOSE CASES ARE QUITE D IFFERENT. IN THE CASE OF NATIONAL INSTITUTE OF AERONAUTICAL ENGINEERING EDUC ATION SOCIETY (SUPRA) THE FINDING HAS BEEN GIVEN THAT THE INSTITUTE WAS C HARGING FEES FROM STUDENTS MAKING HUGE PROFITS. HOWEVER, IN THE INST ANT CASE, THERE IS NO QUESTION OF CHARGING ANY SUBSTANTIAL FEES FROM ANY STUDENT. AS AGAINST 70 SEATS UNDER THE MANAGEMENT QUOTA IN THE TWO COLLEGE S THE ASSESSEE HAS COLLECTED SOME DONATION IN CASE OF ONLY 9 STUDENTS. FURTHER, AS PER GOVERNMENT REGULATIONS UNDER MANAGEMENT QUOTA THE A SSESSEE CAN COLLECT UPTO 5 TIMES OF THE NORMAL FEES FROM THE STUDENTS A ND THE ASSESSEE HAS NOT EXCEEDED THAT, THEREFORE, THE DECISION OF THE HONB LE UTTARAKHAND HIGH COURT IN THE CASE OF NATIONAL INSTITUTE OF AERONAUT ICAL ENGINEERING EDUCATION SOCIETY (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. SO FAR AS THE DECISION OF HONBLE UTTARANCHAL HIGH COURT IN THE CASE OF QUEENS EDUCATION SOCIETY (SUPRA) IS CONCERNED HE SU BMITTED THAT THE SAME IS U/S.10(23C) AND NOT U/S.12AA. HE FURTHER SUBMIT TED THAT IN VIEW OF THE VARIOUS DECISIONS CITED BY HIM EARLIER WHEN THERE A RE 2 VIEWS POSSIBLE THE VIEW WHICH IS IN FAVOUR OF THE ASSESSEE HAS TO BE A LLOWED. RELYING ON VARIOUS OTHER DECISIONS HE SUBMITTED THAT THE ORDER OF THE LD.CIT DENYING THE REGISTRATION U/S.12A SHOULD BE QUASHED. 7. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF CIT. HE SUBMITTED THAT THE ASSESSEE TRUST BY TAKING HUGE DONATIONS FOR GIVING ADMISSION HAS VIOLATED TH E MAHARASHTRA 22 EDUCATIONAL INSTITUTIONS (PROHIBITION OF CAPITATION FEE) ACT, 1987. IT IS ACCUMULATING HUGE SURPLUS WHICH SHOW THAT THE TRUST IS RUNNING ON COMMERCIAL LINES RATHER THAN FOR ANY CHARITY. THE TRUST HAS VIOLATED BY INVESTING IN SHARES OF A COOPERATIVE BANK. IN VIEW OF THE ABOVE AND IN VIEW OF THE DECISIONS OF HONBLE UTTARAKHAND RELIED ON B Y LD. CIT, HE IS JUSTIFIED IN CANCELLING THE REGISTRATION GRANTED U/ S.12A OF THE I.T. ACT. 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH 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. 8.1 NOW COMING TO THE SECOND ISSUE FIRST, I.E. THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 11(5) R.W.S. 13(1)(D) BY INVESTING IN SHARES OF THE COOPERATIVE BANK, WE FIND THE INVESTMENT IN SHARES OF THE COOPERATIVE BANK 23 WAS RS.5,00,150/- AS PER BALANCE SHEET OF THE TRUST FOR A.Y. 2006-07 TO A.Y. 2009-10 WHEREAS THE BORROWING FROM THE BANK DU RING THE ABOVE ASSESSMENT YEARS ARE RS.18.60 CRORES, RS.21.99 CROR ES, 39.21 CRORES AND RS.33.55 CRORES RESPECTIVELY. WE FIND THE ASSESSEE HAS TAKEN LOAN FROM THE BANK FOR WHICH IT HAD TO INVEST IN THE SHARES OF TH E COOPERATIVE BANK AS PER THE BY-LAWS OF THE SAID BANK. WE FIND THE PUNE BEN CH OF THE TRIBUNAL IN THE CASE OF BHARATI VIDYAPEETH MEDICAL FOUNDATION ( SUPRA) WHILE DECIDING AN IDENTICAL ISSUE HAS OBSERVED AS UNDER : 18. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARI OUS DECISIONS CITED BEFORE US. IN THE INSTANT CASE THE AO DENIED THE EXEM PTION U/S.11 ON THE GROUND THAT THERE IS VIOLATION OF PROVISIONS OF SECTION 13(1)(D) R.W.S.11(5) SINCE THE ASSESSEE HAS MADE THE FOLLOWING INVESTMENTS OR CO NTINUED TO HOLD THE INVESTMENTS FOR THE IMPUGNED ASSESSMENT YEAR AS UNDER : A. SHARES IN BHARATI SAHAKARI BANK RS.25,250/- B. ADVANCE TO BHARATI VIDYAPEETH- DEEMED UNIVERSITY MEDICAL COLLEGE RS. 56,73,499/- C. ADVANCE TO AYURVED HOSPITAL RS.1,06,40,099/- D. ADVANCE TO HOMEOPATHETIC HOSPITAL RS. 59,90,016 /- E. RENT ADVANCE TO BHARATI VIDYAPEETH(TRUST) RS. 8, 76,26,124/- 18.1 WE FIND THE LEARNED CIT(A) HELD THAT THERE IS N O VIOLATION OF SECTION 13(1)(D) R.W.S.11(5) ON ACCOUNT OF ITEMS (B) (C) (D) AND (E) ABOVE FOR WHICH THE REVENUE IS NOT IN APPEAL. HOWEVER, HE HELD THA T BY CONTINUING TO HOLD THE SHARES IN BHARATI SAHAKARI BANK AFTER THE LOAN WA S REPAID THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 13(1)(D) R.W.S.11 (5). IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT TH E SHARES WERE PURCHASED UNDER COMPULSION FOR OBTAINING THE LOAN FRO M THE BANK AS PER THE BYE-LAWS OF THE BANK. THE INVESTMENT IN SHARES AMO UNTING TO RS. 25,250/- IS VERY MEAGRE CONSIDERING THE TOTAL ASSETS OF THE TRUST AMOUNTING TO RS.23,24 CRORES. THERE WAS NO OBJECTION BY THE REV ENUE IN THE PAST FOR HOLDING SUCH SHARES IN THE BHARATI SAHAKARI BANK AND E XEMPTION U/S.11 WAS GRANTED, THEREFORE, EXEMPTION U/S.11 SHOULD NOT BE DE NIED TO THE ASSESSEE. IT IS THE CASE OF THE REVENUE THAT BY INVESTING IN SHAR ES OF THE COOPERATIVE BANK THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 13 (1)(D) R.W.S.11(5). THE LOAN SO OBTAINED FROM THE BANK HAS ALREADY BEEN REPAID AND ASSESSEE IS HAVING ONLY OVERDRAFT FROM THE BANK AMOU NTING TO RS.12,87,665/-. THEREFORE, THE ASSESSEE IS NOT ENTITLED TO BENEFIT OF EXEMPTION U/S.11. 18.2 THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT IN THE INSTANT CASE THE ASSESSEE HAD AVAILED LOAN FROM BHARATI SAHAKARI BANK FOR WHICH IT HAD TO BUY CERTAIN NUMBER OF SHARES OF THE B ANK AS A PRE-CONDITION FOR SUCH LOAN AND THE BANK WHILE GRANTING SUCH LOAN H AD DEDUCTED THE SUBSCRIPTION TO SUCH SHARES COULD NOT BE CONTROVERTED BY THE LEARNED DR. 24 THE FURTHER SUBMISSION OF THE LEARNED COUNSEL FOR THE A SSESSEE THAT THERE WAS NO OBJECTION BY THE REVENUE IN THE PAST FOR HOLD ING THE SHARES OF THE BANK IN THE SCRUTINY ASSESSMENTS AND THAT STILL THERE IS O VERDRAFT LOAN FROM THE BANK ALSO COULD NOT BE CONTROVERTED BY THE REVEN UE. WE FIND MERIT IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE PURCHASE OF SHARES OF THE BANK AMOUNTING TO RS.25,250/- IS VERY NEG LIGIBLE CONSIDERING THE TOTAL ASSETS OF THE TRUST AT 23.24 CRORES AND THE SAM E WAS UNDER COMPULSION FOR OBTAINING LOAN FROM THE BANK AND THAT THE BANK WHILE DISBURSING THE LOAN HAD DEDUCTED THE AMOUNT TOWARDS SUC H SHARE SUBSCRIPTION FROM THE LOAN AMOUNT AND THEREFORE, THE SAME SHOULD BE CONSIDERED AS AN APPLICATION OF INCOME. IN OUR OPINI ON, UNDER THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE THE PURCHASE OF SHARE S AMOUNTING TO RS.25,250/- IN THE PAST WHICH THE ASSESSEE CONTINUED TO H OLD DURING THIS YEAR CANNOT BE A GROUND TO HOLD THE SAME AS IN VIOLA TION OF PROVISIONS OF SECTION 11(5) R.W.S. 13(1)(D) ESPECIALLY WHEN THE ASSESSEE IS STILL HAVING AN OVERDRAFT OF RS.12,87,665/- FROM THE BANK AS MENTIONE D BY THE AO. SINCE THE ASSESSEE IS STILL ENJOYING OVERDRAFT FACILITY FROM TH E BANK, THEREFORE, WE FIND NO LOGIC ON THE PART OF THE AO & CIT(A) TO HOL D THAT THERE IS VIOLATION OF PROVISIONS OF SECTION 11(5) R.W.S. 13(1)(D) BECAUSE THE ASSESSEE CONTINUES TO HOLD THE SHARES ONCE THE LOAN WAS REPAID. CONSIDERI NG THE TOTALITY OF THE FACTS OF THE CASE, CONSIDERING THE FACT THAT THE REVEN UE HAD NO OBJECTION IN THE PAST FOR HOLDING THE SHARES OF THE BANK DURING THE TENURE OF LOAN UTILISED BY THE ASSESSEE TRUST AND CONSIDERING THE FACT THAT THE A SSESSEE TRUST IS STILL ENJOYING OVERDRAFT FACILITIES FROM THE BANK WE ARE O F THE CONSIDERED OPINION THAT THERE IS NO VIOLATION OF PROVISIONS OF SECTION 11 (5) R.W.S.13(1)(D) ON ACCOUNT OF HOLDING THE SHARES OF THE BANK. IN THIS V IEW OF THE MATTER, WE SET- ASIDE THE ORDER OF THE CIT(A) AND THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE ARE ALLOWED. SINCE FACTS IN THE INSTANT CASE ARE IDENTICAL TO THE FACTS OF THE CASE DECIDED BY THE PUNE BENCH OF THE TRIBUNAL CITED (SUPRA), TH EREFORE, RESPECTFULLY FOLLOWING THE ABOVE DECISION WE HOLD THAT BY INVESTIN G IN SHARES IN THE COOPERATIVE BANKS FROM WHICH THE ASSESSEE HAS OBTAINED LO AN THE ASSESSEE HAS NOT VIOLATED THE PROVISIONS OF SECTION 11 R.W.S. 13( 1)(D). THEREFORE, THE CIT IS NOT JUSTIFIED IN CANCELLING THE REGISTRATION ON THIS ISSUE. 8.2 SINCE THE ASSESSEE TRUST HAS OBTAINED LOAN FROM THE COOPERATIVE BANK FOR WHICH IT HAS TO MANDATORILY INVEST IN THE REQUI SITE NUMBER OF SHARES, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION CITE D (SUPRA) WE HOLD THAT THE ASSESSEE TRUST HAS NOT VIOLATED THE PROVISIONS OF S ECTION 11 R.W.S. 13(1)(D). THEREFORE, THE LD.CIT IS NOT JUSTIFIED IN CANCELLIN G THE REGISTRATION GRANTED EARLIER U/S.12A ON THIS ISSUE. 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) 25 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 ACCOUNT S COULD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE. 8.4 FROM THE VARIOUS DETAILS FURNISHED BY THE ASSES SEE WE FIND THE ASSESSEE HAS RECEIVED DONATION FROM 9 STUDENTS OUT OF WHICH 4 ARE THROUGH CHEQUES AND 5 ARE IN CASH, THE DETAILS OF WHICH ARE AS UNDER : SR. NO. NAME OF THE PERSON WHOSE STATEMENT U/S. 131 RECORDED AMOUNT OF DONATION NAME OF STUDENT WHO SOUGHT ADMISSION RECEIPT NO BANK DETAILS OF DONATION 1 SHRI PRAMOD N KARLEKAR RS. 5 LACS SHRI MANDAR FOR ADMISSION IN 11TH STANDARD IN RUIA COLLEGE 6520/02.08.08 CHQ. NO- 009968 , AXIS BANK 2 SMT. LEENA S DHARNE RS. 4.25 LACS SHRI ADITYA FOR ADMISSION IN 11TH STANDARD IN RUIA COLLEGE 5890/ 10.07/08 CHQ. NO - 016823 , HDFC BANK 3 SHRI TAPASKUMAR CHOUDHARY RS. 65,000/- SHRI SUVRADIP TAPAS CHOUDHARY FOR ADMISSION IN F.Y.BSC ( COMPUTER ) DONATION IN CASH - DEPOSITED IN BANK ACCOUNT -ACCOUNTED IN CASH BOOK - CONSIDERED AS ANONYMOUS DONATION U/S. 115BBC IN THE INCOME TAX RETURN 4 SHRI ASHOK C THAKKAR RS. 1.50 LACS MISS UNNATI THAKKAR FOR ADMISSION IN F.YJ.C. ( COMMERCE ) IN PODAR COLLEGE DONATION IN CASH - DEPOSITED IN BANK ACCOUNT -ACCOUNTED IN CASH BOOK - CONSIDERED AS ANONYMOUS DONATION U/S. 115BBC IN THE INCOME TAX RETURN 26 5 SHRI VIJAY A THAKKAR RS. 1.50 LACS MISS TWINKLE V THAKKAR FOR ADMISSION IN F.YJ.C. ( COMMERCE ) IN PODAR COLLEGE DONATION IN CASH - DEPOSITED IN BANK ACCOUNT -ACCOUNTED IN CASH BOOK - CONSIDERED AS ANONYMOUS DONATION U/S. 115BBC IN THE INCOME TAX RETURN 6 MRS. ZENOBIA VIRAF MOTIWALA RS. 1 LAC MISS. KARISHMA V MOTIWALA FOR ADMISSION IN LLTH STANDARD IN PODAR COLLEGE. 6434/26.07.08 CHQ. NO - 547195 , HSBC BANK 7 SHRI SUNIL SETHI RS. 1.5 LAC MISS. SHRUTI S. SETHI FOR ADMISSION IN LLTH STANDARD AT PODAR COLLEGE DONATION IN CASH - DEPOSITED IN BANK ACCOUNT -ACCOUNTED IN CASH BOOK - CONSIDERED AS ANONYMOUS DONATION U/S. 115BBC IN THE INCOME TAX RETURN 8 SHRI Z. RAHIMAN I PARKAR RS. 50,000/- MR. MANIR R PARKAR FOR ADMISSION IN LLTH STANDARD IN RUIA COLLEGE 6954/25.11.08 CHEQ NO 610902 INDIAN BANK 9 MR. DINESH C DHAMANI RS. 70,000/- SHRI SUNNY D DHAMANI FOR ADMISSION IN LLTH STANDARD ( COMMERCE ) IN PODAR COLLEGE DONATION IN CASH - DEPOSITED IN BANK ACCOUNT -ACCOUNTED IN CASH BOOK - CONSIDERED AS ANONYMOUS DONATION U/S. 115BBC IN THE INCOME TAX RETURN 8.5 SO FAR AS THE ALLEGATION OF THE LD.CIT THAT IT IS ACCUMULATING HUGE SURPLUS YEAR AFTER YEAR, WE FIND THE SURPLUS OF THE ASSESSEE DURING VARIOUS YEARS IS WITHIN THE PERMISSIBLE LIMIT OF 15% WHICH CAN BE SEEN FROM THE DETAILS OF RECEIPTS FOR VARIOUS FINANCIAL YEARS FIL ED BY THE ASSESSEE WHICH IS AS UNDER : FINANCIAL YEAR INCOME EXPENDITURE SURPLUS DEFICIT 2002 - 03 419769599.15 410778732.37 8990866.78 - 2003 - 04 438334841.84 466731866.40 - 28397024.56 2004 - 05 557831537.81 528144893.95 29686643.86 2005 - 06 673060487.97 642504919.63 30555568.34 2006 - 07 848077942.45 774679424.55 73398517.90 2007 - 08 946894691.52 858171882.07 88722809.45 2008 - 09 1077415402.47 1005830397.33 71585005.14 4,961,384,503.21 4686842116.30 302939411.47 28397024.56 FROM THE ABOVE, IT IS CLEAR THAT ACCUMULATION OF SU RPLUS IS WITHIN THE PERMISSIBLE LIMIT, THEREFORE, IT CANNOT BE SAID THA T THE ASSESSEE IS RUNNING THE EDUCATIONAL INSTITUTIONS ON COMMERCIAL LINES. 27 8.6 WE FIND THE PUNE BENCH OF THE TRIBUNAL IN ASSES SEES OWN CASE FOR A.YRS. 2003-04, 2004-05, AND 2005-06 HAS OBSERVED A S UNDER : 9. WE FIND THAT THE BASIC CONTENTION OF THE ASSESSEE AGAINST THE ACTION OF THE A.O ON THE ISSUE REMAINED THAT THE ASSESSEE BEING SINGLE CHARITABLE ENTITY, PROFIT/LOSS AND EXEMPTION (SEC. 11) CANNOT B E MADE APPLICABLE INSTITUTION WISE OR ACTIVITY WISE BUT ASSESSEE WISE. THE L D CIT(A) HAS ACCEPTED THIS BASIC CONTENTION OF THE ASSESSEE. IN AB SENCE OF REBUTTAL OF THE ABOVE CONTENTION OF THE ASSESSEE BY THE REVENUE, WE DO NOT FIND INFIRMITY IN THE FIRST APPELLATE ORDER ACCEPTING THE SAME. IT IS AN ADMITTED FACT THAT THE ASSESSEE SOCIETY IS THE SINGLE TAXABLE ENTITY. THE REVENU E HAS ALSO NOT BEEN ABLE TO DENY THESE MATERIAL CONTENTIONS OF THE ASSESSEE T HAT THE ASSESSEE HAS CONSISTENTLY BEEN RECOGNIZED U/S. 10(23) AND U/S. 80 G AND IS REGISTERED U/S. 12A, ELIGIBLE FOR TAX EXEMPTION U/S. 1 1 OF THE ACT FOR THE LAST SO MANY YEARS; THE A.O HAS SELECTIVELY CONSIDERED SURPLUS OF THE INSTITUTES NAMED ABOVE AND THAT TOO FEW SPECIFIC ACCOUNTS OR CE RTAIN PROFIT MAKING DIVISIONS OF CERTAIN COLLEGES IGNORING THE LOSSES OR DEFI CIT INCURRED BY OTHER ACCOUNTS OR DIVISIONS OF SAME COLLEGES AND HAS CONSIDERED IT TO BE BUSINESS INCOME SIMULTANEOUSLY IGNORING DEFICIT INCURRED BY OT HER DIVISIONS OF SAME COLLEGE. THE OTHER CONTENTION OF THE ASSESSEE REMAINED THAT THE SURPLUS WAS EXCLUSIVELY OUT OF EDUCATIONAL OR RELATED ACTIVIT Y. THE ASSESSEE HAS MADE ITS COLLEGE-WISE SUBMISSION AS UNDER : 7A) RAM NARAYAN RUIA COLLEGE: THE MAJOR SURPLUS IS ON ACCOUNT OF MISCELLANEOUS ACCOUNT WHICH COMPRISES OF VARIOUS AL LOWABLE, LEGAL COLLECTION FROM STUDENT OTHER THAN NORMAL FEES. THIS ACCOUNT SHOWS A SURPLUS OF RS. 82,64,329/- (PAGE 7,8 & 9 OF ASSESSMENT ORDER). AS AGAINST THIS, OTHER TWO ACCOUNTS I.E. JUNIOR COLLEGE AND SENIOR COLLEGE SHO W A NET DEFICIT OF RS. 24,07,457/- AND RS. 78,42,892/- RESPECTIVELY. (PAGE 4 OF ASSESSMENT ORDER, ITEM NO. 3 & 4 OF THE TABLE) AS ALREADY MENTIONED ABOVE THE ASSESSING OFFICER HA S SELECTIVELY CONSIDERED SURPLUS UNDER THE HEAD OF MISC. A/C AS BUSINESS INC OME AND DENIED EXEMPTION U/S 11 THE MISC A/C HAS FOLLOWING 9 SUBHEADS UNDER WHICH V ARIOUS AMOUNTS/FEES ARE COLLECTED FROM STUDENT WHICH ARE LEGAL & ALLOWED TO BE COLLECTED FROM STUDENTS. THE FOLLOWING ARE THE SAID 9 SUB-HEADS 1) COLLEGE DEVELOPMENT FUND- THE COLLEGE IS ALLOWED TO CHARGE DEVELOPMENT FUND FROM STUDENTS. (ALLOWED VIDE CIRCULAR NO. CONC OL/FEE/190 OF 2003 DATED 13 TH MAY 2003) PLEASE REFER PAGE 77 & 78 OF PAPER BOOK. 2)VPM-VIDYARTHI PRATINIDHI MANDAL- THIS IS A RECOMMENDED ACTIVITY BY THE UNIVERSITY FOR OVERALL DEVELOPMENT OF STUDENTS AND TO PROMOTE EXTRA CURRICULAR ACTIVITIES AMONGST STUDENTS. THIS IS RE QUIRED TO BE FORMED AS PER THE PROVISIONS OF MAHARASHTRA UNIVERSITIES ACT, 197 4 AND ITS AMENDMENT & CONTINUANCE ACT, 2000. PLEASE REFER PAGE NO. 79 & 80 OF PAPER BOOK. 3)O LEVEL AND NRY ACCOUNT THESE COURSES ARE APPROVED/AUTHORIZED BY AN AUTHORIZED BODY OF MINISTRY OF INFORMATION TECHNOLO GY, GOVERNMENT OF INDIA AND MUNICIPAL CORPORATION OF GREATER BOMBAY. THE C OURSES IS DESIGNED TO IMPART COMPUTER TRAINING TO BOYS BELOW POVERTY LINE . REFER PAGE 82 TO 85 OF PAPER BOOK. 28 4) RUIA COLLEGE OF COMPUTER AND ELECTRONICS - IN T HIS ACCOUNT, RECEIPT AND EXPENDITURE IS MAINTAINED IN RESPECT OF COMPUTER AN D ELECTRONICS TRAINING GIVEN TO STUDENTS AFTER 10 TH (ALLOWED BY DIRECTORATE OF VOCATIONAL TRAINING) PAGE 86 TO 88 OF PAPER BOOK. RUIA COLLEGE INFORMATION TECHNOLOGY CENTRE ( COMP UTER PURCHASE ACCOUNT- THROUGH BANK LOAN) COLLEGE SILVER JUBILEE FUND IN THIS ACCOUNT, SILVE R JUBILEE FUNCTION OF JUNIOR COLLEGE WAS ORGANIZED. RECEIPTS & EXPENDITURE OF T HIS ACCOUNT IS MAINTAINED IN THIS. DIAMOND JUBILEE FUND- THE DIAMOND JUBILEE FUNCTION OF SENIOR COLLEGE WAS ORGANIZED IN 1997-98. THE AMOUNT COLLECTED AT THAT TIME WAS KEPT IN F.D. AND THE INTEREST RECEIVED IS SHOWN IN INCOME. SPECIAL EDUCATION FACILITY AND MATERIAL ACCOUNT- T HIS ACCOUNT HAS BEEN MAINTAINED FOR RECEIVING DONATION FROM OLD STUDENTS OF THIS COLLEGE. MISCELLANEOUS ACCOUNT- THIS HAS FOLLOWING SUB-HEADS SPM ROOM RENT:- THE COLLEGE IS GIVING ON RENT DIFF ERENT ROOMS OF THE COLLEGE TO THE BANKS, COACHING CLASSES ETC. IN THE EVENING AND IS CHARGING RS.1100/- PER DAY. IDENTITY CARD FEE ( PERMITTED BY UNIVERSITY) PAGE 7 7 OF PAPER BOOK- COLLECTED FROM STUDENTS AT RS. 100/- PER STUDENT. SALE OF PROSPECTUS A ROUTINE, NORMAL ALLOWABLE AC TIVITY. ANIMAL HOUSE (FOR ZOOLOGY STUDENTS) THE STUDENTS ENROLL FOR POST GRADUATION AND CONDUCT RESEARCH ON SELECTED SUBJECT UNDER THE GUIDANCE OF THEIR GUIDE. RAM NARAYAN RUIA COLLEGE HAS MORE THAN 20 RECOGNIZE D RESEARCH GUIDES AND ABOUT 120 RESEARCH SCHOLARS IN VARIOUS SUBJECTS AND THE COLLEGE HAS PROVIDED NO. OF FACILITIES TO THESE STUDENTS. DIAC FEE & BIO INFOTECH CERTIFICATE COURSE THE FEES CHARGED BY RAM NARAYAN RUIA COLLEGE FOR THE ONE YEAR COURSES ARE RS.8000/- PER YEAR PER STUDENT. THESE ARE PART-TIME COURSES AND THERE IS ONE LECTUR E PER DAY/FIXED LECTURES IN A MONTH. EVEN THOUGH ANY EDUCATIONAL COURSE CONDUCTED BY TH E COLLEGE IS NOT RECOGNIZED BY THE UNIVERSITY, IF IT IS WITHIN THE O BJECT OF THE TRUST, THEN IT CANNOT BE SAID THAT THE CONDUCT OF THE SAID COURSE IS ILLEGAL AND IS PROFITEERING ONE. CHEMISTRY REVISION PRACTICAL A/C AND ALL THE AMOUNT S COLLECTED UNDER THESE VARIOUS SUB-HEADS WAS ALLOWED BY THE RESPECTIVE AUT HORITY I.E. MUMBAI UNIVERSITY. THE ASSESSING OFFICERS OBSERVATION THA T THIS IS A BUSINESS INCOME AS SURPLUS IS HUGE AND NOT FROM EDUCATION ACTIVITIES WAS INCORRECT. THE ASSESSING OFFICER SHOULD HAVE NOTED THE DEFICIT IN RAM NARAYAN RUIA JUNIOR AND SENIOR COLLEGE AND ALSO SHOULD HAVE FOUND OUT T HE NET POSITION OF ALL THESE ACCOUNTS VIZ. JUNIOR COLLEGE, SENIOR COLLEGE AND MISCELLANEOUS ACCOUNTS. ANOTHER MAJOR POINT TO BE NOTED THAT ALL ACTIVITIES ARE PURELY EDUCATIONAL. 7B) THERAPEUTIC DRUG MONITORING (T.D.M.) LABORATORY : THE T.D.M. LABORATORY (IATRIS) IS RESEARCH CENTRE APPROVED BY UNIVERSITY OF PUNE & UNIVERSITY OF BOMBAY FOR GUIDING STUDENTS OF M.SC D EGREE AND PH.D(SCIENCE) DEGREE IN THE SUBJECT OF ANALYTICAL CHEMISTRY, BIO- CHEMISTRY AND MICRO- BIOLOGY. THE RESPECTIVE APPROVAL ARE AT PAGES 89 TO 93 OF PAPER BOOK. THE T.D.M LABORATORY IS THE ONLY PRIVATE COLLEGE WITH THE FACILITY OF BIO EQUIVALENCE STUDIES AND THIS IS BECAUSE OF OUR EXPE RTISE IN ANALYTICAL CHEMISTRY PROVIDING BETTER METHODS OF ANALYSIS WITH MORE SENSITIVITY AND ACCURACY. THE ASSESSING OFFICER WITHOUT NOTICING O R UNDERSTANDING THE FACT 29 THAT THIS IS RESEARCH WING FOR THE STUDENTS HAS ASS UMED IT TO BE BUSINESS INCOME AND TAXED ACCORDINGLY. (PAGE 46 & 47 OF PAPER BOOK) THE NET SURPLUS IS RS. 25,40,673/- (PAGE 10 OF ASSESSMENT ORDER) T HUS, IN VIEW OF THE ABOVE, IT CAN BE SAID THAT THE LABORATORY IS NOT CARRYING ON ANY BUSINESS ACTIVITY AND SOLELY EXISTS FOR EDUCATION ONLY. 7C)R.A. PODDAR COLLEGE APPROVED COMMERCE COLLEGE AND SHOWING FOLLOWING POSITION. (PAGE 47 & 48 OF PAPER BOOK) PARTICULARS SURPLUS/DEFICIT JUNIOR COLLEGE DEFICIT OF RS. 1,54,212/ SENIOR COLLEGE DEFICIT OF RS. 29,91,560/- PODDAR COLLEGE HALL HOSTEL ACCOUNT AND SUNDRY INCOME SURPLUS RS. 9,25,516/- ALL THE COLLECTION UNDER THE HEAD HOSTEL & SUNDRY I NCOME IS LEGAL AND ALLOWABLE. HERE ALSO THE LEARNED ASSESSING OFFICER HAS IGNORED DEFICIT OF PODDAR JUNIOR & SENIOR COLLEGE AND HAS TAXED HOSTEL AND SUNDRY INCOM E. THERE IS SURPLUS OF RS. 9,25,516/- UNDER HOSTEL AND MISC. INCOME. VARIOUS AMOUNTS UNDER THIS HEAD COMPRISES OF :- A)HOSTEL INCOME :- HOSTEL HAS 7 ROOMS ACCOMMODATING 15 BOYS. A INCIDENTAL BUT NECESSARY ACTIVITY FOR COLLEGE. B) SUNDRY INCOME HAS FOLLOWING SUB-HEADS 1. SALE OF PROSPECTUS. 2. TRANSCRIPT CHARGES 3. SALE OF IDENTITY CARDS 4. SALE OF EXAM FORMS 5. COURSE MATERIAL CHARGES 6. CLASS ROOM SERVICE CHARGES 7. HALL CHARGES ALL THESE CHARGES ARE ALLOWED TO BE COLLECTED BY UN IVERSITY AND ARE LEGAL. ALSO THESE ARE INCIDENTAL TO EDUCATIONAL ACTIVITY AND CA NNOT BE TERMED AS BUSINESS AND TAXED BY WITHDRAWING EXEMPTION U/S 11. MOREOVER, IT IS EQUALLY PERTINENT TO NOTE THAT ALL THE AMOUNTS COLLECTED ARE EXCLUSIVE LY USED FOR EDUCATIONAL PURPOSES ONLY AND IT IS INCORRECT TO ASSUME SAME TO BE BUSINESS INCOME. 7D)WELLINGKAR COLLEGE, MUMBAI- A VERY REPUTED MANAGEMENT SCHOOL, LOCATED IN MUMBAI AND RESPECTED AND ACKNOWLEDGED AS A VERY GOOD MANAGEMENT COLLEGE BY VARIOUS BUSINESS MAGAZINES, CORPORATE HO USES AND INDIVIDUALS. (PAGE 48 TO 56 OF PAPER BOOK) (PAGE 13 TO 18 OF ASS ESSMENT ORDER) IT HAS FOLLOWING ACCOUNT. PARTICULARS SURPLUS/DEFICIT AUTONOMOUS COURSES SURPLUS RS. 63,22,417/- UNIVERSITY COURSES DEFICIT RS. 13,75,417/- POST GRADUATE DIPLOMA IN BUSINESS ADMINISTRATION (PGDBA) SURPLUS RS.63,45,208/- DIPLOMA IN MANAGEMENT STUDIES (DMS) RECOGNIZED BY UNIVERSITY SURPLUS RS. 5,90,735/- ASSESSING OFFICER HAS OBSERVED : 1. FEES ARE VERY HIGH. (PAGE 18 OF ASSESSMENT ORDER ) 30 2. EXPENSES LIKE ADVERTISEMENT, PLACEMENT EXPENSES, PROMOTIONAL EXPENSES AND EXPENDITURE ON GIVING GIFTS AND ENTERT AINMENT EXPENSES INCLUDING HOTEL BILLS ETC. ARE LIKE BUSINESS ACTIVI TIES OF ANY CONCERN DOING BUSINESS. (PAGE 17 & 18 OF ASSESSMENT ORDER) AS SUCH ASSESSING OFFICER CONCLUDED THAT THIS COLLE GE IS NOT PREDOMINANTLY EXISTING FOR CHARITABLE PURPOSE BUT FOR PROFIT AND H ENCE TAXED PROFIT OF RS. 63,22,114/- FROM AUTONOMOUS COURSES AND RS. 63,45, 208/- FROM PGDBA COURSE (SURPLUS RS. 63.45 LACS) CALLING IT TO BE BU SINESS ACTIVITY. 10. HAVING GONE THROUGH THE ASSESSMENT ORDER, WE FIND SU BSTANCE IN THE ABOVE CONTENTION OF THE ASSESSEE THAT THE A.O HAS SELECTI VELY CONSIDERED SURPLUS OF FEW INSTITUTES AND THAT TOO FEW SPECIFIC AC COUNTS OR CERTAIN PROFIT MAKING DIVISIONS OF CERTAIN COLLEGES IGNORING LOSSES OR DEFICIT INCURRED BY THE OTHER ACCOUNTS OR DIVISION OF SAME COLLEGES. HE H AS CONSIDERED IT TO BE BUSINESS INCOME AND DENIED EXEMPTION U/S. 11 TO THOSE SU RPLUSES AND SIMULTANEOUSLY IGNORED DEFICIT INCURRED BY OTHER DIVI SIONS OF SAME COLLEGES. FOR EXAMPLE, IN CASE OF RAM NARAYAN RUIA COLLEGE, TH E A.O WHILE CONSIDERING MAJOR SURPLUS ON ACCOUNT OF MISCELLANEOUS ACCOUNT COMPRISING OF VARIOUS ALLOWABLE LEGAL COLLECTIONS FROM STUDENTS OT HER THAN NORMAL FEES SHOWING A SURPLUS OF RS.82,64,329/- HAS NOT CONSIDERED OTHER 2 ACCOUNTS I.E. JUNIOR COLLEGE AND SENIOR COLLEGE SHOWING A NET DEFI CIT OF RS. 24,07,457/- AND RS. 78,42,892/- RESPECTIVELY. IN THE CASE OF THER APEUTIC DRUG MONITORING (T.D.M) LABORATORY, THE A.O. WITHOUT KNO WING OR UNDERSTANDING THE FACT THAT IT IS RESEARCH WING FOR THE STUDENTS, H AS ASSUMED THE NET SURPLUS OF RS.2540673/- TO BE BUSINESS INCOME AND TAXED A CCORDINGLY. IN CASE OF R.A. PODDAR COLLEGE, THE A.O HAS CONSIDERED SUR PLUS OF RS. 9,25,516/- UNDER HOSTEL AND MISCELLANEOUS INCOME WITHOUT CONSIDERI NG THE DEFICIT OF PODDAR JUNIOR AND SENIOR COLLEGE SHOWN AT RS. 1,54,21 2/- AND RS. 29,91,560/- RESPECTIVELY. LIKEWISE IN THE CASE OF WEL LINGKAR COLLEGE, MUMBAI, THE A.O WHILE CONSIDERING THE SURPLUS ON ACCOU NT OF AUTONOMOUS COURSES (RS. 63,22,417/-), POST GRADUATE/DIPLOMA IN BUS INESS ADMINISTRATION (RS. 63,45,208/-) AND DIPLOMA IN MANAG EMENT STUDIES RECOGNIZED BY UNIVERSITY (RS. 5,90,735/-) HAS NOT CON SIDERED THE DEFICIT OF RS. 13,75,417/- ON ACCOUNT OF UNIVERSITY COURSES. THE ASSESSEE HAS ALSO TRIED TO EXPLAIN THAT THE ABOVE NAMED 4 INSTITUTIONS ARE IMPARTING EDUCATION AND THE SURPLUS WAS NOT DIVERTED FOR ANY OTHER PURPOSE THAN TOWARDS THE OBJECTS OF THE ASSESSEE SOCIETY. THIS CONTENTION OF THE ASSESSEE HAS NOT BEEN SATISFACTORILY REBUTTED BEFORE US, HENCE ONLY BECAUSE T HERE WAS SURPLUS IN SOME ACCOUNTS OF SOME INSTITUTIONS AN INFERENCE CANNOT B E DRAWN THAT THE SURPLUS WAS BUSINESS INCOME AND THUS NOT ENTITLED TO EXEMP TION U/S. 11 OF THE ACT AND ABOVE ALL, THE ASSESSEE BEING SINGLE TAXAB LE ENTITY PROFIT/LOSS AND EXEMPTION (SEC. 11) CANNOT BE MADE APPLICABLE I NSTITUTION-WISE OR ACTIVITY-WISE BUT ASSESSEE-WISE. AT PAGE NO. 173 OF THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE, INSTITUTION-WISE INCOME/EXPENDITU RE AND SURPLUS/DEFICITS HAS BEEN GIVEN FOR THE A.Y. 2003-04. THE TOTAL SURPLUS OF THE INSTITUTIONS RUN BY THE ASSESSEE HAS BEEN SHOWN AT RS. 4 ,07,59,630/- AGAINST THE DEFICIT OF RS. 4,43,05,293/-. AT PAGE N O. 15 OF THE FIRST APPELLATE ORDER, THE LD CIT(A) HAS REFERRED THE CBDT INSTRUCTIO N NO. 1112 F. NO. 194/16/72-2 DT. 29.10.1977 WHICH READS AS UNDER : THE QUESTION FOR CONSIDERATION IS WHETHER AN EDUCA TIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSES BUT WHICH SHOWS SOM E SURPLUS AT THE END OF THE YEAR IS ELIGIBLE FOR THIS EXEMPTION. IF THE PR OFIT OF THE EDUCATIONAL INSTITUTION CAN BE DIVERTED FOR PERSONAL USE OF THE PROPRIETOR THEREOF, THEN THE INCOME OF THE EDUCATIONAL INSTITUTION WILL BE SUBJE CT TO TAX. HOWEVER, THERE MAY BE CASES WHERE THE EDUCATIONAL INSTITUTIONS MAY BE OWNED BY THE TRUSTS OR SOCIETIES, TO WHOM THE PROVISIONS OF SEC. 11 MAY BE APPLICABLE. WHERE ALL THE SUBJECTS OF THESE ARE EDUCATIONAL, AND THE SURP LUS, IF ANY, FROM THE 31 RUNNING THE EDUCATIONAL INSTITUTION IS USED FOR EDU CATIONAL PURPOSES ONLY IT CAN BE HELD THAT THE INSTITUTION IS EXISTIN G FOR EDUCATIONAL PURPOSES ONLY AND NOT FOR THE PURPOSES OF PROFIT. HOWEVER, IF THE SURPLUS CAN BE USED FOR NON-EDUCATIONAL PURPOSES IT CANNOT BE SAID THAT THE INSTITUTION IS EXISTING SOLELY FOR EDUCATIONAL PURPO SES AND SUCH INSTITUTION WILL NOT BE LIABLE FOR EXEMPTION UNDER SEC. 10(22). THE LD CIT(A) HAS ALSO PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT VS. SURAT ART SILK CLOTH MA NUFACTURERS ASSOCIATION, 121 ITR 1 (SC) OBSERVING THAT WHAT IS TO BE CONSIDERE D IS WHETHER HAVING REGARD TO ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DOMINANT OBJECT OF THE ACTIVITY IS PROFIT MAKING OR CARRYING OUT A CHAR ITABLE PURPOSE. IF IT IS THE FORMER , THE PURPOSE WOULD NOT BE A CHARITABLE PURPO SE BUT IF IT IS A LATTER, THE CHARITABLE CHARACTER OF THE PURPOSE WOULD NOT BE LOST. THE REVENUE HAVE ALSO NOT SATISFACTORILY REBUTTED THIS SUBMISSION OF T HE ASSESSEE WITH SPECIFIC INSTANCES THAT THERE WAS NO VIOLATION OF GOVER NMENT CIRCULAR FOR FEE CHARGING FROM THE STUDENTS IN DIFFERENT COURSES. IT IS A LSO NOT IN DISPUTE THAT IN LATER 2 ASSESSMENT YEARS, THE A.O HIMSELF HAS NOT TAXE D THE SURPLUS SHOWN IN T.D.M. LABORATORY. WE THUS FULLY CONCUR WI TH THE FINDING OF THE LD CIT(A) THAT IT WAS INCORRECT ON THE PART OF THE A.O TO DENY EXEMPTION U/S. 11 TO THE 4 ABOVE MENTIONED INSTITUTES. THE FIRST A PPELLATE ORDER IN THIS REGARD IS THUS UPHELD AND WE ALSO UPHOLD THE BENEFIT G IVEN BY THE LD CIT(A) ON THIS ACCOUNT. THE ISSUE NO. 1 IS THUS DECIDED IN FA VOUR OF THE ASSESSEE. GROUND NOS. 2 AND 3 ARE THUS REJECTED. 11. AN IDENTICAL ISSUE HAS BEEN RAISED IN THE APPEALS FO R A.YS. 2004-05 AND 2005-06. IN THE A.Y. 2004-05, THE A.O HAD SELE CTIVELY TAXED SURPLUS OF RS. 3,06,04,584/- ARISING FROM (1) RUIA COLLEGE (MISC ELLANEOUS A/C.), (2) R.A. PODDAR COLLEGE, AND (3) WELLINGKAR COLLEGE BE SIDES DONATION FROM INSTITUTIONS. THE A.O HAS NEVERTHLESS GRANTED EXEMPTIO N U/S. 11 TO TDM LABORATORIES. SIMILARLY, IN THE APPEAL FOR THE A.Y. 2005-06, THE A.O HAS SELECTIVELY TAXED SURPLUS OF RS.4,73,92,391/- ARISING F ROM (1) RUIA COLLEGE (MISCELLANEOUS A/C), (2) R.A. PODDAR COLLEGE AND (3) WELLINGKAR COLLEGE, BESIDES DONATION FROM INSTITUTIONS AND DEVELOPMENT FU ND. THE A.O. HAS, HOWEVER, GRANTED DEDUCTION U/S. 11 TO T.D.M. LABOR ATORIES. 12. SIMILAR ARGUMENTS AS ADVANCED IN THE A.Y. 2003-0 4 HAVE BEEN ADOPTED ON THE ISSUE IN THE A.YS. 2004-05 AND 2005-06. WE THUS FOLLOWING THE DECISION TAKEN ON THE ISSUE IN THE APPEAL FOR THE A.Y. 2003-04 UNDER THE SIMILAR FACTS DECIDE THE ISSUE IN THESE APPEALS IN FAVOUR OF THE ASSESSEE. THE GROUND NOS. 2 & 3 IN THE APPEALS FOR A.Y. 2004-05 (IT A NO. 1061) AND FOR A.Y. 2005-06 (ITA NO. 1062) ON THE ISSUE ARE THUS REJE CTED. 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 TH E SUBMISSIONS MADE BY LEARNED COUNSEL FOR THE PARTIES. WE MUST AT THE IN CEPTION ITSELF NOTE THAT THE THREE COMPONENTS SCRUTINIZED BY THE ASSESSING OFFICER ARE THE ADMISSION FEE, CORPUS FUND AND THE LOANS TAKEN FROM PAR ENTS. THUS IT REALLY CAN'T BE DISPUTED THAT EVEN THE SOURCE OF FUND S 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 NATI ONALIZED BANK FOR THE PURPOSE OF CREATING ADDITIONAL INFRASTRUCTURE/SCHO OLS AND THE THREE SETS OF AMOUNTS HAVE BEEN ADDRESSED ONLY TOWARDS THE OBJEC T OF CREATING 32 ADDITIONAL INFRASTRUCTURE AND EASING THE LIABILITY OF THE ASSESSEE TOWARDS THE INTEREST BURDEN OF LOAN REPAYMENT. WHAT IS PERTINENT TO BE TAKEN NOTE OF IS THAT THERE IS NO FINDING OR ALLEGATION OF ANY DIVERSI ON 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 PROFITS FOR SOME OTHER ACTIVITY. IT DOES APPEAR TO US THAT THE ASSESSING AUTHORI TY APPEARS TO HAVE BEEN WEIGHED DOWN BY THE FACTUM OF SOME QUESTIONS BEIN G RAISED IN THE PARLIAMENT ABOUT THE MANNER OF COLLECTION OF FUNDS B Y THE INSTITUTIONS. THAT ALONE, WOULD NOT SUFFICE TO DENY THE EXEMPTION UNDER SECTION 10(22) OF THE IT ACT. THERE IS IN FACT NO MATERIAL TO SHOW OR A COM PLAINT THAT THERE HAS EVEN BEEN ANY COERCIVE PROCESS TO RECOVER THESE AMOUN TS. 27. IT CANNOT BE LOST SIGHT OF THAT IF AN INSTITUTION HAS TO EXPAND, ADDITIONAL INFRASTRUCTURE HAS TO BE CREATED, QUALITY EDUCATION H AS TO BE IMPARTED, ALL THESE ACTIVITIES REQUIRE FUNDS. THERE MAY BE AN ORIGIN AL CORPUS OF THE SOCIETY BUT THEREAFTER THE CORPUS FOR SUCH ACTIVITY CAN BE CREATED ONLY THROUGH VOLUNTARY DONATIONS EITHER FROM ANY PHILANTH ROPIST OR THROUGH COLLECTION OF FUNDS IN THE PROCESS OF ADMISSION. WE ARE NOT CONCERNED WITH THE MORALITY OF THE ISSUE WHILE DECIDING WHETHER EXE MPTION HAS TO BE GRANTED. PERSONAL PREJUDICES SEEM TO HAVE STEPPED IN W HEN ALLEGATIONS WERE MADE WITHOUT ANY MATERIAL AGAINST CERTAIN MEMBE RS (WHICH HAVE RIGHTLY BEEN STRUCK OFF BY THE MAJORITY OPINION OF T RIBUNAL) ALLEGING THAT THESE MEMBERS WERE WELL KNOWN FOR MAKING PROFIT THROU GH EDUCATIONAL INSTITUTIONS. WE ALSO FAIL TO APPRECIATE THE DOUBTS CA ST OR THE POSSIBILITIES EXPRESSED ABOUT THERE BEING SOMETHING MORE TO IT IN VI EW OF THE FUNDS BEING DEPOSITED IN PRIVATE BANKS. THE OPINION IS COMPLETELY BASED ON SURMISES AND CONJECTURES AS IT SEEMS TO SUGGEST THAT MERELY BECAUSE FUNDS WERE IN A PRIVATE BANK, THERE MAY HAVE BEEN DIVERGENCE OF FUN DS TO THE MEMBERS OF THE SOCIETY. SIMILARLY, THE FACTUM OF CONSTRUCTION B EING CARRIED OUT BY AHLUWALIA CONSTRUCTION CO. (P) LTD., STATED TO BE A F AMILY CONCERN OF THE PRESIDENT, WAS NOT MATERIAL AS THERE WAS NO ALLEGATION OF ANY INFLATED COST OF CONSTRUCTION OR UNREASONABLE PROFITS BEING DERIVED FRO M THE SAME BY THIRD PARTIES AS A MODE OF DIVERGENCE OF 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 CAPITATI ON FEE/DONATIONS AND RUNNING ON COMMERCIAL LINES, HOWEVER, WITHOUT GO ING INTO 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 ASSESSEE'S APPLICATION FOR REGISTRATION UNDER SECTION 12AA OF THE ACT. SOMEWHAT SIMILAR SITUATION AROSE 10 BEFORE THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF RAMARAO ADIK EDUCATION SOCIE TY (SUPRA) WHEREIN THE COMMISSIONER OF INCOME-TAX WAS CONSIDERING CANCELLA TION OF REGISTRATION ON THE BASIS OF THE PLEA THAT THE ASSESSEE WA S ACCEPTING CAPITATION FEE/DONATIONS. FOLLOWING DISCUSSION BY OUR C O-ORDINATE BENCH IS RELEVANT: '48. NOW THE QUESTION IS THE LEGAL CONSEQUENCE OF THE ASSESSEE ACCEPTING CAPITATION FEES / DONATIONS FROM STUDENTS SEEKING ADMISSIO N TO VARIOUS COURSES OFFERED BY THE INSTITUTIONS RUN BY THE ASSESSEE-TRU ST. EVEN IN THE MATTER OF CAPITATION FEES / DONATIONS, THE COMMISSIONER OF INCOME TAX HAS 33 NO CASE THAT THE FUNDS COLLECTED BY THE ASSESSEE- TRUST T HROUGH CAPITATION FEES / DONATIONS HAVE BEEN USED FOR THE PURPOSES OTHER T HAN RUNNING THE INSTITUTIONS MANAGED BY THE ASSESSEE TRUST. IT IS TO BE SEEN THAT ALL THE INSTITUTIONS RUN AND MANAGED BY THE ASSESSEE TRUST ARE CA RRYING ON THE ACTIVITIES ENVISAGED IN THE MEMORANDUM OF ASSOCIATION THE ASSESSEE-TRUST. IT IS STATED BY THE COMMISSIONER IN HIS ORDER ITSELF THA T THE MONEYS COLLECTED BY THE ASSESSEE-TRUST BY WAY OF CAPITATION FEE S / DONATIONS ARE USED FOR THE PURPOSE OF NOT ONLY BY THE ASSESSEE-TRUST BU T ALSO FOR OTHER INSTITUTIONS OF SIMILAR NATURE IT IS TO BE SEEN THAT APP LICATION OF FUNDS FOR THE CHARITABLE ACTIVITIES OF ANOTHER ELIGIBLE INSTITU TION AMOUNTS TO APPLICATION OF FUNDS FOR CHARITABLE PURPOSES. THE LAW HAS MADE IT VERY CLEAR THAT THE CHARITABLE ACTIVITIES MAY BE CARRIED OUT DI RECTLY BY AN ELIGIBLE INSTITUTION OR THROUGH ANOTHER ELIGIBLE INSTITUTION F OR THAT MATTER. THEREFORE, THOSE OBSERVATIONS OF THE COMMISSIONER STATED TO BE ADVERSE TO THE ASSESSEE-TRUST ARE NOT IN FACT PREJUDICIAL TO THE CA SE OF THE ASSESSEE- TRUST. 49. THE KARNATAKA HIGH COURT IN THE CASE OF SANJEEVA MMA HANUMANTHE GOWDA CHARITABLE TRUST VS. DIRECTOR OF INCOME TAX (E XEMPTION) [285 ITR 327] HAS CONSIDERED THAT IN MATTERS OF REGISTRATION AND EXEMPTION OF CHARITABLE INSTITUTIONS, THE SATISFACTION OF THE COMMISSI ONER SHOULD BE REGARDING THE APPLICATION OF THE INCOME OF THE TRUST FOR THE SPECIFIED PURPOSES, WHICH ONLY ENTITLES THE ASSESSEE TO CLAIM EXEMP TION. THE COURT OBSERVED THAT FOR ARRIVING AT SUCH SATISFACTION PRIMARI LY 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 TR UST HAS RECEIVED INCOME FROM ITS PROPERTY, THEN FIND OUT HOW THE SAID INCOME HAS BEEN EXPENDED, AND WHETHER IT CAN BE SAID THAT THE INCOME IS UTILIZE D TOWARDS CHARITABLE AND RELIGIOUS PURPOSES. THEREFORE, FOR THE PURPOSES OF R EGISTRATION U/S. 12AA OF THE ACT, WHAT THE AUTHORITIES HAVE TO SATISFY IS THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION AND HOW TH E INCOME DERIVED FROM THE TRUST PROPERTY IS APPLIED TO CHARITABLE OR RELIG IOUS PURPOSES AND NOT THE NATURE OF THE ACTIVITY BY WHICH THE INCOME WAS DERIV ED TO THE TRUST. 50. THE ABOVE JUDGMENT PROPOSES THAT WHAT IS TO BE LOO KED 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 ASSESSEE. IN OTHER W ORDS, THE SOURCE OF FUNDS IS NOT AN IMPORTANT INGREDIENT IN ASSESSING THE CHARACTER OF THE ACTIVITIES CARRIED ON BY A CHARITABLE INSTITUTION. T HE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RED ROSE SCHOOL [163 TAXMANN 19 ] HAS HELD THAT EDUCATIONAL ACTIVITIES CARRIED ON BY A SOCIETY ARE F OR CHARITABLE PURPOSES AND NOT AGAINST THE PUBLIC POLICY. THEREFORE, THE AC TIVITIES CARRIED ON BY THE ASSESSEE-SOCIETY IN THE PRESENT CASE CANNOT IN ANY WAY HE LD AS OPPOSED TO PUBLIC POLICY. THE OBJECTION EXPRESSED BY THE COMMISSIO NER COULD AT A MAXIMUM BE ATTRIBUTED TO THE QUESTION OF ACCEPTING C APITATION FEES / DONATIONS. IN THIS CONTEXT, THE COMMISSIONER-DR HAS RAISE D A CONTENTION THAT THE DONATIONS RECEIVED BY THE ASSESSEE-TR UST ARE NOT VOLUNTARY AND THAT FACT ALSO SHOULD BE CONTRIBUTED TO JUSTIFY TH E CANCELLATION OF THE REGISTRATION.' ON THE BASIS OF THE AFORESAID DECISION OF THE TRIBUNAL, WHICH HAS BEEN RENDERED AFTER CONSIDERING THE JUDGMENTS OF T HE HON'BLE KARNATAKA HIGH COURT IN THE CASE 11 OF SANJEVAMMA HA NUMANTHE GOWDA CHARITABLE TRUST (SUPRA) AND THAT OF THE ALLAHABAD HI GH COURT IN THE CASE OF CIT V RED ROSE SCHOOL 163 TAXMANN 19 (AIL), IT IS QU ITE CLEAR THAT THE OBJECTION RAISED BY THE COMMISSIONER WITH REGARD TO TH E 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 I NTO PLAY IN THE COURSE 34 OF THE EXAMINATION BY THE COMMISSIONER FOR THE PURPO SES OF GRANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT. 14. IN VIEW OF THE AFORESAID DISCUSSION, IN OUR CONSIDER ED OPINION, THE COMMISSIONER HAS EXAMINED THE APPLICATION OF THE ASSESSEE ON IRRELEVANT CONSIDERATIONS WHICH WERE BEYOND THE SCOPE OF ENQUIRY 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 MATTER B ACK TO HIS FILE TO BE EXAMINED AFRESH STRICTLY IN TERMS OF THE SCOPE OF THE E NQUIRY 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 OF NEWLY INSERTED S. 12AA (W.E.F. 1ST APRIL, 1997) HAS ALWAYS BEEN PERENNIA L TEASER NOT ONLY TO THE TRUST OR INSTITUTIONS BUT ALSO TO THE REVENUE DEPAR TMENT AS ALSO FACED BY THE JUDICIARY. TO GET THE ANSWER WE HAVE HEARD BO TH THE SIDES AT LENGTH, CAREFULLY PERUSED THE IMPUGNED ORDER AND ALSO SEVERAL CORRESPONDENCES FILED IN THE COMPILATION IN THE LIGHT OF THE CASE LA WS CITED. 11.1 THE LAW NOW INTRODUCED IS TO STREAMLINE THE 'PROCEDUR E FOR REGISTRATION' AND BY SAYING SO WE DO NOT WANT TO ENTER INTO THE CONTROVERSY WHETHER THE APPLICABILITY OF S. 12AA(3) WAS RETROSPECT IVE OR PROSPECTIVE IN NATURE. RATHER WE CAN MAKE AN OBSERVATION THAT THIS I SSUE STOOD ANSWERED BY CO-ORDINATE BENCHES. WE WANT TO EXPRESS THAT EARLI ER TO THIS SECTION THERE WAS NO GUIDELINES IN THE STATUTE FOR REFUSAL OF R EGISTRATION, THEREFORE IT WAS CONSIDERED EMINENT TO INTRODUCE IN THE STATUTE THE SAID PROCEDURE. WHAT BOTHERED THE TRIBUNALS AND HIGH COURTS IN THE RE CENT PAST IS THE SCOPE AND THE PURPOSE OF INTRODUCTION OF S. 12AA IN TH E STATUTE. ALL THOSE JUDGMENTS AS LISTED ABOVE, IN AGREEMENT HAVE SAID THAT THE ACTIVITIES OUGHT TO BE IN FULFILMENT OF THE OBJECTS FOR WHICH A TRUST IS CREATED. SENTIMENTS SHOULD BE IN LINE WITH THE PURPOSE FOR WHICH THE TRUST IS CREATED. THE PURPOSE SHOULD BE PHILANTHROPIC, CHARITABLE, OR FOR P UBLIC GENERAL UTILITY. SERVICE WITHOUT PROFIT HAS TO BE THE MOTIVE. AS IN TH E PRESENT CASE THE OBJECTS ARE TO UNDERTAKE, TO RUN AND TO IMPROVE THE EDUCATIONAL INSTITUTION FOR IMPARTING EDUCATION IN DIVERGENT FIELDS; DELIBER ATED UPON ANTE. 11.2 IN ANY CASE WE HAVE TO EXAMINE THE PURPOSE OF ENACTME NT OF SS. 12A, 12AA AND 12AA(3), VIZ-A-VIZ SS. 11 AND 12. WHILE READING SEVERAL CASE LAWS AS CITED SUPRA AN IMPORT ANT POINT OF VIEW OF THE HON'BLE COURTS HAVE COME TO OUR NOTICE THAT M ERE REGISTRATION UNDER S. 12AA WOULD NOT BY ITSELF BE A GROUND FOR EXCLUSION OF SUCH AN INCOME FROM THE TOTAL INCOME OF A TRUST. TO OUR UNDERSTANDI NG, ALSO ACKNOWLEDGED IN THE PRECEDENTS; THE PROVISIONS OF S. 12AA PRESCRIBES CONDITIONS FOR 35 REGISTRATION OF A TRUST AND THEREFORE IN THE ABSENCE OF REGISTRATION DISENTITLES ANY TRUST FROM CLAIMING ANY BENEFIT OF THE PROVISIONS OF S. 11 AND S. 12 OF THE ACT IN RELATION TO ITS INCOME. THEREFORE THE CONCLUSION 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 NOT THE OTHER WAY ROUND THAT THE BENEFIT OF SS. 11 AND 12 SHALL BE A UTOMATIC ONCE 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 F ROM THE TOTAL INCOME OF THE PREVIOUS YEAR, EVEN IF SUCH INCOME IS OTHERW ISE LIABLE 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 C AN SUMMARISE THE SECTION OF THE ACT GOVERNING THE ISSUE IN HAND. THE PU RPOSE 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 T HE PROVISIONS OF THE STATUTE, IN A WAY; AN ENTITLEMENT TO ENTER INTO A RO OM 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 ROO M 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 CLAIM EXEMPTION. THIS IS THE FIRST STEP TO CLIMB TO THE LEVEL WHERE THE EXEMPTIONS ARE PLACED. AT THIS FIRST STEP THE CIT IS CONFERRED WITH THE POWERS TO CALL FOR SUCH DOCUMENTS AND INFORMATION IN ORDER TO SATISFY HIMSELF ABOUT THE GENU INENESS OF THE ACTIVITIES AND ALSO TO ENQUIRE THAT THOSE GENUINE ACTI VITIES ARE AS PER THE OBJECTS OF THE TRUST FOR WHICH IT IS SEEKING REGISTRATIO N. 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. 12A A W.E.F. 1ST OCT., 2004 WHICH GIVES POWER OF CANCELLATION OF REGISTRATIO N TO THE CIT, IF HE FINDS THAT THE ACTIVITIES ARE NOT GENUINE OR NOT BEING CAR RIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TRUST. THE NEED FOR THE ENACT MENT HAD ARISEN DUE TO BELIEF OF SOME QUARTER THAT IN THE ABSENCE OF EXPLIC IT LAW THE CIT CANNOT EXERCISE THE POWER OF CANCELLATION OF REGISTRATION. T O OVERCOME THIS HURDLE THIS SUB-SECTION IS INCORPORATED AND NOW IN OPERATION. NATURALLY THESE POWERS ARE CONFERRED WITH A VIEW TO ENSURE THAT IF ON CE 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 PROVISIONS BY GOING HAYWIRE RATHER FURTHERING THE OBJECTS OF THE TRUST OR GENUINE LY NOT PURSUING THE ACTIVITIES FOR WHICH IT WAS ESTABLISHED. 11.5 CONSIDERING THE ARGUMENTS AND THE FACTS OF THIS CA SE WE HAVE NOTED THAT THE MOST IMPORTANT FEATURE OF S. 12AA IS, AS ALSO R EFERRED TO US IN THIS APPEAL FOR OUR ADJUDICATION, THAT THIS SECTION HAS ONL Y LAID DOWN THE PROCEDURE OF REGISTRATION AND THIS SECTION NOWHERE SPEA KS THAT WHILE CONSIDERING THE APPLICATION OF REGISTRATION, THE CIT SHALL ALSO LOOK INTO THE PROCEDURE OF EARNING OF INCOME AND SOURCES FROM WHERE RECEIPTS ARE DERIVED. THE ARGUMENT WAS, IT ALSO DOES NOT SPEAK ANYW HERE 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 POWER OF ENQUIRY, IN RESPECT OF SOURCES OF RECEIPTS AND THE UTILIZATION OF INCOME IS ENTRUSTED IN SEPARATE SECTIONS AS ALREADY DISCUSSED ANTE. THE LANGUAGE THUS USED IN THIS SECTION ONLY CONFINES TO ENQUIRE ABOUT THE ACTIVITIE S OF THE TRUST AND ITS 36 GENUINENESS, WHICH MEANS, IN CONSONANCE WITH THE OBJECT S FOR WHICH CREATED AND THOSE OBJECTS AS ALSO ACTIVITIES SHOULD NOT B E 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 OBJECT S AS ALSO THE ACTIVITIES SHOULD NOT BE PRIMA FACIE AGAINST THE BASIC STRUCTURE F OR WHICH BENEFICIAL LAW IS MADE AND ALSO BE NOT IN CONFLICT WITH THE GENE RAL PUBLIC UTILITY. NATURALLY AN INSTITUTION IF ESTABLISHED TO CARRY OUT A N 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 REGI STRATION. THEREFORE, THIS IS THE FIRST REQUISITE OF THE STATUTE TO MANDATE FOR THE REGISTRATION AND IN THE ABSENCE OF SUCH REGISTRATION DISENTITLEMENT OF EXEMPTIO N. SO WHAT IS EXPLICIT IS THAT THOUGH AN INSTITUTION MAY BE DOING CHARITABL E ACTIVITIES AS PRESCRIBED BUT IN THE ABSENCE OF REGISTRATION CANNOT BE ENTITLED FOR THE EXEMPTIONS OR BENEFITS OF SS. 11 AND 12 OF THE ACT. IT IS ALSO EXPLICI T THAT REGISTRATION IPSO FACTO DOES NOT NECESSARILY ENTITLE AN INSTITUTION TO GE T 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 O F ACTIVITY AND TO GET AWAY FROM THE AMBITS OF THE TAX. AN INSTITUTION HAS TO FO LLOW THE NORMS AS LAID DOWN IN OTHER RELATED SECTIONS FOR AVAILING PRESCRIBE D BENEFITS. 11.6 PROCEDURE OF REGISTRATION IS A FIRST STEP AND A PR ELIMINARY 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 GAT HERED THAT AT THIS INITIAL STAGE THERE IS NO SCOPE OF ANY APPREHENSION OF MISUTILIZ ATION OF FUNDS OR TO JUDGE THE TAXABILITY INCOME. THE SCHEME OF THE ACT O THERWISE DOES NOT SUBSCRIBE AND ALLOW A TRUST TO TAKE THE BENEFIT OF THE PROVISIONS OF SS. 11 AND 12 UNLESS IT ESTABLISHES THE PRESCRIBED UTILIZATION OF TH E INCOME, EVEN IF, AT ALL THE TRUST HOLDS THE REGISTRATION IN ITS HANDS. THERE FORE AT THE STAGE OF GRANTING REGISTRATION THE CIT IS NOT EXPECTED TO BOTH ER HIMSELF ABOUT THE OTHER PROVISIONS OF THE ACT AND SUPPOSED TO CONFINE HIM SELF TO THE PROCEDURE OF REGISTRATION AS LAID DOWN THEREIN. FOR T HIS VIEW, WE DRAW SUPPORT FROM THE ORDER OF THE RESPECTED CO-ORDINATE B ENCH TRIBUNAL, NEW DELHI PRONOUNCED IN THE CASE OF AGGARWAL MITRA MANDA L TRUST VS. DIRECTOR OF IT (EXEMPTION) (SUPRA), A PORTION REPRODUCED BELO W (P. 186 OF PAPER BOOK) : '............IN THIS SITUATION, IF THE REGISTRATION AP PLIED 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 O BJECTS AS INDICATED IN CLAUSE NO. 3(4) ONLY FOR THE BENEFIT OF PUBLIC AT LARGE WITHOUT THERE BEING ANY ACTIVITY UNDERTAKEN AS PER OBJECT CLAUSE NOS. 3(1) AND 3(2), IT WOULD BE DEPRIVED OF ANY BENEFITS WHICH OTHERWISE WERE AVAILAB LE TO IT UNDER S. 11 OR S. 12. THIS CERTAINLY IS NOT THE LEGISLATIVE INTENTION AS REFLECTED IN THE SCHEME LAID DOWN IN SS. 11, 12, 12A, 12AA AND 13. ON THE CON TRARY, THE PHRASEOLOGY OF S. 13, AS ALREADY DISCUSSED, MAKES IT EXPLICITLY CLEAR THAT THE SAID PROVISIONS BECOME OPERATIVE OR RELEVANT ONLY AT THE S TAGE OF ASSESSMENT WHEN THE AO IS REQUIRED TO EXAMINE THE CLAIM OF THE ASSESSEE FOR BENEFITS UNDER S. 11 OR S. 12 WHILE COMPUTING 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 CONTAINE D THEREIN CAN BE INVOKED BY HIM WHILE FRAMING THE ASSESSMENT AND NOT BY THE CIT WHILE CONSIDERING THE APPLICATION FOR REGISTRATION 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 OBJECTION 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 EARL IER, DOES REFLECT THAT ALL 37 ARE PHILANTHROPIC OR BENEVOLENT IN NATURE, PRECISELY FOR THE PURPOSE OF IMPARTING EDUCATION. STRANGE ENOUGH THERE IS NO FIND ING RECORDED BY THE LEARNED CIT CONTRARY TO THIS FACT. BE THAT AS IT MAY, THE REAL AND THE ONLY SUBSTANTIAL OBJECTION FOR REFUSAL OF REGISTRATION WAS TH AT THE INSTITUTION HAS COLLECTED DONATIONS THUS ADOPTED SOME WRONG MEANS OF CO LLECTION OF FEES. BUT WHETHER AT THIS PRELIMINARY STAGE HE HAD THE RIGH T TO DRAW AN ADVERSE INFERENCE SO AS TO REFUSE REGISTRATION OR ALTERNATIVEL Y CONFINE HIMSELF TO THE ENQUIRY ABOUT THE OBJECTS AND THE ACTIVITIES OF THE T RUST 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 OTHER A CTIVITY OF EARNING PROFIT OTHER THAN THE ACTIVITY OF RUNNING EDUCATIONAL INSTI TUTIONS. THE ESTABLISHED FACTUAL POSITION IS THAT THE INSTITUTION IS NOT DOING IN ANY OTHER ACTIVITY EXCEPT RUNNING EDUCATIONAL INSTITUTIONS. IN SUCH CIRC UMSTANCES, CAN WE UPHOLD THE ACTION OF CANCELLATION OF REGISTRATION ? ANSWER IS OBVIOUS NO. 11.8 WHILE READING THE PRECEDENTS CITED FROM THE SIDE OF THE APPELLANT WE COME ACROSS A DECISION OF A RESPECTED CO-ORDINATE BENCH TRIBUNAL, KOLKATA PRONOUNCED IN THE CASE OF KALINGA INSTITUTE OF INDUSTR IAL TECHNOLOGY (SUPRA) AND HAVE FOUND THAT ALMOST ON IDENTICAL SITUATION, AS IN THE PRESENT APPEAL, IT WAS HELD THAT CONSEQUENCE UPON A SEARCH WHILE THE A SSESSMENT PROCEEDINGS ARE PENDING A CANCELLATION OF REGISTRATIO N BY INVOKING S. 12AA(3) IS A PREMATURE ACTION ON THE PART OF CIT, BE CAUSE IT IS EXPECTED FROM HIM TO TAKE PRECAUTION TO LET THE ASSESSMENT GET C OMPLETED, IF POSSIBLE EXPEDITIOUSLY, INSTEAD OF RUSHING TO CANCEL THE REGISTR ATION WHICH SHALL EFFECT AND INTERRUPT THE OTHER PROCEEDINGS UNDER THE ACT AN D SO PREMATURELY PUNISH A PERSON WITHOUT JUDICIOUS HEARING AS PRESCRIBED BY THE STATUTE. HELD PORTION IS WORTH REPRODUCTION AS DID IN PARA (XI I) P. 35 ANTE. 11.9 WE HAVE ALSO GONE THROUGH A DECISION REFERRED FR OM THE SIDE OF THE REVENUE NAMELY THE JAMMU & KASHMIR BANK PRIORITY SEC TOR ASSET RISK FUND VS. CIT (ITA NO. 61/ASR/2006 ORDER DT. 1ST SEPT., 2006) (SUPRA); CITED IN SUPPORT OF THE ARGUMENT THAT FIRSTLY THE CIT HAS BE EN VESTED WITH THE POWERS VIDE S. 12AA(3), INSERTED W.E.F. 1ST OCT., 2004, TO ENQUIRE ABOUT THE GENUINENESS OF THE ACTIVITIES OF A TRUST AND TO SATISFY H IMSELF 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 THAT THE ACTIVITIES ARE NOT IN CONFORMITY WITH THE OBJECT THAT TOO IS THE GOOD REASO N 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 CONSCIEN TIOUS VIEW THERE IS NO DISAGREEMENT ABOUT THE ABOVE-MENTIONED FOUR LEGAL PR OPOSITION AS ERUDITELY LAID DOWN BY THE RESPECTED AMRITSAR BENCH. UNDISPUTEDLY WE HAVE ALSO TO DECIDE THIS APPEAL MORE OR LESS WITHIN THE SE PARAMETERS. BUT THE BASIC QUESTION IS THAT BEFORE STEPPING TOWARDS THE C ANCELLATION OF REGISTRATION THE HEAVY BURDEN IS ON THE LEARNED CIT T O CONCLUSIVELY DEMONSTRATE THAT ALL HAD GONE HAYWIRE I.E., OBJECTS A RE MEANT FOR PERSONAL BENEFITS; THAT ENGAGED IN IMMORAL ACTIVITIES OR THAT THERE IS NO ELEMENT OF PUBLIC BENEFIT. IN THE PRESENT APPEAL NONE OF THE AB OVE CRITERIA FOR REJECTION OF REGISTRATION WAS IN EXISTENCE, HOWEVER MAINLY CONFI NED TO THE FINDING THAT BY CHARGING DONATION THE TRUST HAS INFRINGED THE RULES OF PROHIBITION OF CAPITATION FEE ACT. 11.10 BEFORE WE PART WITH IT IS WORTH TO CITE AN ANOTHER L ATEST DECISION PRONOUNCED BY RESPECTED CO-ORDINATE BENCH OF CHANDIG ARH IN THE CASE OF HIMACHAL PRADESH ENVIRONMENT PROTECTION AND POLLUTIO N 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 : 38 '17. ON A PERUSAL OF THESE OBJECTIVES, AS SANCTIONED BY THE STATUTE, IT IS OBVIOUS THAT THE ACTIVITIES PERFORMED BY THE ASSESSEE TRU ST ARE REGULATORY FUNCTIONS FOR THE PUBLIC GOOD, AND ANY COLLECTION FO R FEES OR CHARGES, IN THE COURSE OF DISCHARGING THESE REGULATORY FUNCTIONS, CANNO T BE VIEWED AS A CONSIDERATION OF RENDERING THESE SERVICES OF POLLUTION CONTROL MEASURES. WE ARE UNABLE TO SEE ANY SUBSTANCE IN LEARNED CIT'S STAND T HAT THE INCOME EARNED BY ASSESSEE AS LICENCE FEES, CONSENT FEES AND TESTING CHARGES ARE RECEIPTS IN CONSIDERATION OF RENDERING THE SERVICES T O TRADE, COMMERCE OR BUSINESS. WHAT IS TERMED AS CONSENT FEES IS IN FACT FEES ACC OMPANYING THE APPLICATION FOR OBTAINING CONSENT (I.E., PERMISSION) O F THE ASSESSEE BOARD TO SET UP A NEW UNIT. IT CANNOT BE ANYBODY'S CASE THAT TH E PROCESSING OF APPLICATIONS BY ITSELF HAS S COMMERCIAL MOTIVE, OR THAT FEES FOR PROCESSING OF APPLICATIONS IS A FEES COLLECTED FOR RENDERING OF SERVI CE OF POLLUTION CONTROL WHICH IS UNDISPUTED SOLE OBJECT OF THE ASSESSEE TRUST. SI MILARLY, FEES FOR TESTING CHARGES AND LICENCE FEES ARE NOT ALSO TOWARDS R ENDERING OF ANY SERVICES OF POLLUTION CONTROL EITHER. THESE ARE NOT TH E SERVICES WITH A PROFIT MOTIVE BUT ESSENTIALLY ONLY TO RECOUP THE COST OF GETT ING THE SAMPLES TESTED OR PROCESSING OF LICENCES. IN ANY EVENT, THESE ACTIVITI ES, IF THESE CAN BE AT ALL BE CONSTRUED AS RENDERING OF SERVICES, THESE ARE WHOLLY SUBSERVIENT TO THE PUBLIC UTILITY OBJECTIVE OF POLLUTION CONTROL, AND, IT CANNOT BE ANYONE'S CASE THAT EVEN THOUGH THE STATE POLLUTION BOARDS LIKE THE ASSESSEE BEFORE US ARE SET UP UNDER AN ACT OF THE PARLIAMENT, BUT, TO USE TH E WORDS EMPLOYED IN THE CBDT CIRCULAR (SUPRA) 'THE OBJECT OF' GENERAL PUBLI C UTILITY' WILL ONLY BE A MASK OR A DEVICE TO HIDE THE TRUE PURPOSE WHICH IS TRA DE, COMMERCE, OR BUSINESS OR RENDERING OF ANY SERVICE IN RELATION TO TRA DE, COMMERCE OR BUSINESS'. 19. IN ANY EVENT, AS A PLAIN READING OF S. 12AA(3) W OULD INDICATE THAT A REGISTRATION GRANTED UNDER S. 12AA CAN ONLY BE WITHDR AWN WHEN THE CIT IS SATISFIED THAT (A) THE ACTIVITIES OF THE TRUST OR THE I NSTITUTION ARE NOT 'GENUINE'; OR (B) THE ACTIVITIES OF THE ASSESSEE ARE NO T BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR THE INSTIT UTION. THERE CANNOT BE ANY OTHER LEGALLY SUSTAINABLE REASON FOR CANCELLING OR WITHDRAWING THE REGISTRATION GRANTED UNDER S. 12AA. BY NO STRETCH OF L OGIC, THE ACTIVITIES OF THE ASSESSEE CAN BE SAID TO BE NOT GENUINE AND THE ASSESSEE IS ADMITTEDLY PURSUING THE OBJECTS FOR WHICH IT WAS ESTABLISHED. WHEN THE ASSESSEE IS ENGAGED IN BONA FIDE ACTIVITIES, WITH THE FRAMEWORK OF LAW, TO PURSUE ITS OBJECTIVES, IT CANNOT BE SAID THAT THE ACTIVITIES OF T HE ASSESSEE ARE NOT GENUINE. LEARNED CIT HAS ALSO NOT BROUGHT ON RECORD A NY MATERIAL TO DEMONSTRATE ACTIVITIES OF THE ASSESSEE ARE NOT BEING CAR RIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR THE INSTIT UTION. UNDER THESE CIRCUMSTANCES, THE WITHDRAWAL OF REGISTRATION GRANTED UNDER S. 12AA CANNOT BE SUSTAINED IN LAW. LEARNED CIT HAS EXTENSIVELY REFERR ED TO AS TO WHY THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION UNDER S. 11 AS THE ACTIVITIES OF THE ASSESSEE CANNOT BE SAID TO BE FOR 'CHARITABLE PURPOSES' DE FINED UNDER S. 2(15), BUT THEN THIS ASPECT OF THE MATTER IS RELEVANT FOR THE ASSESSMENT PROCEEDINGS 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 ON THIS COUNT AS WELL. 20. FOR THE DETAILED REASONS SET OUT ABOVE, WE QUASH TH E 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. THE 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 O BJECT OF ADVANCEMENT OF EDUCATION AS ALSO THE OBJECT OF GENERAL PUBLIC UTILIT Y ARE CARRIED OUT WITH 39 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 CONCERNED THIS IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE WAS NOT IMPARTING EDUCATION. AS WE KNOW THE TERM EDUCATION MEANS TO TEACH SUBJECTS TO STU DENTS FOR THE DEVELOPMENT OF HIS MIND AND ALSO TO EQUIP STUDENTS TO D EAL WITH REALITY. THE TRAINING PROCESS IS EITHER THEORETICAL OR PRACTICAL BU T STUDENT HAS TO BE TAUGHT THE ESSENTIALS OF THE SELECTED SUBJECTS SO AS TO DE VELOP HIS SKILL AND KNOWLEDGE FOR THE SUBJECTS STUDIED BY HIM. THE APPELL ANT INSTITUTE, ADMITTEDLY, FULFILS THE REQUIREMENTS OF IMPARTING FOR MAL EDUCATION BY A SYSTEMATIC TEACHING AND INSTRUCTIONS. SINCE THE QUESTION ABOUT THE IMPARTING OF EDUCATION HAS NOT BEEN DOUBTED OR CHALL ENGED BY THE REVENUE THEREFORE. IN OUR CONSIDERED OPINION THE IMPUGNED OR DER PASSED BY THE RESPONDENT IS UNSUSTAINABLE IN LAW. STRANGE ENOUGH THER E IS NOTHING ON RECORD TO PROVE SIGHTLESSLY THAT THE PURPOSE OF IMPARTI NG OF EDUCATION WAS NOT FULFILLED BY THIS INSTITUTE THUS THE REVENUE DEPA RTMENT HAS HOPELESSLY FAILED TO ESTABLISH THAT THERE WAS ANY ILLEGAL ACTIVIT Y OR INFRINGEMENT OF ANY LAW SO THAT TO DOUBT THE GENUINENESS OF THE ACTIVITIE S. IF IT WAS SO THEN IT CAN BE HELD THAT THE ALLEGATIONS OF THE REVENUE AS DISCUSSED ABOVE, REMAINED UNSUPPORTED THUS DESERVES OUR DISMISSAL. 11.12 BASED UPON THE FACTS OF THIS CASE, WE NOW SUM UP ABOVE D ISCUSSION; THE SINE QUA NON FOR CANCELLATION OF REGISTRATION AR E TWO CONDITIONS PRESCRIBED IN S. 12AA(3) NEEDS TO BE SATISFIED ARE : (A) THAT ACTIVITIES OF THE TRUST/INSTITUTION ARE NOT G ENUINE. (B) THAT ACTIVITIES OF THE TRUST ARE NOT CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST/INSTITUTION. THUS THE FINDINGS OF THE LEARNED CIT HAS NOT TO BE ONL Y CONCEPTUAL OR CONTEXTUAL BUT SHOULD BE WITHIN THE FOUR CORNERS OF L AW SO THAT NOT SURPASSING THE POWER, AS LISTED ABOVE, GRANTED IN SUB-S. ( 3) OF S. 12AA. BUT UNFORTUNATELY THE FALLACY IS WRIT LARGE AS GATHERED O N PERUSING THE IMPUGNED ORDER. WE CAN HOLD THAT THE CIT'S APPROACH FOR DECID ING THE ELIGIBILITY OF REGISTRATION OF A TRUST SHOULD BE DIFFERENT FROM THE A NGLE BY WHICH AN ASSESSMENT OF AN INCOME IS MADE BY THE AO. WE ARE AFRAID ABOUT THE RAMIFICATION IF WE APPROVE THE ACTION OF LEARNED CI T BECAUSE IN THAT CASE IT MAY ADVERSELY AFFECT THE IMPARTING OF EDUCATION ESPE CIALLY WHEN THE REVENUE HAS NOT MADE OUT A CASE THAT THE VERY PURPOSE FOR CREATION OF THE TRUST WAS DEFEATED. RATHER WE WONDER THAT WHAT PURPOSE DOES IT SERVE TO REVENUE BY CANCELLING A REGISTRATION IF THE ACTIVITI ES ARE IN PUBLIC INTEREST BECAUSE IN CASE OF ANY BREACH OF THE LAWS THE SAME IS SU BJECT TO TAX UNDER SS. 11 AND 12 OF IT ACT. THESE TWO PROVISIONS AND FEW OTHE R PROVISIONS ARE COMPETENT ENOUGH TO TACKLE FIRMLY A DEFAULTER OF PH ILANTHROPIC APPLICATION OF INCOME OR FUNDS OF THE TRUST. THE OTHER ADVERSE SIDE OF CANCELLATION IS THAT ON REFUSAL OF REGISTRATION THE ENTIRE RECEIPTS SHALL BE SUBJECT TO ASSESSMENT WITHOUT GRANTING BENEFIT OF S. 11 AND S. 12 OF IT ACT 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 ACHIEVING THE OBJECTS I.E., IMPARTING EDUCATION, AS IN THIS CASE, BUT THE AO SHALL BE AUTOMATICALLY FORBIDDEN TO GRANT ADVANTAGE OF EXEMPTION CONSEQUENT UPON THE CANCELLATION AS IS MANDATORY IN STATUTE; RELEVANT SECTI ON ALREADY REPRODUCED ANTE. THE OUTCOME OF THE DELIBERATION MADE IN DETAI L HEREINABOVE IS THAT 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. 40 11.13 THE ASPECT OF MORALITY AS TOUCHED BY THE LEARNED CIT IS APPRECIABLE. EVERY VIGILANT AND LAW ABIDING CITIZEN HAS TO BE FAI R IN HIS CONDUCT AND SHOULD REFRAIN FROM IMMORAL ACTIVITIES. BUT EXISTING B LUE LAWS ARE DERIVED FROM THE NUMEROUS EXTREMELY RIGOROUS LAWS DESIGNED TO R EGULATE MORALS AND CONDUCT. THESE LAWS ARE ENACTED IN SUCH A FASHION T HAT IF IMPLEMENTED CORRECTLY AND EFFICIENTLY THEN THERE IS NO SCAPEGOAT FOR AN OFFENDER. WE ARE TEMPTED TO WRITE AN IDIOMATIC LANGUAGE DUE TO THE SE NSITIVITY 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 STIC K FOR INFLICTING TAX ON DEFAULTER; THAT INCLUDES A TRUST OR EDUCATIONAL INSTI TUTION. THE GIST IS THAT IF THE CIT HAD AN INFORMATION OF SOME WRONGFUL MEANS OF EARNING FEES IN THE FORM OF A DONATION OR THE INFORMATION TELLS ABOUT EX CESSIVE CHARGING OF FEES; THEN THE CIT IN HIS RIGHTS CAN PASS ON THE INFORMATIO N TO THE CONCERNED OFFICE BEARERS WORKING UNDER THE MAHARASHTRA CAPITATI ON FEES (PROHIBITION) ACT. THESE AUTHORITIES HAVE ENOUGH POWER TO DEAL WITH SUCH NATURE OF DEFAULT, SIDE BY SIDE THE CIT IS TO LIMIT HIS JURISDICT ION WITHIN THE AMBITS OF PROVISIONS OF THE ACT AND EXPECTED TO GIVE A FINDING ON FACTS THAT EITHER THE OBJECTS ARE NOT FOR GENERAL PUBLIC UTILITY OR NOT AC HIEVED AS PRESCRIBED UNDER LAW. HOWEVER PRESENTLY THE SITUATION IS THAT TH E REVENUE HAS NOT SAID ABOUT ANY IMMORAL ACTIVITY OF THE APPELLANT OR THE COLLECTION OF FEES WAS BY WRONGFUL MEANS; HENCE DEREGISTRATION SANS OUR APPROVAL . NEVERTHELESS THE LIST OF FIFTEEN CASES, AS HIGHLIGHTED BY LEARNED CIT, L ACK DESIRED POSITIVE FINDING AS IT WAS LEFT BLANK ON THE EXCUSE THAT EVEN T HE OTHER AUTHORITIES COULD NOT LAY THEIR HANDS ON ALLEGED DEFAULTS SO IT W AS ALSO DIFFICULT FOR THE REVENUE AUTHORITIES TO TRACE THE CORRECT POSITION. WH ILE DEALING WITH THE FACTS ANTE, IT WAS FOUND THAT AFTER EXHAUSTIVE ENQUIRY FEW INSTANCES; FIFTEEN IN NUMBERS; WERE NOTICED BY THE REVENUE AUTHORITIES W HEREIN IT WAS ALLEGED TO BE THE INFRINGEMENT OF CAPITATION FEE AC T. BUT THE 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 ADMISSION IN THE DEFINED MANAGEMENT QUOTA. THEREUPON THERE WAS A CIRCUMVENT I N THE APPROACH OF THE LEARNED CIT THAT THE AMOUNT OF DONATION BE CONSI DERED TOGETHER WITH THE FEES TO FIND OUT THE VIOLATION OF PROHIBITION OF CAPITATION FEE ACT. BUT ON FACTS THAT TOO DID NOT STAND THE TEST OF THOSE PROVISION S SINCE ADMITTEDLY DID NOT EXCEED THE PRESCRIBED LIMIT. 11.14 FACTS OF THIS APPEAL ARE PECULIAR, AS ALREADY DISCUSSED IN ABOVE PARAS IN DETAIL AND THEREUPON CAN COMMENT THAT PRIMA FACI E NO CASE WAS MADE OUT BY THE LEARNED CIT SO AS TO EVEN VAGUELY DEMONSTRATE T HAT THE ACTIVITIES OF THE APPELLANT WERE NOT GENUINE OR ACTIVITY OF IMPAR TING OF EDUCATION, FOR WHICH THE TRUST WAS CREATED, WERE NOT CARRIED OUT. EV EN THE LEARNED CIT HAS FAILED TO ESTABLISH THAT ANY PART OF THE INCOME/RECEI PT OF THE TRUST WAS IN ANY MANNER MISUTILIZED BY THE TRUSTEES FOR THEIR PERSONAL B ENEFIT 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 THE DONATIONS ARE R AISED BUT NOT UTILIZED FOR ACHIEVING THE OBJECTS I.E., TOWARDS IMPARTING EDU CATION; THEN SUCH AN INSTITUTION MUST BEAR THE CONSEQUENCE OF CANCELLATION OF REGISTRATION SINCE IPSO FACTO INFRINGED S. 12AA(3) CONDITION. SECOND ASPE CT IS, THAT THOUGH THE DONATIONS RECEIVED ARE MEANT TO FULFILL THE OBJECTS B UT TOGETHER WITH FEES HAVE INFRINGED ANTI CAPITATION PROHIBITION ACT; THE N COMES WITHIN THE CLUTCHES OF THAT ACT BUT DEFINITELY NOT UNDER S. 12AA (3) PROVISIONS. THE THIRD ASPECT IS, THAT THE DONATION PLUS FEES DO NOT EXCEED T HE PRESCRIBED LIMIT OF ANTI CAPITATION FEE ACT I.E., FIVE TIMES THE NORMAL FEES; FURTHER THAT NO EVIDENCE OF MISUTILIZATION OTHER THAN THE PRESCRIBED ACTIVITY THEN NO ACTION CAN BE SUGGESTED UNDER S. 12AA(3). THE ASSESSEE'S CASE FALLS UNDER THE THIRD CATEGORY. WITH THE RESULT, TOTALITY OF THE CIRCUMSTAN CES THUS WARRANTS, IN THE LIGHT OF THE FOREGOING DISCUSSION, NOT TO ENDORSE THE V IEW OF THE LEARNED CIT; CONSEQUENCE THERE UPON REVERSE THOSE FINDINGS. THE ORDE R OF CANCELLATION OF REGISTRATION IS HEREBY REVOKED. GROUNDS ALLOWED. 41 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. ITA NO.1348/PN/2010 (A.Y. 2010-11) : 9. ALTHOUGH A NUMBER OF GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE THEY ALL RELATE TO DENIAL OF RENEWAL OF APPROVAL U/S.80G OF THE I.T. ACT. 9.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE MADE AN APPLICATION ON 31-03-2009 BEFORE THE CIT-III, PUNE FOR SEEKING RENEWAL OF APPROVAL 42 U/S.80G FOR A FURTHER PERIOD FROM 31-03-2009. THE APPLICATION WAS REJECTED BY THE CIT VIDE ORDER DATED 24-09-2009. THE ASSESS EE FILED A WRIT PETITION NO.9397/2009 BEFORE THE HONBLE MUMBAI HIGH COURT. THE HONBLE HIGH COURT SET-ASIDE THE ORDER OF THE CIT ON THE GROUND THAT IT WAS PASSED IN BREACH OF PRINCIPLES OF NATURAL JUSTICE AS ASSESSEE S DETAILED SUBMISSIONS FILED ON 25-09-2009 WERE NOT CONSIDERED BY THE CIT BEFORE PASSING THE ORDER. SUBSEQUENTLY, THE LD.CIT CALLED FOR VARIOUS DETAILS FROM THE ASSESSEE. AFTER OBSERVING THAT ASSESSEE HAS VIOLAT ED THE PROVISIONS OF SECTION 11/13(1)(D) BY INVESTING IN SHARES OF COOPE RATIVE SOCIETY AND FURTHER OBSERVING THAT REGISTRATION GRANTED EARLIER U/S.12A HAS BEEN CANCELLED, THE LD.CIT HELD THAT THE ASSESSEE DOES N OT SATISFY THE CONDITIONS IN CLAUSE-I(5) OF SECTION 80G. HE ACCORDINGLY WAS IN AGREEMENT WITH HIS PREDECESSOR AND HELD THAT THE ASSESSEE IS NOT ENGAG ED IN CHARITABLE ACTIVITIES AND THE ACTIVITIES OF THE ASSESSEE ARE N OT GENUINE. THE ASSESSEE DOES NOT FULFIL CONDITIONS FOR APPROVAL U/S.80G(5)( VI) OF THE INCOME TAX ACT. HE ACCORDINGLY REJECTED THE APPLICATION FILED BY THE ASSESSEE IN FORM 10G SEEKING RENEWAL AND THE APPROVAL GRANTED EARLIE R. 10. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES. WHILE DECIDING THE APPEAL FILED BY THE ASSESSEE FOR RESTORING THE REGISTRATION U/S.12A WE HAVE ALREADY HELD THAT THE ASSESSEE HAS NOT VIOLATED ANY OF THE PROVISIONS OF SECTION 11 R.W.S. 13(1)(D) AND THAT T HE ASSESSEE IS ENTITLED FOR REGISTRATION U/S.12A. SINCE THE ASSESSEE FULFILS T HE CONDITIONS FOR APPROVAL U/S.80G(5)(VI) OF THE INCOME TAX ACT, THEREFORE, WE HOLD THAT THE ASSESSEE IS ENTITLED TO RENEWAL OF APPROVAL U/S.80G OF THE I NCOME TAX ACT. WE ACCORDINGLY DIRECT THE LD.CIT TO GRANT RENEWAL OF A PPROVAL U/S.80G. 43 11. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 27-03-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEM BER SATISH PUNE, DATED 27 TH MARCH , 2014 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT CENTRAL PUNE. 4. THE DR B BENCH, 5. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLAT E TRIBUNAL, PUNE