Vignana Jyothi, Secunderabad V. DIT(Exemptions), Hyderabad, Hyderabad

ITA 1751/HYD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2545 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 11-01-2017
• Assessment Year: misc
• Appeal Filed On: 17-11-2014
• Court: TRIBUNAL
• Department Lawyers: P CHANDRA SEKHAR
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Charitable institution; Opportunity of being heard; Earning of tax free income; Deemed to accrue or arise in india; Question of law; Capital receipt; Benefit of exemption; Cancellation of registration
• Section: 143(3); 80G; 12A; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI, SECUNDERABAD [PAN: AAATV1122C] VS DIRECTOR OF INCOME TAX, (EXEMPTIONS), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI V. SIVA KUMAR, AR FOR REVENUE : SHRI P. CHANDRA SEKHAR, DR DATE OF HEARING : 06-02-2017 DATE OF PRONOUNCEMENT : 26-04-2017 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E DIRECTOR OF INCOME TAX (EXEMPTIONS), CANCELLING THE RE GISTRATION GRANTED U/S. 12A OF THE INCOME TAX ACT [ACT] ON 09-05- 1991, INVOKING THE PROVISIONS OF SECTION 12AA(3) VIDE THE I MPUGNED ORDER DT. 30-09-2014. 2. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE DIRECTOR OF INCOME TAX (EXEMPT IONS), HYDERABAD DATED 30-09-2014 IS CONTRARY TO LAW AND FACTS OF THE CASE . I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 2 - : 2. (A) DIRECTOR OF INCOME TAX (EXEMPTIONS) ERRED IN HOLDING THAT THE APPELLANT SOCIETY IS NOT CARRYING OUT ACTIVITY IN A CCORDANCE WITH CHARITABLE OBJECTS. (B) DIRECTOR OF INCOME TAX (EXEMPTIONS) OUGHT TO HA VE SEEN THAT THE ACTIVITIES OF THE SOCIETY ARE GENUINE AND ALL THE A CTIVITIES ARE CARRIED OUT BY THE SOCIETY ARE IN ACCORDANCE WITH ITS OBJECTS. (C) DIRECTOR OF INCOME TAX (EXEMPTIONS) DID NOT BRI NG OUT ANY INCIDENCE OF MIS-UTILISATION OF TRUST PROPERTY OR A NY OTHER VIOLATION. GROUND NO. 3 IS GENERAL IN NATURE. 3. BRIEFLY STATED, THE ASSESSEE SOCIETY 'VIGNANA JYOTH I' WAS GRANTED REGISTRATION U/S.12A OF THE INCOME TAX ACT, 1961 , BY THE THEN COMMISSIONER OF INCOME TAX, ANDHRA PRADESH-II, HYDERABAD, VIDE ORDER IN F.NO. H.QRS.II/12A & 80G/95/90-91 DAT ED 09-05- 1991. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR AYS. 2005-06 & 2006-07, AO WAS OF THE VIEW THAT THE ASSESSE E-SOCIETY HAS COLLECTED CAPITATION FEE FROM STUDENTS, WHICH WAS D IRECTLY LINKED TO ADMISSION OF STUDENTS IN THE ENGINEERING CO LLEGE RUN BY THE SOCIETY. IN VIEW OF THAT, ASSESSING OFFICER (AO) D ENIED THE CLAIM OF EXEMPTION U/S. 11 OF THE INCOME TAX ACT ( ACT ) TO A SSESSEE FOR BOTH THE ASSESSMENT YEARS, AND COMPLETED THE ASSESSME NTS, TREATING DONATIONS AS INCOME, VIDE ORDER DATED 31-12- 2007 PASSED U/S. 143(3) OF THE ACT FOR THE A.Y. 2005-06 AND VIDE ORDER DATED 29-12-2008 PASSED U/S. 143(3) R.W.S 147 OF THE ACT F OR THE A.Y. 2006-07. THE SAID ASSESSMENTS MADE BY THE AO DENYING EXEMPTION TO THE ASSESSEE U/S.11 OF THE ACT WERE CONF IRMED BY THE CIT(APPEALS)-IV, HYDERABAD VIDE ORDER DATED 30-12-2 008 FOR A.Y. 2005-06 AND 30-10-2008 FOR THE A.Y. 2006-07. CONSEQU ENTLY, LD. I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 3 - : DIT (E) WAS OF THE OPINION THAT THE ASSESSEE SOCIETY I S NOT RUNNING AS A CHARITABLE INSTITUTION AND ALSO NOT CARRYING OUT A CTIVITIES AS PER THE CHARITABLE OBJECTS OF THE SOCIETY, AND THUS UND ER THAT CIRCUMSTANCE, IT NEEDS WITHDRAWAL OF REGISTRATION U/S.12 A GRANTED TO THE ASSESSEE SOCIETY EARLIER. THEREFORE, VIDE A SH OW CAUSE NOTICE DATED 13-03-2014 ISSUED U/S.12AA(3) OF THE ACT TO THE A SSESSEE- SOCIETY, IT WAS ASKED TO EXPLAIN WHY THE REGISTRATION GR ANTED U/S.12A EARLIER IN ITS CASE SHOULD NOT BE WITHDRAWN. 5. IN RESPONSE TO THE SAID NOTICE, INITIALLY SEEKING FURTHER TIME FOR FURNISHING REPLY, THE ASSESSEE SOCIETY FURNI SHED A REPLY VIDE LETTER DATED 05-05-2014. IN THAT REPLY, AFTER REF ERRING TO THE SAID ASSESSMENTS MADE BY THE AO FOR BOTH THE ASSESSMEN T YEARS DENYING EXEMPTION U/S. 11 OF THE ACT AND THE APPELLATE O RDERS OF THE CIT(APPEALS) THEREON, IT WAS SUBMITTED THAT THE ASSESS EE- SOCIETY HAVING AGGRIEVED HAD FILED APPEALS BEFORE T HE HON'BLE INCOME TAX APPELLATE TRIBUNAL, AND THAT THE HON'BLE IT AT, AFTER HEARING THEIR CASE, REMITTED THE MATTER TO THE AO FOR DE CIDING THE CASE AFRESH ON THE GROUND THAT THE ENQUIRY CONDUCTED BY THE AO WITH HANDFUL OF PERSONS DOES NOT APPEAR TO HAVE BROUG HT OUT THE REALITY OF THE SITUATION AS TO COLLECTION OF CAPITATIO N FEE BY THE SOCIETY AND THAT ANOTHER OPPORTUNITY WAS TO BE GIVEN TO THE SOCIETY TO SUBSTANTIATE ITS CLAIM BEFORE THE AO. IT WAS SUBMITTED THAT THE AO AGAIN COMPLETED THE ASSESSMENTS ON SIMILAR LINES, WITHOUT CONSIDERING THE DIRECTIONS OF THE HON'BLE ITAT FOR AY S. 2005-06 &- 2006-07. AGGRIEVED BY THOSE ORDERS, ASSESSEE HAS FI LED APPEALS BEFORE THE CIT(A). IT WAS STATED THAT THE MATTER WAS PENDIN G BEFORE THE CIT(A) ON THE ISSUE OF TREATING DONATIONS AS CAPITATI ON FEE BY THE AO. IT WAS FURTHER SUBMITTED THAT, IT IS PREMATURE TO TAK E A I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 4 - : DECISION FOR CANCELLATION OF REGISTRATION AT THIS STAGE B EFORE THE APPEALS FOR THE AYS. 2005-06, 2006-07 AND FOR 2010-1 1 AND 2011- 12 ARE DECIDED. 5.1. IT WAS FURTHER SUBMITTED THAT, THE SOCIETY IS A PUB LIC CHARITABLE ORGANIZATION REGISTERED UNDER SOCIETIES REGI STRATION ACT, AND IS ENGAGED IN RUNNING VARIOUS EDUCATIONAL INSTI TUTIONS AS PART OF ITS CHARITABLE ACTIVITIES, AND WAS REGISTERED U/S. 1 2A OF THE ACT AFTER SATISFYING WITH ITS CHARITABLE NATURE. DURING THE COURSE OF ENTIRE ASSESSMENT PROCEEDINGS, THE AO HAS NOT FOUND ANY VIOLATION OF THE CONDITIONS STIPULATED IN SECTION 13 OF THE ACT, AN D IT WAS STATED THAT, IN ABSENCE OF ANY VIOLATION, THE SOCIETY I S ENTITLED FOR CONTINUATION OF REGISTRATION U/S. 12A OF THE ACT. 5.2. IT WAS FURTHER SUBMITTED THAT THE SOCIETY WAS STARTED IN THE YEAR 1991 BY PROMINENT INDUSTRIALISTS AND PROFESS IONALS FOR PROVIDING GOOD EDUCATIONAL FACILITIES TO THE STUDENTS. THEY HAVE SET APART A SUBSTANTIAL AMOUNT TO PROVIDE SCHOLARSHIP TO STU DENTS. IT WAS STATED THAT FOR SUCH ACTIVITIES SUBSTANTIAL DONATIONS WERE GIVEN BY THEIR MEMBERS AND PUBLIC. IT WAS FURTHER SUBMITTED THA T THE MANAGEMENT OF THE SOCIETY IS PUTTING ITS BEST EFFORTS IN PROVIDING BEST POSSIBLE FACILITIES TO ALL CONCERNED AND NOT WASTI NG THE DONATIONS RECEIVED. WITH THESE SUBMISSIONS, ASSESSEE- SOCIETY REQUESTED THAT THE PROCEEDINGS BE DROPPED. 5.3. LD.DIT(E) HAS HOWEVER, CANCELLED THE REGISTRA TION BY STATING AS UNDER: 4. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MAD E BY THE ASSESSEE SOCIETY IN THAT LETTER. HOWEVER, THE SAME ARE NOT T ENABLE. I HAVE CAREFULLY I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 5 - : GONE THROUGH THE SAID APPELLATE ORDERS OF THE CIT(A ) AND THE ORDER OF HON'BLE ITAT IN INCOME TAX ACT, 1961 NO. 378/HYD/20 09 (A.Y.2005-06) AND ITA NO. 66/HYD/2010 DATED 19-10-2012. I HAVE AL SO CAREFULLY GONE THROUGH THE SAID ASSESSMENT ORDERS DATED 31-12-2007 AND DATED 29-12- 2008 PASSED BY THE AO EARLIER FOR THE A.Y. 2005-06 AND 2006-07 RESPECTIVELY AND THE SUBSEQUENT ASSESSMENT ORDERS B OTH DATED 31-3-2014 PASSED BY THE AO U/S. 143(3) R.W.S 254 OF THE ACT S UBSEQUENT TO THE SAID ORDER OF THE HON'BLE ITAT. 4.1 IT MAY BE MENTIONED HERE THAT IN THE FIRST ASSE SSMENT ORDER FOR THE A.Y. 2005-06 DATED 31.12.2007 PASSED BY THE AO U/S. 143(3) OF THE ACT, WHILE POINTING OUT THAT, THE DONATIONS RECEIVED WER E RECEIVED BY THE ASSESSEE DURING THE MONTHS OF MAY AND JUNE AND A FE W RECEIVED IN THE MONTH OF JULY, HE HAS REFERRED TO THE REPLY RECEIVE D FROM ONE SRI M. MURALI RAJU RELATING TO DONATION GIVEN PERTAINING TO HIS D AUGHTER CHY. M. AMBIKA WHO WAS STUDYING IN VNR VIGNAN JYOTHI INSTITUTE OF TECHNOLOGY, RUN BY THE ASSESSEE SOCIETY. THE SAID REPLY RECEIVED FROM THAT PERSON, AS REFERRED TO BY THE AO IN THAT ASSESSMENT ORDER CLEARLY SHOWS NEXUS OF THAT AMOUNT GIVEN AS DONATION BY THE CONCERNED RELATIVE OF THAT STUDENT, WITH ADMISSION OF THAT STUDENT INTO THAT COLLEGE RUN BY THE ASSESSEE SOCIETY. FURTHER, THOUGH, IT HAS' BEEN, SUBMITTED BEFORE ME THAT THE ASSESSEE HAS FILED AN APPEAL BEFORE THE CIT(A) AGAINST THE SUBSE QUENT ASSESSMENT ORDER PASSED BY THE AO FOR A.Y. 2005-06, FOLLOWING THAT O RDER OF THE HON'BLE ITAT IN THEIR CASE, FROM THE OBSERVATIONS MADE BY T HE AO IN PARA 2.4 OF THAT ASSESSMENT ORDER, POINTING OUT INABILITY ON TH E PART OF THE ASSESSEE TO PRODUCE THOSE PERSONS WHO HAD GIVEN DONATION EXCEED ING RS. 3.00 LAKHS DURING THAT YEAR BEFORE HIM, IT SHOWS THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH ITS CLAIM OF NON-RECEIPT OF CAPITATION FE E FROM STUDENTS FOR ADMISSION DURING THAT YEAR. RATHER WHEN THE ASSESSE E HAS, NOT BEEN ABLE TO PRODUCE ANY SUCH PERSON BEFORE AO, DURING THAT A SSESSMENT PROCEEDINGS AND MOREOVER HAS NOT BEEN ABLE TO ADDUC E ANY EVIDENCE IN THAT REGARD, IT APPEARS, SUCH DONATION RECEIVED BY THE ASSESSEE IS LINKED TO THE ADMISSION OF THE CONCERNED STUDENTS TO THAT COLLEGE RUN BY THE ASSESSEE SOCIETY AND THE SAME IS FULLY IN NATURE OF CAPITATION FEE COLLECTED BY THE ASSESSEE DURING THAT YEAR. 4.2 FURTHER, IN THE FIRST ASSESSMENT MADE BY THE AO FOR A.Y. 2006-07 VIDE ORDER U/S. 143(3) R.W.S. 147 OF THE ACT DATED 29-12 -2008, HE HAS REFERRED TO VARIOUS LETTERS PERTAINING TO DONATIONS PAID BY DIFFERENT PERSONS WHICH HAVE NEXUS WITH THE ADMISSION OF THE CONCERNED STUD ENTS AS GIVEN BY HIM IN THE TABULAR CHART AT PAGE 5 TO 7 OF THAT ASSESSM ENT ORDER. REFERENCE IN THIS REGARD MADE AT SL. NO.3, 4 AND 5 OF THAT CHART , CLEARLY SHOWS NEXUS OF SUCH DONATION, AMOUNTS RECEIVED BY THE ASSESSEE WIT H ADMISSION OF THOSE STUDENTS. FURTHER FROM THE SUBSEQUENT ASSESSMENT OR DER PASSED BY THE AO, FOR A.Y. 2006-07, AFTER THE SAID ORDER OF HON'B LE ITAT, IT IS NOTICED THAT I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 6 - : THE ASSESSEE HAS NOT BEEN ABLE TO PRODUCE THOSE PER SONS BEFORE HIM, WHO HAD GIVEN DONATION EXCEEDING RS. 3.00 LAKHS DURING THAT YEAR. 4.3 DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2006-07, AFTER THE SAID ORDER DATED 19-10-2012 OF HON'BLE ITAT, TH E ASSESSEE HAS FURNISHED THE DETAILS OF STATEMENT OF DONATIONS REC EIVED BY IT DURING THE YEARS RELEVANT TO THE A.YS. 2005-06 AND 2006-07 VID E ITS LETTER DATED 24- 03-2014. FROM THE LIST OF SUCH DONATION, IT IS PERT INENT REFER TO THE, FOLLOWING THREE DONATIONS RECEIVED DURING THE YEAR 2005-06, SHOWN AGAINST RECT. NOS.214, 241 AND 1923, WHICH ARE AS U NDER: RECT.NO. NAME & ADDRESS OF THE DONOR AMOUNT IN R S. 214 SRI P.V. RAMANA RAJU, 4,00,000 6-3-712/128, PANJAGUTTA COLONY, HYDERABAD-500 082. 241 SMT. K.RATNA KUMARI, 4,00,000 PLOT NO. 407, BHADRADRI TOWERS, VIVEKANANDA NAGAR, KUKATPALLY, HYDERABAD. 1923 SMT. VEMPATI SUJATHA, 4,00,000 H.NO.316 C, B.K.GUDA, S.R.NAGAR, HYDERABAD. AS STATED ABOVE, DURING THE COURSE OF THE ASSESSMEN T PROCEEDINGS WHEN THE AO HAS ASKED THE ASSESSEE TO PRODUCE THOSE PERS ONS WHO HAD GIVEN DONATIONS OF MORE THAN RS.3.00 LAKHS, BEFORE HIM, ' THE ASSESSEE 'HAS NOT BEEN ABLE TO PRODUCE THOSE PERSONS BEFORE HIM, EVID ENT FROM PARA 2.4 OF THAT ASSESSMENT ORDER DATED 31.03.2014 PASSED U/S. 143(3) R.W.S. 254 OF THE ACT. IT MAY BE MENTIONED HERE THAT SRI P.V.RAMA NA RAJU WHO HAD GIVEN DONATION OF RS 4.00 LAKHS IS THE FATHER OF TH E STUDENT P.NIKHILA, WHO HAS TAKEN ADMISSION INTO B.TECH COURSE IN THE COLLE GE RUN BY THE ASSESSEE, MENTIONED TO BY THE AO EARLIER AT SL.NO.6 AT PAGE 6 OF THE ORIGINAL ASSESSMENT ORDER DATED 29-12-2008 PASSED F OR A.Y. 2006-07. SIMILARLY, SMT. K. RATNAKUMARI WHO HAD GIVEN DONATI ON OF RS.4.00 LAKHS, IS THE MOTHER OF THE STUDENT K.ANVESH WHO HAS TAKEN ADMISSION IN THE COLLEGE RUN BY THE ASSESSEE, AS MENTIONED BY THE AO AT SI.NO. AT PAGE 3 OF THE ORIGINAL ASSESSMENT ORDER. FURTHER, SMT. VEMPAT I SUJATHA WHO HAD GIVEN DONATION OF RS. 4.00 LAKHS IS THE MOTHER OF T HE STUDENT HARISH CHAKRAVARTHY, AS REFERRED BY THE AO AT SL.NO.12, AT PAGE 7 OF THE ORIGINAL ASSESSMENT ORDER. SINCE, SUCH DONATIONS HAVE BEEN R ECEIVED FROM THOSE PERSONS WHO ARE THE PARENTS OR THOSE STUDENTS, WHO HAD TAKEN ADMISSION IN THAT COLLEGE RUN BY THE ASSESSEE SOCIETY, IT CLE ARLY INDICATES THAT SUCH AMOUNTS AS DONATIONS, RECEIVED FROM THOSE PERSONS A RE IN THE NATURE OF I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 7 - : CAPITATION FEE COLLECTED BY THE ASSESSEE SOCIETY FO R THE PURPOSE OF GIVING ADMISSION TO THE CONCERNED STUDENTS IN ITS COLLEGE. 4.4 IT MAY BE MENTIONED HERE THAT THE HON'BLE SUPRE ME COURT IN THEIR DECISION IN THE CASE OF MOHINI JAIN (MISS) VS. STAT E OF KARNATAKA & OTHERS (1992) 2 SCC' 666, WHERE THE MATTER RELATES TO ISSU E OF CAPITATION FEE, OBSERVED THAT THE 'CAPITATION FEE IS NOTHING BUT A PRICE FOR SELLING EDUCATION'. LATER, THE HON'BLE APEX COURT IN THEIR DECISION IN ISLAMIC ACADEMY EDUCATION AND ANOTHER VS STATE OF KARNATAKA AND ANOTHER (2003) 6 SCC 697, WHILE REFERRING TO THEIR JUDGEMEN T IN TMA PAI CASE AND DIRECTING THE RESPECTIVE STATE GOVERNMENTS/CONCERNE D AUTHORITY TO SET UP COMMITTEE FOR FIXATION OF FEES, HELD THAT ONCE FEES ARE FIXED BY THE COMMITTEE, THE INSTITUTE CANNOT CHARGE EITHER DIREC TLY OR INDIRECTLY ANY OTHER AMOUNT OVER AND ABOVE THE AMOUNT FIXED AS FEE S. THE HON'BLE APEX COURT FURTHER HELD, IF ANY OTHER AMOUNT IS CHARGED, UNDER ANY OTHER HEAD OR GUISE E.G., DONATIONS, THE SAME WOULD AMOUNT TO CHARGING OF CAPITATION FEE. THUS, APPLYING THE ABOVE TWO JUDGMENTS OF THE HON'BLE SUPREME COURT TO THE FACTS IN THE CASE OF THE ASSESSEE SOCIETY, A ND WHEN IT HAS COLLECTED SUCH DONATIONS FROM THE PARENTS OF SUCH STUDENTS WH O HAD TAKEN ADMISSIONS INTO THE COLLEGE RUN BY THE ASSESSEE SOC IETY, IT IS CLEAR THAT SUCH DONATIONS COLLECTED BY THE ASSESSEE, ARE PUREL Y IN THE NATURE OF CAPITATION FEE CHARGED BY THE ASSESSEE FOR THE PURP OSE OF GIVING ADMISSION TO THOSE STUDENTS. FURTHER, IT MAY BE MENTIONED HER E THAT THE HON'BLE ITAT, HYDERABAD IN THEIR DECISION IN THE CASE OF VO DITHALA EDUCATION SOCIETY VS. ADIT(E)-II, IN ITA NO. 1138/HYD/06 DATE D 31-10-2007 WHILE REFERRING TO THE SAID JUDGMENTS OF THE APEX COURT, HAVE, HELD THAT ANY AMOUNT RECEIVED BY THE ASSESSEE OVER AND ABOVE FEE FIXED BY THE COMMITTEES HAS TO BE CLASSIFIED AS CAPITATION FEES AND THE INSTITUTION HALL FACE THE LEGAL CONSEQUENCES. IN PARA 22 OF THAT ORD ER, THE HON'BLE ITAT FURTHER OBSERVED, 'IN OTHER' WORDS, THE ASSESSEE EX ISTS FOR PROFIT AND SOLELY FOR EDUCATIONAL PURPOSE'. UNDER THESE CIRCUMSTANCES , THE ASSESSEE SOCIETY THUS, CANNOT BE CONSIDERED AS A PUBLIC CHARITABLE I NSTITUTION AND HENCE IT IS NOT ENTITLED FOR CONTINUATION OF REGISTRATION U/ S 12A OF THE ACT GRANTED EARLIER. 5. IN VIEW OF THE FOREGOING DISCUSSIONS, THUS IT IS CLEAR THAT THE ASSESSEE SOCIETY IS NOT CARRYING OUT ACTIVITIES, IN ACCORDAN CE WITH THE CHARITABLE OBJECTS AND HENCE, IT NEEDS WITHDRAWAL OF REGISTRAT ION GRANTED U/S 12A OF THE ACT TO THE ASSESSEE SOCIETY EARLIER. THUS, IT I S A FIT CASE FOR CANCELLATION OF THE REGISTRATION U/S 12AA(3) OF THE ACT. HENCE, THE REGISTRATION GRANTED EARLIER TO THE ASSESSEE SOCIETY U/S 12A OF THE ACT, VIDE THAT ORDER F.NO. H.QRS.II/12A & 80G/95/90-91 DATED 09-5-1991, IS HER EBY CANCELLED, WITH EFFECT FROM 01.04.2005. 6. FOLLOWING CANCELLATION OF REGISTRATION U/S 12A, IT LEADS TO WITHDRAWAL OF THE APPROVAL GRANTED U/S 80G(5)(VI) OF THE ACT TO T HE ASSESSEE SOCIETY. IT MAY BE MENTIONED HERE THAT REGISTRATION U/S 12A OF THE ACT IS A PRE- I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 8 - : REQUISITE FOR APPROVAL U/S 80G(5)(VI) OF THE ACT, W HICH FOLLOWS FROM THE PROVISIONS CONTAINED IN SUB-RULE (2) OF RULE 11AA O F THE INCOME TAX RULES, 1962. SINCE, REGISTRATION U/S' 12A GRANTED EARLIER TO THE ASSESSEE HAS BEEN CANCELLED VIDE THIS ORDER, CONSEQUENTLY, THE A PPROVAL U/S 80G(5)(VI) OF THE ACT GRANTED EARLIER TO THE ASSESSEE VIDE ORD ER IN F.NO. DIT(E)/HYD/80G/44(09)/09-10 DATED 21-01-2010, IS HE REBY WITHDRAWN. ASSESSEE IS AGGRIEVED. 6. REITERATING THE CONTENTIONS MADE BEFORE THE LD.DIT(E ), IT WAS SUBMITTED THAT THE SOCIETY IS RECEIVING DONATIONS N OT ONLY FROM THE MEMBERS BUT ALSO FROM OTHERS INCLUDING SOME PARENTS AND THESE ARE DULY ACCOUNTED FOR AND WAS BEING UTILIS ED FOR THE OBJECTS OF THE SOCIETY. IT WAS FURTHER SUBMITTED THAT AO IN THE COURSE OF ASSESSMENT HAS ENQUIRED IN ONLY FOUR CASES OUT OF SO MANY DONORS TO CONCLUDE THAT THE DONATIONS ARE NOT VOLUN TARY. IT WAS FURTHER SUBMITTED THAT THE ITAT HAS REMITTED THE MATTER FOR FURTHER ENQUIRY AS THE ASSESSEE COULD FILE AFFIDAVITS FROM THE SAID PARTIES DENYING THE NATURE OF DONATIONS AS CAPITATION FE E AND AO WITHOUT ANY FURTHER ENQUIRY REPEATED THE ORIGINAL ORDE R IN RE- ASSESSMENT PROCEEDINGS, WHICH IS THE BASIS FOR THE PR ESENT PROCEEDINGS. IT WAS THE CONTENTION THAT THE NATURE OF DO NATIONS ARE VOLUNTARY AND ARE RECEIVED IN THE COURSE OF SOCIE TY-TRUST ACTIVITIES AND ARE DULY ACCOUNTED. THERE IS NO ALLEGA TION OF MISUTILISATION OF FUNDS. 6.1. IT WAS SUBMITTED BY LD. COUNSEL THAT THE ORDER IS B ASED ON (A) PREMATURE CONCLUSIONS DURING THE ASSESSMENT; (B ) THE TWIN CONDITION PRESCRIBED IN THE PROVISION WAS NOT SATISFIE D AND THERE IS NO FINDING ON THOSE CONDITIONS AND (C) THAT THERE IS NO INDEPENDENT APPLICATION OF MIND. LD. COUNSEL RELIED ON THE FOLL OWING CASES IN SUPPORT: I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 9 - : I. HON'BLE ITAT A BENCH, HYDERABAD IN THE CASE OF VI GNANA JYOTHI VS. DDIT (EXEM) IN ITA NOS. 378 & 399/H/09 & 66 & 83/H/10 DT. 19-10-2012; II. MAHARASHTRA ACADEMY OF ENGG & EDUCATIONAL RESEARCH VS. CIT [133 TTJ 706] (PUNE); III. HON'BLE ITAT A BENCH, CHENNAI IN THE CASE OF PADA NILAM WELFARE TRUST VS. DCIT [20 TAXMANN.COM 113] (CHENNA I); IV. HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. KARNATAKA LINGAYAT EDUCATION SOCIETY [59 TAXMANN.CO M 87] (KAR); V. HON'BLE ITAT C BENCH, BANGALORE IN THE CASE OF DC IT VS. R.N. SHETTY TRUST [59 TAXMANN.COM 68] (BANGALORE); VI. HON'BLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. BALAJI EDUCATIONAL & CHARITABLE PUBLIC TRUST [56 TAXMANN.C OM 182] (MAD); VII. HON'BLE ITAT, CHANDIGARH IN THE CASE OF PUNJAB CRIC KET ASSOCIATION VS. CIT [65 TAXMANN.COM 239] (CHANDIGAR H); VIII. HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. ISLAMIC ACADEMY OF EDUCATION [54 TAXMANN.COM 255] (KAR); 7. LD.CIT-DR HOWEVER SUBMITTED, IN SUPPORT OF THE ORDE R, THAT THE ACTIVITIES OF THE TRUST ARE NOT BEING CARRIED OUT A CCORDING TO THE OBJECTS. WHILE ACCEPTING THAT THE SOCIETY WAS FORM ED FOR RUNNING EDUCATIONAL INSTITUTE OF CHARITABLE NATURE, IT WA S SUBMITTED THAT ASSESSEE-SOCIETY WAS INVOLVED IN COLLECTI NG CAPITATION FEE AND MAKING PROFITS. HE REITERATED THAT TH E DONATIONS ARE COLLECTED FROM THE PARENTS OR RELATIONS FOR ADMISS ION IN MANAGEMENT QUOTA AND IT IS IN CLEAR VIOLATION OF STATUT ORY I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 10 -: DIRECTIONS ON THE SUBJECT. HE RELIED ON THE FOLLOWING CASE LAW IN SUPPORT: I. ADITANAR EDUCATIONAL INSTITUTIONS VS. ADDL. CIT [22 4 ITR 310 (SC)]; II. ADITANAR EDUCATIONAL INSTITUTIONS VS. ASST. DIRECTO R OF IT (EXEM) [297 ITR 376] (MAD.HC); III. ADDL.CIT, GUJARAT VS. SURAT ART SILKS MANUFACTURERS ASSOCIATION [121 ITR 1 (SC)]; IV. AMERICAN HOTEL & LODGING ASSOCIATION EDUCATIONAL IN STITUTION VS. CBDT & ORS [301 ITR 86 (SC)]; V. VISVESVARAYA TECHNOLOGICAL UNIVERSITY VS. ACIT [201 6 TAX PUB (DT) 1933 (SC)] [CIVIL APPEALS NOS. 4361 TO 4366/20 16 DT. 22- 04-2016]; VI. QUEENS EDUCATIONAL SOCIETY VS. CIT [372 ITR 699 (SC )]; VII. CIT VS. NATIONAL INSTITUTE OF AERONAUTICAL ENGG. ED UCATION SOCIETY [315 ITR 428] (UTTARAKHAND HC); VIII. INDIAN CHAMBERS OF COMMERCE VS. CIT [101 ITR 796] ( SC); IX. SOLE TRUSTEE, LOKSIKSHANA TRUST VS. CIT [101 ITR 23 4] (SC); X. P.S. GOVINDSWAMY NAIDU & SONS VS. ACIT [324 ITR 44] (MAD.HC); XI. TRAVANCORE EDUCATION SOCIETY VS. CIT [369 ITR 534] (KER.HC); XII. TRAVANCORE EDUCATION SOCIETY VS. CIT [167 TTJ 45] ( COCH.TRIB); XIII. DY. DIRECTOR OF INCOME TAX (EXEM) VS. CHAITANYA MEM ORIAL EDUCATION SOCIETY, HYD [(2014) 30 ITR (T) 120 (2015 ) 68 SOT 396]; XIV. DAWN EDUCATIONAL CHARITABLE TRUST VS. CIT [370 ITR 724] (KER.HC); I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 11 -: XV. VODITALA EDUCATIONAL SOCIETY VS. ASST. DIRECTOR (EX EM), HYD [20 SOT 353 ITAT, HYD ORDER IN ITA NO. 1138/H/06 DT. 31.10.2007]; XVI. RAJA SIR ANNAMALAI CHEETTIAR FOUNDATION VS. DIT (EX EM) [(2011) 10 ITR (T) 424] (CHENNAI TRIB); XVII. SRI ANJANEYA MEDICAL TRUST VS. CIT [(2014) 66 SOT 272] (COCH. TRIB); XVIII. A.P.PRIVATE ENGG. COLLEGES VS. GOVT. OF AP & ANR. [ (2000) (5) ALD 205 (AP HC)]; XIX. MOHINI JAIN VS. STATE OF KARNATAKA [(1992) SCC 666( SC)]; XX. ADIT(EXEM)-III VS. VASAVI ACADEMY OF EDUCATION [ITA T, HYD ORDER IN ITA NO. 1120/H/09 DT. 29-01-2010]; XXI. MARIMALLAPPAS CHARITIES VS. ACIT [ITAT BANGALORE O RDER IN ITA NO. 1492 & 1493/BANG/10 AND 675/BANG/2014 DT. 24-06 - 2016]; XXII. DDIT(EXEM) VS. KAMMAVARI SANGHAM [ITAT BANGALORE OR DER IN ITA NO. 206 & 207/BANG/2014 DT. 17-06-2016]; XXIII. MUNICIPAL CORPORATION OF DELHI VS. CHILDREN BOOK TR UST [(1992) 63 TAXMAN 385 (SC)]; 8. AFTER HEARING WAS OVER, LD.CIT-DR PLACED DETAILED WRITTEN SUBMISSIONS, AS HE SOUGHT PERMISSION DURING TH E COURSE OF HEARING. HIS WRITTEN SUBMISSIONS ARE AS UNDER: AS PER THE PROVISIONS OF SEC. 12AA(3) OF INCOME TA X ACT, 1961, THE PR.CIT /CIT, AS THE CASE MAY BE IS VESTED WITH THE POWERS TO CANCEL THE REGISTRATION GRANTED EARLIER U/S. 12AA(I)(B) / 12A SUBJECT TO RECORDING HIS SATISFACTION WITH REGARD TO EITHER OF THE TWO CONDI TIONS MENTIONED BELOW:- I. THAT THE ACTIVITIES OF THE TRUST / INSTITUTION ARE NOT GENUINE; OR II. THE ACTIVITIES OF THE TRUST/INSTITUTION ARE NOT BEI NG CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITU TION. I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 12 -: THE RELEVANT PROVISIONS OF THE STATUTE ARE REPRODUC ED BELOW FOR READY REFERENCE: 12AA (3) : WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) OR HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A [AS IT STOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO. 2) ACT. 1996 (33 OF 1996] AND SUBSEQUENTLY THE PRINCIP AL COMMISSIONER OR COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SU CH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDA NCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY HE. HE SH ALL PASS AN ORDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUST O R INSTITUTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASSED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REASONABLE OP PORTUNITY OF BEING HEARD. 2. IN THE INSTANT CASE, THE LD. DIT(E), HYDERABAD H AS INVOKED THE SECOND LIMB OF THE CONDITIONS I.E. ACTIVITIES ARE NOT BEIN G CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE SOCIETY. AT THIS JUNCTURE I T IS SUBMITTED THAT ONE OF THE MAIN OBJECTS OF THE ASSESSEE-SOCIETY, APART FRO M OTHERS, IS LITO ESTABLISH, MAINTAIN, RUN, DEVELOP, IMPROVE AND EXPE ND EDUCATIONAL INSTITUTIONS INCLUDING VOCATIONAL TRAINING CENTRES AND SIMILAR OTHER INSTITUTIONS(PL. REFER TO PARA NO. 3(XI) OF THE MEM ORANDUM OF THE SOCIETY). FURTHER, IN THE MEMORANDUM OF SOCIETY, IT IS CERTIF IED BY THE OFFICER BEARERS OF THE SOCIETY THAT THE SOCIETY IS FORMED WITH NO P ROFIT MOTIVE AND NO COMMERCIAL ACTIVITY IS INVOLVED IN ITS WORKING (PL. REFER TO PARA-4(I) OF MEMORANDUM OF SOCIETY). ALSO, NOWHERE IN THE MEMORA NDUM OF SOCIETY IT IS MENTIONED THAT COLLECTING GENERAL DONATIONS AND CORPUS FUND DONATIONS IS ONE OF THE OBJECTS OR ACTIVITIES OF THE SOCIETY. ON THE OTHER HAND, AT PARA NO.3 (XVII) OF MEMORANDUM OF SOCIETY, IT IS STATED THAT EXTENDING GRANTS, DONATIONS FOR AND TO AID AND ASSIST FOR THE ESTABLI SHMENT, MAINTENANCE ETC. OF ANY OTHER TYPE OF PUBLIC CHARITABLE INSTITU TIONS HAVING SAME OR SIMILAR OBJECTS IS ALSO ONE OF THE OBJECTS OF THE S OCIETY. 3. ACCORDINGLY, AS PER THE OBJECTS AND ACTIVITIES M ENTIONED IN THE MEMORANDUM OF SOCIETY, THE ASSESSEE SOCIETY SHOULD CARRY OUT ITS ACTIVITIES I.E. IMPARTING EDUCATION BY MEANS OF EST ABLISHING EDUCATIONAL INSTITUTIONS WITHOUT PROFIT MOTIVE AND IT SHOULD NO T ENGAGE IN COMMERCIAL ACTIVITY WHILE RUNNING SUCH EDUCATIONAL INSTITUTION S. 4. IN THE BACKDROP OF THIS FACTUAL MATRIX, IT IS TO BE ANALYZED WHETHER THE ASSESSEE HAS CARRIED OUT ITS ACTIVITIES IN ACCORDAN CE WITH THE CHARITABLE OBJECTS AS ENSHRINED IN THE MEMORANDUM OF SOCIETY. IN THE INSTANT CASE, THE OBJECT OF THE ASSESSEE IS IMPARTING EDUCATION, AND SINCE EDUCATION IS ALSO ONE OF THE CHARITABLE PURPOSES AS DEFINED IN S EC. 2(15) OF THE I.T. ACT, THE OBJECTS OF THE ASSESSEE WOULD FALL UNDER CHARIT ABLE PURPOSES AS PER I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 13 -: THE INCOME TAX ACT. AT THIS JUNCTURE, IT IS SUBMITT ED THAT EDUCATION PER SE WILL NOT BE A CHARITABLE ACTIVITY UNLESS THE ACTIVI TIES ARE CARRIED OUT ON A CHARITABLE ENDEAVOUR. AN ASSESSEE CARRYING ON EDUCA TION ON COMMERCIAL LINES CAN'T CLAIM THE STATUS OF A CHARITABLE INSTIT UTION ONLY FOR THE REASON THAT THE ASSESSEE IS ENGAGED IN EDUCATIONAL ACTIVIT IES. 5. AS PER THE DETAILS GATHERED BY THE DEPARTMENT DU RING THE COURSE OF ASSESSMENT PROCEEDINGS WITH REGARD TO THE ACTIVITIE S OF THE ASSESSEE, THE SOCIETY HAS BEEN COLLECTING CAPITATION FEE FROM THE STUDENTS FOR GIVING ADMISSION UNDER MANAGEMENT QUOTA BUT IN THE GUISE O F VOLUNTARY CONTRIBUTIONS. ON THE OTHER HAND, THE ASSESSEE HAS TAKEN A STAND THAT VOLUNTARY CONTRIBUTIONS ARE NOT IN THE NATURE OF CA PITATION FEE SINCE THE PARENTS OF THE WARDS CONTRIBUTED SUCH AMOUNT VOLUNT ARILY ON THEIR OWN WITHOUT HAVING ANY NEXUS WITH THE ADMISSION OF THEI R WARDS UNDER MANAGEMENT QUOTA. HOWEVER, THIS CONTENTIOUS ISSUE W AS ADJUDICATED BY HON'BLE SUPREME COURT IN HOST OF CASES AND HELD THA T ANY AMOUNT RECEIVED OVER AND ABOVE REGULAR FEE FIXED BY THE ST ATUTE / GOVERNMENT AUTHORITIES / COMMITTEE IN WHATEVER NAME CALLED I.E . BUILDING FUND, DONATIONS, VOLUNTARY CONTRIBUTION, GENERAL DONATION , CORPUS DONATION ETC. WOULD PARTAKE THE NATURE OF CAPITATION FEE AND SUCH RECEIPT OF CAPITATION FEE FOR GIVING ADMISSIONS IN THE COLLEGES RUN BY TH E SOCIETIES / TRUSTS IS A CLEAR VIOLATION OF LAW. RELEVANT CASE LAWS ARE SUBM ITTED BELOW: I. T.M.A. PAI FOUNDATION VS. STATE OF KARNATAKA (2002) 8 SCC 481 II. P.A. INAMDAR VS. STATE OF MAHARASHTRA (2005) 6 SCC 537 III. MOHINI JAIN VS. STATE OF KARNATAKA & OTHERS (1992) 2 SCC 666 IV. ISLAMIC ACADEMY OF EDUCATION VS. STATE OF KARNATAKA (2003) 6 SCC 677 8.1. LD. DR ELABORATED THE PRINCIPLES LAID DOWN IN THE FOLLOWING CASES: I. ADITANAR EDUCATIONAL INSTITUT IONS VS. ADDL. CIT [224 ITR 310 (SC)]; II. VISVESVARAYA TECHNOLOGICAL UNIVERSITY VS. ACIT [20 16] (TAX PUB(DT) 1933 (SC) CIVIL APPEALS NOS. 4361 TO 4366/2 016 DT. 22-04-2016; III. QUEENS EDUCATIONAL SOCIETY VS. CIT [372 ITR 699] ( SC); I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 14 -: IV. VODITALA EDUCATIONAL SOCIETY VS. ASST. DIRECTOR (E XEM), HYD [20 SOT 353]; ITAT, HYD ORDER IN ITA NO. 1138/H/06 DT. 31-10-2007; V. INDIAN CHAMBERS OF COMMERCE VS. CIT [101 ITR 796] (SC); VI. P.S. GOVINDSWAMY NAIDU & SONS VS. ACIT [324 ITR 44 ] (MAD. HC); 8.2. IT WAS FURTHER SUBMITTED THAT: 7. IN VIEW OF THIS, ACCORDING TO THE DECISION OF H ON'BLE SUPREME COURT, THE FOLLOWING FACTS REQUIRED TO BE EXAMINED IN ORDE R TO ARRIVE AT THE CONCLUSION WHETHER THE ASSESSE IS ENTITLED TO CLAIM EXEMPTION U/S. 11 / 10(23C) AND REGISTRATION U/S.12AA : A) WHETHER THE SOURCE OF INCOME IS FROM AN ACTIVITY LAWFULLY CARRIED ON BY THE SOCIETY / EDUCATIONAL INSTITUTION OR NOT. B) WHETHER SURPLUS RESULTING FROM SUCH ACTIVITY, AF TER MEETING THE EXPENDITURE, IS INCIDENTAL OR NOT. C) WHETHER SURPLUS GENERATED IS APPLIED EXCLUSIVELY TO THE OBJECTS FOR WHICH THE SOCIETY / EDUCATIONAL INSTITUTION IS ESTA BLISHED. ALL THE ABOVE 3 CONDITIONS SHOULD BE FULFILLED CUMU LATIVELY TO QUALIFY FOR THE PURPOSE OF CLAIMING REGISTRATION U/S. 12AA AS WELL AS EXEMPTION OF INCOME U/S. 10(23C) /11 AS THE CASE MAY BE. 8. ON THE BASIS OF ASCERTAINING THE ABOVE MENTIONED FACTS, IT IS POSSIBLE TO DETERMINE THE PREDOMINANT OBJECT OF THE ACTIVITY CA RRIED ON BY THE SOCIETY / EDUCATIONAL INSTITUTION AND THEREBY AN INFERENCE CA N BE DRAWN WHETHER IT IS EXISTING WHOLLY FOR THE PURPOSE OF EDUCATION AND NOT TO EARN PROFIT. THE SAME ARE ANALYZED AS UNDER. 9. SOURCE OF INCOME IS FROM THE ACTIVITY LAWFULLY C ARRIED ON :- IN THE INSTANT CASE, IT IS IMPORTANT TO EXAMINE THE NATURE AND SOU RCE OF INCOME I.E. COLLECTION OF DONATION FROM THE PARENTS OF WARDS IS AS PER LAW OR IN CONTRAVENTION OF LAW. IF SUCH AMOUNT IS COLLECTED C ONTRAVENING ANY LAW / PROVISIONS OF ACT / GOVT. ORDERS, THEN THE ASSESSEE IS FAILING IN FULFILLMENT OF THE BASIC REQUIREMENT OF INCOME DERIVED FROM THE PROPERTY HELD UNDER TRUST WHOLLY/SOLELY FOR CHARITABLE PURPOSES. ACCORD INGLY, IT IS NOT ELIGIBLE TO REGISTER U/S. 12AA AND IN CASE IT IS ALREADY REGIST ERED, THEN IT IS LIABLE FOR CANCELLATION OF REGISTRATION AS CHARITABLE INSTITUT ION / TRUST. I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 15 -: 10. IN THIS CONTEXT, IT IS NOT RELEVANT TO EXAMINE FURTHER WHETHER SUCH ACTIVITY OF COLLECTING DONATION / ANY OTHER FUND CO NTRAVENING THE PROVISIONS OF THE LAW RESULTS IN HUGE AMOUNT OF SURPLUS OR NOT . EVEN IN A CASE OF MEAGER SURPLUS OR NIL SURPLUS CASES ALSO, THE ASSES SEE IS NOT ELIGIBLE FOR REGISTRATION U/S. 12AA AND TO CLAIM THE BENEFIT OF EXEMPTION U/S. 11 AS IT HAS FAILED TO FULFILL THE BASIC REQUIREMENT OF COND UCTING THE ACTIVITIES LAWFULLY. 11. GENERATION OF SURPLUS, WHETHER INCIDENTAL TO MA IN ACTIVITY OR NOT:- IF IN CASE SUCH ADDITIONAL AMOUNT OR DONATION IS COLLECTE D WITHOUT CONTRAVENING ANY LAW IN FORCE GOVERNING THE ESTABLISHMENT AND RU NNING OF EDUCATIONAL INSTITUTIONS, THEN IT IS TO BE SEEN WHETHER SUCH AC TIVITY IS RESULTING IN GENERATION OF HUGE AMOUNT OF SURPLUS OR NOT. IF IT IS RESULTING IN GENERATION OF SURPLUS OF 15% OR MORE, THEN IN ACCORDANCE WITH THE LAW LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF P.A. INAMD AR (2005) 6 SCC 537, IT IS REQUIRED TO BE VERIFIED THE EXACT SOURCE OF S UCH SURPLUS I.E. I. WHETHER IT IS RESULTING ON ACCOUNT OF REGULAR FE E COLLECTED WITHOUT INCLUDING THE ADDITIONAL FEE / VOLUNTARY DONATION. II. WHETHER IT IS RESULTING ON ACCOUNT OF ADDITIONA L FEE / VOLUNTARY DONATION COLLECTED FROM THE STUDENTS, WHICH IS ALLOWED / PER MITTED AS PER LAW, IF ANY. III. IF THE SURPLUS IS RESULTING ON ACCOUNT OF REGU LAR FEE COLLECTED, THEN NO ADVERSE INFERENCE CAN BE DRAWN AND THE SURPLUS THOU GH GENERATED CAN BE CONSIDERED AS INCIDENTAL TO MAIN ACTIVITY OF IMPART ING EDUCATION. ON THE OTHER HAND, IF THE SURPLUS IS ON ACCOUNT OF COLLECT ION OF ADDITIONAL FEE / VOLUNTARY EDUCATION, EVEN IN ACCORDANCE WITH LAW, A ND IT IS BEING GENERATED CONSISTENTLY YEAR AFTER YEAR, THEN IT CAN BE CONSTRUED THAT GENERATION OF SUCH SURPLUS IS NOT INCIDENTAL TO THE MAIN ACTIVITY OF RUNNING EDUCATIONAL INSTITUTION. 12. APPLICATION / UTILIZATION OF SURPLUS FOR CHARIT ABLE PURPOSE:- AFTER FULFILLING ABOVE MENTIONED CONDITIONS, NEXT ISSUE T O BE EXAMINED IS WHETHER SUCH SURPLUS AMOUNT IS UTILIZED /APPLIED FO R CHARITABLE PURPOSE IN THE SAME YEAR OF GENERATION OR ACCUMULATED OVER A P ERIOD OF TIME AS PER THE PROVISIONS OF SEC. 11(1)(A). AS SUCH, THE ISSUE OF APPLICATION / UTILIZATION OF SURPLUS WOULD COME INTO PICTURE ONLY AFTER HAVING FULFILLED THE PRIMARY REQUIREMENTS OF- I. GENERATION OF INCOME / SURPLUS BY LEGAL MEANS WI THOUT CONTRAVENING ANY LAW; AND II. ANY SURPLUS GENERATED EXCEEDING 15% OF THE RECE IPTS IS INCIDENTAL TO THE MAIN ACTIVITY OF RUNNING EDUCATIONAL INSTITUTION. I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 16 -: 13. IN THE INSTANT CASE, IT IS AN ADMITTED FACT THA T THE ASSESSEE HAS COLLECTED ADDITIONAL FEE/CAPITATION FEE IN THE GARB OF VOLUNTARY CONTRIBUTIONS FROM THE PARENTS OF THE STUDENTS. THO UGH THE ASSESSEE HAS CONTENDED THAT SUCH DONATIONS WERE RECEIVED VOLUNTA RILY FROM THE PARENTS OF THE STUDENTS, BUT A DETAILED INVESTIGATION CONDU CTED BY THE ASSESSING OFFICER IN THIS REGARD HAS REVEALED THE FACT THAT S UCH DONATIONS WERE ACTUALLY COLLECTED FROM THE PARENTS OF THE STUDENTS WHO GOT ADMISSION UNDER MANAGEMENT QUOTA, BUT ACCOUNTED THE SAME IN T HE BOOKS AS VOLUNTARY DONATIONS IN ORDER TO CIRCUMVENT THE PROV ISIONS OF LAW. 14. IN THIS CONTEXT, IT IS IMPORTANT TO KNOW THAT T HE GOVERNMENT OF ANDHRA PRADESH HAS ISSUED A G.O. I.E. G.O (RT) NO. 950 DAT ED 06.12.2000,CONSEQUENT TO THE DECISION OF THE HON'BL E SUPREME COURT IN THE CASE OF UNNIKRISHNAN VS. STATE OF ANDHRA PRADESH [( 1993) 4 SCC 697] AND SUBSEQUENT RESOLUTION OF MINISTRY OF HUMAN RESOURCE DEVELOPMENT, WITH REGARD TO COLLECTION OF DEVELOPMENT FEE BY THE ENGI NEERING COLLEGES OVER AND ABOVE THE REGULAR FEE IN ORDER TO MEET EXPENDIT URE RELATED TO THE DEVELOPMENT OF INFRASTRUCTURE OF THE EDUCATIONAL IN STITUTIONS. AS PER THIS G.O., WHICH IS APPLICABLE W.E.F. ACADEMIC YEAR 2001 -02 TO 2002-03 I.E. ASSESSMENT YEAR 2002-03 AND 2003-04, ENGINEERING CO LLEGES ARE ENTITLED TO COLLECT DEVELOPMENT FEE TO THE EXTENT OF RS. 3,0 00/- FROM FREE SEAT STUDENTS, RS. 8,000/- FROM PAYMENT SEAT STUDENTS AN D $ 1,000 FROM NRI SEAT STUDENTS. THIS AMOUNT WAS FIXED OVER AND ABOVE THE REGULAR FEE. IT IS ALSO STATED IN THE SAID G.O IN PARA NO. 6(E) THAT N O COLLEGE INCLUDING THE MINORITY COLLEGES SHOULD CHARGE ANY DEVELOPMENT FEE BY WHATEVER NAME IN EXCESS OF WHAT IS PERMITTED BY THE GOVERNMENT AND A NY VIOLATION WOULD ENTAIL WITHDRAWAL OF PERMISSION TO THE DEFAULTING I NSTITUTION. 15. FURTHER, THE GOVERNMENT OF ANDHRA PRADESH ISSUE D ONE MORE G.O I.E. G.O.(MS) NO. 33 DATED 11.06.2003 [PI. REFER TO PARA NO. 9.3 OF THE ORDER OF DIT(E) ] (COPY SUBMITTED DURING THE COURSE OF HEARI NG), CONSEQUENT TO THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF T. M.A. POI FOUNDATION & ORS VS. STATE OF KARNATAKA & ORS IN WRIT PETITION(C IVIL) NO. 317/1993 DATED 31.10.2002 [(2002) 8 SCC 481(SC)], WHEREIN TH E ENGINEERING COLLEGES ARE PROHIBITED FROM COLLECTING ANY FEE IN THE NAME OF DEVELOPMENT FEE, BUILDING FUND, INFRASTRUCTURE DONATIONS ETC., APART FROM TUITION FEE FIXED THEREOF. TO BE PRECISE, IN THE SAID G.O, A UN IFORM TUITION FEE OF RS. 22,000/- PER STUDENT PER ANNUM IS FIXED IN RESPECT OF GENERAL QUOTA SEATS / GOVERNMENT QUOTA AND RS. 75,000/- PER STUDENT PER ANNUM FOR THE 15% MANAGEMENT QUOTA SEATS. AS SUCH, IN RESPECT OF MANA GEMENT QUOTA SEATS, THE BASIC TUITION FEE ITSELF HAS BEEN HIKED AND, TH EREFORE, PROHIBITED FROM COLLECTING ANY OTHER FEE IN THE GARB OF DEVELOPMENT FEE, BUILDING FUND, INFRASTRUCTURE DEVELOPMENT FEE, VOLUNTARY DONATIONS ETC. THIS PARTICULAR G.O. CAME INTO EFFECT STARING FROM ACADEMIC YEAR 20 03-04 ONWARDS I.E. STARING FROM AY 2004-05 (THE ASSESSING OFFICER HAS RELIED UPON THIS G.O WHILE DENYING EXEMPTION U/S. 11 FOR THE AY. 2005-06 & 2006-07). I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 17 -: 8.3. RELYING ON THE GO ISSUED BY STATE GOVERNMENT, IT WAS REITERATED THAT ASSESSEE-TRUST HAS VIOLATED THAT GO. AS T HERE IS CLEAR VIOLATION OF LAW IN COLLECTING THE AMOUNTS, IN A CCORDANCE WITH THE PROVISIONS OF LAW LAID DOWN BY THE HON'BLE SUPRE ME COURT IN THE CASE OF ADINATAR EDUCATIONAL INSTITUTIONS VS. ADDL. CIT [224 ITR 310 (SC)], VISVESVARAYYA TECHNOLOGICAL UNIVERSI TY VS. ACIT [2016] (TAX PUB(DT) 1933 (SC) CIVIL APPEALS NOS. 4 361 TO 4366/2016 DT. 22-04-2016 AND QUEENS EDUCATIONAL SOCIE TY VS. CIT [372 ITR 699] (SC), ASSESSEE HAS FAILED TO QUALI FY AS AN EDUCATIONAL INSTITUTIONS SOCIETY EXISTING WHOLLY FOR CH ARITABLE PURPOSES WITHIN THE MEANING OF SECTION 12AA R.W.S. 2(1 5) OF THE IT ACT). 8.4. IN VIEW OF THE ABOVE, IT WAS SUBMITTED THAT IN HIS ORDER DATED 30-09-2014, THE LD. DIT(E) HAS GIVEN A FINDING OF FACT THAT ASSESSEE HAS VIOLATED THE LAW LAID DOWN BY HON'BLE S UPREME COURT IN THE CASE OF T.M.A. PAI FOUNDATION VS. STATE OF KARNA TAKA & ORS. (2002) [8 SCC 481 (SC)] AND MOHINI JAIN VS. STATE OF KARNATAKA & OTHERS (1992) [2 SCC 666] AND ISLAMIC ACADEMY OF EDU CATION VS. STATE OF KARNATAKA (2003) [6 SCC 677] IN REGARD TO COLL ECTION OF CAPITATION FEE AND ALSO PLACED RELIANCE ON THE DECISIO N OF HON'BLE ITAT IN THE CASE OF VODITALA EDUCATIONAL SOCIETY VS. ADIT [20 SOT 353] AND, ACCORDINGLY, CANCELLED THE REGISTRATION BY I NVOKING THE SECOND LIMB OF THE SEC. 12AA(3) I.E., ASSESSEE HAS N OT CARRIED OUT ITS ACTIVITIES IN ACCORDANCE WITH THE CHARITABLE OBJECTS AS ENSHRINED IN THE MEMORANDUM OF SOCIETY. IN VIEW OF THIS, IT IS A N UNDISPUTED FACT PROVED BY THE LD. DIT(E) THAT ASSESSEE HAS CONTRAVE NED THE LAW I.E G.O. MS. NO. 33 DATED 11-06-2003 ISSUED BY G OVT. OF ANDHRA PRADESH IN REGARD TO COLLECTION OF FEE UNDER M ANAGEMENT I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 18 -: QUOTA. ACCORDINGLY, IT IS PRAYED THAT THE ORDER OF THE LD . DIT(E) PASSED U/S. 12AA(3) DATED 30-09-2014 CANCELLING THE REGISTRATION GRANTED EARLIER U/S. 12A MAY BE SUSTAINED. 8.5. RELIANCE IS PLACED ON THE FOLLOWING DECISION O F VARIOUS HIGH COURTS WHEREIN REJECTION / CANCELLATION OF REGISTR ATION U/S. 12AA HAS BEEN UPHELD: I. TRAVANCORE EDUCATIONAL SOCIETY VS. CIT (2014) [36 9 ITR 534] (PAGE NOS. 130 TO 131 OF DEPT. PAPER BOOK) : ' SECTION 1(15) OF THE INCOME-TAX ACT, 1961 - CHARITABLE PURPOSE (EDUCATIO N) - WHERE ASSESSEE-TRUST COLLECTED CAPITATION FEES IN ADDITIO N TO PRESCRIBED FEES, OBJECT OF ASSESSEE-TRUST COULD NO MORE BE SAI D TO BE CHARITABLE IN NATURE AND, HENCE, REGISTRATION GRANTED TO IT WA S TO BE REJECTED (IN FAVOUR OF REVENUE). HELD THAT CAPITATION FEES WAS COLLECTED BY TRUST IN ADDITION TO FEE PRESCRIBED AND SAID FACT WAS ADMITTED BY TREASURER OF TRUST. IN VIEW OF ABOVE, IT WAS RIGHTLY HELD THAT OBJECT OF TRUST WAS NOT CHARITABLE AND REGISTRATION GRANTED TO IT U/S. 12AA WAS TO BE REJECTED .' II. CIT VS. NATIONAL INSTITUTE OF AERONAUTICAL ENGINEERI NG (2009) [315 ITR 428] (UTTARAKHAND HC) (PAGE NOS. 105 TO 107 OF DEPT. PAPER BOOK): CHARITABLE TRUST REGISTRATION U/S. 12AA EDUCATIONAL INSTITUTION MAKING HUGE PROFITS APPLICATION OF ASSE SSEE-SOCIETY FOR GRANT OF REGISTRATION U/S. 12AA, WAS REJECTED BY CI T BECAUSE ASSESSEE WAS NOT CARRYING ANY CHARITABLE ACTIVITY W ITHIN THE MEANING OF SECTION 2(15). CIT AFTER CONSIDERING THE RECORD BEFORE HIM HAD OBSERVED THAT SOCIETY WAS CHARGING SUBSTANTIAL FEES FROM STUDENTS AND MAKING HUGE PROFITS. TRIBUNAL, HOWEVER HELD THAT THE I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 19 -: ASSESSEE WAS ENTITLED FOR REGISTRATION U/S. 12AA. H ELD: MERE IMPARTING EDUCATION FOR PRIMARY PURPOSES OF EARNING PROFITS CANNOT BE SAID TO BE A CHARITABLE ACTIVITY SO AS TO GET RE GISTRATION U/S. 12AA. III. DAWN EDUCATIONAL CHARITABLE TRUST VS. CIT (2015) [370 ITR 724] (PAGE NOS. 142 TO 143 OF DEPT. PAPER BOOK) : WHEREIN HON'BLE HIGH COURT OF KERALA HELD THAT WHEN SCHOOL IS RUNNI NG UNDER THE COMMERCIAL LINES UNDER THE CLAD OF CHARITABLE PURPO SES, THE AUTHORITIES ARE JUSTIFIED IN MAKING ENQUIRIES AND R EJECTING THE APPLICATIONS. RELEVANT HEAD NOTE IS REPRODUCED BELO W: 'CHARITABLE TRUST - REGISTRATION U/S. 12A CHARITABL E PURPOSE - ASSESSEE TRUST, RUNNING A SCHOOL FILED AN APPLICATI ON SEEKING REGISTRATION U/S. 12A. ON ENQUIRY, IT WAS FOUND THA T THOUGH THE MAIN OBJECT OF TRUST BEING TO RUN EDUCATIONAL INSTITUTIO NS AND ESTABLISH INSTITUTIONS OF TRAINING AND REHABILITATION FOR MEN TALLY RETARDED PERSONS, PHYSICALLY HANDICAPPED PERSONS, ETC., BUT THE ACTIVITY OF THE TRUST WAS ONLY TO BRING UNDER ITS AMBIT THE ALREADY EXISTING SCHOOL RUN BY THE MANAGING TRUSTEE. THE SCHOOL IS RUN IN A BUILDING WHERE AIR-CONDITIONED CLASS ROOMS WITH BREAKFAST AND LUNC H WERE PROVIDED. THE SCHOOL IS MAINTAINED AND MEANT FOR THE BENEFIT OF CHILDREN OF NON-RESIDENT INDIANS. THUS, CIT REJECTED THE REGIST RATION APPLICATION TAKING VIEW THAT ASSESSEE INTENDED TO RUN A POSH IN TERNATIONAL SCHOOL IN THE NAME OF CHARITABLE ACTIVITY TRIBUNAL AFFIRMED THE ORDER OF CIT. BEING AGGRIEVED, ASSESSEE PREFERRED AN APPE AL BEFORE THE HIGH COURT.' FURTHER, THIS DECISION OF HON'BLE KERALA HIGH COURT HAS BEEN AFFIRMED BY THE HON'BLE SUPREME COURT BY VIRTUE OF DISMISSAL OF ASSESSEE'S SPECIAL LEAVE PETITION VIDE DAWN EDUCATI ONAL CHARITABLE I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 20 -: TRUST VS. CIT (2016) 242 TAXMAN 1 (SC) . RELEVANT HEAD NOTE IS REPRODUCED BELOW: SPECIAL LEAVE PETITION WAS DISMISSED WHERE ASSESSE E HAD FILED SLP AGAINST JUDGMENT OF KERALA HIGH COURT IN CASE OF DA WN EDUCATION CHARITABLE TRUST VS CIT (2015) 370 ITR 724 (KER): ( 2015) 63 ITCL 46 (KER) WHEREIN THE HIGH COURT HELD THAT THE AUTHORITIES WE RE JUSTIFIED IN REJECTING THE APPLICATION FOR GRANT OF REGISTRATION UNDER SEC TION 12A, TO AN ASSESSEE- TRUST CLAIMING THAT IT WAS IMPARTING EDUCATION, BAS ED ON THE GROUND THAT IT WAS RUNNING POSH SCHOOL FOR CHILDREN OF NON-RESIDEN T INDIANS ON COMMERCIAL LINES UNDER GUISE OF CHARITABLE PURPOSE. ' 9. IN REPLY, LD. COUNSEL FOR THE ASSESSEE PLACED CO UNTER SUBMISSIONS AS UNDER: REJOINDER TO WRITTEN SUBMISSIONS FILED ON BEHALF OF THE RESPONDENT. PARAGRAPHS 2, 3 AND 4: 1. IT IS THE CONTENTION OF THE RESPONDENT DEPARTMEN T THAT THE DIT(E) HAS INVOKED SECOND LIMB OF THE CONDITIONS FOR CANCELLAT ION OF REGISTRATION GRANTED TO THE ASSESSEE. VIZ., THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE SOCIETY. PARAGRAPH 5: 2. IT HAS BEEN STATED BY THE D.R ON BEHALF OF THE R ESPONDENT THAT AS PER THE DETAILS GATHERED BY THE DEPARTMENT DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE SOCIETY HAS BEEN COLLECTI NG CAPITATION FEE FROM THE STUDENTS FOR GIVING ADMISSION UNDER MANAGEMENT QUOTA. AS SUBMITTED IN DETAIL IN THE SUCCEEDING PARAGRAPHS, THIS ISSUE HAS BEEN CONSIDERED BY THE HON'BLE ITAT IN THE QUANTUM APPEALS FOR ASST. Y EARS 2005-06 AND 2006-07 WHEREIN THE A.O HAS TREATED THE VOLUNTARY D ONATIONS RECEIVED BY THE ASSESSEE AS CAPITATION FEE. THE HON'BLE ITAT HA S SET ASIDE THE ASSESSMENTS WITH A DIRECTION TO THE ASSESSING OFFIC ER TO CONDUCT ADEQUATE ENQUIRIES BEFORE COMING TO A CONCLUSION THAT THE AS SESSEE HAS COLLECTED CAPITATION FEE. THE A.O COMPLETED FRESH ASSESSMENT LATER ON AND THE RELEVANT ORDERS OF FRESH ASSESSMENT HAVE BEEN FILED BEFORE THE HON'BLE ITAT TO SHOW THAT NO SUCH INVESTIGATION WORTH MENTI ONING WAS CARRIED OUT BY THE ASSESSING OFFICER AND THAT THE APPEALS AGAIN ST THE FRESH ASSESSMENTS ARE PENDING BEFORE THE C.I.T (APPEALS). IT HAS ALSO BEEN BROUGHT TO THE KIND NOTICE OF THE HON'BLE ITAT THAT FOR THE ASSESSMENT YEARS 2010-11 AND 2011-12, THE ASSESSING OFFICER TR EATED VOLUNTARY DONATIONS AS CAPITATION FEE AND THAT IN APPEAL, THE C.I.T(APPEALS), AFTER I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 21 -: OBTAINING REMAND REPORTS FROM THE ASSESSING OFFICER , HELD THAT NEXUS BETWEEN THE DONATIONS AND ADMISSIONS WAS NOT ESTABL ISHED. THESE ORDERS EXONERATING THE ASSESSEE WERE PASSED ON 12-09-2014 I.E., JUST BEFORE THE D.I.T (EXEM) HELD AGAINST THE ASSESSEE IN HIS ORDER U/S.12AA(3). THE ASSESSEE THEREFORE SUBMITS THAT THE AVERMENT OF THE DR NEEDS TO BE DISCARDED IN THE LIGHT OF THE FACTS SUBMITTED ABOVE . PARAGRAPHS 6 TO 10: 3. THE SUBMISSIONS MADE BY THE LEARNED DR CITING DE CISIONS OF THE APEX COURT IN THE CASES OF ADITNAR EDUCATIONAL INSTITUTI ONS VS ADDL CIT 224 ITR 310 SC, VISWESWARAYA TECHNOLOGICAL UNIVERSITY VS AC IT TAX PUB (DT) 1933 SC AND QUEENS EDUCATIONAL SOCIETY VS CIT 372 I TR 699 SC ARE, IT IS SUBMITTED, NOT DIRECTLY RELEVANT TO THE ISSUE IN TH E PRESENT APPEAL FOR THE REASON THAT THE SAID CASES PERTAINS TO SECTIONS 10( 22), 10(23C)(IIIAD) ETC. IN FACT THE LEARNED DR SUBMITTED IN PARAGRAPH 6 THA T IN ONE CASE THE ASSESSEE WAS UNIVERSITY RUN BY THE GOVERNMENT AND I N ANOTHER CASE, THERE WAS NO ISSUE OF COLLECTION OF ANY FEE IN VIOL ATION OF LAW. PARAGRAPH 11: THE SUBMISSIONS MADE BY LEARNED DR UNDER THE HEADIN G 'GENERATION OF SURPLUS, WHETHER INCIDENTAL TO MAIN ACTIVITY OR NOT ' ARE NOT DIRECTLY RELEVANT TO THE ISSUE IN APPEAL. ALSO THE DECISION OF THE SUPREME COURT IN THE CASE OF P.A INAMDAR (2205) 6 SCC 537 SC HAS NOT BEEN DISCUSSED BEFORE THE HON'BLE ITAT NOR A COPY OF THE ORDER OF THE SUPREME COURT FILED BY EITHER PARTY. PARAGRAPHS 12, 13, 14 AND 15 AND 16 4. THE SUBMISSIONS MADE BY THE LEARNED DR UNDER THE HEADING 'APPLICATION/UTILISATION OF SURPLUS FOR CHARITABLE PURPOSES' ARE NOT GERMANE TO THE ISSUE IN APPEAL AS THERE IS NO ALLEG ATION THAT THE ASSESSEE HAS NOT ACCOUNTED FOR THE DONATIONS RECEIVED IN ITS BOOKS OF ACCOUNT OR UTILISED THE SAME FOR ANY PURPOSE OTHER THAN THE OB JECTS OF THE ASSESSEE SOCIETY. PARAGRAPH 17: 5. THE LEARNED DR HAS PLEADED THAT THE D.I.T(EXEM) HAS GIVEN A FINDING OF FACT THAT THE ASSESSEE HAS VIOLATED THE LAW LAID DO WN BY THE APEX COURT AND THAT THE D.I.T(E) HAS ALSO PLACED RELIANCE ON T HE DECISION IN THE CASE OF VODITHELA EDUCATIONAL SOCIETY VS ADIT 20 SOT 353 HY D. THE ASSESSEE SUBMITS THAT THE DECISIONS RENDERED BY THE APEX COU RT ARE NOT DIRECTLY RELEVANT IN THE CONTEXT OF THE ASSESSEE'S CASE IN A S MUCH AS THESE DECISIONS HAVE BEEN CONSIDERED IN THE VARIOUS DECID ED CASES ON THE ISSUE OF CANCELLATION OF REGISTRATION U/S.12AA(3) RELIED ON BY THE ASSESSEE. AS I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 22 -: REGARDS THE CASE OF VODITHELA EDUCATIONAL SOCIETY, THE SAID CASE WAS DECIDED UNDER SEC.10(23C) AND ALSO IN THE SAID CASE , IT IS AN ADMITTED FACT ON-MONEY COLLECTED WAS CONCEALED INCOME OF THE ASSE SSEE. THE LEARNED ALSO RELIED ON SOME DECIDED CASES AS UNDER: 6. TRAVANCORE EDUCATION SOCIETY VS CIT 58 TAXMANN.C OM 40 COCHIN: THE FACTS OF THE CASE AS REVEALED IN THE DECISION OF TH E HON'BLE ITAT IN THE SAME CASE (AVAILABLE AT PAGES 132 AND 133 OF THE PA PER BOOK FILED BY LEARNED DR) SHOW THAT IN SWORN STATEMENTS RECORDED, THE TREASURER AND THE SECRETARY ADMITTED THAT MONIES WERE COLLECTED A S CAPITATION FEE AND WERE BEING SHARED AMONG THE TRUSTEES, VIDE PARAGRAP H 5 OF THE ORDER OF THE HON'BLE ITAT. THUS THE FACTS OF THE SAID CASE A RE NOT APPLICABLE TO THE ASSESSEE'S CASE. 7. CIT VS NATIONAL INSTITUTE OF AERONAUTICAL ENGINE ERING EDUCATIONAL SOCIETY 315 ITR 428 UTTARAKHAND: IT WAS FOUND AS A FACT IN THAT CASE THAT THE ASSESSEE WAS CARRYING ON COMMERCIAL ACTIVITY AN D IT WAS HELD BY THE COURT THAT MERE TRADE OR COMMERCE IN THE NAME OF ED UCATION CANNOT ENTITLE THE ASSESSEE TO REGISTRATION U/S.12M. THUS THE FACT S OF THE SAID CASE ARE NOT APPLICABLE TO THE ASSESSEE'S CASE. 8. SIMILARLY THE DECISION IN THE CASE DAWN EDUCATIO NAL CHARITABLE TRUST VS CIT 370 ITR 724 KER (AFFIRMED BY HON'BLE SUPREME CO URT) IS DISTINGUISHABLE. THE ACTIVITY OF THE TRUST WAS ONLY TO BRING UNDER ITS AMBIT THE ALREADY EXISTING SCHOOL RUN BY THE MANAGING TRU STEE. THE SAID SCHOOL IS RUN IN A BUILDING WHERE AIR CONDITIONED CLASSROO MS WITH BREAKFAST AND LUNCH ARE PROVIDED. THE SCHOOL IS MAINTAINED AND ME ANT FOR THE BENEFIT OF CHILDREN OF NON-RESIDENT INDIANS WHEREAS THE MAIN O BJECT OF THAT TRUST WAS TO RUN EDUCATIONAL INSTITUTIONS, ESTABLISH INSTITUT IONS OF TRAINING AND REHABILITATION FOR MENTALLY RETARDED PERSONS, PHYSI CALLY HANDICAPPED PERSONS ETC., ON THESE FACTS, REGISTRATION SOUGHT U /S.12A WAS REJECTED AND THE SAME WAS UPHELD. 9. THE CONTENTION OF THE LEARNED DR IS THAT THE D.I .T(EXEM) HAS GIVEN A FINDING OF FACT THAT THE ASSESSEE HAS VIOLATED LAW LAID DOWN BY THE HON'BLE SUPREME COURT IN REGARD TO COLLECTION OF CA PITATION FEE ETC. AND ACCORDINGLY CANCELLED REGISTRATION BY INVOKING THE SECOND LIMB OF SEC.12AA(3) OF THE ACT. 10. AS ALREADY SUBMITTED, THE ASSESSING OFFICER MAD E ADDITIONS OF RS.1,55,81,000/- IN THE ASSESSMENT FOR ASST.YEAR 20 05-06 AND RS.1,84,85,000/- FOR ASST.YEAR 2006-07. WHEN THE MA TTER REACHED THE HON'BLE ITAT, IT HAS BEEN HELD BY THE HON'BLE ITAT IN ITS ORDER DATED 19- 10-2012 IN THE QUANTUM APPEALS FOR ASST.YEARS 2005- 06 AND 2006-07 IN ITA NOS.378/HYD/2009 AND 66/HYD/2010 DATED 19-10-20 12 WE ARE OF THE OPINION THAT ADEQUATE ENQUIRY SHOULD HAVE BEEN CONDUCTED BY THE LOWER AUTHORITIES BEFORE COMING TO THE CONCLUSION T HAT THE ASSESSEE HAS I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 23 -: CHARGED CAPITATION FEE (PLEASE SEE PARAGRAPH 12 OF THE SAID ITAT'S ORDER- AT PAGES 50 TO 56 OF PAPER BOOK FILED BY ASSESSEE). ACCORDINGLY, THE MATTER WAS REMITTED BACK TO THE FILE OF THE ASSESSING OFFI CER FOR DECIDING THE ISSUE AFRESH AND THE APPEALS ON THE A.O'S ORDER ARE STILL PENDING BEFORE C.I.T(APPEALS). 11. MUCH LATER TO THE ORDER OF THE HON'BLE ITAT, TH E D.I.T(EXEM) ISSUED A SHOW CAUSE NOTICE DATED DON 13-03-2014, TAKING SUPP ORT FROM THE FACT THAT THE ORIGINAL ASSESSMENTS MADE BY THE A.O WERE CONFIRMED BY THE C.I.T(APPEALS). IN THIS SHOW CAUSE HE RECORDED THAT 'THE ASSESSEE WAS NOT RUNNING ITS ACTIVITIES AS PER THE CHARITABLE OBJECT S IN THE CASE OF THE SOCIETY' AND THUS IT NEEDS WITHDRAWAL OF REGISTRATI ON GRANTED TO THE SOCIETY EARLIER U/S.12A. THE FACTS ON RECORD SHOW THAT THE D.I.T(E) HIMSELF DID NOT CONDUCT ANY ENQUIRY OR CAUSE ANY ENQUIRY TO BE COND UCTED. EVEN THE A.O DID NOT CONDUCT ANY INVESTIGATION AS DIRECTED BY TH E HON'BLE ITAT. THE A.O COMPLETED THE FRESH ASSESSMENT ON 31-03-2014 IN A S UMMARY MANNER AND WITHOUT EXAMINING A SINGLE PERSON. HE COMPLETED FRESH ASSESSMENTS WITHOUT BRINGING ANY FRESH MATERIAL ON RECORD OR EX AMINING ANY PERSON, STATING THAT DONORS WHO GAVE DONATIONS OF MORE THAN RS.3 LAKHS WERE NOT PRODUCED AS REQUIRED AND HENCE THE ENTIRE DONATIONS WERE BEING TREATED AS CAPITATION FEE. NOT ONLY THAT, HE BROUGHT TO TAX AN AMOUNT OF RS.2,29,99,999/- AS AGAINST RS.1,55,81,000/- IN THE ORIGINAL ASSESSMENT FOR ASST.YEAR 200506, WITHOUT BRINGING ANY FURTHER MATERIAL ON RECORD. SIMILARLY AND IN THE SAME MANNER, AN AMOUNT OF RS.L ,84,85,000/- BEING THE SAME AMOUNT TAXED IN THE ORIGINAL ASSESSMENT WA S BROUGHT TO TAX IN THE FRESH ASSESSMENT FOR ASST.YEAR 2006-07. (PLEASE SEE PAGES 1 TO 4 AND 5 TO 8 OF PAPER BOOK FILED BY ASSESSEE). THE ASSESS EE'S APPEAL BEFORE THE C.I.T(APPEALS) IS STILL PENDING. 12. THUS THE CONTENTION OF THE LEARNED DR THAT THE FINDING OF THE D.I.T(EXEM) THAT THE ASSESSEE HAS COLLECTED CAPITAT ION FEE IS A NOT FINDING OF FACT, AND IS NOT BASED ON MATERIAL ON RECORD. TH IS IS WITHOUT PREJUDICE TO THE SUBMISSION MADE BY THE ASSESSEE THAT THE ISSUE OF COLLECTION OF CAPITATION FEE CANNOT BY ITSELF BE A REASON FOR CAN CELLATION OF REGISTRATION IN SUPPORT OF WHICH THE ASSESSEE HAS RELIED ON SEVERAL DECIDED CASES SUBMITTED IN ITS PAPER BOOK. 13. IT IS SUBMITTED ON BEHALF OF THE APPELLANT THAT EVEN AS PER THE LEARNED DR'S SUBMISSIONS, THE DIT(EXEM) HAS NOT FOUND THE O BJECTS OF THE ASSESSEE TO BE NOT GENUINE. THE CONTENTIONS RAISED BY THE LE ARNED DR FAIL TO TAKE INTO ACCOUNT THE FACT THAT THE ORDER OF THE D.I.T ( EXEMPTIONS) DOES NOT SHOW THAT THE ASSESSEE IS CARRYING OUT ANY ACTIVITY WHIC H IS NOT IN ACCORDANCE WITH ITS OBJECTS OR THAT THERE HAS BEEN MISAPPROPRI ATION OF FUNDS OR UTILISATION FOR PURPOSES OTHER THAN THE OBJECTS OF THE SOCIETY. 14. THE ASSEESSE HAS PLACED EVIDENCE IN THE PAPER B OOK FILED TO SHOW THAT SEVERAL DONORS HAVE GIVEN VOLUNTARY DONATIONS THE N ATURE OF WHICH HAS I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 24 -: NOT BEEN DISPROVED BY THE ASSESSING OFFICER EVEN DU RING THE COURSE OF FRESH ASSESSMENT PROCEEDINGS. IN THIS CONNECTION A NOTE ON BACKGROUND OF THE ASSESSEE SOCIETY (AVAILABLE AT PAGE 151 OF THE PAPER BOOK FILED BY ASSESSEE) IS REPRODUCED HEREWITH: 'IT IS ALSO SUBMI TTED THAT THE ASSESSEE- SOCIETY WAS SET UP IN THE YEAR 1991 BY SOME PROMINE NT INDUSTRIALISTS, PROFESSIONALS AND SERVICE MINDED PEOPLE IN HYDERABA D FOR PROVIDING GOOD EDUCATIONAL FACILITIES WITH THE BEST POSSIBLE STAND ARDS TO STUDENTS TO ENABLE THEM TO STAND ON THEIR OWN. THE ASSESSEE HAS ALSO SET APART A SUBSTANTIAL SUM OF RS.2 CRORES TO PROVIDE SCHOLARSH IPS TO DESERVING MERIT STUDENTS. FOR ALL THESE ACTIVITIES SUBSTANTIAL DONA TIONS WERE GIVEN BY THE MEMBERS OF THE SOCIETY AND PUBLIC. IN THIS CONNECTI ON IT MAY NOT BE OUT OF PLACE TO MENTION THAT ASSESSEE'S INSTITUTIONS ARE H AVING THE BEST POSSIBLE INFRASTRUCTURE FACILITIES AND DIGNITARIES FROM UNIV ERSITIES, AICTE, UGC AND OTHER ORGANISATIONS HAVE BEEN PRAISING THE ASSESSEE SOCIETY FOR THE EFFORTS PUT IN BY THE SOCIETY IN DEVELOPING AND PROVIDING T HE BEST POSSIBLE FACILITIES IN ITS INSTITUTIONS. A VISIT TO THE INST ITUTIONS WILL PROVE THE SERVICE RENDERED BY IT IN VARIOUS FIELDS IN WHICH THE ASSES SEE IS PROVIDING SERVICES. IN THIS PROCESS VARIOUS PERSONS INCLUDING PARENTS OF THE STUDENTS HAVING SATISFIED WITH THE FACILITIES, INFRASTRUCTUR E, AND AMBIENCE ETC., PROVIDED BY THE SOCIETY HAVE BEEN GIVING DONATIONS. IT WOULD NOT BE OUT OF PLACE TO MENTION THAT THE MANAGEMENT OF THE ASSESSE E SOCIETY IS PUTTING ITS BEST EFFORTS IN PROVIDING BEST POSSIBLE FACILIT IES TO ALL CONCERNED AND NOT WASTING EVEN A SINGLE RUPEE OF DONATION RECEIVED AN D USING IT ONLY FOR IMPROVING INFRASTRUCTURE OF THE EDUCATIONAL INSTITU TIONS AND RURAL DEVELOPMENT ACTIVITIES SET UP BY IT. THUS THE SOCIE TY IS DOING ITS BEST TO UTILISE THE FUNDS PROVIDED BY PHILANTHROPISTS TO TH E BEST POSSIBLE USE.' A LIST OF SUCH DONATIONS AMOUNTING TO MORE THAN RS.8 CRORES HAS ALREADY BEEN SUBMITTED BY THE ASSESSEE. (AVAILABLE AT PAGE 42 OF THE PAPER BOOK FILED BY IT). 15. THE ASSESSEE HAS ALSO PLACED RELIANCE ON SEVERA L DECIDED CASES (KINDLY REFER TO THE PAPER BOOKS FILED BY THE ASSES SEE) IN SUPPORT OF ITS CONTENTION THAT THE D.I.T(EXEM) WAS NOT CORRECT IN CANCELLING REGISTRATION SOLELY ON THE COUNT THAT THE ASSESSEE HAS RECEIVED DONATIONS WHICH ARE ACCOUNTED FOR AND UTILISED FOR CHARITABLE PURPOSES. 16. THE ASSESSEE SUBMITS THAT THE CONTENTIONS RAISE D BY THE D.R ON BEHALF OF THE RESPONDENT MAY BE REJECTED AND THE ORDER OF THE D.I.T(EXEM), HYDERABAD CANCELLING REGISTRATION EARLIER GRANTED T O THE ASSESSEE U/S.12A OF THE ACT MAY BE QUASHED. 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND SUBMISSIONS AND PERUSED DOCUMENTS PLACED ON RECORD. AS CAN BE SEEN FROM THE ORDER, THE LD.DIT(E) BASED HIS CONCLUSI ON ON THE I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 25 -: BASIS OF ENQUIRY FROM FOUR PARENTS/RELATIONS IN ASSE SSMENT PROCEEDINGS CONCLUDED IN THE YEAR 2007 FOR AY. 2005- 06 AND IN YEAR 2008 FOR AY. 2006-07. EVEN THOUGH THOSE FINDINGS IN ASSESSMENTS WERE NOT CONCLUSIVE AND MATTERS WERE REST ORED TO AO FOR FURTHER ENQUIRY, NO SUCH ENQUIRY WAS MADE AS CAN BE SEEN FROM THE ORDERS PASSED AGAIN ON 31-03-2014 FOR THE ABOVE Y EARS. THESE ORDERS AT PRESENT ARE PENDING ADJUDICATION BEFORE CIT (A). THUS, THE ORDER OF DIT(E) IS BASED ON PREMATURE CONCLUSIONS AND THE CONTENTION OF LD.CIT-DR STATING THAT THE DEPARTMENT HAS CONCLUSIVELY PROVED THE COLLECTION OF CAPITATION FEE IS DEVOID OF ANY MERIT. 10.1. AS CAN BE SEEN FROM THE FACTS, ONLY FOUR CASES WERE EXAMINED AND ON THE BASIS OF THAT, ALL THE DONATIONS REC EIVED INCLUDING FROM MEMBERS OF SOCIETY WERE CONSIDERED A S CAPITATION FEES AND WERE BROUGHT TO TAX. ASSESSEE FILED THE LETTER S FROM THE ABOVE FOUR PERSONS THAT THE DONATIONS ARE VOLUNTARY AN D NO CAPITATION FEE WAS COLLECTED. NO FURTHER ENQUIRY WAS CONDUCTED IN SPITE OF REMITTING MATTER FOR EXAMINATION OF THE SAME. E VEN THOUGH THE MATTER IS PENDING ADJUDICATION BEFORE THE LD.CIT(A ) IN ASSESSMENT PROCEEDINGS, WE ARE OF THE OPINION THAT TH ESE FOUR ISOLATED INSTANCES WHICH WERE RELIED ON BY AO DOES NO T CONCLUSIVELY ESTABLISH THAT THE SOCIETY HAS VIOLATED THE OBJECTS FOR WHICH IT WAS ESTABLISHED AND REGISTRATION FRAMED SO AS TO INVOKE PROVISIONS OF SECTION 12AA(3) TO CANCEL REGISTRATION. 11. BEFORE ADVERTING TO THE ISSUE OF CANCELLATION, IT WOULD BE BETTER TO ANALYSE THE CONCEPTS OF CHARITABLE PURPOSE, T AXABILITY OF VOLUNTARY CONTRIBUTIONS, CAPITATION FEE, WHETHER THE DONATI ON CAN I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 26 -: BE CONSIDERED AS CAPITATION FEE AND PROFITS AND PROFIT EERING THE REASONS GIVEN BY THE LD. DIT(E) WHILE CANCELLING TH E REGISTRATION. THESE ARE ANALYSED HEREIN ONWARDS. 11.1. FIRST WE WILL CONSIDER THE MEANING OF CHARITAB LE PURPOSE UNDER THE INCOME TAX ACT. SECTION 2(15) OF THE ACT DEFINES CHARITABLE PURPOSE AS UNDER: CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OBJ ECT OF GENERAL PUBLIC UTILITY (NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT). THE ITALICIZED WORDS IN THE ABOVE DEFINITION WERE DEL ETED W.E.F. 1 ST APRIL, 1984 BY THE FINANCE ACT 1983. IT CAN BE SEEN THA T THE ABOVE DEFINITION IS NOT EXHAUSTIVE OR EXCLUSIVE BUT IS AN I NCLUSIVE DEFINITION. IT CLASSIFIES THE CHARITABLE ACTIVITIES UND ER THE FOLLOWING FOUR HEADS: A) RELIEF OF THE POOR; B) EDUCATION; C) MEDICAL RELIEF; AND D) THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY. THE AMBIT AND SCOPE OF THE WORD EDUCATION OCCURRING IN THE DEFINITION OF CHARITABLE PURPOSE UNDER SECTION 2(15 ) OF THE I.T. ACT HAS BEEN EXAMINED BY THE HONBLE APEX COURT IN THE CAS E OF SOLE TRUSTEE, LOKA SHIKSHANA TRUST V. CIT REPORTED IN 101 ITR 234(SC) WHEREIN THE HONBLE SUPREME COURT HELD THAT THE WORD E DUCATION USED IN THE DEFINITION WILL NOT ENCOMPASS EVERY ACQUIS ITION OF I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 27 -: KNOWLEDGE AND GAVE A RESTRICTED MEANING TO THE WORD EDUCATION BY CONFINING IT TO SCHOLASTIC INSTRUCTION AND NORM AL SCHOOLING. 11.2. IN THE CASE BEFORE US, THE ASSESSEE SOCIETY ES TABLISHED EDUCATIONAL INSTITUTION TO IMPART SCHOLASTIC INSTRUCTION IN VARIOUS STREAMS FOR GENERAL PUBLIC AND THUS SATISFIES THE COND ITION LAID DOWN BY THE APEX COURT IN THE ABOVE CASE. THEREFORE, A SSESSEES ACTIVITIES CONSTITUTES EDUCATION AS CLASSIFIED IN C HARITABLE PURPOSES U/S. 2(15) OF THE I.T. ACT. THE FURTHER U NDISPUTED FACT THAT THE ASSESSEE HAS BEEN GRANTED THE REGISTRATION U/S. 12A OF THE I.T. ACT ALSO CONFIRMS THAT DEPARTMENT WAS ALSO SATISFIED THAT THE OBJECTS AND ACTIVITIES OF THE ASSESSEE SOCIETY ARE CHAR ITABLE IN NATURE. 11.3. AS POINTED OUT IN THE ABOVE PARAGRAPH, PRIOR TO 1 ST APRIL, 1984, THE DEFINITION OF CHARITABLE PURPOSE U /S. 2(15) OF THE ACT, ENDED WITH THE WORDS NOT INVOLVING THE CARRYING ON OF ANY ACTIVITIES FOR PROFIT (EMPHASIS SUPPLIED BY US) . THE HONBLE SUPREME COURT IN THE CASE OF SOLE TRUSTEE, LOKA SHIKSHANA TRUST VS. CIT (CITED SUPRA) HAS HELD THAT THE OBJECT OF THE TRUST THEREI N WAS NOT EDUCATION WITHIN THE MEANING OF SEC 2(15) BUT AN OBJECT OF GENERAL PUBLIC UTILITY. THEREAFTER, WHILE HOLDING THAT THE P UBLICATION OF NEWSPAPERS AND JOURNALS CARRIED ON BY THE TRUST THEREIN INVOLVED THE CARRYING OF AN ACTIVITY FOR PROFIT, IT WAS HELD THAT THE INCOME OF THE TRUST THEREIN WAS NOT EXEMPT FROM TAX. IT WAS IN THIS C ONTEXT THAT THE HONBLE APEX COURT FURTHER HELD THAT IT IS NOT P ERMISSIBLE TO READ THE WORD PROFIT IN THE EXPRESSION NOT INVOLV ING THE CARRYING ON OF AN ACTIVITY FOR PROFIT AS PRIVATE PRO FIT AS THE WORDS I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 28 -: GENERAL PUBLIC UTILITY THEMSELVES EXCLUDE OBJECTS OF PRIVATE GAIN. THE RELEVANT PORTION OF THE JUDGMENT IS REPRODUCED HERE UNDER: IT HAS BEEN POINTED OUT IN THE EARLIER PART OF THE JUDGMENT THAT IN THE DEFINITION OF CHARITABLE PURPOSE AS GIVEN IN S. 2(15) OF THE ACT THE WORDS 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT' HAVE BEEN ADDED AT THE END OF THE DEFINITIO N AS IT WAS GIVEN IN S. 4(3) OF THE INDIAN IT ACT, 1922. THE PO SITION AS IT EXISTED UNDER THE ACT OF 1922 WAS THAT ONCE THE PUR POSE OF THE TRUST WAS RELIEF OF THE POOR, EDUCATION, MEDICAL RE LIEF OR THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY, THE TRUST WAS CONSIDERED TO BE FOR A CHARITABLE PURPOSE . AS A RESULT OF THE ADDITION OF THE WORD 'NOT INVOLVING THE CARR YING ON OF ANY ACTIVITY FOR PROFIT' AT THE END OF THE DEFINITION I N S. 2(15) OF THE ACT, EVEN IF THE PURPOSE OF TRUST IS 'ADVANCEMENT O F ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY', IT WOULD NOT BE CONSIDERED TO BE 'CHARITABLE PURPOSE' UNLESS IT IS SHOWN THAT THE AB OVE PURPOSE DOES NOT INVOLVE THE CARRYING ON OF ANY ACTIVITY FO R PROFIT. THE RESULT THUS OF THE CHANGE IN THE DEFINITION IS THAT IN ORDER TO BRING A CASE WITHIN THE FOURTH CATEGORY OF CHARITABLE PUR POSE, IT WOULD BE NECESSARY TO SHOW THAT : (1) THE PURPOSE OF THE TRUST IS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY, AND (2) THE ABOVE PURPOSE DOES NOT INVOLVE THE CARRYING ON OF ANY ACTIVITY FOR PROFIT. BOTH THE ABOVE CONDITIONS MUST BE FULFILLED BEFORE THE PURPOSE OF THE TRUST CAN BE HELD TO BE C HARITABLE PURPOSE. IT IS NOT NECESSARY FOR THE DECISION OF TH E CASE, AS ALREADY MENTIONED ABOVE, TO GO INTO THE QUESTION AS TO WHETHER THE WORDS 'NOT INVOLVING THE CARRYING ON OF ANY ACT IVITY FOR PROFIT' ALSO QUALIFY THE FIRST THREE CATEGORIES OF CHARITAB LE PURPOSE, NAMELY, RELIEF OF THE POOR, EDUCATION AND MEDICAL R ELIEF. THUS, IT IS CLEAR THAT THE REFERENCE TO PROFIT NOT MEANING PRIVATE PROFIT BY THE APEX COURT WAS IN REFERENCE TO THE FOURTH CATEGORY OF CHARITABLE ACTIVITY AND NOT TO THE FIRST THREE CATEGORIES. 11.4. THE HONBLE SUPREME COURT, FURTHER, IN THE CASE OF DHARMADEEPTI V. CIT, KERALA REPORTED IN 114 ITR 454(SC) HAS CONSIDERED THE MEANING OF THE DEFINITION OF CHARITABLE PURPOSE AS EXISTING PRIOR TO 1 ST APRIL, 1984 AND HAS HELD THAT THESE WORDS WHICH RESTRICT THE EXEMPTION COVERS ONLY THE FOURTH HEAD OF OBJECT I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 29 -: OF GENERAL PUBLIC UTILITY AND DO NOT REFER TO THE FIR ST THREE HEADS OF CHARITABLE PURPOSE. THE RELEVANT PORTION OF THE JUDGM ENT READS AS UNDER: APPARENTLY, WHEN FRAMING THE INCOME TAX ACT, 1961, PARLIAMENT CONSIDERED IT APPROPRIATE TO CUT DOWN TH E WIDE SCOPE OF THESE WORDS BY QUALIFYING THEM WITH THE RESTRICT IVE WORDS NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFI T. THIS WAS DONE TO EMPHASIZE THAT THE RESIDUAL GENERAL HEAD WA S TO BE CONFINED TO OBJECTS WHICH WERE ESSENTIALLY CHARITAB LE IN NATURE. IT IS, THEREFORE, CLEAR THAT THE WORDS NOT INVOLVI NG THE CARRYING ON OF ANY ACTIVITY FOR PROFIT GOVERN THE WORDS TH E ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND NOT THE WORDS RELIEF OF THE POOR, EDUCATION AND MEDICAL RELIEF I N SEC 2(15). THE HEADS RELIEF OF THE POOR, EDUCATION, AND MEDICAL R ELIEF REMAINED UNQUALIFIED BY ANY EXPRESS STATUTORY RESTR ICTION, AND INCOME ARISING FROM A PROFIT-MAKING ACTIVITY LINKED WITH THOSE HEADS ENJOYED EXEMPTION WITHOUT EXPRESS LIMITATION UNTIL SECTION 13(1)(BB) WAS INSERTED IN THE ACT BY THE TAXATION L AWS (AMENDMENT) ACT, 1975, WITH EFFECT FROM APRIL 1, 19 77. 11.5. THE ABOVE JUDGMENT REFERS TO THE LIMITATION PLACE D BY SEC.13(1)(BB) OF THE ACT INSERTED BY THE TAXATION LAWS (AMENDMENT) ACT, 1975. LET US NOW EXAMINE THE SCOPE OF LIMITATION PLACED BY CLAUSE (BB) TO SECTION 13(1) INSERTED WITH EFFECT FRO M APRIL 1, 1977. IT READS AS UNDER: (BB) IN THE CASE OF A CHARITABLE TRUST OR INSTITU TION FOR THE RELIEF OF THE POOR, EDUCATION OR MEDICAL RELIEF, WHICH CAR RIES ON BUSINESS, UNLESS THE BUSINESS IS CARRIED ON IN THE COURSE OF THE ACTUAL CARRYING ON OF A PRIMARY PURPOSE OF THE TRUS T OR INSTITUTION. HOWEVER, THIS PROVISION HAS BEEN OMITTED BY THE FINANCE ACT, 1983 (W.E.F.1-4-1984) IN VIEW OF THE NEW PROVISION MADE I N SUB-SECTION (4A) OF SECTION 11. THE PROVISIONS OF SUB-SECTION (4A ) AS INSERTED BY THE FINANCE ACT, 1983 (W.E.F.1-4-1984) READ AS UNDER: I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 30 -: (4A). SUB-SECTION (1), OR SUB-SECTION (2) OR SUB-S ECTION (3) OR SUB- SECTION (3A) SHALL NOT APPLY IN RELATION TO ANY INC OME, BEING PROFITS AND GAINS OF BUSINESS, UNLESS (A) THE BUSINESS IS CARRIED ON BY A TRUST WHOLLY FOR P UBLIC RELIGIOUS PURPOSES AND THE BUSINESS CONSISTS OF PRI NTING AND PUBLICATION OF BOOKS OR PUBLICATION OF BOOKS OR IS OF A KIND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS BEH ALF IN THE OFFICIAL GAZETTE: OR (B) THE BUSINESS IS CARRIED ON BY AN INSTITUTION WHOLL Y FOR CHARITABLE PURPOSES AND THE WORK IN CONNECTION WITH THE BUSINESS IS MAINLY CARRIED ON BY THE BENEFICIARIES OF THE INSTITUTION. AND SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED BY THE TRUST OR INSTITUTION IN RESPECT OF SUCH BUSINESS SUB-SEC.(4A) HAS BEEN SUBSTITUTED BY THE FOLLOWING BY THE FINANCE ACT,1991 W.E.F. 1-4-1991. (4A) SUB-SECTION (1) OR SUB-SECTION (2) OR SUB-SEC TION (3) OR SUB-SECTION (3A) SHALL NOT APPLY IN RELATION TO ANY INCOME OF A TRUST OR AN INSTITUTION, BEING PROFITS AND GAINS OF BUSINESS, UNLESS THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE TRUST OR, AS THE CASE MAY BE, INS TITUTION, AND SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED BY SUCH TR UST OR INSTITUTION IN RESPECT OF SUCH BUSINESS. DEPARTMENT CIRCULAR NO.642 DATED 11-12-1992 HAS EXPLA INED THAT SUB-SECTION (4A) HAS THUS BEEN AMENDED TO PERMIT TRUSTS A ND INSTITUTIONS TO CARRY ON BUSINESS ACTIVITIES IF THE BUSI NESS ACTIVITIES ARE INCIDENTAL TO THE ATTAINMENT OF ITS OBJECTIVE AND THE CHARITABLE OR RELIGIOUS TRUST WILL NO LONGER LOSE COMPLETE EXEM PTION FROM INCOME TAX, BUT HOWEVER, THE PROFITS AND GAINS FROM SUC H BUSINESS ACTIVITY WILL BE SUBJECT TO TAX. I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 31 -: 11.6. FURTHER, THE LARGER BENCH OF THE APEX COURT IN A SUBSEQUENT JUDGMENT IN THE CASE OF CIT V. SURAT ART CLOTH MANUFACTURERS ASSOCIATION REPORTED IN 121 ITR 1 (SC) HAS LAID DOWN THE FOLLOWING PRINCIPLES:- (I). THE WORDS NOT INVOLVING THE CARRYING ON OF AN Y ACTIVITY FOR PROFIT GOVERN THE WORDS OBJECTS OF GENERAL PU BLIC UTILITY, AND NOT THE WORD ADVANCEMENT AS WRONGLY HELD IN T HE INDIAN CHAMBER OF COMMERCE CASE. IT IS THE OBJECT AND NOT ITS ACCOMPLISHMENT WHICH SHOULD INVOLVE THE CARRYING ON OF AN ACTIVITY FOR PROFIT. (II) TO SATISFY THE ABOVE QUOTED WORDS, IT IS NOT AT ALL NECESSARY THAT THERE SHOULD BE A PROVISION IN THE C ONSTITUTION OF THE TRUST OR INSTITUTION THAT THE ACTIVITY SHALL BE CONDUCTED ON A NO PROFIT NO LOSS BASIS OR THAT NO PROFIT SHALL BE PRESCRIBED. (III) THE DEFINITION OF CHARITABLE PURPOSE WOULD NOT BE SATISFIED (A) WHERE AN ACTIVITY FOR PROFIT IS ACTUA LLY CARRIED ON AS AN INTEGRAL PART OF THE PURPOSE OR IN ORDER TO ADVA NCE THE PURPOSE, OR (B) WHERE THE TRUST DEED EXPRESSLY PROV IDES THAT THE PURPOSE SHALL BE CARRIED OUT BY ENGAGING IN AN ACTI VITY WHICH HAS PREDOMINANT PROFIT MOTIVE, IN WHICH CASE IT WOU LD BE NON- CHARITABLE EVEN IF NO ACTIVITY FOR PROFIT IS ACTUAL LY CARRIED ON. (IV) ACTIVITY FOR PROFIT CONNOTES THAT THE PREDOM INANT OBJECT OF THE ACTIVITY MUST BE THE MAKING OF PROFIT : IT IS NOT ENOUGH THAT AS A MATTER OF FACT THE ACTIVITY RESULT S IN PROFIT. BHAGWATI J SAID, WHERE AN ACTIVITY IS NOT PERVADED BY PROFIT MOTIVE BUT IS CARRIED ON PRIMARILY FOR SERVING THE CHARITABLE PURPOSE, IT WOULD NOT BE CORRECT TO DESCRIBE IT AS AN ACTIVITY FOR PROFIT MERELY BECAUSE PROFIT ACCRUES. PATHAK J OBS ERVED, I AM UNABLE TO ACCEPT THE PROPOSITION THAT IF THE PURPOS E IS TRULY CHARITABLE, THE ATTAINMENT OF THE PURPOSE MUST RIGO ROUSLY EXCLUDE ANY ACTIVITY FOR PROFIT (V) ON THE OTHER HAND, WHERE PROFIT MAKING IS THE PREDOMINANT OBJECT OF THE ACTIVITY, THE PURPOSE, TH OUGH IT MAY AIM AT ADVANCING AN OBJECT OF GENERAL PUBLIC UTILIT Y, WOULD CEASE TO BE A CHARITABLE PURPOSE UNDER S.2(15). THUS, WHERE THE PROFIT EARNED BY A CHARITABLE INSTITUTIO N IS NOT PURSUANT ITS OBJECTIVES BUT IS INCIDENTAL TO ITS ACTIVITIES , SUCH AN I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 32 -: INSTITUTION WILL STILL BE ELIGIBLE FOR EXEMPTION FROM INCOME TAX U/SEC.11 OF THE ACT, BUT THE INCIDENTAL PROFIT SO EARNED WOULD BE LIABLE TO INCOME TAX UNLESS IT IS APPLIED FOR THE OBJE CTS OF THE CHARITABLE INSTITUTION. 11.7. IN THE SCHEME OF THE ACT AND PROVISIONS, A CHAR ITABLE INSTITUTION IS ELIGIBLE FOR EXEMPTION U/S.11 OF THE ACT , PROVIDED IT FULFILS THE CONDITIONS PRESCRIBED U/S.11 TO 13 OF THE IT ACT. SEC.11(1) LAYS DOWN CERTAIN CONDITIONS REGARDING APP LICATION OF INCOME BY THE TRUST ON CHARITABLE OBJECTS WHICH SHOULD BE FULFILLED BEFORE CLAIMING EXEMPTION UNDER THAT SECTION. THEREFORE , THE EXEMPTION U/S11 IS NOT AUTOMATIC AND THE AO IS REQUIRE D TO EXAMINE THE FULFILLMENT OF THE CONDITIONS SPECIFIED UN DER SECTIONS 11 TO 13 DURING THE ASSESSMENT PROCEEDINGS OF THE RELE VANT ASSESSMENT YEARS. THE FIRST AND FOREMOST BASIC REQUI REMENT FOR CLAIMING THE BENEFIT OF EXEMPTION UNDER S.11 IS REGIS TRATION U/S.12A/ 12AA OF THE ACT AND WITHOUT THE SAME, EXEMPTION UNDER S.11 WOULD NOT BE AVAILABLE AT ALL. SECTION 12 SPECIFI ES THE INCOME WHICH IS TO BE DEEMED TO BE THE INCOME OF THE CHARITABLE INSTITUTION, WHILE SEC.12A PRESCRIBES THE CONDITIONS FO R APPLICABILITY OF SECTIONS 11 AND 12 AND SECTION 12AA PRESCRIBES THE PROCEDURE FOR REGISTRATION. SECTION 13 SPECIFIES THE CONDITIONS UNDER WHICH SECTION 11 IS NOT APPLICABLE. 11.8. AS SET OUT EARLIER, THE EXEMPTION U/S. 11 IS AV AILABLE TO AN ASSESSEE ON THE BASIS OF ITS CHARACTER, I.E., EXEMP TION U/S.11 IS AVAILABLE TO AN ASSESSEE WHOSE ACTIVITIES ARE WHOLLY F OR CHARITABLE OR RELIGIOUS PURPOSES. CLAUSE (A) OF SUB-SEC.(1) P ROVIDES THAT THE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 33 -: OR RELIGIOUS PURPOSES IS UNCONDITIONALLY EXEMPT TO THE EXTENT IT IS APPLIED TO SUCH PURPOSES IN INDIA OR IS ALLOWED TO BE ACCUMULATED FOR SUCH PURPOSES. THUS, THOUGH THE PROPERTY MAY BE H ELD WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, THE WHOLE OR A PART OF THE INCOME MAY STILL BE DISENTITLED TO EXEMPTION IN A PARTICU LAR YEAR ON THE GROUND THAT: I. THE INCOME IS APPLIED TO PURPOSES OTHER THAN CHARIT ABLE OR RELIGIOUS; II. THE INCOME IS APPLIED TO ANY PURPOSE OUTSIDE INDIA; III. THE INCOME ACCUMULATED IS IN EXCESS OF THE PERMISSI BLE LIMIT OF ACCUMULATION; IV. THE INCOME SHOWN IN THE ACCOUNTS OF A BUSINESS UNDERTAKING HELD UPON TRUST IS LESS THAN THE INCOME COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE A CT; V. THE ACCOUNTS ARE NOT AUDITED; OR VI. THE FUNDS ARE NOT INVESTED OR DEPOSITED ACCORDING T O STATUTORY REQUIREMENTS. THUS, THE PORTION OF THE TRUST-INCOME ENTITLED TO EXEMPTION MAY VARY FROM YEAR TO YEAR AND THEREFORE THE AO HAS TO EXA MINE THE ISSUE YEAR AFTER YEAR AND SECTION 11 CAN HAVE NO APP LICATION UNLESS THE SOURCE OF THE INCOME IS SOME PROPERTY, AND THE PR OPERTY IS HELD UNDER TRUST OR OTHER LEGAL OBLIGATION WHOLLY OR IN PAR T FOR A RELIGIOUS OR CHARITABLE PURPOSES. 11.9. CLAUSE (D) OF SUB-SEC(1) OF SEC.11 PROVIDES THAT VOLUNTARY CONTRIBUTIONS MADE WITH A SPECIFIC DIRECTION T HAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTITUTIO N SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 34 -: RECEIPT OF THE INCOME. ON THE OTHER HAND, SECTION 2(24) (IIA) DEFINES INCOME TO INCLUDE VOLUNTARY CONTRIBUTIONS RECEIVED B Y A TRUST CREATED WHOLLY OR PARTLY FOR CHARITABLE OR RELIGIOUS PURPOSES BY AN INSTITUTION ESTABLISHED WHOLLY OR PARTLY FOR SUCH PURPO SES[..]. SUB-SEC.(1) OF SECTION 12 ALSO PROVIDES THAT ANY VOLUN TARY CONTRIBUTIONS RECEIVED BY A TRUST CREATED WHOLLY FOR CH ARITABLE OR RELIGIOUS PURPOSES OR BY AN INSTITUTION ESTABLISHED W HOLLY FOR SUCH PURPOSES (NOT BEING CONTRIBUTIONS MADE WITH A SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST OR I NSTITUTION) SHALL, FOR THE PURPOSES OF SEC.11, BE DEEMED TO BE IN COME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE O R RELIGIOUS PURPOSES. THUS, THE INCOME REFERRED TO UNDER 11(1)(D) IS CONSIDERED TO BE CAPITAL RECEIPT AND EXCLUDED FROM THE FROM THE D EEMED INCOME UNDER SEC.12(1) OF THE ACT. THEREFORE, UNLES S THE DONATIONS RECEIVED BY THE ASSESSEE FALLS UNDER THE CA TEGORY OF VOLUNTARY CONTRIBUTION U/S 11(1)(D) OF THE ACT, IT WOU LD BE INCOME OR DEEMED INCOME OF THE ASSESSEE. 11.10. THE TEST OF THE NATURE OF CONTRIBUTIONS BEING V OLUNTARY OR COMPULSORY AND WHETHER IT IS FOR THE CORPUS, OR NOT INTENDED FOR CORPUS, IS ONLY LIMITED FOR THE PURPOSE OF CONSIDERI NG WHETHER SUCH CONTRIBUTIONS HAVE TO BE TAKEN AS INCOME OR NOT. THE IT ACT NOWHERE STATES THAT IF THE CONTRIBUTION IS COMPULSORY (OR NOT VOLUNTARY) THE RECIPIENT CEASES TO BE CHARITABLE IN NATU RE OR THAT THE BENEFIT OF SECTION 11 OF THE IT ACT SHOULD BE DENIED . SUPPORT CAN BE TAKEN FROM THE FOLLOWING DECISIONS: (A) SHRI BELIMATHA MAHA SAMSTHANA SOCIO CULTURAL & EDUCATIONAL TRUST REPORTED IN (2010) 46 DTR JUDGMENT 290(KAR) I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 35 -: (B) DCIT VS. VELLORE INSTITUTE OF TECHNOLOGY 46 SOT 224 (C) KARANDHAI TAMIL SANGHAM, THANJAVUR VS. CIT IN ITA. NO. 960/MAD/2011 DT.9-8-2011. EVEN IF THE DONATIONS ARE HELD TO BE NOT VOLUNTARY AND A RE LINKED TO ADMISSIONS, IT STILL DOES NOT DESTROY THE CHARITABLE C HARACTER OF THE ASSESSEE. THUS, IN OUR OPINION COLLECTING DONATIONS VOLUNTARILY OR COMPULSORILY MAY HAVE AN EFFECT IN COMPUTATION OF INCO ME BUT NOT TO THE NATURE OF THE ACTIVITIES OF THE TRUST-SOCIETY. 11.11. THE NEXT ISSUE FOR CONSIDERATION IS WHETHER THE DONATIONS RECEIVED/COLLECTED BY THE ASSESSEE CAN B E TERMED AS CAPITATION FEE? WHETHER COLLECTION OF DONATIONS CA N BE CONSIDERED AS PROFITEERING BY THE ASSESSEE? TO A NSWER THIS QUESTION, IT IS NECESSARY TO UNDERSTAND THE MEANING OF THE WORD CAPITATION FEE. THE INCOME TAX ACT HAS NOT DEFINED CAPITATION FEE AND THEREFORE IT IS NECESSARY TO LOOK AT THE MEANIN G GIVEN TO THIS WORD IN OTHER RELATED ACTS AND THE JUDICIAL PRONO UNCEMENTS THEREON. THE RIGHT OF CHILDREN TO FREE & COMPULSORY ED UCATION ACT, 2009 DEFINES CAPITATION FEE IN SECTION 2(B) AS FOLLOWS: CAPITATION FEE MEANS ANY KIND OF DONATION OR CONTRIBUTION OR PAYMENT OTHER THAN THE FEE NOTIFIED BY THE SCHOO L . THUS, THE TERM CAPITATION FEE INCLUDES ALL AMOUNTS OF MONEY BY WHATEVER NAME IT IS CALLED OR MAY BE CALLED BY VARIOU S NAMES VIZ., DONATION/SECURITY DEPOSIT FEE/MAINTENANCE FEE/ACTIVITY FEE/DEVELOPMENT FEE/ENTERTAINMENT FEE ETC. LD DIT PLAC ED RELIANCE UPON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF MISS MOHINI JAIN V. STATE OF KARNATAKA [1992] 2 SCC 666 AND ALSO THE DECISION OF THE ITAT IN THE CASE OF RAJAH SIR ANNAMALAI CHETTIAR I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 36 -: FOUNDATION V. DIT(E) (2011) 48 SOT 502/15 TAXMANN.COM 313, IN SUPPORT OF HIS DECISION THAT COLLECTION OF CAPITAL FEE F OR ADMISSION AMOUNTS TO SALE OF EDUCATION AND HENCE IS NO LONGER A CHARITABLE ACTIVITY, BUT IS AN ACTIVITY RUN WITH A PROFIT MOTIVE A ND IS NOT BEING RUN WHOLLY FOR CHARITABLE PURPOSES AS REQUIRED U/S 1 2(1). 11.12. WE FIND THAT THE AO IN THE ASSESSMENTS HAS RELIED UPON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF TMA PAI FOUNDATION & OTHERS IN WRIT PETITION (CIVIL) 317 OF 1993 DATED 31- 10-2002 WHEREIN IT HAS BEEN HELD THAT CHARGING OF CAP ITATION FEE IS AGAINST PUBLIC POLICY AND PROFITEERING IS NOT PERMISSI BLE IN THE FIELD OF EDUCATION. HOWEVER, HONBLE SUPREME COURT ALSO C ONSIDERED THAT RECEIVING DONATIONS BY AN EDUCATIONAL INSTITUTION, UNCONNECTED WITH ADMISSION OF STUDENTS, COULD NOT OBVI OUSLY BE TREATED AS AN EQUIVALENT OF COLLECTION OF CAPITATION FEE . FROM THE DECISION OF THE HONBLE SUPREME COURT, IT IS CLEAR THAT PRIVATE UNAIDED INSTITUTIONS ARE PROHIBITED FROM COLLECTING CAP ITATION FEE AND PROFITEERING, BUT NOT FROM MAKING PROFIT. DIFFERENT INSTITUTIONS ARE ENTITLED TO NOTIFY DIFFERENT FEE FOR THE SAME COURSE AND THE SAME INSTITUTION MAY NOTIFY DIFFERENT FEES STRUCTURE FOR DIF FERENT COURSES. IN SUCH CASES, THE FEE NOTIFIED BY THE INSTITUTION WOUL D NOT BE CONSIDERED AS CAPITATION FEE. WE FURTHER FIND THAT IN THE SUBSEQUENT JUDGMENT IN THE CASE OF ACTION COMMITTEE, UNAIDED PRIVATE SCHOOLS AND OTHERS VS. DIRECTOR OF EDUCATIO N REPORTED IN 2009 11 SCALE- P.11(SC), THE HONBLE SUPREME COURT CONSIDERED ITS SUBSEQUENT JUDGMENTS IN THE CASES OF P.A.INAMDAR AND ISLAMIC ACADEMY OF EDUCATION AND HAS CONSIDERED THE QUESTION AS TO WHETHER ADMISSION PROCEDURE AND FEE STRUCTURE OF AN UN AIDED MINORITY AND NON-MINORITY INSTITUTIONS IMPARTING PROFE SSIONAL I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 37 -: EDUCATION CAN BE REGULATED OR TAKEN OVER BY THE COMMITTEE S ORDERED TO BE CONSTITUTED BY ISLAMIC ACADEMY OF EDUCATI ON. IT TOOK NOTE OF THE FOLLOWING FINDINGS OF THE COURT IN THE CAS E OF P.A. INAMDAR : 129. .STATE REGULATION SHOULD BE MINIMAL AND ONLY WITH A VIEW TO MAINTAIN FAIRNESS AND TRANSPARENCY I N ADMISSION PROCEDURE AND TO CHECK EXPLOITATION OF THE STUDENTS BY CHARGING EXORBITANT MONEY OR CAPITATION FEES. 139. TO SET UP A REASONABLE FEE STRUCTURE IS ALSO A COMPONENT OF THE RIGHT TO ESTABLISH AND ADMINISTER AN INSTITUTI ON WITHIN THE MEANING OF ARTICLE 30(1) OF THE CONSTITUTION, AS PE R THE LAW DECLARED IN PAI FOUNDATION. EVERY INSTITUTION IS FREE TO DEVISE ITS OWN FEE STRUCTURE SUBJECT TO THE LIMITATION THA T THERE CAN BE NO PROFITEERING AND NO CAPITATION FEE CAN BE CHARGED DIRECTLY OR INDIRECTLY, OR IN ANY FORM. AT PARA 29 OF ITS ORDER IN THE CASE OF ACTION COMMI TTEE, UNAIDED PRIVATE SCHOOLS(CITED SUPRA) , THE HONBLE APEX COURT HELD AS UNDER: 29. I, IN VIEW OF THE STATEMENT OF LAW LAID DOWN IN P.A.INAMDAR(SUPRA), AM OF THE OPINION THAT THE AUTH ORITIES OF ALL THE SCHOOLS, PARTICULARLY, UNAIDED SCHOOLS, MAY LAY DOWN ITS OWN FEE CRITERIA. IMPOSITION OF REGULATION, HOWEVE R, ONLY IS PERMISSIBLE FOR THE PURPOSE OF EXERCISING CONTROL O VER PROFITEERING AND NOT EARNING OF A PROFIT WHICH WOULD INCLUDE REA SONABLE RETURN OF THE INVESTMENT MADE. I SAY SO BECAUSE IN T.M.A. PAI FOUNDATION, THIS COURT ITSELF HELD: 11.13. REVENUE HAS PLACED RELIANCE IN THE CASE OF MOHINI JAINS CASE (CITED SUPRA), WHEREAS THERE HAS BEEN A CHANGE I N APPROACH THEREAFTER IN SUBSEQUENT JUDGMENTS OF THE HONBLE APEX COURT. IN MOHINI JAINS CASE, THE APEX COURT HAD HELD THAT ANY PRESCRIPTION OF FEE IN EXCESS OF WHAT WAS PAYABLE IN GOVERNMENT CO LLEGES WAS A CAPITATION FEE AND WOULD THEREFORE BE ILLEGAL. SUB SEQUENTLY, IN THE CASE OF UNNIKRISHNAN VS. STATE OF ANDHRA PRADESH [(1993) 4 SC C 697] (SUPRA), THE HONBLE COURT HELD THAT PRIVATE UNAIDE D I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 38 -: EDUCATIONAL INSTITUTIONS RUNNING PROFESSIONAL COURSE WE RE ENTITLED TO CHARGE A FEE HIGHER THAN THAT CHARGED BY GOVERNMENT INSTITUTIONS FOR SIMILAR COURSES BUT THAT SUCH A FEE C OULD NOT EXCEED THE MAXIMUM LIMIT FIXED BY THE STATE. THE COURT THEN FORMULATED A SCHEME AND DIRECTED EVERY AUTHORITY GRANT ING RECOGNITION/AFFILIATION TO IMPOSE THAT SCHEME UPON INST ITUTIONS SEEKING RECOGNITION/AFFILIATION, EVEN IF THEY WERE UN AIDED INSTITUTIONS. IN TMA PAIS CASE, THE HONBLE COURT RECONSIDERED ITS VERDICT IN THE UNNI KRISHNANS CASE AND HELD THAT THE SCHEME FRAMED BY THE COURT AND THEREAFTER FOLLOWED BY THE GOVE RNMENTS CANNOT BE CALLED A REASONABLE RESTRICTION UNDER ARTICLE 19(6) OF THE CONSTITUTION. IT WAS HELD THAT THE DECISION ON THE FEE TO BE CHARGED MUST NECESSARILY BE LEFT TO THE PRIVATE UNAIDED EDUCATION AL INSTITUTIONS. IT WAS FURTHER HELD THAT SINCE THE OBJECT OF SETTING UP AN EDUCATIONAL INSTITUTION IS BY DEFINITION CHARITABLE , IT IS CLEAR THAT AN EDUCATIONAL INSTITUTION CANNOT CHARGE SUCH A FEE AS IS NOT REQUIRED FOR THE PURPOSE OF FULFILLING THE OBJECT OF D EVELOPMENT OF EDUCATION AND EXPANSION OF THE INSTITUTION. IT WAS FURTH ER DIRECTED THAT A RATIONAL FEE STRUCTURE SHOULD BE ADOPTED BY THE MANAGEMENT, WHICH WOULD NOT BE ENTITLED TO CHARGE A CAP ITATION FEE AND APPROPRIATE MACHINERY CAN BE DEVISED BY THE STATE OR UNIVERSITY TO ENSURE THAT NO CAPITATION FEE IS CHARGED AND THAT THERE IS NO PROFITEERING THOUGH A REASONABLE SURPLUS FOR THE FURTHERANCE OF EDUCATION IS HELD TO BE PERMISSIBLE. T HE DECISION OF THE ELEVEN JUDGE BENCH IN THE CASE OF TMA PAI (SUPRA) WAS EXPLAINED BY THE APEX COURT IN IT SUBSEQUENT JUDGMENTS. IN ALL THE JUDGMENTS, THE APEX COURT HAS, HOWEVER, DEPRECATED COL LECTION OF CAPITATION FEE AND PROFITEERING BY THE EDUCATIONAL INSTI TUTIONS, BUT I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 39 -: DID NOT PROHIBIT COLLECTION OF FUNDS FOR THE PURPOSE OF ACHIEVING ITS OBJECTS. 11.14. IT IS THUS SEEN THAT THE PRIVATE UNAIDED PROFESS IONAL COLLEGES ARE ENTITLED TO FIX THEIR OWN FEE STRUCTURE SUB JECT TO THE LIMITATION THAT THERE CANNOT BE PROFITEERING AND COLLECTI ON OF CAPITATION FEE. ONLY THE PAYMENTS, OTHER THAN FEE NOTIFI ED BY THE EDUCATIONAL INSTITUTION, ARE CALLED AS CAPITATION FEE. I N THE CASE BEFORE US, THE ASSESSEE IS ALLEGED TO HAVE COLLECTED DONATIONS IN ADDITION TO THE PRESCRIBED FEE ONLY FROM THE STUDENTS ADM ITTED UNDER THE MANAGEMENT QUOTA. THE STAND OF THE AO HAS BEEN THAT THE ASSESSEE HAS COLLECTED DONATIONS, IT IS IN FACT, PAYMENT FOR ADMISSION AND HENCE CAPITATION FEE. IN VIEW OF THIS STAND OF THE REVENUE, IT IS, THEREFORE, NECESSARY TO EXAMINE IF THE 'DONATIONS' IS QUID PRO QUO FOR A SEAT IN A COLLEGE. G.O. MS.NO.33 DATED 11-6- 2003 ISSUED BY THE GOVT. OF ANDHRA PRADESH TO IMPLEMEN T THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF TMA PAI (CITED SUPRA), HAS NOTIFIED RULES AND REGULATIONS FOR ADMISSIONS INTO UNDER GRADUATE PROFESSIONAL COURSES THROUGH COMMON EN TRANCE TEST. THE RULES ARE APPLICABLE TO ALL THE UNAIDED NON -MINORITY PROFESSIONAL INSTITUTIONS IMPARTING UNDER-GRADUATE PROF ESSIONAL COURSES IN VARIOUS STREAMS STATED THEREIN. THE EAMCET IS THE BASIS FOR ADMISSION OF STUDENTS INTO VARIOUS UNAIDED NON-MINORITY PROFESSIONAL INSTITUTIONS IN THE STATE OF ANDHRA PRADE SH (AT THE RELEVANT POINT OF TIME). MANAGEMENT SEATS ARE DEFINED AS THE SEATS EARMARKED FROM OUT OF THE SANCTIONED INTAKE OF SEATS IN EACH COURSE TO BE FILLED BY THE MANAGEMENT OF THE UNAIDED NO N-MINORITY PROFESSIONAL INSTITUTIONS. RULE 4 OF THE ABOVE RULES PROVIDES THAT THE MANAGEMENT SEATS SHALL BE FILLED EITHER ON THE BASIS OF RANK I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 40 -: OBTAINED IN EAMCET CONDUCTED BY THE STATE SCORING NOT LE SS THAN 50% MARKS IN AGGREGATE OR IN GROUP SUBJECTS IN THE QU ALIFYING EXAMINATION. RULE 5(C) PROVIDES THAT 15% OF THE TOTAL I NTAKE OF SEATS OF EACH COURSE SHALL BE EARMARKED AS MANAGEMEN T SEATS. RULE 6(B) PROVIDES THAT THE MANAGEMENTS SEATS SHALL BE F ILLED BY THE MANAGEMENT OF THE CONCERNED PROFESSIONAL COLLEGE B Y ENSURING MERIT AND TRANSPARENCY. RULE 7(B) PROVIDES THAT THE MAN AGEMENT SEATS SHALL BE FILLED BY THE MANAGEMENT OF THE INSTITUTI ON KEEPING THEM OPEN TO ALL THE ELIGIBLE CANDIDATES. RULE 9(2) P ROVIDES THAT THE MANAGEMENT MAY CHARGE UP TO A FEE OF RS.75,000/- P ER STUDENT PER ANNUM FOR THE 15% SEATS UNDER MANAGEMENT QUO TA WHILE RULE 9(3) PROVIDES THAT THE MANAGEMENT SHALL NOT C OLLECT ANY OTHER FEES IN THE NAME OF DEVELOPMENT FEE, BUILDING FE E, INFRASTRUCTURE DEVELOPMENT FEE ETC., EXCEPT REFUNDABLE DEPOSITS LIKE LIBRARY DEPOSIT, LABORATORY DEPOSIT ETC., AND SHAL L NOT CHARGE ANY CAPITATION FEES OR RESORT TO PROFITEERING IN ACCORD ANCE WITH THE JUDGMENT OF THE SUPREME COURT IN THE TMA PAIS CASE. FROM THE ABOVE RULES, IT IS EVIDENT THAT COLLECTION OF CAPITATION F EE AND PROFITEERING IS PROHIBITED, BUT NOT RECEIPT OF ANY CONTR IBUTION. FEE IS THE SUM CHARGED FOR SERVICES RENDERED WHILE DONATI ON IS A SUM SET APART FOR A SPECIFIC PURPOSE. THEN THE QUESTION TH AT ARISES IS WHERE THE DONATION IS LINKED TO THE ADMISSION OF A STU DENT, IS IT TO BE CONSIDERED AS A FEE AND IF IT IS OVER AND ABOVE THE PRESCRIBED FEE THEN IS IT IN THE NATURE OF CAPITATION FEE? THE HONBLE APEX COURT IN THE CASE REFERRED TO ABOVE HAS HELD THAT THE MA NAGEMENTS OF PRIVATE UN-AIDED PROFESSIONAL COLLEGES CAN PRESCR IBE THEIR OWN FEE STRUCTURE IN ORDER TO MAINTAIN AND IMPROVE THE INSTITU TION. AS SEEN FROM THE RULES FRAMED ABOVE, 85% OF THE SEATS AR E TO BE FILLED BY THE CONVENER AND THE MANAGEMENT HAS NO ROLE OR DIS CRETION I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 41 -: WHAT-SO-EVER EITHER IN THE ADMISSION PROCESS OR IN CO LLECTION OF FEE AS REGARDS THESE SEATS. AS REGARDS THE BALANCE 15% OF THE SEATS UNDER THE MANAGEMENT QUOTA ALSO, ADMISSION CRITERIA IS ALREADY FIXED BY THE RULES AND THE DISCRETION OF THE MANAGEMENT IS LIMITED. IN SUCH CIRCUMSTANCES, CAN IT BE SAID THAT THE ASSESSEE IS INVOLVED IN PROFITEERING OR COLLECTION OF CAPITATION FEE? 11.15. WE HAVE ALREADY BROUGHT OUT ABOVE, THE OBSERVATI ONS OF THE APEX COURT THAT IN VIEW OF THE MAJORITY JUDGMENT IN THE CASE OF TMA PAI, DIFFERENT INSTITUTIONS MAY NOTIFY DIFFERENT FEE FOR DIFF ERENT COURSES AND THE SAME INSTITUTION IS ALSO ENTITLED TO FIX DIFFERENT FEE FOR DIFFERENT COURSES. THEREFORE, IF THE INSTITUTION HAS FIXED DIFFERENT SUMS FOR DIFFERENT COURSES, THEY ARE PERFECTLY ENTITLED TO DO SO BUT THEY MUST NOTIFY THE SAME. TO OUR UNDERSTANDING, THE RE QUIREMENT OF NOTIFYING THE FEE IS TO ENSURE TRANSPARENCY AND ACC OUNTABILITY AND TO PREVENT MISUSE OF FUNDS. IN THE CASE BEFORE U S, IT IS THE STAND OF THE ASSESSEE THAT THESE ARE VOLUNTARY CONTRIBUTION S NOT CONNECTED TO THE ADMISSION OF STUDENTS. HOWEVER, FRO M THE STATEMENTS OF THE PARENTS BEFORE THE AO WHEN ENQUIRED INI TIALLY, THE CONTRIBUTIONS ARE STATED TO BE LINKED TO THE ADMISSION OF STUDENTS, EVEN THOUGH THEY HAVE FILED AFFIDAVITS SUBSEQU ENTLY DENYING THE SAME. WE ALSO FIND THAT THE INSTITUTION HAS RECEIVED THE FUND THROUGH D.DS/ CHEQUES AND HAS ISSUED RECEIPTS FOR THE SAME AND HAS ALSO ACCOUNTED FOR THE SAME. THEREFORE , THERE IS TRANSPARENCY IN ACCOUNTING THE RECEIPTS. THE HONBLE APEX COURT HAS FURTHER HELD THAT THE PRIVATE UNAIDED INSTITUTIONS A RE ENTITLED TO COLLECT FUNDS FOR THE MAINTENANCE AND IMPROVEMENT OF THE INSTITUTION. HOWEVER, THE OBJECTIVE OF THE COLLECTION OF FUNDS MUST BE THE IMPARTING OF STANDARD EDUCATION TO THE PUBLIC AT LARGE. IN I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 42 -: THE CASE BEFORE US, THERE IS NO ALLEGATION THAT THE FUND S COLLECTED BY THE ASSESSEE SOCIETY ARE FOR ANY OTHER PURPOSE O R THAT THE PROFITS HAVE BEEN DISTRIBUTED TO ANY PERSON OR PERSONS. THEREF ORE THE COLLECTION OF THE DONATIONS BY THE ASSESSEE INSTITUTION CANNOT BE REGARDED AS CAPITATION FEE. 11.16. NOW ISSUE ARISES ABOUT PROFITEERING? PROFITEERI NG REFERS TO TAKING ADVANTAGE OF UNUSUAL OR EXCEPTIONAL CIRCUMSTAN CES TO MAKE EXCESSIVE PROFITS. IT IS THE GENERATION OF DISPRO PORTIONATE OR UNFAIR PROFIT THROUGH MANIPULATION OF PRICES, ABUSE OF DOMINANT POSITION, OR BY EXPLOITING A BAD OR UNUSUAL SITUATION SUCH AS TEMPORARY SCARCITY. USUALLY, THERE IS NO GOVERNMENTAL CONTROL OVER PROFITEERING UNLESS IT INVOLVES ANY ILLEGAL MEANS. SA LE OF SCARCE GOODS AT INFLATED PRICE DURING WAR IS AN EXAMPLE FOR PROFITEERING. BUT IN THE CASE BEFORE US, THERE IS NO CASE OF UNUSUA L OR EXCEPTIONAL CIRCUMSTANCES TO MAKE EXCESSIVE PROFITS. I T IS NOT THE CASE THAT ENGINEERING INSTITUTIONS IN THE STATE OF ANDHRA PRADESH ARE ONLY A FEW AND THEREFORE THERE WAS SCARCITY OF SE ATS AND THE ASSESSEE HAS EXPLOITED SUCH A SITUATION TO MAKE EXCES SIVE PROFITS. IN THE STATE OF ANDHRA PRADESH, DURING THE RELEVANT P ERIOD, THERE WERE A NUMBER OF ENGINEERING COLLEGES AND THERE WAS NO SCARCITY OF SEATS FOR THE ASPIRANT STUDENTS. IN FACT, THERE WERE NEWS PAPER REPORTS THAT MANY COLLEGES COULD NOT GET THE PERMITTED NUM BER OF STUDENTS. THE REASONS FOR NOT GETTING THE STUDENTS MAY BE MANY SUCH LACK INFRASTRUCTURE, OR FACULTY OR STANDARD OF E DUCATION. THE ASSESSEE INSTITUTION MAY BE COMMANDING GOOD REPUTATION AND MAY ALSO BE A SOUGHT AFTER INSTITUTION DUE TO WHICH THE PA RENTS AND THE STUDENTS MAY BE WILLING TO CONTRIBUTE TO THE DEVELOPMENT OF THE I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 43 -: INSTITUTION BUT THAT WOULD NOT AMOUNT TO PROFITEERING BY THE INSTITUTION. 12. THAT LEADS US TO THE QUESTION WHETHER THE ASSESSEE HAS VIOLATED THE RULES AND REGULATIONS OF THE GOVERNMENT O F ANDHRA PRADESH FRAMED FOR THE PURPOSE OF PROHIBITING THE COL LECTION OF CAPITATION FEES? ONE OF THE GROUNDS ON WHICH THE REVE NUE HAS RELIED IS THAT THE ASSESSEE HAS VIOLATED THE PROVISION S OF THE ANDHRA PRADESH EDUCATIONAL INSTITUTIONS (REGULATION OF ADMI SSION AND PROHIBITION OF CAPITATION FEE) ACT, 1983 WHICH PROHIBI TED COLLECTION OF ANY FEE OTHER THAN THE FEE FIXED BY THE GOVT. THE LD DR HAS PLACED BEFORE US THE COPY OF THE G.O.MS.33, DT.11-06 -2003 ISSUED BY THE GOVERNMENT OF ANDHRA PRADESH TO IMPLEMENT THE JU DGMENT OF THE APEX COURT IN THE CASE OF T.M.A. PAI FOUNDATION (SUPRA) BY FRAMING THE RULES AND REGULATIONS FOR ADMISSION OF STU DENTS INTO PROFESSIONAL COLLEGES. AS PER THESE RULES, THE FEE P RESCRIBED PER STUDENT ADMITTED TO AN ENGINEERING COLLEGE UNDER THE MAN AGEMENT QUOTA WAS UP TO A SUM OF RS.75,000/ PER ANNUM. THER E IS NO ALLEGATION THAT ASSESSEE HAS COLLECTED ANY FEE IN EXCE SS OF SUCH PRESCRIBED AMOUNT. IN ADDITION TO THE ABOVE FEE NOTIFIED , THE ASSESSEE HAS ALSO COLLECTED THE DONATIONS NOT ONLY FRO M SOME PARENTS/ RELATIVES BIT ALSO FROM MEMBERS OF SOCIETY. WHETHER SUCH COLLECTION OF DONATION IS PROHIBITED BY THE ANDHRA PRA DESH EDUCATIONAL INSTITUTIONS (REGULATION OF ADMISSION AND PROHIBITION OF CAPITATION FEE) ACT, 1983 IS TO BE EXAMINED. THE RE LIANCE OF THE REVENUE HAS BEEN ONLY ON THE RULES FRAMED VIDE G.O.M S.33(SUPRA) IN WHICH THERE IS NO MENTION OF DONATIONS AND CONTRIB UTIONS TO THE EDUCATIONAL INSTITUTIONS. THE RULES HAVE PRESCRIBED O NLY THE FEE TO BE COLLECTED FROM THE STUDENTS AND HAVE PROHIBITED THE COLLECTION OF I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 44 -: THE FEE OF ANY KIND OTHER THAN THOSE MENTIONED IN THE RU LES. BUT SEC.6 OF THE ANDHRA PRADESH EDUCATIONAL INSTITUTIONS ( REGULATION OF ADMISSION AND PROHIBITION OF CAPITATION FEE) ACT, 1 983 PERMITS THE RECEIPT OF VOLUNTARY DONATIONS. FOR THE SAKE OF E ASY REFERENCE THE RELEVANT PROVISION IS REPRODUCED HEREUNDER: SEC.6. (1) ANY DONATION OF MONEY TO ANY EDUCATIONA L INSTITUTION, SHALL BE MADE ONLY IN SUCH MANNER AS MAY BE PRESCRI BED AND NOT OTHERWISE. (2) ALL MONEYS RECEIVED BY ANY EDUCATIONAL INSTITUT ION BY WAY OF VOLUNTARY DONATIONS SHALL BE DEPOSITED IN THE ACCOU NT OF THE INSTITUTION, IN ANY SCHEDULED BANK AND SHALL BE APP LIED AND EXPENDED FOR THE IMPROVEMENT OF THE INSTITUTION AND THE DEVELOPMENT OF THE EDUCATIONAL FACILITIES AND FOR S UCH OTHER RELATED PURPOSES AS MAY BE PRESCRIBED. THUS, IT CAN BE SEEN THAT THE ANDHRA PRADESH EDUCATIONA L INSTITUTIONS (REGULATION OF ADMISSION AND PROHIBITION OF CAPITATION FEE) ACT, 1983 DOES NOT PROHIBIT THE RECEIPT OF VOLUNTARY DONATIONS OR CONTRIBUTIONS, BUT THE LIMITATION PLACED IS ON THE MANN ER OF PAYMENT OF SUCH DONATION AND THE PURPOSE OF THE DONA TION TO BE FOR THE IMPROVEMENT AND DEVELOPMENT OF THE INSTITUTION. IN THE CASE BEFORE US, THE ASSESSEE HAS RECEIVED THE DONATION S BY WAY OF D.DS/ CHEQUES WHICH ARE DULY ACCOUNTED FOR IN ITS BO OKS OF ACCOUNT AND HAS ALSO BEEN APPLIED FOR THE PURPOSES OF THE EDUCATION ONLY. THEREFORE, IN OUR OPINION, THERE IS NO VIOLATION OF THE PROVISIONS OF ANDHRA PRADESH EDUCATIONAL INSTITUT IONS (REGULATION OF ADMISSION AND PROHIBITION OF CAPITATION FEE) ACT, 1983. 13. THUS, IT CAN BE SEEN THAT THE CONTENTIONS OF THE REVENUE CANNOT BE SUPPORTED FULLY ON THE PARAMETERS SE T-OUT I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 45 -: ABOVE. HOWEVER, THESE ISSUES WILL ARISE IN AN ASSESS MENT COMPLETED IN A TRUST CASE UNDER THE PROVISIONS OF SECTION 11 AND 13 OF THE ACT. IN THE PRESENT CASE, IT IS NOT THE ISSUE OF ASSES SMENT BUT ISSUE OF CANCELLATION OF REGISTRATION ALREADY GRANTED. MOST OF THE ISSUES DISCUSSED ABOVE ARE ACADEMIC IN NATURE BUT THOSE ARE TO BE DISCUSSED AS LD.DIT(E) HAS RELIED ON THE FINDINGS O N THE ASSESSMENT ORDER, TO RESORT TO CANCELLATION OF REGISTRATIO N. THE PROVISIONS OF SECTION 12AA(3) WHICH EMPOWERS THE LD.D IT(E) TO CANCEL THE REGISTRATION ARE AS UNDER: 12AA(3) WHERE A TRUST OR AN INSTITUTION HAS BEEN G RANTED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) [O R HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A [AS IT S TOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO.2) ACT, 1996 (33 OF 19 96]] AND SUBSEQUENTLY THE [PRINCIPAL COMMISSIONER OR] COMMIS SIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INST ITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUS T OR INSTITUTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASSED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A R EASONABLE OPPORTUNITY OF BEING HEARD.] THUS, THE PROVISION ENVISAGES THAT THE PRINCIPAL CIT OR CIT IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTIO N ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WI TH THE OBJECTS OF THE TRUST OR INSTITUTION. EVEN THOUGH LD.DIT(E) HAS US ED THE ABOVE WORDS IN THE ORDER BEFORE CANCELLING THE REGISTR ATION, THERE IS NO SUCH FINDING THAT THE ACTIVITIES ARE NOT GENUINE OR A RE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS. ASSESSE E NO DOUBT IS RUNNING AN EDUCATIONAL INSTITUTION AND I.E., OF CHARI TABLE NATURE. EVEN THOUGH DONATIONS ARE COLLECTED, THEY ARE PERMITTED BY THE MEMORANDUM AND AS DISCUSSED ABOVE, PERMITTED BY THE STA TUTE I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 46 -: ALSO [ANDHRA PRADESH EDUCATIONAL INSTITUTIONS (REGULATI ON OF ADMISSION AND PROHIBITION OF CAPITATION FEE) ACT, 1983 ]. THERE ARE NO COMPLAINT OR PROCEEDINGS THAT ASSESSEE WAS COLLECTIN G ANY FEES MORE THAN WHAT WAS PRESCRIBED. THERE IS NO ALLEGATION ALSO THAT ANY OF THE TRUST FUNDS ARE BEING MIS-USED/DIVERTED FOR ANY PURPOSE OTHER THAN FOR THE OBJECTS OF THE TRUST. IN VIEW OF THE A BOVE, WE ARE OF THE OPINION THAT THE PROVISIONS OF SECTION 12AA(3) A RE NOT SATISFIED SO AS TO CANCEL THE REGISTRATION. 13.1. THE CO-ORDINATE BENCH IN THE CASE OF MAHARASHTR A ACADEMY OF ENGINEERING & EDUCATIONAL RESEARCH VS. C IT [133 TTJ 706] [36 DTR 321] HAS ANALYSED THE SAME ISSUE AND HELD CHARITABLE TRUST--REGISTRATION UNDER SECTION 12A-- CANCELLATION OF REGISTRATION UNDER SECTION 12AA(3)-- THE INVESTIGAT ION WING OF THE IT DEPARTMENT AFTER THE SEARCH AND SURVEY WAS OF THE O PINION THAT THE TRUST WAS TAKING THE DONATION AND CAPITATION FEES FOR ADM ISSION THOUGH PROHIBITED UNDER MAHARASHTRA EDUCATIONAL INSTITUTIO NS (PROHIBITION OF CAPITATION FEES) ACT, 1987. THE IMPUGNED ORDER OF C ANCELLATION OF REGISTRATION WAS PASSED UNDER SECTION 12AA(3) BY CI T(CENTRAL). AN INSTITUTION MAY BE DOING CHARITABLE ACTIVITIES AS P RESCRIBED BUT IN THE ABSENCE OF REGISTRATION IT CANNOT BE ENTITLED FOR T HE EXEMPTIONS OR BENEFITS OF SECTIONS 11 AND 12. IT IS ALSO EXPLICIT THAT REG ISTRATION IPSO FACTO DOES NOT NECESSARILY ENTITLE AN INSTITUTION TO GET THE R ECEIPTS EXCLUDED FROM THE INCOME OR EXEMPTION BE GRANTED AUTOMATICALLY BY JUS T SHOWING THE REGISTRATION CERTIFICATE TO THE REVENUE AUTHORITIES . THE SINE QUA NON FOR CANCELLATION OF REGISTRATION ARE TWO CONDITIONS PRE SCRIBED IN SECTION 12AA(3) NEEDS TO BE SATISFIED ARE: (A) THAT ACTIVIT IES OF THE TRUST/INSTITUTION ARE NOT GENUINE. (B) THAT ACTIVITIES OF THE TRUST A RE NOT CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST/INSTITUTIO N. THUS, THE FINDINGS OF THE CIT HAS NOT TO BE ONLY CONCEPTUAL OR CONTEXTUAL BUT SHOULD BE WITHIN THE FOUR-CORNERS OF LAW SO THAT NOT SURPASSING THE POWER GRANTED IN SUB- SECTION (3) OF SECTION 12AA. BUT UNFORTUNATELY THE FALLACY IS WRIT LARGE AS GATHERED ON PERUSING THE IMPUGNED ORDER. THE CITS APPROACH FOR DECIDING THE ELIGIBILITY OF REGISTRATION OF A TRUST SHOULD B E DIFFERENT FROM THE ANGLE BY WHICH AN ASSESSMENT OF AN INCOME IS MADE BY AO. IN THE RECENT PAST SUB-SECTION (3) WAS INSERTED IN SECTION 12AA WITH EFFECT FROM 1-10-2004 WHICH GIVES POWER OF CANCELLATION OF REGISTRATION TO THE I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 47 -: CIT, IF HE FINDS THAT THE ACTIVITIES ARE NOT GENUIN E OR NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TRUST. THE NEE D FOR THE ENACTMENT HAD ARISEN DUE TO BELIEF OF SOME QUARTER THAT IN THE AB SENCE OF EXPLICIT LAW THE CIT CANNOT EXERCISE THE POWER OF CANCELLATION OF RE GISTRATION. TO OVERCOME THIS HURDLE THIS SUB-SECTION IS INCORPORATED AND NO W IN OPERATION. NATURALLY THESE POWERS ARE CONFERRED WITH A VIEW TO ENSURE THAT IF ONCE A REGISTRATION HAS BEEN GRANTED UNDER SECTION 12AA, A TRUST OR INSTITUTION MAY NOT TAKE ANY SUCH LIBERTY OF MISUSE OF THE REGI STRATION OR THE PROVISIONS BY GOING HAYWIRE RATHER FURTHERING THE O BJECTS OF THE TRUST OR GENUINELY NOT PURSUING THE ACTIVITIES FOR WHICH IT WAS ESTABLISHED. [PARA 11.4] THE MOST IMPORTANT FEATURE OF SECTION 12AA IS THAT THIS SECTION HAS ONLY LAID DOWN THE PROCEDURE OF REGISTRATION AND TH IS SECTION NOWHERE SPEAKS THAT WHILE CONSIDERING THE APPLICATION OF RE GISTRATION, THE CIT SHALL ALSO LOOK INTO THE PROCEDURE OF EARNING OF INCOME A ND SOURCES FROM WHERE RECEIPTS ARE DERIVED. THE ARGUMENT WAS, IT ALSO DOE S NOT SPEAK ANYWHERE THAT WHILE CONSIDERING THE REGISTRATION THE CIT SHA LL ALSO SEE THE MANNER IN WHICH THE RECEIPTS OR THE INCOME IS BEING SPENT BY THE TRUST. VARIOUS RELATED PROVISIONS, THE POWER OF ENQUIRY, IN RESPEC T OF SOURCES OF RECEIPTS AND THE UTILIZATION OF INCOME IS ENTRUSTED IN SEPAR ATE SECTIONS AS ALREADY DISCUSSED ANTE. THE LANGUAGE THUS USED IN SECTION 1 2AA ONLY CONFINES TO ENQUIRE ABOUT THE ACTIVITIES OF THE TRUST AND ITS G ENUINENESS, WHICH MEANS, IN CONSONANCE WITH THE OBJECTS FOR WHICH CREATED AN D THOSE OBJECTS AS ALSO ACTIVITIES SHOULD NOT BE A CAMOUFLAGE BUT PURE, SIN CERE, CHARITABLE AND FOR PUBLIC UTILITY AT LARGE. WHAT IS IMPLICIT IS THAT T HE CIT HAS TO SINCERELY EXAMINE THAT THE OBJECTS AS ALSO THE ACTIVITIES SHO ULD NOT BE PRIMA FACIE AGAINST THE BASIC STRUCTURE FOR WHICH BENEFICIAL LA W IS MADE AND ALSO BE NOT IN CONFLICT WITH THE GENERAL PUBLIC UTILITY. NA TURALLY AN INSTITUTION IF ESTABLISHED TO CARRY OUT AN ILLEGAL ACTIVITY OR ACT IVITIES ARE CAUSING ANY TYPE OF NUISANCE NOT IN THE INTEREST OF THE PUBLIC AT LARGE SHOULD DEFINITELY LEAD TO CANCELLATION OF REGISTRATION. THEREFORE, TH IS IS THE FIRST REQUISITE OF THE STATUTE TO MANDATE FOR THE REGISTRATION AND IN THE ABSENCE OF SUCH REGISTRATION DISENTITLEMENT OF EXEMPTION. SO WHAT I S EXPLICIT IS THAT THOUGH AN INSTITUTION MAY BE DOING CHARITABLE ACTIVITIES A S PRESCRIBED BUT IN THE ABSENCE OF REGISTRATION CANNOT BE ENTITLED FOR THE EXEMPTIONS OR BENEFITS OF SECTIONS 11 AND 12. IT IS ALSO EXPLICIT THAT REGIST RATION IPSO FACTO DOES NOT NECESSARILY ENTITLE AN INSTITUTION TO GET THE RECEI PTS EXCLUDED FROM THE INCOME OR EXEMPTION BE GRANTED AUTOMATICALLY BY JUS T SHOWING THE REGISTRATION CERTIFICATE TO THE REVENUE AUTHORITIES . [PARA 11.5] PROCEDURE OF REGISTRATION IS A FIRST STEP AND A PRELIMINARY STAG E WHERE THE CIT SHALL RESTRICT THE ENQUIRIES AS TO WHETHER THE TRUST IS A CTUALLY AND WHOLE HEARTEDLY PERFORMING ALL THE DUTIES AND ACTIVITIES FOR WHICH IT WAS CREATED. ON CAREFUL READING OF THIS SECTION IT WAS GATHERED THAT AT THIS INITIAL STAGE THERE IS NO SCOPE OF ANY APPREHENSION OF MISUTILIZA TION OF FUNDS OR TO JUDGE THE TAXABILITY INCOME. THE SCHEME OF THE ACT OTHERW ISE DOES NOT SUBSCRIBE AND ALLOW A TRUST TO TAKE THE BENEFIT OF THE PROVIS IONS OF SECTION 11 AND 12 UNLESS IT ESTABLISHES THE PRESCRIBED UTILIZATION OF THE INCOME EVEN IF AT ALL HE TRUST HOLDS THE REGISTRATION IN ITS HANDS. THERE FORE AT THE STAGE OF I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 48 -: GRANTING REGISTRATION THE CIT IS NOT EXPECTED TO BO THER HIMSELF ABOUT THE OTHER PROVISIONS OF THE ACT AND SUPPOSED TO CONFINE HIMSELF TO THE PROCEDURE OF REGISTRATION AS LAID DOWN THEREIN. [PA RA 11.6] ANOTHER FEATURE OF THE IMPUGNED ORDER OF THE CIT IS IN FACT BOTHERI NG THAT NOWHERE HE HAS TAKEN ANY OBJECTION TO THE CHARITABLE AND EDUCATION AL NATURE OF THE INSTITUTION. IN FACT, THE OBJECTS OF THE INSTITUTIO N, AS DECLARED IN THE TRUST DEED DOES REFLECT THAT ALL ARE PHILANTHROPIC OR BEN EVOLENT IN NATURE, PRECISELY FOR THE PURPOSE OF IMPARTING EDUCATION. STRANGE ENOUGH THERE IS NO FINDING RECORDED BY THE CIT CONTRARY TO THIS FAC T. BE THAT AS IT MAY, THE REAL AND THE ONLY SUBSTANTIAL OBJECTION FOR REFUSAL OF REGISTRATION WAS THAT THE INSTITUTION HAS COLLECTED DONATIONS THUS ADOPTE D SOME WRONG MEANS OF COLLECTION OF FEES. BUT WHETHER AT THIS PRELIMINARY STAGE HE HAD THE RIGHT TO DRAW AN ADVERSE INFERENCE SO AS TO REFUSE REGISTRAT ION OR ALTERNATIVELY CONFINE HIMSELF TO THE ENQUIRY ABOUT THE OBJECTS AN D THE ACTIVITIES OF THE TRUST AS PER THE LIMITS OF THE JURISDICTION OF SECT ION 12AA. RATHER THIS IS ALSO NOT THE CASE OF THE CIT THAT THE INSTITUTION I S DOING SOME OTHER ACTIVITY OF EARNING PROFIT OTHER THAN THE ACTIVITY OF RUNNIN G EDUCATIONAL INSTITUTIONS. THE ESTABLISHED FACTUAL POSITION IS THAT THE INSTIT UTION IS NOT DOING IN ANY OTHER ACTIVITY EXCEPT RUNNING EDUCATIONAL INSTITUTI ONS. IN SUCH CIRCUMSTANCES, CAN ONE UPHOLD THE ACTION OF CANCELL ATION OF REGISTRATION? ANSWER IS OBVIOUS NO. [PARA 11.7] AS FAR AS THE OBJ ECTIVE OF THE APPELLANT IS CONCERNED THIS IS NOT THE CASE OF THE REVENUE TH AT THE ASSESSEE WAS NOT IMPARTING EDUCATION. THE TERM EDUCATION MEANS TO TE ACH SUBJECTS TO STUDENTS FOR THE DEVELOPMENT OF HIS MIND AND ALSO T O EQUIP STUDENTS TO DEAL WITH REALITY. THE TRAINING PROCESS IS EITHER T HEORETICAL OR PRACTICAL BUT STUDENT HAS TO BE TAUGHT THE ESSENTIALS OF THE SELE CTED SUBJECTS SO AS TO DEVELOP HIS SKILL AND KNOWLEDGE FOR THE SUBJECTS ST UDIED BY HIM. THE APPELLANT INSTITUTE, ADMITTEDLY, FULFILS THE REQUIR EMENTS OF IMPARTING FORMAL EDUCATION BY A SYSTEMATIC TEACHING AND INSTRUCTIONS . SINCE THE QUESTION- ABOUT THE IMPARTING OF EDUCATION HAS NOT BEEN DOUBT ED OR CHALLENGED BY THE REVENUE THEREFORE, THE IMPUGNED ORDER PASSED BY THE RESPONDENT IS UNSUSTAINABLE IN LAW. STRANGE ENOUGH THERE IS NOTHI NG ON RECORD TO PROVE SIGHTLESSLY THAT THE PURPOSE OF IMPARTING OF EDUCAT ION WAS NOT FULFILLED BY THIS INSTITUTE THUS THE REVENUE DEPARTMENT HAS HOPE LESSLY FAILED TO ESTABLISH THAT THERE WAS ANY ILLEGAL ACTIVITY OR IN FRINGEMENT OF ANY LAW SO THAT TO DOUBT THE GENUINENESS OF THE ACTIVITIES. [P ARA 11.11] THE SINE QUA NON FOR CANCELLATION OF REGISTRATION ARE TWO CONDIT IONS PRESCRIBED IN SECTION 12AA(3) NEEDS TO BE SATISFIED ARE: (A) T HAT ACTIVITIES OF THE TRUST/INSTITUTION ARE NOT GENUINE. (B) THAT ACT IVITIES OF THE TRUST ARE NOT CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST/INSTITUTION. THUS THE FINDINGS OF THE CIT HAS NOT TO BE ONLY CONCEPTUAL OR CONTEXTUAL BUT SHOULD BE WITHIN THE F OUR CORNERS OF LAW SO THAT NOT SURPASSING THE POWER, AS LISTED ABO VE, GRANTED IN SUB-SECTION (3) OF SECTION 12AA. BUT UNFORTUNATELY THE FALLACY IS WRIT LARGE AS GATHERED ON PERUSING THE IMPUGNED ORD ER. THE CITS APPROACH FOR DECIDING THE ELIGIBILITY OF REGISTRATI ON OF A TRUST SHOULD BE DIFFERENT FROM THE ANGLE BY WHICH AN ASSE SSMENT OF AN I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 49 -: INCOME IS MADE BY THE AO. ABOUT THE RAMIFICATION IF ONE APPROVE THE ACTION OF CIT BECAUSE IN THAT CASE IT MAY ADVERSELY AFFECT THE IMPARTING OF EDUCATION ESPECIALLY WHEN THE REVENUE HAS NOT MADE OUT A CASE THAT THE VERY PURPOSE FOR CREATION OF THE TRUST WAS DEFEATED . RATHER ONE WONDERS THAT WHAT PURPOSE DOES IT SERVE TO REVENUE BY CANCE LLING A REGISTRATION IF THE ACTIVITIES ARE IN PUBLIC INTEREST BECAUSE IN CA SE OF ANY BREACH OF THE LAWS THE SAME IS SUBJECT TO TAX UNDER SECTIONS 11 A ND 12. THESE TWO PROVISIONS AND FEW OTHER PROVISIONS ARE COMPETENT E NOUGH TO TACKLE FIRMLY A DEFAULTER OF PHILANTHROPIC APPLICATION OF INCOME OR FUNDS OF THE TRUST. THE OTHER ADVERSE SIDE OF CANCELLATION IS THAT ON REFUS AL OF REGISTRATION THE ENTIRE RECEIPTS SHALL BE SUBJECT TO ASSESSMENT WITH OUT GRANTING BENEFIT OF SECTION 11 AND SECTION 12 TO ASSESS INCOME WHICH DO NOT FORM PART OF TOTAL INCOME THOUGH THE FACTUAL POSITION COULD BE THAT MA JOR PART MIGHT HAVE BEEN DEVOTED TOWARDS ACHIEVING THE OBJECTS, I.E., I MPARTING EDUCATION, AS IN THIS CASE, BUT THE AO SHALL BE AUTOMATICALLY FOR BIDDEN TO GRANT ADVANTAGE OF EXEMPTION CONSEQUENT UPON THE CANCELLA TION AS IS MANDATORY IN STATUTE; RELEVANT SECTION ALREADY REPRODUCED ANT E. THE OUTCOME OF THE DELIBERATION MADE IN DETAIL HEREINABOVE IS THAT PER CURIAN OPINION IS TO DEBAR THE CIT TO ENTER INTO THE AREA OF INVESTIGATI ON OF SOURCE OF INCOME AND ALSO APPLICATION OF INCOME, SO THAT THE AMOUNT OF CORRECT EXEMPT INCOME BE NOT PREJUDGED. [PARA 11.12] THE ASPECT OF MORALITY AS TOUCHED BY THE CIT IS APPRECIABLE. EVERY VIGILANT AND LAW A BIDING CITIZEN HAS TO BE FAIR IN HIS CONDUCT AND SHOULD REFRAIN FROM IMMORAL ACTIVITIES. BUT EXISTING BLUE LAWS ARE DERIVED FROM THE NUMEROUS EXTREMELY R IGOROUS LAWS DESIGNED TO REGULATE MORALS AND CONDUCT. THESE LAWS ARE ENACTED IN SUCH A FASHION THAT IF IMPLEMENTED CORRECTLY AND EFFICIE NTLY THEN THERE IS NO SCAPEGOAT FOR AN OFFENDER. ONE IS TEMPTED TO WRITE AN IDIOMATIC LANGUAGE DUE TO THE SENSITIVITY OF THE ISSUE, THAT A CIT CAN NOT BE ALLOWED TO HOLD A BATON OF MORALITY IN HIS HAND TO HIT AN IMMORAL; BU T THE STATUTE HAS GIVEN HIM A FLEXIBLE STICK FOR INFLICTING TAX ON DEFAULTE R; THAT INCLUDES A TRUST OR EDUCATIONAL INSTITUTION. THE GIST IS THAT IF THE CI T HAD AN INFORMATION OF SOME WRONGFUL MEANS OF EARNING FEES IN THE FORM OF A DONATION OR THE INFORMATION TELLS ABOUT EXCESSIVE CHARGING OF FEES; THEN THE CIT IN HIS RIGHTS CAN PASS ON THE INFORMATION TO THE CONCERNED OFFICE BEARERS WORKING UNDER THE MAHARASHTRA CAPITATION FEES (PROHIBITION) ACT. THESE AUTHORITIES HAVE ENOUGH POWER TO DEAL WITH SUCH NATURE OF DEFAU LT, SIDE BY SIDE THE CIT IS TO LIMIT HIS JURISDICTION 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 ACHIEVED AS PRESCRIBE D UNDER LAW. HOWEVER PRESENTLY THE SITUATION IS THAT THE REVENUE HAS NOT SAID ABOUT ANY IMMORAL ACTIVITY OF THE APPELLANT OR THE COLLECTION OF FEES WAS BY WRONGFUL MEANS; HENCE DEREGISTRATION SANS THE TRIBUNAL'S APPROVAL. [PARA 11.13] PRIMA FACIE NO CASE WAS MADE OUT BY THE CIT SO AS TO EVEN VAGUE LY DEMONSTRATE THAT THE ACTIVITIES OF THE APPELLANT WERE NOT GENUINE OR ACTIVITY OF IMPARTING OF EDUCATION, FOR WHICH THE TRUST WAS CREATED, WERE NO T CARRIED OUT. EVEN THE CIT HAS FAILED TO ESTABLISH THAT ANY PART OF THE IN COME/RECEIPT OF THE TRUST WAS IN ANY MANNER MISUTILIZED BY THE TRUSTEES FOR T HEIR PERSONAL BENEFIT I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 50 -: I.E., NOT IN FULFILLMENT OF THE OBJECT OF THE TRUST . OTHERWISE ALSO THERE ARE THREE WAYS TO LOOK AT THIS PROBLEM. ONE IS, THAT TH E DONATIONS ARE RAISED BUT NOT UTILIZED FOR ACHIEVING THE OBJECTS, LE., TO WARDS IMPARTING EDUCATION; THEN SUCH AN INSTITUTION MUST BEAR THE CONSEQUENCE OF CANCELLATION OF REGISTRATION SINCE IPSO FACTO INFRINGED SECTION 12A A(3) CONDITION. SECOND ASPECT IS, THAT THOUGH THE DONATIONS RECEIVED ARE M EANT TO FULFILL THE OBJECTS BUT TOGETHER WITH FEES HAVE INFRINGED ANTI CAPITATION PROHIBITION ACT; THEN COMES WITHIN THE CLUTCHES OF THAT ACT BUT DEFINITELY NOT UNDER SECTION 12AA(3) PROVISIONS. THE THIRD ASPECT IS, TH AT THE DONATION PLUS FEES DO NOT EXCEED THE PRESCRIBED LIMIT OF ANTI CAPITATI ON FEE ACT I.E., FIVE TIMES THE NORMAL FEES; FURTHER THAT NO EVIDENCE OF MISUTI LIZATION OTHER THAN THE PRESCRIBED ACTIVITY THEN NO ACTION CAN BE SUGGESTED UNDER SECTION 12AA(3). THE ASSESSEE'S CASE FALLS UNDER THE THIRD CATEGORY. WITH THE RESULT, TOTALITY OF THE CIRCUMSTANCES THUS WARRANTS, IN THE LIGHT OF THE FOREGOING DISCUSSION, NOT TO ENDORSE THE VIEW OF THE CIT; CON SEQUENCE THERE UPON REVERSE THOSE FINDINGS. THE ORDER OF CANCELLATION O F REGISTRATION IS HEREBY REVOKED. [EMPHASIS SUPPLIED] NO CONTRARY DECISION WAS BROUGHT TO OUR NOTICE. 13.2. THE ISSUE IN VODITALA EDUCATIONAL SOCIETY VS. ASST. DIRECTOR (EXEM), HYD [20 SOT 353] (ITAT, HYD ORDER I N ITA NO. 1138/H/06 DT. 31-10-2007) AND OTHER CASES OF COORDIN ATE BENCHES AT HYDERABAD WAS WITH REFERENCE TO EXEMPTION U/S 11 AN D NOT CANCELLATION OF REGISTRATION FOR WHICH PROVISIONS ARE DIFFERENT. A REFERENCE TO SPECIAL BENCH WAS MADE ON THE REASON THAT WHILE DECIDING THE ABOVE CASES, COORDINATE BENCHES HAVE NO T CONSIDERED THE VIEWS EXPRESSED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF GOVERNING BODY OF RANGARAYA MEDICAL COLLEGE VS. ITO REPORTED IN 117 ITR 284(AP) AND ALSO THE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CHAIRMAN, ANDHRA PRADESH WELFARE FUND VS. CIT REPORTED IN 143 ITR 82 WHEREIN THE HONBLE HIGH COURT HAS HELD THAT THE MERE FACT THAT THE RICE MIL LERS PAID CONTRIBUTIONS WITH AN OBLIQUE MOTIVE WOULD NOT AFFECT THE CHARACTER OF THE CONTRIBUTION AS VOLUNTARY CONTRIBUTIONS. IT WAS A LSO I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 51 -: CONSIDERED THAT EVEN IN THE CASE OF TMA PAI FOUNDATION , THE HONBLE SUPREME COURT HAS ANALYZED THE CONSTITUTIONAL VALIDITY OF ESTABLISHING PROFESSIONAL COLLEGES CHARGING DONATIONS /CAPITATION FEE. IN A SUBSEQUENT JUDGMENT IN THE CASE OF ACTION COMMITTEE, UN- AIDED PVT. SCHOOLS & OTHERS VS. DIRECTOR OF EDUCAT ION (DECIDED ON 7- 8-2009) THE HONBLE APEX COURT HAS ANALYZED THESE DECI SIONS AND HAS HELD THAT PRIVATE AND UNAIDED INSTITUTIONS NOT DEPEN DING UPON ANY FUNDS FROM THE GOVERNMENT ARE COMPETENT TO DECIDE O N THE FEES TO BE CHARGED. IT WAS ALSO CONSIDERED THE PROVIS IONS OF AP EDUCATIONAL INSTITUTION (REGULATION OF ADMISSIONS AND PROHIBITION OF CAPITATION FEE) ACT, 1983 TO COME TO THE CONCLUSION THA T THE EDUCATIONAL INSTITUTION IS NOT PROHIBITED IN COLLECTING DONATIONS BUT THAT THE SAME HAS TO BE COLLECTED IN THE MANNER PRESCRIB ED. THAT THE DECISION OF THE ITAT IN THE CASE OF M/S.VODITHALA EDUCATION SOCIETY AND VASAVI ACADEMY OF EDUCATION, HYDERABAD (SUPRA) WAS RENDERED WITHOUT EXAMINING THE PROVISIONS OF THE AP EDU CATIONAL INSTITUTION (REGULATION OF ADMISSIONS AND PROHIBITION OF CAPITATION FEE) ACT, 1983 AND MANY OTHER DECISIONS OF HIGH COUR TS AND CO- ORDINATE BENCHES OF THE TRIBUNAL AT OTHER PLACES AND THA T IT HAS THE EFFECT OF DETERMINING THE LEGAL POSITION OF TAXABILIT Y OF EDUCATIONAL INSTITUTIONS IN THE STATE OF AP AT VARIANCE W ITH THE FOLLOWING DECISIONS IN THE REST OF THE COUNTRY: I. DIRECTOR OF INCOME-TAX (EXEMPTION) & ANOTHER VS SHRI BELIMATHA MAHASAMSTHANA SOCIO CULTURAL & EDUCATIONA L TRUST (46 DTR (KAR) 290 II. MAHARASHTRA ACADEMY OF ENGINEERING & EDUCATIONAL RESEARCH VS. CIT (133 TTJ 706)(PUNE) III. KARANDHAI TAMIL SANGAM, THANJAVUR, VS. CIT (ITA 960/MDS/2011 DT.9-8-2011) I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 52 -: IV. DCIT VS. VELLORE INSTITUTE OF TECHNOLOGY (46 SOT 224) (ITAT, CHENNAI). HOWEVER, THE REFERENCE AND CONSTITUTION OF SPECIAL BE NCH IN MATRUSRI EDUCATIONAL SOCIETY CASE WAS REJECTED AS THE MATTER WAS PENDING BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT. HOWEVER AS STATED EARLIER THE ISSUE IS ONE OF VIOLATION OF PROVISI ONS OF SECTION 11 AND 13 OF THE ACT AND NOT CANCELLATION OF REGISTRATION . MOST OF THE CASE LAW RELIED ON BY THE CIT-DR IS WITH REFERENCE TO THE VIOLATION OF PROVISIONS OF SECTION 11 & 13 OR GRANTING REGISTRATION U/S.12A / 12AA. THUS, THOSE DECISIONS MAY NOT DIRECTL Y APPLY TO THE ISSUE UNDER CONSIDERATION. 14. FURTHER, HON'BLE KARNATAKA HIGH COURT IN IT APPEA L NO. 805 OF 2008 IN THE CASE OF CIT VS. ISLAMIC ACADEMY OF EDUCATION [54 TAXMANN.COM 255] (KARNATAKA) HAS HELD AS UNDER: SECTION 12A, READ WITH SECTION 80G, OF THE INCOME- TAX ACT, 1961 - CHARITABLE OR RELIGIOUS TRUST - REGISTRATION OF (CA NCELLATION OF REGISTRATION) - WHETHER, WHERE ASSESSEE-TRUST WAS FULFILLING ITS MA IN OBJECT OF IMPARTING EDUCATION BY ESTABLISHING EDUCATIONAL INSTITUTION A ND TAKING ADMISSION OF STUDENTS EVERY YEAR, ONLY ON BASIS THAT TRUSTEES WE RE MISAPPROPRIATING FUNDS OF SAID TRUST, REGISTRATION OF TRUST COULD NO T BE CANCELLED - HELD, YES [PARA 8] [IN FAVOUR OF ASSESSEE] CIRCULARS AND NOTIFICATIONS: CIRCULAR NO. 5 OF 2005 , DATED 15-7-2005 FACTS REGISTRATION OF THE ASSESSEE TRUST UNDER SECTION 12A AND RECOGNITION UNDER SECTION 80G WERE WITHDRAWN ON GROUND THAT THR EE OF THE TRUSTEES OF THE ASSESSEE WERE ALSO THE DIRECTORS/CHAIRMAN IN YI MSRPL A PRIVATE LIMITED COMPANY. THE ASSESSEE HAD INVESTED RS. 20 L AKHS IN ORDINARY SHARES OF YIMSRPL. THE ASSESSEE WAS PAYING HUGE REN T TO YIMSRPL AND HAD ALSO GIVEN HUGE DEPOSIT OF RS.225 LAKHS WHICH W AS CLAIMED AS RENT DEPOSIT AND CASH OF RS.74 LAKHS WAS FOUND IN THE RE SIDENTIAL PREMISES OF ONE OF TRUSTEES AND THE SAME WAS OFFERED TO TAX. FE ES FOR ADMISSION REPORTED TO HAVE BEEN COLLECTED MUCH HIGHER THAN WH AT WAS RECORDED IN I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 53 -: THE BOOKS AND THAT THE ACTUAL AMOUNT OF FEES COLLEC TED HAD BEEN SUPPRESSED. THE TRIBUNAL HELD THAT AT THE TIME OF CONSIDERING CANCELLATION OF REGISTRATION OF TRUST ALREADY GRANTED, WHAT WAS MAI NLY TO BE SEEN WAS, WHETHER THE ACTIVITIES OF THE TRUST OR INSTITUTION WERE NOT GENUINE OR WERE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT S OF THE TRUST OR INSTITUTION. THERE WAS NOTHING ON RECORD TO SHOW TH AT THE ACTIVITIES WERE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT S OF THE TRUST I.E., IMPARTING EDUCATION. ADMITTEDLY, THE TRUST WAS CARR YING ON THE OBJECT OF THE TRUST NAMELY IMPARTING OF EDUCATION. THE TRUST WAS NOT SHAM OR BOGUS. THEREFORE, THE TRIBUNAL HAD SET ASIDE THE ORDER PAS SED BY THE COMMISSIONER AND RESTORED THE REGISTRATION. ON APPEAL: HELD IN THE INSTANT CASE, THE MATERIAL ON RECORD SHOWS T HAT THE TRUST HAS ESTABLISHED EDUCATIONAL INSTITUTION AND _IMPARTING MEDICAL EDUCATION. EVERY YEAR, STUDENTS ARE ADMITTED. HUGE INVESTMENT IS MADE FOR CONSTRUCTION OF BUILDINGS FOR HOUSING THE COLLEGE, HOSTEL AND TO PROVIDE OTHER FACILITIES TO THE STUDENTS WHO ARE STUDYING I N THE COLLEGE. THE COLLEGE IS RECOGNIZED BY THE MEDICAL COUNCIL OF INDIA, STAT E OF KARNATAKA AND ALL OTHER STATUTORY AUTHORITIES. THEREFORE, IT CANNOT BE SAID THAT THE TRUST IS NOT GENUINE. ADMITTEDLY, THE STUDENTS ARE BEING ADMITTED EVERY YEAR. STUDENTS ARE STUDYING IN ALL COURSES. THUS TH E OBJECT OF THE CONSTITUTION OF THE TRUST NAMELY IMPARTING OF EDUCA TION IS GOING ON UNINTERRUPTEDLY. THEREFORE, IT CANNOT BE SAID THAT THE ACTIVITIES OF THE TRUST ARE NOT BEING CARRIED OUT IN ACCORDANCE W ITH THE OBJECTS OF THE TRUST. WHEN THE AFORESAID TWO CONDITIONS ARE FULLY SATISFIED, ON THE GROUND THAT THE TRUSTEES ARE MISAPPROPRIATIN G THE FUNDS OF THE TRUST THE REGISTRATION OF THE TRUST CANNOT BE C ANCELLED. IF THE TRUSTEES ARE MISAPPROPRIATING THE FUNDS, IF THEY AR E MAINTAINING FALSE ACCOUNTS, IT IS OPEN TO THE AUTHORITIES TO DE NY THE BENEFIT UNDER SECTION 11, BUT THAT IS NOT A GROUND FOR CANC ELLATION OF REGISTRATION ITSELF. THAT IS PRECISELY WHAT THE TRI BUNAL HAS HELD. THEREFORE, THE SUBSTANTIAL QUESTION OF LAW IS ANSWE RED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 15. THE PRINCIPLES LAID DOWN BY THE HONBLE KARNATA KA HIGH COURT IN THE ABOVE SAID CASE WILL EQUALLY APPLY TO THE FACTS OF THE CASE. AS STATED EARLIER, THERE IS NO ALLEGATION THAT FU NDS ARE BEING MISUSED OR DIVERTED OR ASSESSEE IS NOT IMPARTING EDU CATION. THE I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 54 -: ACTIVITIES OF THE TRUST CANNOT BE CONSIDERED AS NOT GENUIN E. FURTHER, THE TRUST IS SPENDING THE FUNDS FOR FULFILLING THE OBJECTS OF THE TRUST FOR WHICH IT IS FORMED. THEREFORE, TWIN COND ITIONS PRESCRIBED FOR CANCELLATION OF TRUST REGISTRATION HAVE N OT BEEN FULFILLED. IT IS OPEN TO THE AUTHORITIES TO DENY THE BEN EFIT U/S.11 BUT THIS CANNOT BE A GROUND FOR CANCELLATION OF REGISTRATION . RESPECTFULLY FOLLOWING THE PRINCIPLES LAID DOWN BY TH E HONBLE KARNATAKA HIGH COURT IN THE AFORESAID CASES I.E., CIT VS. ISLAMIC ACADEMY OF EDUCATION [54 TAXMANN.COM 255] (KARNATAKA) AND CO- ORDINATE BENCH DECISION IN THE CASE OF MAHARASHTRA AC ADEMY OF ENGINEERING & EDUCATIONAL RESEARCH VS. CIT [133 TTJ 706] [36 DTR 321], WE HAVE NO HESITATION TO HOLD THAT LD.DIT(E) ERRED IN CANCELLATION OF THE REGISTRATION ALREADY GRANTED TO THE AS SESSEE. THEREFORE, WE HEREBY SET ASIDE THE IMPUGNED ORDER OF THE DIT(E) AND RESTORE THE REGISTRATION ALREADY GRANTED TO THE ASSES SEE BY THE THEN COMMISSIONER OF INCOME TAX, ANDHRA PRADESH-II, HYDERABAD, VIDE ORDER IN F.NO. H.QRS.II/12A & 80G/95/90-91 DAT ED 09-05- 1991. THE GROUNDS OF ASSESSEE ARE ACCORDINGLY CONS IDERED ALLOWED. 16. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH APRIL, 2017 SD/- SD/- (G. PAVAN KUMAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMB ER HYDERABAD, DATED 26 TH APRIL, 2017 TNMM I.T.A. NO. 1751/HYD/2014 VIGNANA JYOTHI :- 55 -: COPY TO : 1. VIGNANA JYOTHI, XAVIER BHAVAN, PLOT NO. 7, ROAD NO. 16, WEST MARREDPALLY, SECUNDERABAD. 2. DIRECTOR OF INCOME TAX OFFICER (EXEMPTIONS), HYD ERABAD. 3. DDIT (E)-III, HYDERABAD. 4. D.R. ITAT, HYDERABAD. 5. GUARD FILE.