Sri Aurobindo Annai Trust, Kovilpatti V. CIT, Madurai

ITA 1773/CHNY/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0965 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 17-11-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: VELAUTHAM RAGHAVAN CAAR
• Keywords: Capital asset; Charitable institution; Competent authority; Onus to prove
• Section: 80G; 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CH ENNAI BENCHE `A, CHENNAI BEFORE S/ SHRI U.B.S.BEDI, JM AN D SANJAY ARORA, AM I.T.A. NOS.1773&1774/MDS/2009 SRI AUROBINDO ANNAI TRUST, 147, ARIGNAR ANNA NAGAR, ASHOK NAGAR, KATHIRESAN KOIL ROAD, KOVILPATTI - 628 502. [PAN: AAGTS 7529C] VS. THE COMMISSIONER OF INCOME-TAX- I, MADURAI. (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI VELAUTHAM RAGHAVAN, CA-AR REVENUE BY SHRI SHAJI P. JACOB, DR O R D E R PER SANJAY ARORA, AM: THESE ARE A SET OF TWO APPEALS BY AP PLICANT-TRUST CONTESTING THE DENIAL OF REGISTRATION U/S. 12AA AND APPR OVAL U/S. 80G OF THE INCOME-TAX ACT, 1961 ('THE ACT' HEREINAFTER). 2.1 THE ASSESSEEAPPLICANT IS A PUBLIC CHAR ITABLE TRUST REGISTERED UNDER THE INDIAN TRUST ACT, 1882 VIDE A TRUST DEED DATED 31.5.2007 ON 1.6.2007 WITH THE APPROPRIATE AUTHORITY, BEING THE OFFICE OF SUB-REGISTRAR, KOVILPATTI. THE SAME STOOD AMENDED PER A DEED OF AMENDMENT DA TED 12.3.2008 BY MRS. BALA RAMACH ANDRAN, THE AUTHOR AND FOUNDER OF THE TRUST, DULY REGISTERED ON THE SAME DATE. COPIES OF BOTH THE DEEDS ARE ON RECORD. IT MOVED SIMULTANEOUS APPLICATIONS U/S. 12AA AND 80G OF THE ACT WITH THE COMPETENT AUTHORITY, BEING THE OFFICE OF THE COMMI SSIONER OF INCOME-TAX-I, MADURAI (CIT FOR SHORT) ON 19.2.2009, WHICH STOO D DENIED PER IDENTICAL WORDED SEPARATE ORDERS OF EVEN DATE, I.E., 31.8.2009. THE REASON(S) FOR SA ME, AS ASCERTAINED THERE-FROM, ARE AS:- (A) THE ONLY ACTIVITY OF THE TRUST, AS FOUND BY THE ASSESSING OFFICER (AO), IS THE RUNNING OF A NURSERY-CUM -PRIMARY SCHOOL UP TO CLASS IV (WHICH STARTED FUNCTIONING IN OCTOBER, 2007), WITH A PRESENT STRENGTH OF 300 STUDENTS; ITA.NOS.1773 & 1774/MDS/2009 2 (B) NO INFORMATION REGARDIN G THE SOCIO-ECONOMIC BACKGROUND, EDUCATIONAL QUALIFICATIONS OR THE PROFESSIONAL COMPETENCE OF THE TRUSTEES, TO BE ABLE TO RUN THE CHARITABLE TRUST, STOOD SUPPLIED; (C) THERE IS NO MENTION OF BENEFICIARIES WHAT SOEVER, I.E., THE SAME ARE NOT IDENTIFIABLE, EVEN AS THERE WA S A SEPARATE CLAUSE (IN THE TRUST DEED FOR PROVIDING ASSISTANCE IN CASH AND/OR IN KIND TO POO R AND DESTITUTE PEOPLE; (D) THE AMOUNT SETTLED IN TRUS T IS ONLY 1000/- SO THAT IT IS NOT UNDERSTOOD AS TO HOW IT WA S ABLE TO ACHIEVE ITS LOFTY OB JECTS WITH THAT MEAGRE SUM; (E) THE ACCOUNTS FOR THE Y EAR ENDING 31.3.2009 REFLECT A SURPLUS OF ` 3.62 LAKHS ON A GROSS RECEIPT OF ` 10.21 LAKHS; (F) NO CASE OF FREE OR SUBSIDIZED EDUCATION OR PROVISION OF SCHOLARSHIP, STANDS REPORTED DURING THE CURRENCY OF THE RUNNING OF THE SCHOOL (EVEN AS AFFIRMED BY THE LD. AR, I.E., DURING HEARING).. 2.2 IN VIEW OF THE FOREGOING, THE LD. CIT DENIED THE SAID REGISTRATION AND APPROVAL, PLACING RELIANCE ON THE DECISION BY THE APEX COURT IN THE CASE SOLE TRUSTEE LOKASHIKSHANA TRUST VS. CIT , 101 ITR 234 (SC); HIS FI NDING BEING AS UNDER: `THE TRUST WAS CREATED ON 31.5.2007 . AS PER THIS JUDGMENT, THE ACTIVITIES OF THE TRUST DO NOT QUALIFY TO BE A CHARITABLE. THEREFORE, THE BASIC OBJECT OF THE TRUST IS TO EA RN PROFIT BY RUNNING A SCHOOL ON COMMERCIAL BASIS. THERE IS NO ELEMENT OF CHARITY IN IT. AFTER CONSIDERATION OF ALL THESE FACTS, IT IS FOUND THAT THE APPLICATION FOR RE GISTRATION AS A CHARITABLE IN STITUTION IS WITHOUT ANY MERIT. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD AS WELL AS THE CASE LAW CITED. 3.1 THE REVENUES PRINCI PAL OBJECTION IS THAT THE ACTIV ITIES OF THE TRUST, WHICH ARE LIMITED TO RUNNING A SCHOOL, IS BEING RUN ON COMMERCIAL LINES, SO THAT THERE IS NO QUESTION OF IT BEING CHARITABLE. THE WORD CHARITABL E UNDER THE ACT, DEFINED IN AN INCLUSIVE MANNER; NEVERTHELESS, HAS TO CONFORM TO TH E ORDINARY AND PLAIN UNDERSTANDING OF THE CONCEPT SIGNIFIED BY THE WORD CHARITY. TH E ASSESSEES CASE, ON THE OTHER HAND, IS THAT EDUCATION IS PER SE CHARITABLE AND DOES NOT REQUIRE IT BEING GIVEN EITHER FREE OR SUBSIDIZED OR WITHOUT CHARGING ANY CONSIDERATION, ETC. FOR IT TO QUALIFY AS BEING CHARITABLE, ITA.NOS.1773 & 1774/MDS/2009 3 AND FOR WHICH REFERENCE IS MADE TO THE DECISION IN THE CASE OF GAUR BRAHMIN VIDYA PRACHARINI SABHA VS. CIT (2010) 129 TTJ (DEL.) 627. TH E DECISION IN THE CASE OF SOLE TRUSTEE LOKASHIKSH ANA TRUST VS. CIT (SUPRA), AS ITS READING WOUL D SHOW, YIELDS THE SAME CONCLUSION; THE APEX COURT IN THAT CASE BEING SEIZED WITH THE LEGAL ISSUE AS TO WHETHER THE WORDS NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR A PROFIT , FOLLOWING THE WORDS ` ADVANCEMENT OF ANY OTHER OB JECT OF GENERAL PUBLIC UTILITY OCCURRING IN SECTION 2(15) DEFINING THE EXPRESSION `CHAR ITABLE PURPOSE UNDER THE ACT (SINCE AMENDED BY FINANCE ACT, 1983, WITH EFFECT FRO M 1.4.1984) QUALIFIED ONLY THE ACTIVITY QUA THE OBJECT OF GENERAL PUBLIC UTILITY AND NOT THE OTHER ACTIVITIES, VIZ. RELIEF OF THE POOR, EDUCATION, AND MEDICAL RELIEF, WITH REFERE NCE TO WHICH THE WORD CHARITABLE PURPOSE STANDS INCLUSIVELY DEFINED THER E-UNDER. IT, AFTER AN EXHAUSTIVE DELIBERATION ON THE SUBJECT, HELD OF IT AS QUALIFYING ONLY THE RESIDUARY ACTI VITY, I.E., RELATING TO THE ADVANCEMENT OF ANY OBJECT OF PUBLIC GENERAL UTILITY. THIS VIEW STA NDS FURTHER AFFIRMED BY IT PER ITS SUBSEQUENT DECISIONS, AS IN THE CASE OF DHARMADEEPTI V. CIT (1978) 114 ITR 454 (SC) AND DHARMAPOSHANAN CO. V. CIT (1978) 114 ITR 463 (SC). THE MATTER, THUS, STANDS JUDICIALLY SETTLED. IN FACT, THE MATTER STANDS CLARIFIED BY THE STATUTE ITSELF, I.E., AFTER INSERTION OF THE PROVISO TO THE PROVISION W.E.F. 1.4.2009; THE PROVISO EXCLUDING FROM THE PURVIEW OF THE SECTION `THE ADVANCEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILITY WHERE IT INVOLVED CARRYING ON OF AN ACTIVITY IN THE NATURE OF TRADE; COMMERCE OR BUSINESS, ETC. THAT BEING THE LEGAL POSITION, I. E., IN APPARENT CONTRADICTION TO WHAT THE LD. CIT STATES TO BE THE PURPORT AND IMPORT OF THE DECISION IN THE CASE OF SOLE TRUSTEE, LOKASHIKSHANA TRUST VS. CIT (SUPRA), RELIED UPON BY HIM, WITH NO REBUTTAL THERE-TO BY THE ASSESSEE, THE MATTER WAS POSTED FOR HEARING THE PARTIES, ON THE SAME. 3.2 THE LD. DR, IN THESE PROCEEDINGS, RELIED ON TH E DECISION IN THE CASE OF CIT VS. NATIONAL INSTITUTE OF AERONAUTICAL ENGINEERING E DUCATIONAL SOCIETY (2009) 315 ITR 428 (UTTARAKHAND). IT STANDS CLARIFIED THAT WHERE THE PROFIT MAKING ACTIVITY INFLICTS THE ACTIVITY OF EDUCATION, THE SAME CAN NO LONGER BE C ONSIDERED AS IMBUED W ITH THE CHARACTER OF CHARITY; CHARITY BEING THE SOUL OF THE EX PRESSION CHARITABLE PURPOSE. THE REVENUE AUTHORITIES ARE SUFFICIENTLY EMPOW ERED TO LOOK INTO THE TRUTH OF THE TRANSACTIONS AND ARE NOT SUPPOSED TO ALLOW REGISTRATION WITH BLIND EYES. TRADE OR COMMERCE IN THE NAME OF ITA.NOS.1773 & 1774/MDS/2009 4 EDUCATION COULD NOT BE SAID TO BE A CHARITABL E PURPOSE SO AS TO SATISFY THE MANDATE OF S. 12AA. THE LD. AR, ON THE OT HER HAND, WOULD SUBMIT THAT TH ESE BEING INITIAL YEARS OF THE INSTITUTION, THE OVERHEAD EXPENS ES WERE RELATIVELY LOWER, RE SULTING IN A PROFIT, WHICH MAY NOT NECESSARILY OBTAIN, OR AT LEAS T TO THAT EXTENT, IN FUTURE. ALSO, THE PROFITS STAND INVESTED IN THE SPECIFIED INVESTMENTS OR DEPLOYED IN CAPITAL ASSETS FOR THE SCHOOL; THE CAPITAL REQUIREMENT FOR WHICH WAS IMMEDIATE AND PRESSI NG, I.E., UTILIZED ONLY FOR THE OBJECT OF PROVIDING EDUCATION, A CHARITABLE PURPOSE , THROUGH THE MEDIUM OF A SCHOOL. 3.3 AS CLARIFIED BY THE APEX COURT IN THE CASE OF, INTER ALIA , SOLE TRUSTEE LOKASHIKSHANA TRUST VS. CIT (SUPRA), THE EMBARGO ON THE PROFIT MOTIVE ONLY IMPINGES ON THE ACTIVITY PERTAINING TO ANY OBJECT OF GE NERAL PUBLIC UTILITY. IN FA CT, THE LAW, AS IS APPLICABLE FROM 1.4.2009 (I.E ., PREVIOUS YEAR COMMENCING 1. 4.2008), MAKES THIS EXPLICIT BY CARVING OUT A PROVISO IN RESPECT OF THIS ACTIVITY; WH ICH FORMS PART OF THE EXPRESSION CHARITABLE PURPOSE, EXCLUDING THE SAME WH ERE IT INVOLVED THE CARRYING ON OF ANY BUSINESS ACTIVITY. THE APEX COURT IN THE CASE OF ADITANAR EDUCATIONAL INSTITUTIONS VS CIT (ADDL.) (1997) 224 ITR 310 (SC) EXPLAINED THAT THE PROFIT MAKING WOULD NOT BY ITSELF BE CONSIDERED AS AN ANATHEMA, AND WHERE INCIDENT AL TO AN ACTIVITY BEING CARRIED ON FOR THE ATTAINMENT OF THE PRIMARY OBJECT OF THE EDUC ATIONAL INSTITUTION, IT WILL NOT CEASE TO BE ONE EXISTING SOLELY FOR THE PURPOSES OF EDUCATION; THE OBJECT BEING NOT ONE TO MAKE PROFIT. NO DOUBT, THE APEX COURT, IN THAT CASE, WA S CONCERNED WITH THE SCOPE OF THE WORDS ` EXISTING SOLELY FOR EDUCATIONAL PURPOSES A ND NOT FOR THE PURPOSES OF PROFIT OCCURRING IN S. 10(22). THOUGH THE SECTION STANDS OMITTED SINCE, TH E SAID WORDS/EXPRESSION FINDS REFLECTION IN SECTION 10(23C)( IIIAB, IIIAD, VI) OF THE ACT IN THE CONTEXT OF EX EMPTION FROM TAX OF INCOME OF EDUCATIONAL INS TITUTIONS, INCLUDING A UNIVERS ITY, WHERE APPROVED BY THE GOVERNMENT, OR BY THE PRESCRIBED AUTHORITY, OR OTHERWISE HAVE A TURNOVER LESS THAN THE PRESCRIBED LIMIT, AS THE CASE MAY BE. SURELY, THE SAME CONSIDERATIONS SHOULD INFORM THE EXEMPTION TO THE OBJECT OF `EDUCATION BEIN G PURSUED BY A CHARITABLE INSTITUTION/TRUST AS WELL. THIS IS AS DIFFERENT PARAMETERS COULD NOT POSSIBLY ATTEND THE SAME OBJECT, WHICH AS A MATTER OF PUBLIC POLICY HAS BEEN CONSIDER ED BY THE LEGISLATURE AS ITSELF CONSTITUTING CHARITY; OUR COUNTRY HAVING TH E LEGACY WHERE `EDUCATION HA S ALWAYS BEEN REGARDED AS PIOUS. ITA.NOS.1773 & 1774/MDS/2009 5 3.4 AT THE SAME TIME, THE REVENUES STAND IS NOT WITHOUT MERIT. WHERE THE PROFIT MAKING IS INCIDENTAL, IT SHALL NOT EXCLUDE TH E BUSINESS ACTIVITY BEIN G CARRIED ON FOR THE FULFILMENT OF A PRIMARY OBJECT OF CHARITABL E NATURE, AS EDUCATION, I.E. FROM BEING CONSIDERED AS TOWARD A CHAR ITABLE PURPOSE. HOWEVER, WHER E PROFIT MAKING BECOMES THE DOMINANT OBJECT, AND EDUCATION A MEANS TOWARD THE SAME, COULD IT BE SAID THAT THE ENTERPRISE IS CHARITABLE OR THAT CHARITABLE PURPOSE INFORMS AND IMBUES IT. CLEARLY, NOT. THE PRINCIPLE OR LAW INVOLVED STANDS EXPL AINED BY THE APEX COURT IN THE CASE OF CIT (ADDL.) VS. SURAT ARTS SILK CLOTH MFRS. ASSOCN . (1980) 121 ITR 1 (SC) , WITH IT STATING THAT THE CHARITABLE PURPOSE SHOULD NOT BE SUBMERGED BY THE PROFIT MAKING MOTIVE; THE LATTER SHOULD NOT MASQUERADE UNDER THE GUISE OF THE FORMER, SO THAT WHERE PROFIT MAKING IS THE PRE-DOMINANT OBJECT OF AN ACTIVITY, IT WOULD CEASE TO BE A CHARITABL E PURPOSE. BUT WHERE THE PRE-DOMINANT OBJECT OF THE ACTIVITY IS TO CARRY OUT THE CHARITABLE PURPOSE AND NOT TO EARN PROFIT, IT WOULD NOT LOSE ITS CHARACTER OF A CHARITABLE PURPOSE MERELY BECAUSE SOME PROFIT ARISES FROM THE ACTIVITY. IT GOES ON TO SAY (AT PG. 28): `WHAT IS NECESSARY TO BE CONSIDERED IS WHETHER HAVING REGARD TO ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DOMINANT OBJECT OF THE ACTIVITY IS PROFIT MAKING OR CARRYING OUT A CHARITABLE PURPOSE. IF IT IS A FORMER, THE PURPOSE WOULD NOT BE A CHARITABLE PURPOSE, IF IT IS LATTER, THE CHARITABL E CHARACTER OF THE PURPOSE IS NOT LOST. THIS, AS EXPLAINED BY THE H ONBLE COURT, IS FOR THE REASON THAT CHARITY IS SOMETHING WHICH IS INTRINSICALLY ALTRUISTIC IN THO UGHT AND IN DEED, INVOLVING THE CONCEPT OF SELFLESSNESS, I.E., TO BE OF SOME ASSISTANCE FO R BENEFIT TO SOMEONE OUTS IDE ONESELF. THIS IS PRECISELY THE CONCERN EXPRESSED BY THE HONB LE HIGH COURT OF UTTARAKHAND, BEING THE RAISON DETRE AND THE LEITMOTIF OF ITS DECISIONS IN THE CASE OF NATIONAL AERONAUTICAL ENGINEERING EDUCATIONAL SOCIETY (SUPRA) AND CIT VS. QUEENS EDUCATIONAL SOCIETY , 319 ITR 160 (UTT.). IT HAS IN RENDERING THESE DECISIONS ELABORATED AND EXPLAI NED THIS ASPECT OF THE LAW. THE WHOLE PURPORT OF THE ACTIVITIES OF THE INSTITUTIONS SHOULD BE (CHARITABLE), AS EXPLAINED BY THE APEX COURT IN THE CASE OF MUNICIPAL CORPORATION OF DELHI V. CHILDREN BOOK TRUST (1992) 3 SCC 390; EXHAUSTIVELY DEALI NG WITH THE SUBJECT, EMPHASIZING THAT CHARITY MUST NEVERTHELESS PREVADE AND INFORM THE ACTIVITIES OF THE IN STITUTION, I.E., SHOULD BE ITS DOMINANT OBJECT; THE WHOLE PREMISE OF THE INSTITUTION BEING ON LY CHARITABLE. IF NOT SO CONSIDERED EVERY PRIVATE INSTITUTION (INCLUDING SCHOOL S AND COLLEGES) ENGAGED IN RENDERING EDUCATION, THOUGH R UN ON AND GUIDED BY PROFIT CONSID ERATION, WOULD ANSWER THE ITA.NOS.1773 & 1774/MDS/2009 6 DESCRIPTION OF UNDERTAKING CH ARITABLE ACTIVITY, ENTITLED TO EX EMPTION OF PROF IT EARNED THUS; IT STATING AS: ` IN OTHER WORDS, WHAT WE WANT TO STRESS IS , WHEN A SOCIETY OR BOD Y IS MAKING SYSTEMATIC PROFIT, EVEN THOUGH THAT PROFIT IS UTILIZED ONL Y FOR CHARITABLE PURPOSE S, YET IT CANNOT BE SAID THAT IT COULD CLAIM EXEMPTION. IF, MERELY QUALITATIVE TEST IS APPLIED TO SECTION, EVEN SCHOOLS WHICH ARE RUN ON COMMERCIAL BASIS MA KING PROFIT WOULD GO OU T OF THE PURVIEW OF TAXATION AND DEMAND EXEMPTION . WE MAY CONCLUDE THIS DISCUSSI ON WITH THE FOLLOWING OBSERVATIONS BY THE APEX COURT IN THE CASE OF ADITANAR EDUCATIONAL INS TITUTIONS VS. CIT (ADDL.) (SUPRA): `. THE DECISIVE OR ACID TEST IS WHETHER ON AN OVERALL VIEW OF THE MATTER, THE OBJECT IS TO MAKE PROFIT. IN EVALUATING OR APPRAISING THE ABOVE, ONE SHOU LD ALSO BEAR IN MIND THE DISTINCTION BETWEEN THE CORPUS, THE OBJ ECTS AND POWERS OF THE CONCERNED ENTITY . 3.5 HAVING EXAMINED THE LAW, AND CULLED OUT TH E PRINCIPLES INVOLVED IN APPLYING IT, WE MAY NOW ADDRESS THE FACTUAL ISSUE ARISING FOR DETERMINATION, I.E., WHETHER THE APPLICANT- TRUST IN THE PRESENT CASE IS EX ISTING FOR PROFIT OR FOR CHARITA BLE PURPOSES. IN OTHER WORDS, WHETHER THE PROFIT MAKING IS INCIDENTAL TO ITS ACTIVITIES OF RUNNING A SCHOOL, THROUGH WHICH THE CHARITABLE PURPOSE OF EDUCATION IS SO UGHT TO BE FULFILLED, OR A MEANS OR MEDIUM TO EARN PROFITS. IT IS ONLY ON THIS FACTUAL INFE RENCE, DRAWN ON A CONSIDERATION OF THE ENTIRETY OF FACTS AND CIRCUMSTANCES, THAT THE DECISION IN THE PRESENT CASE SHA LL HINGE UPON; THE LAW IN THE MATTER HAVING BE EN ELUCIDATED BY THE HIGHER COURTS OF LAW. 3.6 THE TRUST IS CREATED WITH A PALTRY SUM OF RUPEES ONE THOUSAND. CLEARLY, THE SETTLOR DID NOT INTEND TO BESTOW ANY ENDOWMENT FO R EDUCATION, WHICH WAS, THEREFORE, ONLY CONTEMPLATED FOR BEING PURSUED BY EITHER RAISING CONTRIBUTIONS FROM THE PUBLIC AT LARGE OR THE BENEFICIARIES OR THROUGH BORROWINGS, WHIC H COULD AGAIN BE EITHER ON COMMERCIAL OR ON NON-COMMERCIAL BASIS; THE FORMER ATTRACTING MORE STRINGENT TERMS AS TO INTEREST AND REPAYMENT. WE FIND FROM THE ANNUAL ACCOUNTS THAT THERE HAS BEEN AN ADMIXTURE OF BOTH; THE TRUSTS CAPITAL (APART FROM THE PROFIT FOR THE YEAR) AND LO ANS AS ON 31.3.2009 STANDING AT ` 21.49 LAKHS AND ` 45.56 LAKHS RESPECTIVELY. THIS IS ALSO UNDERSTANDABLE, AS IT MAY NOT BE POSSIBLE TO SET UP A PROJECT ENTIRELY ON THE BASIS OF `VOLUNTARY CONTRIBUTIONS, WHICH SOURCE, BY ITS VERY NATURE, IS UNCERTAIN, AND CANNOT BE PREDICATED. BESIDES, IT WOULD ALSO DEPEND, TO A LARGE EXTENT, ON THE QUANTUM OF FUNDS INVOLVED. IN TH E INSTANT CASE, AS IT ITA.NOS.1773 & 1774/MDS/2009 7 WOULD BE THUS SEEN, THE APPLICANT HAS RAISED SUBSTANTIAL LOANS ON CO MMERCIAL BASIS. NOW, WHEN THE PROJECT IS SET UP BY, AND INDEED CONT EMPLATED FOR BEING SO, I.E., TO A SUBSTANTIAL EXTENT, BY RAISING MONEY THROUGH COMMERCIA L BORROWINGS, THE INFERENCE COULD ONLY BE THAT IT IS TO BE RUN ON A COMME RCIAL BASIS. IT CANNOT BUT BE OTHERWISE, AND FOR THE SIMPLE REASON THAT, AS AFORE-MENTIONED, THE FUNDS FR OM VOLUNTARY SOURCES CANNOT BE PREDICATED AND ARE, AT BEST, CONTINGENT, SO THAT FUNDS NEED TO BE GENERATED, BOTH FOR REPAYMENT OF LOANS AS WELL AS FOR INTEREST, ESSENTIALLY OR PRIMARILY THROUGH INTERNAL ACCRUALS, NECESSITATING IT BEING RUN ON COMMERCIAL LINE S. NO FINANCIAL INSTITUTION WOULD EXTEND LOAN/S ON THE PREMISE THAT TH E BORROWER SHALL RAISE CAPITAL OR FUNDS THROUG H CONTRIBUTIONS TO MEET THE OBLIGATIONS ARISING OUT OF THE LOAN S. THERE COULD BE EXCEPTIONS, AS OF A BRIDGE LOAN, WHICH WOULD REQUIRE A FIRM ARRANGEME NT FOR IT BEING SO GRANTED. THE SAME, IMPROBABLE EVEN FOR A BUSINESS SET-UP, BE ING GRANTED ONLY IN CASE OF REPUTED ORGANIZATIONS, IS INCONCEIVABLE FOR A NON-BUSI NESS, CHARITABLE ORGANIZATION, AND A NASCENT ONE AT THAT. THE BORROWER HAS, THUS, NECE SSARILY TO SATISFY THE TEST OF BEING A COMMERCIALLY VIABLE ENTERPRISE, I.E., OF IT BEI NG ABLE TO GENERATE SURP LUS SUFFICIENT TO MEET THE LIABILITY ARISING OUT OF TH E LOAN(S), AND WHICH IT MUST BE THEREFORE BE REGARDED AS HAVING SATISFIED. NO DOUBT, THE LAST CLAUSE OF THE TRUST DEED AS MADE ON 12.3.2008, READS AS:- ` WHEREAS THE TRUST WILL NOT RUN ANY BUSINE SS AND THE TRUST WILL NOT FUNCTION FOR THE PURPOSE OF PROFIT. HOWEVER, IT WOULD BE OF NO AVAIL WHEN THE FINANCING AND THE RUNNING OF THE TRUST IS PATENTLY ON COMMERCIAL BASIS. RATHER, IF AT A LL, IT LEADS TO ANOTHER DISABILITY FOR THE GRANT OF REGISTRATION INASMUCH AS THE ACTIVITIES OF THE TRUST, AS BEING CARRIED OUT, ARE INCONSISTENT WITH ITS AVOWED OBJECTS. IN FA CT, THE APPELLANT NOWHERE DISPUTES THE SAME; ITS ONLY CONTENTION IS THAT THE BUSINESS AND TH E CONCOMITANT PROFIT MAKING IS NO BAR FOR REGISTRATION AS A PUBLIC CHARITABLE TRUST, I.E., UNDER THE ACT. HERE IT MAY ALSO BE PERTINENT TO STATE THAT SECTION 20(E) OF THE INDIAN TR UST ACT, 1882, I.E., THE LAW UNDER WHICH THE TRUST IS FORMED AND IS GOVERNED BY, PRECLUDES ANY TRUST TO RAISE MONEY ON FIRST MORTGAGE OF PROPERTY, WHERE IN RELATION TO ANY BUILDI NG, IN EXCESS OF 50% OF THE VALUE OF THE BUILDING. IN THE INSTANT CASE, AS THE ACCOUNTS WOULD SHOW, TH IS PROVISION STANDS CLEARLY VIOLATED. A TRUST/ENTITY ACTING IN VIOLATION OF THE LAW AS WELL AS ITS BYE LAWS , WOULD LOOSE ITA.NOS.1773 & 1774/MDS/2009 8 ITS CLAIM FOR EXEMPTION OR THE BENEFITS C ONFERRED BY LAW, WHICH INURE TO ONE ACTING LAWFULLY. REFERENCE IN THIS CONTEXT BE DRAWN TO THE DECISION IN THE CASE OF SIND COOPERATIVE HOUSING SOCIETY V. ITO , 317 ITR 47 (BOM.) AND WALKESHWAR TRIVENI COOPERATIVE HOUSING SOCIETY LTD. V. ITO , 88 ITD 159 (MUM.)(SB). FURTHER, THE APPLICANT-TRUST HAS GROWN TO AN ASSET BASE OF 77.81 LACS INSIDE A PERIOD OF LESS THAN 18 MONTHS OF ITS FORMATION, I. E., UP TO 31/3/2009. THE FACT THAT THE PROFITS COULD NOT BE WITHDRAWN AND STA ND UTILIZED IN CREATION OF ASSE TS OF THE SCHOOL, WOULD NOT COME TO THE RESCUE OF THE APPLICANT, AS EX PLAINED BY THE HONBLE COURT IN THE CASE OF NATIONAL AERONAUTICAL ENGI NEERING EDUCATIONAL SOCIETY (SUPRA) AND CIT VS. QUEENS EDUCATIONAL SOCIETY (SUPRA). IT HAS ALSO NOWHERE C ONTENDED OF HAVING CHARGED LESS FROM THE STUDENTS, I.E., VIS--VIS THE NORMATIVE FE E CHARGED BY OTHER PUBLIC SCHOOLS OR THAT PRESCRIBED BY THE REGULATORY AU THORITIES. THAT IS, HAS NOT MADE OUT ANY CASE IN ITS RESPECT; ONLY STATING OF IT BEING INCONSEQUENTIAL IN VI EW OF THE OBJECT PURSUED, I.E., EDUCATION, BEING PER SE CHARITABLE. FROM WHOM THE VOLUNTARY CO NTRIBUTIONS STAND RAISED IS ALSO NOT KNOWN. THOUGH, THEREFORE, THIS SHOULD NORMALLY BE TAKEN AS A NEUTRAL FACTOR, HAVING NO ADVERSE IMPLICATION, IT WOULD BE RELEVANT TO STATE THAT TH E HONBLE COURT IN THE CASE OF MUNICIPAL CORPORATION OF DELHI V. CHILDREN BOOK TRUST (SUPRA) HAS HELD THAT ABSENCE OF SUCH INFORMATION WOULD ONLY LEAD TO THE PRES UMPTION OF IT HAVING BEEN OBTAINED FROM THE BENEFICIARIES, I.E., THE PARENT S OF THE STUDENTS/BENEFICIARIES, VITIATING ITS APPLICATION FOR REGISTRATION AND RECOGNITION IN LAW AS A PUBLIC CHARITABLE INSTITUTION. WE DO NOT VENTURE TO MAKE ANY FURTHER COMMENT; THE INFORMATION HA VING APPARENTLY NOT BEEN CALLED FOR BY THE COMPETENT AUTHORITY, THOUGH IT MAY BE RELEVANT TO STATE THAT THE ONUS TO PROVE ITS CASE, I.E., THE GENUINENESS OF ITS ACTIVITIES, IS ONLY ON THE APPLICANT. THIS ASPECT STANDS HIGHLIGHTED IN THE CONTEXT OF THE FOREGOING OBSERVATION THAT TH E BENEFICIARIES COULD ALSO BE A SOURCE OF THE CAPITAL RAISED. 4. IN VIEW OF THE FOREGOING, IN OUR CONSIDERED VIEW, THE REGISTRATION U/S. 12A STANDS RIGHTLY DENIED TO THE APPELLANT IN THE PRESENT CASE. THE DENIAL OF APPROVAL U/S. 80G WOULD FOLLOW CONSEQUENTIALLY. WE DECIDE ACCORD INGLY, UPHOLDING THE IMPUGNED ORDERS. ITA.NOS.1773 & 1774/MDS/2009 9 5. IN THE RESULT, THE ASSESS EES APPEALS ARE DISMISSED. SD/- SD/- . (U.B.S.BEDI) (SANJAY ARORA) JUDICIAL MEMBER ACCO UNTANT MEMBER PLACE: CHENNAI DATED: MARCH 18, 2011 GJ COPY TO: 1 . SRI AUROBINDO ANNAI TRUST, 147, ARIGNAR AN NA NAGAR, ASHOK NAGAR, KATHIRESAN KOIL ROAD, KOVILPATTI-628502. 2. THE COMMISSIONER OF INCOME-TAX-I, MADURAI. 3. THE INCOME-TAX OFFICER (HQRS.)-1, MADURAI. 4. D.R., I.T.A.T., CHENNAI BENCH, CHENNAI. 5. GUARD FILE. // TRUE COPY // ITA.NOS.1773 & 1774/MDS/2009 10