Baba Gandha Singh Education Trust, Barnala V. CIT, Patiala

ITA 231/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63999 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 24-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Assessee Lawyers: H R SALDI
• Keywords: Depreciation; Charitable institution; Opportunity of being heard; Condonation of delay; Cancellation of registration
• Section: 12A; 12AA; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, J M ITA NO. 231/CHD/2012 ASSESSMENT YEAR : 2007-08 BABA GANDHA SINGH V C.I.T. PATIALA EDUCATIONAL TRUST ITI CHOWK DHANAULA ROAD BARNALA AAATB 7399D (APPELLANT) (RESPONDENT) APPELLANT BY SHRI H.R. SALDI RESPONDENT BY: SMT. JYOTI KUMARI DATE OF HEARING 1.11.2012 DATE OF PRONOUNCEMENT 8.11.2012 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX, PATIALA DATED 3.2.2012. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS: 1 THAT THE LD. CIT HAS EXCEEDED THE JURISDICTION B Y WITHDRAWING THE REGISTRATION WHICH WAS GRANTED BY T HE HON'BLE ITAT, CHANDIGARH VIDE ITS ORDER DATED 29.9.2010 IN ITA NO. 357/CHD/2010. 2. THAT THE LD. CIT HAS COMMITTED THE CONTEMPT OF T HE HON'BLE ITAT, CHANDIGARH BENCH BY HIS DECISION AS H E HAS TRIED TO OVER RULE THE JUDGMENT PASSED BY THE JURIS DICTION ITAT IN THE SAME MATTER ON THE SAME ISSUE AND THERE BY IT IS PRAYED THAT THE EXEMPLARY COST SHOULD BE AWARDED IN TERMS OF SUBMISSIONS SEC (2B) OF SECTION 254 OF THE ACT. 3. THAT THE LD. CIT HAS NOT FOLLOWED THE DIRECTIONS OF THE HON'BLE ITAT ISSUED VIDE ORDER DATED 20.20.2011 ITA NO. 698/CHD/2011. THE HON'BLE ITAT HAD DIRECTED HIM TO DECIDE ON THE ISSUE OF REGISTRATION W.E.F. 1.4.12006 INSTE AD OF 1.4.2007 BY FOLLOWING THE PROCEDURE IN SECTION 12AA (1) OF THE IT ACT BUT THE LD. CIT HAVE IGNORED THE PROCEDURE L AID DOWN SUPRA. 2 4. THE REASON FOR WITHDRAWING THE REGISTRATION IS T HAT ACTIVITIES OF THE TRUST ARE NOT BEING CARRIED OUT I N ACCORDANCE WITH THE OBJECTS OF THE TRUST WHICH IS WRONG AS THE HON'BLE IRTAT HAS ALREADY DECIDED THE SAME ISSUE FOR THE SA ME YEAR IN FAVOUR OF THE ASSESSEE. 5. THE LD. CIT MAY KINDLY BE DIRECTED TO GRANT THE REGISTRATION W.E.F. 1.4.2006 TO 1.3.2007 AS THE DEL AY FOR THE SAME HAS ALREADY BEEN CONDONED BY THE ON BENCH OF I TAT, CHANDIGARH. 3. BOTH THE PARTIES WERE HEARD IN DETAIL. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THE ASSESSEE-SOCIETY WAS CREATED ON 1.4.1999. THE ASSE SSEE APPLIED FOR REGISTRATION U/S 12A OF THE ACT ON 11.4 .2007. REGISTRATION U/S 12A OF THE ACT WAS GRANTED TO THE ASSESSEE- SOCIETY W.E.F. 1.4.2007 BY THE CIT VIDE ORDER DATED 27.8.2007. THE APPLICATION FOR CONDONATION OF DELAY FOR FILING APPLICATION U/S 12A OF THE ACT BEFORE THE CIT, WAS REJECTED VID E ORDER DATED 29.8.2007. THE ASSESSEE FILED AN APPEAL TO T HE TRIBUNAL FOR NOT CONSIDERING THE CONDONATION OF DELAY APPLIC ATION FILED BY THE ASSESSEE-SOCIETY BEFORE THE COMMISSIONER OF INCOME TAX. THE TRIBUNAL VIDE ITS ORDER DATED 27.12.2007 IN ITA NO. 878/CHD/2007 RESTORED THE MATTER TO THE FILE OF COM MISSIONER FOR FRESH ADJUDICATION AFTER GRANTING OPPORTUNITY O F BEING HEARD. THE COMMISSIONER VIDE ORDER DATED 8.6.2009 REJECTED THE PLEA OF THE ASSESSEE FOR CONDONATION OF DELAY. THIS ORD ER WAS CHALLENGED BY THE ASSESSEE BEFORE THE TRIBUNAL. THE TRIBUNAL IN ITA NO. 803/CHD/2009 VIDE ORDER DATED 29.9.2010 AGAIN RESTORED THE MATTER OF CONDONATION OF DELAY FOR REA DJUCATION BY HOLDING THAT OPPORTUNITY ALLOWED BY THE COMMISSIONE R TO THE ASSESSEE TO APPEAR BEFORE THE AO, DOES NOT TANTAMOU NT TO AFFORDING AN OPPORTUNITY BY THE COMMISSIONER HIMSEL F. THE COMMISSIONER AGAIN REFUSED TO CONDONE THE DELAY BY RELYING ON THE ORDER DATED 8.6.2009 OF PREDECESSOR. AGAINST T HIS ORDER THE ASSESSEE AGAIN FILED APPEAL BEFORE THE TRIBUNAL . THE TRIBUNAL VIDE ORDER DATED 20.10.2011 IN ITA NO. 707 & 698/CHD/2011 AFTER CONSIDERING THE ISSUE IN DETAIL HELD THAT DELAY HAS TO BE CONDONED AND REGISTRATION HAS TO BE GRANTED W.E.F. 1.4.2006 . THE RELEVANT PARA 11 OF THE TRIB UNAL READS AS UNDER:- 3 IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT IGNO RANCE OF LAW CAN BE TAKEN AS A REASONABLE EXCUSE IN FILING T HE APPLICATION FOR REGISTRATION BELATEDLY. HOWEVER, W E FIND THAT THE ENTIRE RELEVANT FACTS AND EVIDENCE RELATING TO GENUINENESS OF ACTIVITIES OF THE TRUST ARE NOT ON RECORD. EVEN THE AIMS AND OBJECTIVES OF THE TRUST ARE NOT ON RECORD. IN THE ABSENCE OF ABOVE EVIDENCE, THE ISSUE OF GRANTING REGISTRATI ON TO THE ASSESSEES TRUST COULD NOT BE DECIDED AT OUR LEVEL. EVEN WE COULD NOT DECIDE THE ISSUE WHETHER THE TRUST IS GEN UINE OR NOT PARTICULARLY IN THE ABSENCE OF RELEVANT EVIDENCE. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT C ASE, WE CONDONE THE DELAY IN FILING THE APPLICATION FOR REG ISTRATION BELATEDLY. AS REGARDS THE GRANT OF REGISTRATION W. E.F. 1.4.2006, AS PRAYED FOR BY SHRI H.R. SALDI, LD. COU NSEL OF THE ASSESSEE, WE DIRECT THE CIT TO CONSIDER AND DECIDE THE ISSUE OF GRANTING REGISTRATION TO THE ASSESSEES TRUST BY FOLLOWING THE PROCEDURE FOR REGISTRATION AS PRESCRIBED IN SEC TION 12AA(1) OF THE INCOME-TAX ACT, 1961. THE LD. CIT(A ) IS ALSO DIRECTED TO GIVE AN OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE BEFORE DECIDING THE ISSUE OF GRANTING REGISTRATION TO THE ASSESSEES TRUST W.E.F. 1.4.2006. SINCE THE FACTS ON MERITS WERE NOT BEFORE THE TRIBU NAL, THE ISSUE REGARDING GRANTING OF REGISTRATION WAS RESTOR ED TO THE FILE OF COMMISSIONER BY THE ABOVE ORDER. IN THE IMPUGNE D ORDER THE REGISTRATION HAS BEEN CANCELLED BY THE COMMISSI ONER BY STATING THAT THE ASSESSEE HAS CONTINUOUSLY SHOWN SU RPLUS WHICH MEANS THE AFFAIRS OF THE SOCIETY BEING RUN AS COMMERCIAL VENTURE WITH THE MOTIVE OF EARNING PROFIT BY USING EDUCATIONAL BUSINESS. IT WAS ALSO OBSERVED THAT EDUCATION PER- SE IS NOT CHARITABLE PURPOSE. THE CONTENTION THAT SURPLUS SH OULD BE DETERMINED AFTER ALLOWANCE OF DEPRECIATION WAS AL SO DECLINED. IN THIS BACKGROUND REGISTRATION WAS CANCELLED. 5. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMI TTED THAT ON MERITS THE ISSUE HAS ALREADY BEEN DECIDED BY THE TRIBUNAL VIDE ITA NO. 357/CHD/2010 ORDER DATED 29.9.2010. 6. ON THE OTHER HAND, THE CIT, DR FOR THE REVENUE RELIED ON THE ORDER OF THE COMMISSIONER. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THE ISSUE OF ASSESSEE BEING ENGAGED IN CHARITA BLE ACTIVITIES AND GENERATION OF SURPLUS FROM SUCH ACTI VITIES AND CONSEQUENT GRANT OF REGISTRATION U/S 12AA OF THE AC T HAS ALREADY BEEN ADJUDICATED BY THE TRIBUNAL IN ITA NO. 357/CHD/2010 IN DETAIL. THE ISSUE WAS DECIDED I N APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT DAT ED 16.3.2010 PASSED U/S 12AA (3) OF THE ACT CANCELING THE REGISTRATION 4 EARLIER GRANTED TO THE ASSESSEE-SOCIETY. THE TRIBU NAL VIDE PARA 5 TO 10 OF THE SAID ORDER HAS HELD AS UNDER: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY. THE FOREMOST ISSUE IN THIS APPEAL REVOLVES AROUND THE J USTIFICATION FOR THE COMMISSIONER TO PASS THE IMPUGNED ORDER UND ER SECTION 12AA(3) OF THE ACT CANCELING THE REGISTRATI ON EARLIER GRANTED TO THE ASSESSEE UNDER SECTION 12AA(1)(B) OF THE ACT. SUB-SECTION 3 OF SECTION 12AA OF THE ACT, WHICH REA DS AS UNDER:- (3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANT ED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) AN D SUBSEQUENTLY THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GEN UINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OB JECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELING THE REGISTRATION OF SUCH TRUST OR INSTITUTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASSED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GI VEN A REASONABLE OPPORTUNITY OF BEING HEARD. EMPOWERS THE COMMISSIONER TO CANCEL A REGISTRATION GRANTED UNDER SECTION 12AA(1)(B) OF THE ACT. THE SCOPE AND AMBIT OF THE POWER MANIFESTED IN THE COMMISSIONER AS PER SEC TION 12AA(3) OF THE ACT HAS BEEN EXAMINED BY THE CHANDIG ARH BENCH A OF THE TRIBUNAL IN THE CASE OF H. P. GOVE RNMENT ENERGY DEVELOPMENT AGENCY (ITA NO. 889/CHANDI/2009 DATED 15.09.2010) IN THE FOLLOWING WORDS: 6. SECTION 12AA(1) OF THE ACT PRESCRIBES THE PROCEDURE FOR REGISTRATION. IN TERMS THEREOF, THE COMMISSIONER IS EMPOWERED TO CALL FOR SUCH DOCUMENT S OR INFORMATION FROM THE APPLICANT AND MAKE SUCH ENQUIRIES AS MAY BE DEEMED NECESSARY IN THIS BEHALF . IT IS QUITE CLEAR FROM THE SAID SECTION THAT THE COMMISSIONER IS TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES AND THE OBJECTS OF TH E APPLICANT, BEFORE HE PASSES AN ORDER REGISTERING OR REFUSING TO REGISTER AN APPLICANT. AS PER THE SAID SCHEME OF THE ACT, AT THE TIME OF REGISTRATION THE MAIN INGREDIENTS REQUIRED TO BE SEEN BY THE COMMISSIONER ARE TWO-FOLDS FIRSTLY, THAT THE OBJECTS OF THE AP PLICANT ARE FOR CHARITABLE PURPOSE WITHIN THE MEANING OF SECTION 2(15) OF THE ACT; AND, SECONDLY, THAT THE ACTIVITIES OF THE APPLICANT ARE GENUINE. 7. SUB-SECTION (3) OF SECTION 12AA PERMITS THE COMMISSIONER TO CANCEL THE REGISTRATION GRANTED IN TERMS OF SECTION 12AA(1)(B) OF THE ACT. IN ORDER T O DO SO, SUB- SECTION (3) MANDATES THAT THE COMMISSIONER OUGHT TO BE SATISFIED ON TWO COUNTS, - FIRSTLY, THA T THE ACTIVITIES OF THE TRUST OR INSTITUTION ARE NOT GENU INE; AND, SECONDLY, THAT THE ACTIVITIES ARE NOT BEING CA RRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE. NOTABLY, THE COMMISSIONER IS EMPOWERED TO INVOKE SECTION 12AA(3) OF THE ACT ON BEING SATISFIED ABOUT EITHER OF THE T WO 5 INGREDIENTS MENTIONED THEREIN. PROVISO BELOW SUB- SECTION (3) OF SECTION 12AA OF THE ACT FURTHER PRESCRIBES THAT NO ORDER CANCELING THE REGISTRATION SHALL BE PASSED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. 8. IN VIEW OF AFORESAID DISCUSSION, IT IS EVIDENT T HAT THE POWER OF THE COMMISSIONER TO CANCEL THE REGISTRATION IS NOT UNFETTERED. IT IS CIRCUMSCRIBED BY THE CONDITIONS PRESCRIBED IN SECTION 12AA(3) OF THE ACT . IT IS ALSO CLEAR THAT SUCH POWER DOES NOT PERMIT WHOLE SALE REVIEW OF THE INGREDIENTS WHICH HAVE BEEN CONSIDERE D BY THE COMMISSIONER WHILE GRANTING REGISTRATION U/S 12AA OF THE ACT. TO ILLUSTRATE, WE MAY POINT OUT T HAT AT THE TIME OF EVALUATING THE APPLICATION OF REGISTRAT ION U/S 12AA(1) OF THE ACT, THE COMMISSIONER IS TO SATISFY HIMSELF ON TWO CONDITIONS I.E. THAT THE ACTIVITIES ARE GENUINE AND, THAT THE OBJECTS OF THE APPLICANT FALL WITHIN THE MEANING OF CHARITABLE PURPOSE AS PER SECTION 2(15) OF THE ACT. IN CONTRAST, AT THE TIME OF CANCELING OF REGISTRATION UNDER SECTION 12AA(3) OF THE ACT, THE COMMISSIONER HAS TO SATISFY HIMSELF ABOUT EITHER OF THE TWO CONDITIONS PRESCRIBED THEREIN, NA MELY, THAT THE ACTIVITIES ARE NOT GENUINE OR THAT THE ACT IVITIES ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS THE CASE MA Y BE. PERTINENTLY, THE SATISFACTION ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION BEING AS PER SECTION 2(15) OF THE ACT, IS NOT A CONDITION MENTIONED IN SECTION 12AA(3 ) OF THE ACT TO CANCEL THE REGISTRATION ALREADY GRANTED UNDER SECTION 12AA(3) OF THE ACT. THE ONLY GROUND AVAILAB LE WITH THE COMMISSIONER TO CANCEL THE REGISTRATION IS TO EITHER ESTABLISH THAT THE ACTIVITIES OF THE TRUST O R INSTITUTION ARE NOT GENUINE OR THAT THE SAME ARE NO T BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE. IN OUR CONSIDERED OPINION, THE COMMISSIONER IS BOUND TO FUNCTION STRICTLY IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. A STATUTORY AUTHORITY HAS NO POWER, JURISD ICTION OR DISCRETION TO GO BEYOND THE STATUTORY PROVISIONS . NO POWER CAN BE ASSUMED IN THE ABSENCE OF ANY SPECIFIC PROVISION. IT IS QUITE CLEAR THAT AS PER SUB-SECTIO N (3) OF SECTION 12AA OF THE ACT, COMMISSIONER HAS POWER TO RESCIND THE REGISTRATION ONLY ON BEING SATISFIED AB OUT EITHER OF THE TWO POINTS MENTIONED THEREIN, AND NOT FOR ANY OTHER REASON. WE MAY CONCLUDE HERE THAT THE REGISTRATION ALREADY GRANTED U/S 12AA(1)(B) OF THE ACT CAN BE CANCELLED ONLY ON THE FULFILLMENT OF THE CONDITIONS MENTIONED IN SECTION 12AA(3) OF THE ACT AND NOT FOR ANY OTHER REASONS. 6. FROM THE AFORESAID DISCUSSION, IT IS EVIDENT THA T IN TERMS OF SECTION 12AA(3) OF THE ACT, COMMISSIONER HAS POW ER TO CANCEL REGISTRATION GRANTED UNDER SECTION 12AA(1)(B ) OF THE ACT ON BEING SATISFIED ON EITHER OF THE TWO CONDITI ONS, NAMELY, THAT THE ACTIVITIES OF THE TRUST OR THE INSTITUTION ARE NOT GENUINE OR THAT THE ACTIVITIES ARE NOT BEING CARRIE D OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITU TION, AS THE CASE MAY BE. 7. IN THIS BACKGROUND, WE NOW EXAMINE THE REASONS P UT FORTH BY THE COMMISSIONER IN THIS CASE TO CANCEL TH E 6 REGISTRATION ALREADY GRANTED TO THE ASSESSEE UNDER SECTION 12AA(1)(B) OF THE ACT. FIRSTLY, AS PER THE COMMISSI ONER ASSESSEE IS NOT CARRYING OUT ACTIVITIES IN ACCORDAN CE WITH ITS OBJECTS. THE OBJECTS OF THE ASSESSEE ARE TO CARRY O UT EDUCATIONAL ACTIVITIES. ACCORDING TO THE COMMISSION ER ASSESSEE WAS NOT CARRYING OUT EDUCATION AS CHARITY, BUT WAS DOING TRADE AND COMMERCE IN THE NAME OF EDUCATION. PERTINENTLY, THE COMMISSIONER DOES NOT DISPUTE THAT ASSESSEE WAS CARRYING ON EDUCATION ACTIVITY, WHICH IS ADMITT EDLY THE DOMINANT OBJECTIVE OF THE ASSESSEE. NOTABLY, THE AS SESSEE IS ENGAGED IN RUNNING OF SCHOOLS AND THE COMMISSIONER HAS NOT POINTED OUT ANY OTHER ACTIVITY BEING CARRIED OUT BY THE ASSESSEE. THE OBJECTION OF THE COMMISSIONER IS THAT THE ACTIVITY OF EDUCATION IS BEING CARRIED OUT AS A TRA DE AND COMMERCE. THIS IS FOUNDED ON PLEA THAT THE ASSESSEE HAS EARNED SYSTEMATIC PROFITS, AS REVEALED BY THE FINAN CIAL ACCOUNTS PERTAINING TO THE ASSESSMENT YEARS 2002-03 TO 2007- 08. IN OTHER WORDS, AS PER THE COMMISSIONER, GENERA TING OF SURPLUS INCOME YEAR AFTER YEAR IN EDUCATIONAL ACTIV ITY IMPUTES A COMMERCIAL ANGLE AND IT CANNOT BE SAID THAT THE A SSESSEE IS CARRYING ON ACTIVITIES IN ACCORDANCE WITH ITS OBJEC TS, ALTHOUGH THE ACTIVITY CARRIED OUT IS IN THE FIELD OF EDUCATI ON AS STATED IN THE OBJECTS OF THE ASSESSEE. IN OUR CONSIDERED OPIN ION, THE REASONING OF THE COMMISSIONER IS CONTRARY TO THE RA TIO OF THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUST & OTHERS (SUPRA). AS PER THE HONBLE HIGH COURT MERELY BECAU SE AN INSTITUTION HAS EARNED PROFITS, IT WOULD NOT BE A D ECIDING FACTOR TO CONCLUDE THAT SUCH AN EDUCATIONAL INSTITUTION EX ISTED FOR PROFIT. THE HONBLE HIGH COURT SPECIFICALLY NEGATED THE INTERPRETATION OF THE REVENUE THAT THERE HAS TO BE A REASONABLE PROFIT ONLY TO MAKE AN INSTITUTION NOT T O BE EXISTING SOLELY FOR THE PURPOSES OF THE PROFIT. THOUGH THE I SSUE BEFORE THE HONBLE HIGH COURT WAS IN THE CONTEXT OF SECTIO N 10(23C)(VI) OF THE ACT HOWEVER THE COURT HAS SPECIF ICALLY DEALT WITH THE QUESTION AS TO WHETHER AN EDUCATIONAL INST ITUTION CEASES TO EXIST SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT, MERELY BECAUSE IT HAS GENERATED SURPLUS INCOME OVER A PERIOD OF 4/5 YEARS AFTER MEETING ITS EXPENDITURES. THE HONBLE HIGH COURT OPINED THAT M ERELY BECAUSE PROFITS HAVE RESULTED FROM THE ACTIVITY OF IMPARTING EDUCATION, IT WOULD NOT RESULT IN CHANGE OF CHARACT ER OF INSTITUTION THAT IT EXISTS SOLELY FOR EDUCATIONAL P URPOSES. EVIDENTLY, IDENTICAL FACET HAS BEEN CONSIDERED BY T HE COMMISSIONER TO CONCLUDE THAT GENERATING OF SURPLUS FROM EDUCATIONAL ACTIVITY YEAR AFTER YEAR, CHANGES THE C HARACTER OF ACTIVITY AS A TRADE AND COMMENCE. THE PROPOSITION L AID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT BELIES THE ARGUMENT OF THE COMMISSIONER, AND IT IS FULLY APPLICABLE IN PRE SENT CASE ALSO. NOTABLY, THERE IS NO ALLEGATION BY THE COMMIS SIONER THAT ANY ACTIVITY OTHER THAN EDUCATION HAS BEEN CARRIED OUT BY THE ASSESSEE. 8. THUS FOLLOWING THE PARTY OF REASONING LAID DOWN BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUST (SUPRA), W E DISAGREE WITH THE INFERENCE OF THE COMMISSIONER THAT BECAUSE THE ASSESSEE HAS GENERATED SURPLUS INCOME AFTER MEETING EXPENDITURE IN ITS EDUCATIONAL ACTIVITIES, SUCH ACT IVITY IS TO BE REGARDED AS DOING TRADE AND COMMERCE IN THE NAME OF EDUCATION , SO AS TO INVITE CANCELLATION OF REGISTRATION UNDE R SECTION 12AA(3) OF THE ACT. AT THIS POINT WE MAY RE FER TO THE RELIANCE PLACED BY THE COMMISSIONER ON THE JUDGMENT OF THE HONBLE UTTARKHAND HIGH COURT IN THE CASE OF QUEEN S 7 EDUCATIONAL SOCIETY (SUPRA), WHICH HAS BEEN DISSENT ED BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUST (SUPRA). F OLLOWING THE PRINCIPLES OF JUDICIAL DISCIPLINE, THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IS TO BE PREFER RED, BEING THE JURISDICTIONAL AUTHORITY RATHER THAN THE JUDGMENT OF THE NON-JURISDICTIONAL HIGH COURT. IN THE FINAL ANA LYSIS, WE ARE UNABLE TO UPHOLD THE CONCLUSION DRAWN BY THE COMMIS SIONER THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT BEING C ARRIED OUT IN ACCORDANCE WITH ITS OBJECTS MERELY BECAUSE IT WAS G ENERATING PROFITS FROM SUCH ACTIVITY. THEREFORE, INVOCATION O F SECTION 12AA(3) OF THE ACT BY THE COMMISSIONER ON THIS ASPE CT HAS TO FAIL. 9. ANOTHER REASON TAKEN BY THE COMMISSIONER TO CANC EL THE REGISTRATION IS THAT THE ACTIVITY OF EDUCATION BEIN G CARRIED OUT BY THE ASSESSEE, CANNOT BE REGARDED AS A CHARITABL E PURPOSE. ACCORDING TO THE COMMISSIONER, ACTIVITY O F EDUCATION IS PERSE NOT A CHARITABLE PURPOSE AS PER THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F MCD VS. CHILDREN BOOK TRUST (1992) 3 SC 390. ON THIS AS PECT, WE HAVE ALREADY NOTED IN THE CASE OF H.P. GOVERNMENT E NERGY DEVELOPMENT AGENCY, SHIMLA (SUPRA) (RELEVANT PORTIO N HAS BEEN EXTRACTED EARLIER) THAT SUCH A REASON CANNOT F ORM A BASIS TO CANCEL REGISTRATION IN TERMS OF SECTION 12AA(3) OF THE ACT. THEREFORE, THE ACTION OF THE COMMISSIONER ON THIS A SPECT IS BEYOND THE JURISDICTION ENVISAGED UNDER SECTION 12A A(3) OF THE ACT AND IS ACCORDINGLY LIABLE TO BE IGNORED. IN ANY CASE, IN OUR VIEW, THE REASONING OF THE COMMISSIONER IS UNSU STAINABLE HAVING REGARD TO THE JUDGEMENT OF THE HON'BLE PUNJA B & HARYANA HIGH COURT IN THE CASE OF PINEGROVE INTERNA TIONAL CHARITABLE TRUST (SUPRA), WHEREIN THE HON'BLE COURT HAS EXPLAINED AND DISTINGUISHED THE JUDGEMENT IN THE CA SE OF CHILDREN BOOK TRUST (SUPRA), RELIED UPON BY THE COMMISSIONER. THE FOLLOWING DISCUSSION IS WORTHY O F NOTICE : THE OBSERVATIONS OF HON'BLE SUPREME COURT QUOTED FROM PARA 82 OF THE AFORESAID JUDGMENT TO THE EFFEC T THAT WHAT WE WANT TO STRESS IS WHERE A SOCIETY O R BODY IS MAKING SYSTEMATIC PROFITS, EVEN THOUGH THAT PROFIT IS UTILIZED ONLY FOR CHARITABLE PURPOSES, YE T IT CANNOT BE SAID THAT IT COULD CLAIM EXEMPTION DESERVES TO BE READ IN CONJUNCTION WITH THE EXPRESS PROVISIONS OF THE THIRD PROVISO TO S.10(23)(VI) F T HE ACT WHICH STIPULATE THE RETENTION OF 15 PER CENT OF THE PROFITS OF THE TOTAL INCOME AFTER QUANTIFICATION TH EREOF, OF THE EDUCATIONAL INSTITUTION EARNED IN EACH YEAR PROVIDED 85 PER CENT OF THE TOTAL INCOME IS SPENT F OR THE OBJECTS OF THE SOCIETY. INFACT, THE JUDGEMENT RENDERED BY HON'BLE THE SUPREME COURT IN CHILDREN BOOK TRUST CASE (SUPRA) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE OF THE PETITIONER-SOCIETY HEREIN, IS NOT AT ALL APPLICABLE BY VIRTUE OF THE APPLICABILITY OF THE MECHANISM CONTAINED IN THE THI RD PROVISO TO S. 10(23)(VI) OF THE ACT. IT MAY BE CLAR IFIED THAT HON'BLE THE SUPREME COURT HAD DECIDED THE CASE OF CHILDREN BOOK TRUST (SUPRA) UNDER THE DELHI MUNICIPAL CORPORATION ACT, 1957 AND HAD NOT DEALT WITH THE PROVISIONS OF S. 10(23)(VI) OF THE ACT WHI CH ARE A COMPLETE CODE IN ITSELF, INTERALIA PROVIDING A MECHANISM FOR THE UTILIZATION OF SURPLUSES AND PRIO R TO THE UTILIZATION DETERMINATION OF THE EXISTENCE O F THE EDUCATIONAL INSTITUTION SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR MAKING PROFIT. 8 BY THE SIMILAR PARITY OF REASONING, THE JUDGEMENT I N THE CASE OF CHILDREN BOOK TRUST (SUPRA) CAN BE SAID TO BE IN APPLICABLE TO A CASE OF SECTIONS 11 AND 12 OF THE ACT, AS IT I S A COMPLETE CODE BY ITSELF AS IS THE CASE WITH SECTION 10(23C(V I) NOTED BY THE HON'BLE HIGH COURT IN THE ABOVE DISCUSSION. TH US, THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F CHILDREN BOOK TRUST (SUPRA) HAS NO APPLICATION TO THE INSTA NT CASE UNDER SECTIONS 11 & 12 OF THE ACT PRIMARILY FOR THE REASON THAT THE PROVISIONS UNDER WHICH THE AFORESAID JUDGEMENT WAS RENDERED BY THE HON'BLE SUPREME COURT ARE NOT PARIM ATERIA TO THE PROVISIONS RELATING TO SECTIONS 11 & 12 OF THE ACT, APART FROM THE SCHEME OF THE ACT BEING DIFFERENT. THUS, THE SECOND REASON TAKEN BY THE COMMISSIONER IS UNFOUNDED AND C ANNOT BE UPHELD. WE HOLD SO. 10. THUS, IN TERMS OF OUR AFORESAID DISCUSSION, THE IMPUGNED ORDER OF THE COMMISSIONER IS UNSUSTAINABLE . IN THE FINAL ANALYSIS, WE SET ASIDE THE IMPUGNED ORDER AND THE REGISTRATION GRANTED TO THE ASSESSEE VIDE ORDER DAT ED 29.08.2007 IS HEREBY RESTORED. IN OUR OPINION, THE REGISTRATION U/S 12AA OF THE AC T HAS TO BE GRANTED TO THE ASSESSEE SOCIETY AS THE ASSESSEE WAS ENGAGED IN THE CHARITABLE ACTIVITIES OF PROVIDING EDUCATION AND THE ISSUE ON MERITS HAS BEEN DECIDED IN FAVOUR OF THE ASSESSE E IN ITA NO. 357/CHD/2010. FURTHER THE SAID REGISTRATION HA S TO BE GRANTED TO THE ASSESSEE W.E.F. 1.4.2006 AS THE DELA Y IN FILING THE APPLICATION U/S 12A OF THE ACT HAS BEEN CONDONE D BY THE TRIBUNAL IN ITAS NO. 707 & 698/CHD/2011. ACCORDINGL Y WE SET ASIDE THE ORDER OF COMMISSIONER AND DIRECT HIM TO P ASS A CONSEQUENT ORDER OR REGISTRATION U/S 12AA OF THE AC T W.E.F. 1.4.2006. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED ON 8.11.2012. SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 8 .11. 2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR 9