Rotary Welfare Trust, Gajraula V. CIT, Moradabad

ITA 3622/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1172 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 24-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIKHIL CHOUDHARY
• Keywords: Charitable institution; Opportunity of being heard; Question of law; Cancellation of registration
• Section: 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI I.P. BANSAL, JUDICIAL MEMBER ITA NO. 3622 & 3623/DEL/2009 ASSESSMENT YEAR : - ROTARY WELFARE TRUST, BHARTIYA GRAM, GAJRAULA. VS. CIT, MORADABAD. CO NO.337/DEL/2009 (ITA NO.3623/DEL/09) ASSESSMENT YEAR : - CIT, MORADABAD ROTARY WELFARE TRUST, BHARTIYA GRAM, GAJRAULA. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. SAMPATH, ADVOCATE REVENUE BY : SHRI NIKHIL CHOUDHARY, SR. DR O R D E R PER BENCH: THE APPEALS ARE FILED BY THE ASSESSEE AND THE CROS S OBJECTIONS BY THE DEPARTMENT. ALL OF THEM ARE DIRECTED AGAINST TWO S EPARATE ORDERS PASSED BY THE CIT, MORADABAD DATED 29.6.2009. ITA NO.3623/DEL/20 09 AND CROSS OBJECTION IS IN RESPECT OF ORDER OF CIT PASSED U/S 11AA/12A OF I NCOME-TAX ACT, 1961 AND ITA NO.3622/DEL/09 RELATES TO ORDER PASSED BY CIT U/S 1 1AA/80-G OF INCOME-TAX ACT, 1961. THE REGISTRATION HAS BEEN REFUSED TO BE GRANTED TO THE ASSESSEE ON THE GROUND THAT AS THE TRUST HAS BEEN CREATED TO CO NSTRUCT TRAUMA CENTER, BUT THE TRUST HAS NOT CARRIED OUT ANY WORK IN THAT REGARD A S NO CONSTRUCTION ACTIVITY HAS BEEN CARRIED OUT IN THAT RESPECT. IT IS FURTHER OB SERVED BY CIT THAT FROM THE ITA NO.3622 & 3623/DEL/2009 C.O.337/DEL/2009 2 DOCUMENTS IT IS REVEALED THAT THE WORK, WHICH HAS B EEN CARRIED OUT BY ROTARY CLUB, GAJRAULA/BHARTIYA GRAM CANNOT BE RECOGNIZED A S WORK DONE BY THE ASSESSEE TRUST. FOR THESE REASONS REGISTRATION HAS BEEN REFUSED TO BE GRANTED. AS REGISTRATION HAS BEEN REFUSED TO BE GRANTED, ASS ESSEES APPLICATION FOR REGISTRATION U/S 80-G HAS ALSO BEEN REFUSED. THE A SSESSEE IS AGGRIEVED IN BOTH THE APPEALS REGARDING NON-GRANT OF REGISTRATION U/S 12A AS WELL AS U/S 80-G OF THE ACT. IN CROSS OBJECTIONS THE REVENUE HAS SUPPORTED THE STAND OF LD. CIT AND, THUS, IT HAS BEEN PLEADED THAT THE REGISTRATION HAS RIGHTLY BEEN DENIED TO THE ASSESSEE TRUST. 2. AT THE OUTSET, IT WAS PLEADED BY LD. AR THAT THE OBJECTS OF THE TRUST ARE UNDOUBTEDLY CHARITABLE. HE, IN THIS REGARD REFERRE D TO THE COPY OF THE TRUST DEED PLACED AT PAGES 1-18 OF THE PAPER BOOK. AS PER CLA USE (III) THE OBJECT INTER ALIA INCLUDED TO PROVIDE BASIC HEALTH CARE FACILITIES TO THE COMMUNITY THROUGH DIRECT OR INDIRECT SUPPORT TO ACHIEVE POSITIVE HEALTH AND IMP ROVE QUALITY OF LIFE; TO SET UP MEDIAL CENTER/HOSPITAL AND RUN THEM SMOOTHLY. IT W AS SUBMITTED THAT NONE OF THE OBJECTS OF THE TRUST CAN BE SAID TO BE NON-CHARITAB LE. IT WAS SUBMITTED THAT IT IS EVEN NOT THE CASE OF THE CIT THAT THE OBJECTS OF TH E TRUST ARE NOT CHARITABLE IN NATURE. IT WAS SUBMITTED THAT REGISTRATION HAS BEE N REFUSED SIMPLY FOR THE REASON THAT CONSTRUCTION OF THE PROPOSED TRAUMA CENTER HAS NOT EVEN STARTED AND THE EXPENSES, IF ANY, WERE INCURRED BY ROTARY CLUB FOR CARRYING OUT CHARITABLE ACTIVITIES. IT WAS SUBMITTED THAT HUGE FUNDS ARE R EQUIRED TO CONSTRUCT TRAUMA CENTER FOR WHICH THE ASSESSEE WAS MAKING EFFORTS AN D CERTAIN FUNDS WERE ALSO COLLECTED. IT WAS SUBMITTED THAT AT THE TIME OF RE GISTRATION WHAT IS IMPORTANT TO SEE IS THE OBJECTS AND THE GENUINENESS OF THE ACTIV ITIES OF THE TRUST. IT WAS SUBMITTED THAT NEITHER THE OBJECTS STATED IN THE TR UST DEED ARE OF NON-CHARITABLE IN NATURE NOR THE ACTIVITIES OF THE TRUST HAVE BEEN FO UND TO BE NON-GENUINE. HE SUBMITTED THAT ACCORDING TO WELL ESTABLISHED PRINCI PLES OF LAW, AT THE TIME OF REGISTRATION, LD. CIT IS ONLY REQUIRED TO SEE THE OBJECTS AND TO SEE THAT WHETHER THE ACTIVITIES OF THE TRUST ARE GENUINELY CARRIED O N. HE SUBMITTED THAT THERE IS NO FAILURE ON THE PART OF THE ASSESSEE ON EITHER GROUN D AND, THEREFORE, REGISTRATION ITA NO.3622 & 3623/DEL/2009 C.O.337/DEL/2009 3 HAS WRONGLY BEEN REFUSED. IT WAS SUBMITTED THAT TH E MATTER MAY BE RESTORED BACK TO THE CIT TO EXAMINE THE APPLICATION OF THE A SSESSEE IN THE LIGHT OF THE PREVALENT LAW WHICH STATE THAT AT THE TIME OF REGIS TRATION THE JURISDICTION OF CIT IS LIMITED TO SEE THE OBJECTS AND ALSO TO SEE THE GENU INENESS OF THE ACTIVITIES AND HIS POWERS ARE NOT EXTENDED BEYOND THAT. 3. ON THE OTHER HAND, OPPOSING THE ARGUMENTS OF LD. AR IT WAS PLEADED BY LD. DR THAT THE ASSESSEE DID NOT CARRY OUT ANY ACTI VITY OF CHARITABLE NATURE. HE CONTENDED THAT EVEN CONSTRUCTION WAS NOT STARTED. HE CONTENDED THAT THE EXPENSES, IF ANY, WERE INCURRED BY ROTARY CLUB ON T HE CHARITABLE ACTIVITIES, THEREFORE, THE APPLICATION FILED BY THE ASSESSEE FO R REGISTRATION U/S 12A AND 80-G WERE RIGHTLY REJECTED. 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. THE ISSUE THAT WHAT IS TO BE DONE AT THE TIME OF SEEKING REGISTRATION BY THE CIT HAS BEEN CONSIDERED BY JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RED ROSE SCHOOL 163 TAXMANN 19 (ALL) AND IT WILL BE RELEVANT TO REPRODUCE THE FOLLOWING OBSERVATIONS OF THEIR LORDSHIPS FROM THE SAID DECISION:- 22. THE PROCEDURE FOR REGISTRATION HAS BEEN GIVEN IN S ECTION 12AA, WHICH READS AS UNDER : 12AA. PROCEDURE FOR REGISTRATION .(1) THE COMMISSIONER, ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRU ST OR INSTITUTION MADE UNDER CLAUSE ( A ) OF SECTION 12A, SHALL - ( A ) CALL FOR SUCH DOCUMENTS OR INFORMATION FORM THE T RUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATI SFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTI TUTION AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THI S BEHALF; AND ( B ) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, HE - ( I )SHALL PASS AN ORDER IN WRITING REGISTERING THE TRU ST OR INSTITUTION; ( II ) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORDER I N WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTION, AND A COPY OF SU CH ORDER SHALL BE SENT TO THE APPLICANT : ITA NO.3622 & 3623/DEL/2009 C.O.337/DEL/2009 4 PROVIDED THAT NO ORDER UNDER SUB-CLAUSE ( II ) SHALL BE PASSED UNLESS THE APPLICANT HAS BEEN GIVEN A REASONABLE OPPORTUNI TY OF BEING HEARD. ( 1A ) ALL APPLICATIONS, PENDING BEFORE THE CHIEF COMMIS SIONER ON WHICH NO ORDER HAS BEEN PASSED UNDER CLAUSE ( B ) OF SUB-SECTION (1) BEFORE THE 1ST DAY OF JUNE, 1999 SHALL STAND TRANSF ERRED ON THAT DAY TO THE COMMISSIONER AND THE COMMISSIONER MAY PROCEE D WITH SUCH APPLICATIONS UNDER THAT SUB-SECTION FROM THE STAGE AT WHICH THEY WERE ON THAT DAY. (2) EVERY ORDER GRANTING OR REFUSING REGISTRATION U NDER CLAUSE ( B ) OF SUB-SECTION (1) SHALL BE PASSED BEFORE THE EXPIRY O F SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE APPLICATION WAS RECEIVED UNDER CLAUSE ( A ) OF SECTION 12A. (3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTE D REGISTRATION UNDER CLAUSE ( B ) OF SUB-SECTION (1) AND SUBSEQUENTLY THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SU CH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIE D OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITU TION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELLIN G THE REGISTRATION OF SUCH TRUST OR INSTITUTION : PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASS ED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A R EASONABLE OPPORTUNITY OF BEING HEARD. SUB-CLAUSE 3, AFORESAID, WAS INSERTED BY THE FINANC E ACT NO. 2 OF 2004 WITH EFFECT FROM 1-10-2004. 23. THE AFORESAID PROVISION CONFERS POWER ON THE COMMI SSIONER WHILE CONSIDERING THE APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUTION MADE UNDER CLAUSE ( A ) OF SECTION 12A TO CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST OR INSTITUT ION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GEN UINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTION, AND ALSO TO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF AND AFTER S ATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTI ON AND THE GENUINENESS OF ITS ACTIVITIES, HE SHALL PASS AN ORD ER IN WRITING REGISTERING THE TRUST OR INSTITUTION AND IF HE IS N OT SATISFIED, HE WOULD REFUSE THE REGISTRATION. 24. SUB-SECTION (3) INSERTED WITH EFFECT FROM 1-10-200 4, GAVE POWER OF CANCELLATION OF REGISTRATION TO THE COMMISSIONER , IF SUBSEQUENTLY HE FINDS AND IS SATISFIED THAT ACTIVITIES OF SUCH T RUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDA NCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION. 25. POWER OF CANCELLATION OF REGISTRATION HAS BEEN CON FERRED WITH A VIEW TO ENSURE THAT IF ONCE A REGISTRATION HAS BEEN GRANTED UNDER SECTION 12AA, THE TRUST OR THE INSTITUTION MAY NOT TAKE LIBERTY OF MISUSING THE PROVISION AND CONSEQUENTLY GO HAYWIRE IN FURTHERING ITA NO.3622 & 3623/DEL/2009 C.O.337/DEL/2009 5 THE OBJECT OF THE TRUST OR ITS ACTIVITIES DO NOT RE MAIN GENUINE ANY FURTHER. 26. THE MOOT QUESTION WHICH HAS BEEN PRESSED FROM BOTH THE SIDES, AS PER THEIR OWN INTERESTS, IS REGARDING THE SCOPE OF AUTHORITY AND THE EXTENT OF INVESTIGATION BY THE COMMISSIONER FOR THE PURPOSE OF SATISFYING ABOUT THE GENUINENESS OF THE ACTIVITI ES OF THE TRUST OR INSTITUTION, FOR THE PURPOSE OF GRANT OF REGISTRATI ON. 27. THE REVENUE HAS, IN SUBSTANCE, PLEADED THAT THE COMMISSIONER, WHILE SATISFYING HIMSELF ABOUT THE GE NUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION, HAS GOT FULL POWER TO MAKE ANY SUCH ENQUIRIES, WHICH MAY REFLECT UPON THE GENU INENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION AND FOR THAT PURPOSE, THE INCOME DERIVED BY THE TRUST OR THE INSTITUTION, ITS EXPEND ITURE AND ALSO OTHER ACTIVITIES, IN THE MATTER OF CARRYING OUT THE OBJEC TS OF THE TRUST, CAN BE SUBJECTED TO SCRUTINY BEFORE GRANTING REGISTRATI ON. 28. IN RESPONSE, THE ASSESSEE SUBMITS THAT THE COMMISS IONER HAS TO LIMIT HIS ENQUIRIES ONLY TO THE OBJECT OF THE SO CIETY, TO SEE THAT THE OBJECTS ARE NOT AGAINST PUBLIC POLICY AND THEY ARE, IN EFFECT, THE OBJECTS FOR CHARITABLE PURPOSES AND IT CANNOT BE DI SPUTED THAT EDUCATION IS ONE SUCH CHARITABLE PURPOSE AND THAT G ENUINENESS OF THE ACTIVITIES WOULD ONLY RELATE TO THE INCOME DERI VED BY THE INSTITUTION AND NOT IN WHAT MANNER THE SAME HAS BEE N SPENT. 29. ELABORATING THE AFORESAID ARGUMENT, IT HAS BEEN SU BMITTED THAT SINCE THE PROVISIONS OF SECTION 12A DEBARS A TRUST OR AN INSTITUTION FROM CLAIMING ANY EXEMPTION UNDER SECTION 11 OR SEC TION 12 AND CONSEQUENTLY THE APPLICABILITY OF SECTION 13, IN TH E ABSENCE OF REGISTRATION UNDER SECTION 12AA, THE COMMISSIONER W AS ONLY TO SEE THAT WHETHER THE INCOME OF THE TRUST/INSTITUTION FA LLS WITHIN ANY OF THE HEADS UNDER THE AFORESAID PROVISIONS OF SECTIONS 11 AND 12, AND IN CASE DURING THE ASSESSMENT PROCEEDINGS, FOR ANY PAR TICULAR ASSESSMENT YEAR, THE ASSESSING OFFICER FINDS THAT E ITHER THE INCOME DERIVED CANNOT BE SAID TO BE INCOME FROM EDUCATIONA L ACTIVITIES OR ITS EXPENDITURE CANNOT BE ATTRIBUTED TO ANY EDUCATI ONAL PURPOSE, HE WOULD BE AT LIBERTY TO ASSESS THAT INCOME AND LEVY TAX BUT ON THE CONTRARY, IN THE ABSENCE OF REGISTRATION, THE ASSES SEE WOULD BE DEPRIVED OF CLAIMING SUCH BENEFIT, EVEN THOUGH IT I S OTHERWISE ENTITLED FOR THE SAME EITHER IN RESPECT OF THE ENTI RE INCOME OR A PART THEREOF. SUBMISSION FURTHER IS THAT THE GROUNDS TAK EN BY THE COMMISSIONER OF INCOME-TAX IN THE INSTANT CASE, DO NOT CONSTITUTE ANY VALID REASON FOR REJECTION OF REGISTRATION AND, THEREFORE, ALSO THE ORDER OF THE ITAT, CANNOT BE INTERFERED WITH NOR AN Y SUBSTANTIAL QUESTION OF LAW ARISES IN THE APPEAL SO AS TO WARRA NT ANY INTERFERENCE. 30. ON A READING OF PROVISIONS OF SUB-CLAUSES ( A ) AND ( B ) OF SECTION 12AA, IT MAKES CLEAR THAT THE COMMISSIONER HAS TO S ATISFY HIMSELF ITA NO.3622 & 3623/DEL/2009 C.O.337/DEL/2009 6 ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUS T OR INSTITUTION AND ALSO ABOUT THE OBJECTS OF THE TRUST OR THE INSTITUT ION. 31. ON BEING SATISFIED ABOUT THE GENUINENESS OF THE AC TIVITIES OF THE TRUST OR THE INSTRUCTION AND ALSO ABOUT ITS OBJECTS , THE COMMISSIONER WOULD EITHER GRANT THE CERTIFICATE OR WOULD REJECT THE PRAYER. IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACT IVITIES OF THE TRUST OR THE INSTITUTION, HE CAN CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST OR THE INSTITUTION, AS HE THINKS NEC ESSARY AND HE IS ALSO EMPOWERED TO MAKE SUCH ENQUIRIES AS HE MAY DEE M NECESSARY IN THIS BEHALF. 32. THE OBJECTS OF THE TRUST CAN BE HAD FROM THE BYE-L AWS OR THE DEED OF TRUST, AS THE CASE MAY BE AND UNLESS, OF CO URSE, THE OBJECTS OF THE TRUST APPARENTLY MAKE OUT THAT THEY WERE NOT IN CONSONANCE WITH THE PUBLIC POLICY OR THAT THEY WERE NOT THE OB JECTS OF ANY CHARITABLE PURPOSE, REGISTRATION CANNOT BE REFUSED ACCORDINGLY ON THIS GROUND. 33. IN REGARD TO THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION, WHOSE OBJECTS DO NOT RUN CONTRARY TO P UBLIC POLICY AND ARE, IN FACT, RELATED TO CHARITABLE PURPOSES, THE C OMMISSIONER IS AGAIN EMPOWERED TO MAKE ENQUIRIES AS HE THINKS FIT. IN CASE THE ACTIVITIES ARE NOT GENUINE AND THEY ARE NOT BEING C ARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST/SOCIETY OR THE INSTITUTION, OF COURSE, THE REGISTRATION CAN AGAIN BE REFUSED. BUT ON MERE PRESUMPTIONS AND ON SURMISES THAT INCOME DERIVED BY THE TRUST OR THE INSTITUTION IS BEING MISUSED OR THAT THERE IS S OME APPREHENSION THAT THE SAME WOULD NOT BE USED IN THE PROPER MANNE R AND FOR THE PURPOSES RELATING TO ANY CHARITABLE PURPOSE, REJECT ION CANNOT BE MADE. 34. SECTION 12AA, WHICH LAYS DOWN THE PROCEDURE FOR RE GISTRATION, DOES NOT SPEAK ANYWHERE THAT THE COMMISSIONER, WHIL E CONSIDERING THE APPLICATION FOR REGISTRATION, SHALL ALSO SEE TH AT THE INCOME DERIVED BY THE TRUST OR THE INSTITUTION IS EITHER N OT BEING SPENT FOR CHARITABLE PURPOSE OR SUCH INSTITUTION IS EARNING P ROFIT. THE LANGUAGE USED IN THE SECTION ONLY REQUIRES THAT ACT IVITIES OF THE TRUST OR THE INSTITUTION MUST BE GENUINE, WHICH ACCORDING LY WOULD MEAN, THEY ARE IN CONSONANCE WITH THE OBJECTS OF THE TRUS T/INSTITUTION, AND ARE NOT MERE CAMOUFLAGE BUT ARE REAL, PURE AND SINC ERE, NOR AGAINST THE PROPOSED OBJECTS. THE PROFIT EARNING OR MISUSE OF THE INCOME DERIVED BY CHARITABLE INSTITUTION FROM ITS CHARITAB LE ACTIVITIES, MAY BE A GROUND FOR REFUSING EXEMPTION ONLY WITH RESPECT T O THAT PART OF THE INCOME BUT CANNOT BE TAKEN TO BE A SYNONYM TO THE G ENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION. 35. THIS IS MORE EVIDENT IF WE SEE THE PROVISIONS OF S ECTION 11, WHICH, WHILE EXEMPTING THE INCOME GIVEN IN ITS VARI OUS SUB-CLAUSES FROM BEING INCLUDED IN THE TOTAL INCOME OF THE PREV IOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME, FOR EXAMPLE, IN SU B-CLAUSE (1) SAYS ITA NO.3622 & 3623/DEL/2009 C.O.337/DEL/2009 7 INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOL LY FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA; AND WHERE ANY SUCH INCOM E IS ACCUMULATED OR SET APART FOR APPLICATION TO SUCH PU RPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOME SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF FIFTEEN PER CENT OF THE INCOME FROM SU CH PROPERTY. 36. THE AFORESAID PROVISION THUS, CLARIFIES THAT ALL T HAT INCOME, WHICH IS DERIVED FROM THE PROPERTY HELD UNDER THE TRUST W HOLLY FOR CHARITABLE PURPOSES OR RELIGIOUS PURPOSES, SHALL ST AND EXEMPTED TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA BUT IF THE INCOME IS ACCUMULATED OR SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA, THE SAME SHALL NOT BE IN EX CESS OF FIFTEEN PER CENT OF THE INCOME FROM SUCH PROPERTY. 37. SUB-SECTION (2) OF SECTION 11 STATES ABOUT A SITUA TION WHERE EIGHTY FIVE PER CENT OF THE INCOME REFERRED TO IN C LAUSE ( A ) OR CLAUSE ( B ) OF SUB-SECTION (1) READ WITH THE EXPLANATION TO THAT SUB-SECTION IS NOT APPLIED, OR IS NOT DEEMED TO HAVE BEEN APPLI ED, TO CHARITABLE OR RELIGIOUS PURPOSES IN INDIA DURING THE PREVIOUS YEAR BUT IS ACCUMULATED OR SET APART, EITHER IN WHOLE OR IN PAR T, FOR APPLICATION TO SUCH PURPOSES IN INDIA, AND SAYS THAT IN SUCH A SITUATION, SUCH INCOME SO ACCUMULATED OR SET APART SHALL NOT BE INC LUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME, PROVIDED THE CONDITIONS GIVEN IN SUB-CLAUSE S ( A ) AND ( B ) ARE COMPLIED WITH. 38. THIS ALSO MEANS THAT EVEN THAT INCOME, WHICH COULD NOT BE EXEMPTED UNDER SUB-CLAUSE ( A ) OR ( B ) OF SUB-SECTION (1), CAN STILL BE EXEMPTED, IF THE CONDITIONS ATTACHED TO SUB-SECTION (2) IN ITS SUB- CLAUSES ( A ) AND ( B ) ARE COMPLIED WITH. 39. SUB-SECTION (3) AGAIN SAYS THAT IF ANY INCOME REFE RRED TO IN SUB- SECTION (2) IS APPLIED TO PURPOSES OTHER THAN CHARI TABLE OR RELIGIOUS PURPOSES AS AFORESAID OR CEASES TO BE ACCUMULATED O R SET APART FOR APPLICATION THERETO, OR CEASES TO REMAIN INVESTED O R DEPOSITED IN ANY OF THE FORMS OR MODES SPECIFIED IN SUB-SECTION (5), OR IS NOT UTILISED FOR THE PURPOSE FOR WHICH IT IS SO ACCUMUL ATED OR SET APART DURING THE PERIOD REFERRED TO IN CLAUSE ( A ) OF THAT SUB-SECTION OR IN THE YEAR IMMEDIATELY FOLLOWING THE EXPIRY THEREOF, OR IS CREDITED OR PAID TO ANY TRUST OR INSTITUTION REGISTERED UNDER S ECTION 12AA OR TO ANY FUND OR INSTITUTION OR TRUST OR INSTITUTION REG ISTERED UNDER SECTION 12AA OR TO ANY FUND OR INSTITUTION OR TRUST OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER ME DICAL INSTITUTION REFERRED TO IN SUB-CLAUSE ( IV ) OR SUB-CLAUSE ( V ) OR SUB-CLAUSE ( VI ) OR SUB-CLAUSE ( VIA ) OF CLAUSE ( 23C ) OF SECTION 10, SHALL BE DEEMED TO BE THE INCOME OF SUCH PERSON OF THE PREVIOUS YEAR I N WHICH IT IS SO APPLIED OR CEASES TO BE ACCUMULATED OR SET APART OR CEASES TO REMAIN SO INVESTED OR DEPOSITED OR CREDITED OR PAID OR, AS THE CASE ITA NO.3622 & 3623/DEL/2009 C.O.337/DEL/2009 8 MAY BE, OF THE PREVIOUS YEAR IMMEDIATELY FOLLOWING THE EXPIRY OF THE PERIOD AFORESAID. 40. SECTION 12 ALSO ONLY SAYS THAT ANY VOLUNTARY CONTR IBUTIONS RECEIVED BY A TRUST CREATED WHOLLY FOR CHARITABLE O R RELIGIOUS PURPOSES OR BY AN INSTITUTION ESTABLISHED WHOLLY FO R SUCH PURPOSES, SHALL FOR THE PURPOSES OF SECTION 11 BE DEEMED TO B E INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR C HARITABLE OR RELIGIOUS PURPOSES AND THE PROVISIONS OF THAT SECTI ON AND SECTION 13 SHALL APPLY ACCORDINGLY. 41. THE PROVISION THUS, EMPHASIZES UPON THE INCOME OF THE TRUST CREATED WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES OR AN INSTITUTION ESTABLISHED WHOLLY FOR SUCH PURPOSES AND SO IS THE CASE IN SUB- SECTION (2) OF THE AFORESAID SECTION. THE PROVISION S OF SECTION 13 EXCLUDES THE APPLICABILITY OF SECTION 11 IN CERTAIN CASES. 42. A CUMULATIVE READING OF THE AFORESAID PROVISIONS L EAVES NO MANNER OF DOUBT THAT EXEMPTION UNDER THE AFORESAID PROVISIONS CAN BE CLAIMED WITH RESPECT TO THE INCOME DERIVED BY TH E TRUST OR THE INSTITUTION, WHICH IS BEING RUN FOR A CHARITABLE PU RPOSE AND, THEREFORE, WHILE CONSIDERING THE REGISTRATION UNDER SECTION 12AA, THE SCOPE OF ENQUIRY OF THE COMMISSIONER, WOULD BE LIMITED TO THE AFORESAID EXTENT. 43. SINCE IN THE ABSENCE OF SUCH REGISTRATION, THE TRU ST OR THE INSTITUTION WOULD NOT BE ENTITLED TO CLAIM ANY EXEM PTION OF THE INCOME DERIVED, THOUGH IT IS BEING RUN FOR CHARITAB LE PURPOSES, THE REGISTRATION HAS TO BE CONSIDERED IN THE LIGHT OF T HE SPECIFIC PROVISIONS AFORESAID AND IN THE MANNER THAT IT FURT HERS THE OBJECT OF THE SCHEME OF REGISTRATION AND, OF COURSE, EXEMPTIO N OF THE ENTIRE INCOME OR THE PART OF THE INCOME, AS THE CASE MAY B E, OF A CHARITABLE TRUST OR INSTITUTION HAS TO BE CONSIDERE D DURING ASSESSMENT PROCEEDINGS. 44. IT IS SIGNIFICANT TO MENTION THAT REGISTRATION UND ER SECTION 12AA, DOES NOT NECESSARILY ENTITLE THE ASSESSEE TO GET TH E INCOME EXCLUDED FROM THE INCOME OF THE PREVIOUS YEAR FOR T HE PURPOSE OF DETERMINATION OF TAX LIABILITY BUT IT ONLY ENTITLES THE ASSESSEE TO CLAIM SUCH EXEMPTION, WHICH OTHERWISE COULD NOT BE CLAIME D IN THE ABSENCE OF REGISTRATION. THE ENQUIRY BY THE COMMISS IONER SHALL REMAIN RESTRICTED TO THE EXAMINA-TION, AS TO WHETHE R THE ASSESSEE, WHO HAS MOVED THE APPLICATION FOR REGISTRATION UNDE R SECTION 12A, IS ACTUALLY IN THE ACTIVITIES WHICH ARE GENUINE. GE NUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION HAS TO B E SEEN, KEEPING IN MIND THE OBJECTS THEREOF, WHICH NECESSARILY MEANS T HAT THE COMMISSIONER SHALL SATISFY HIMSELF ABOUT THE FACT T HAT THE ACTIVITIES ARE GENUINE AND IN CONSONANCE WITH THE OBJECTS OF T HE TRUST OR THE INSTITUTION. IN OTHER WORDS, IF ESTABLISHING AND RU NNING A SCHOOL IS THE OBJECT OF THE SOCIETY, AS GIVEN IN ITS BYE-LAWS, IT HAS TO BE SATISFIED THAT THE SOCIETY HAS ESTABLISHED THE SCHOOL, WHERE EDUCATION IS ITA NO.3622 & 3623/DEL/2009 C.O.337/DEL/2009 9 BEING IMPARTED AS PER RULES AND THE FACTUM OF ESTAB LISHMENT AND RUNNING SCHOOL IS A GENUINE ACTIVITY. THE ENQUIRY R EGARDING GENUINENESS OF THE ACTIVITIES CANNOT BE STRETCHED B EYOND THIS. 45. SUFFICIENT SAFEGUARDS HAVING BEEN GIVEN IN SECTION S 11, 12 AND 13 FOR ASSESSING THE INCOME WHICH HAS NOT BEEN APPL IED TO THE PURPOSE OF THE TRUST OR THE INSTITUTION, THE INTENT ION OF THE LAW MAKER AND THE SCOPE AND PURPORT OF THE PROVISION IS APPAR ENT WHILE CONSIDERING THE QUESTION OF REGISTRATION. 62. THE SCHEME OF SECTION 12A AND SECTION 12AA DOES NO T ALLOW ANY PERSON/TRUST OR INSTITUTION TO TAKE BENEFIT OF THE PROVISIONS OF SECTION 11, SECTION 12, AS THE CASE MAY BE, UNLESS REGISTRATION UNDER SECTION 12AA IS OBTAINED AND THAT SUB-CLAUSE (3) OF SECTION 12AA PUTS COMPLETE CONTROL OVER THE ACTIVITIES OF T HE TRUST OR THE INSTITUTION AND IF IT IS FOUND AT ANY SUBSEQUENT ST AGE, THAT ITS ACTIVITIES ARE NOT BEING CARRIED AS PER THE OBJECTS OR THEY DO NOT REMAIN GENUINE, ACTION FOR CANCELLATION OF REGISTRA TION CAN BE TAKEN. 5. IF THE FACTS OF THE PRESENT CASE ARE SEEN FROM T HE LAW EXPLAINED IN THE ABOVE DECISION, IT WILL BE REQUIRED TO SEE THAT WHE THER OBJECTS OF THE ASSESSEE TRUST ARE CHARITABLE IN NATURE. IN OUR OPINION, TH ERE IS NO DISPUTE TO THIS EXTENT AS IT IS NOT EVEN THE CASE OF THE CIT THAT THE OBJECT S OF THE ASSESSEE TRUST ARE NOT CHARITABLE IN NATURE. THE SECOND THING WHICH IS RE QUIRED TO BE EXAMINED IS GENUINENESS OF THE ACTIVITIES OF THE TRUST WHOSE OB JECTS DO NOT RUN CONTRARY TO THE PUBLIC POLICY. IN THAT CASE THE COMMISSIONER IS EM POWERED TO MAKE INQUIRY AS HE THINKS FIT IN CASE THE ACTIVITIES ARE NOT GENUIN E AND IF THEY ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST/SOC IETY OR THE INSTITUTION, OF COURSE, THE REGISTRATION CAN AGAIN BE REFUSED. BUT IN THE PRESENT CASE, IT IS NOT EVEN THE CASE OF COMMISSIONER THAT THE ACTIVITY OF THE TRUST ARE NOT GENUINE. THE REGISTRATION IS REFUSED SIMPLY ON THE GROUND THAT C ONSTRUCTION ACTIVITY OF TRAUMA CENTER HAS NOT BEEN CARRIED OUT. HERE, IT WILL BE RELEVANT TO MENTION THAT THE ASSESSEE IS IN THE PROCESS OF GENERATING FUNDS FOR CONSTRUCTION OF TRAUMA CENTER. THE LAND, AS PER SUBMISSIONS MADE BEFORE THE CIT W AS GRANTED BY NAGAR PANCHAYAT, GAJRAULA TO CONSTRUCT THE TRAUMA CENTER. THUS, IT IS A STEP TAKEN BY THE ASSESSEE TO ACHIEVE ITS OBJECTS. IT HAS ALSO B EEN MENTIONED THAT THE ASSESSEE IS IN THE PROCESS OF GENERATING FUNDS TO C ONSTRUCT THE SAME. ALL THESE ITA NO.3622 & 3623/DEL/2009 C.O.337/DEL/2009 10 FACTS HAVE NOT BEEN MENTIONED IN THE ORDER OF THE C IT. IF THE ASSESSEE IS TAKING STEPS TOWARDS FULFILLMENT OF THE OBJECTS, THEN, REG ISTRATION CANNOT BE REFUSED TO THE ASSESSEE SIMPLY FOR THE REASON THAT NO CONSTRUCTION ACTIVITY HAS BEGUN. IN THIS VIEW OF THE SITUATION, ACCEPTING THE REQUEST OF THE LD. AR, WE RESTORE THESE APPEALS TO THE FILE OF THE LD. CIT (A) WITH A DIREC TION TO DECIDE THE SAME IN THE LIGHT OF PRINCIPLES LAID DOWN BY HONBLE JURISDICTI ONAL HIGH COURT IN THE CASE OF CIT VS. RED ROSE SCHOOL (SUPRA). WE DIRECT ACCORDINGLY . 6. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APP EALS FILED BY THE ASSESSEE AS WELL AS CROSS OBJECTIONS FILED BY THE REVENUE ARE T REATED TO BE ALLOWED.. . 7. THE ORDER PRONOUNCED IN THE OPEN COURT ON 30.10. 2009. [P.K. BANSAL] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED,30.10.2009. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES