Chhabi Roy Trust, Lucknow V. C..I.T. I, Lucknow

ITA 416/LKW/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8163 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-07-2012
• Assessment Year: 2011-2012
• Appeal Filed On: 04-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Assessee Lawyers: J J MEHROTRA
• Keywords: Charitable institution; Benefit of exemption
• Section: 12A; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI B. R. JAIN , ACCOUNTANT MEMBER ITA NO. 416/LKW/2011 ASSESSMENT YEAR: 2011 - 12 CHHABI ROY TRUST SAHARA SCHOOL OF BUSINESS 1, KAPOOR THALA COMPLEX ALIGANJ, LUCKNOW V. CIT - I LUCKNOW PAN: AABTC2189Q (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. J. J. MEHROTRA, C.A. RESPONDENT BY: SHRI. ALOK MITRA, D.R. DATE OF HEARING: 26.07.2012 DATE OF PRONOUNCEMENT: 23.08.2012 O R D E R PER S UNIL K UMAR YADAV : THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX DENYING REGISTRATION UNDER SECTION 12AA OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT'). 2 . THE FACTS IN BRIEF BORNE OUT FROM TH E RECORD ARE THAT THE ASSESSEE - TRUST APPLIED FOR REGISTRATION UNDER SECTION 12AA OF THE ACT , WITH THE LD. COMMISSIONER OF INCOME - TAX. HAVING NOTED CERTAIN DEFECTS IN THE TRUST DEED , THE LD. COMMISSIONER OF INCOME - TAX DENIED REGISTRATION TO THE ASSESSEE - TR UST UNDER SECTION 12AA OF THE ACT . THE DENIAL WAS PRIMARILY FOR THE REASON S THAT THERE IS NO CLAUSE INDICATING THE DISTRIBUTION OF ASSETS IN CASE OF DISSOLUTION OF THE TRUST AND DURING THE YEAR THE TRUST HAS RECEIVED FREE HOLD LAND FOR ` 53,60,020 AS DONAT ION TOWARDS CORPUS FROM ONE OF THE : - 2 - : SAHARA GROUP OF COMPANIES, NAMELY M/S SAHARA PRIME CITY LTD., BUT NO DOCUMENT WAS EXECUTED IN FAVOUR OF THE TRUST AND THE LAND HAS BEEN DIRECTLY TRANSFERRED IN THE NAME OF THE ASSESSEE - TRUST BY M/S RUKMINI SAHKARI GRIH NI RMAN SAMIT LTD., LUCKNOW. THE LD. COMMISSIONER OF INCOME - TAX CONSEQUENTLY HELD THAT THE SETTLER HAS NO INTENTION TO SETTLE ANY SUCH TRUST BUT IT WAS CREATED AT THE INSTANCE OF SAHARA GROUP OF COMPANIES TO RUN A BUSINESS OF SCHOOLING IN THE GUISE OF TRUST. 3 . AGAINST THE AFORESAID DENIAL OF REGISTRATION UNDER SECTION 12AA OF THE ACT, THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND INVITED OUR ATTENTION TO THE COPY OF THE TRUST DEED WITH THE SUBMISSION THAT THE OBJECTS OF THE TRUST CLEARLY DEPICT T HAT IT WAS CONSTITUTED FOR THE CHARITABLE PURPOSES MAINLY TO OPEN, RUN, CONTINUE AN EDUCATIONAL AND VOCATION INSTITUTION IN HEALTHY SURROUNDINGS AND ALSO TO ENGAGE TEACHERS, PROFESSORS, INSTRUCTORS AND EXPERTS OF GOOD MORAL CHARACTER AND CAPABLE TO IMPART EFFICIENTLY AND ECONOMICALLY UP - TO - DATE INSTRUCTION TO STUDENTS IN MODERN SCIENCES, INDUSTRIAL AVOCATIONS, RESEARCH WORK, INTELLECTUAL AND OTHER U SUAL PURSUITS. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT THE TRUST IS IRREVOCABLE TRUST AND IT WOULD NOT BE DISSOLVED AT ANY POINT OF TIME. THE RELEVANT CLAUSE IN THIS REGARD IN THE TRUST DEED IS CLAUSE 6 AND ACCORDING TO OTHER CLAUSE S, IT IS SPECIFIED IN THE TRUST DEED THAT AS AND WHEN VACANCY OCCURS ON ACCOUNT OF DEATH OF A TRUSTEE OR THE ABSENCE OF A TRUST EE FOR MORE THAN A YEAR, THE OTHER TRUSTEES MAY FILL UP THE VACANCY BY APPOINTING NEW TRUSTEE. THEREFORE, THIS TRUST WILL FUNCTION IN PERPETU ITY . SO FAR AS THE PURCHASE OF LAND IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATT ENTION TO THE SALE DEED WITH THE SUBMISSION THAT THE LAND WAS PURCHASED IN THE NAME OF THE TRUST FROM M/S RUKMINI SAHKARI GRIH NIRMAN SAMIT LTD., LUCKNOW OUT OF THE FUNDS OF M/S SAHARA PRIME CITY LTD. AND THE LAND WAS FINALLY DONATED TO THE CORPUS OF THE T RUST. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO INVITED OUR ATTENTION TO THE LETTER DATED : - 3 - : 21.10.2010 OF M/S SAHARA PRIME CITY LTD. WITH REGARD TO THESE FACTS. THEREFORE, THE LD. COMMISSIONER OF INCOME - TAX HAS DISALLOWED REGISTRATION UNDER SECTION 12AA OF THE ACT ON CONJECTURES AND SURMISES WITHOUT VERIFYING THE CORRECT FACTS. IT WAS FURTHER CONTENDED ON BEHALF OF THE ASSESSEE THAT THERE IS NO BAR IN LAW THAT THE PERSONS RELATED TO EACH OTHER CANNOT BECOME TRUSTEE S OF THE TRUST. WHILE GRANTING REGISTRATI ON UNDER SECTION 12AA OF THE ACT, THE LD. COMMISSIONER OF INCOME - TAX IS ONLY REQUIRED TO EXAMINE/VERIFY FROM THE OBJECTS OF THE TRUST WHETHER THE TRUST IS CREATED FOR CHARITABLE PURPOSES OR NOT. THE APPLICATION OF INCOME OF THE TRUST CAN ONLY BE EXAMINED WHILE GRANTING BENEFIT OF EXEMPTION UNDER SECTION 11 OF THE ACT BY THE ASSESSING OFFICER WHILE FRAMING REGULAR ASSESSMENT. THEREFORE, NOTHING IS BROUGHT OUT BY THE LD. COMMISSIONER OF INCOME - TAX ON RECORD TO ESTABLISH THAT THE TRUST WAS NO T CREATED FOR CH ARITABLE PURPOSES. HE HAS ALSO INVITED OUR ATTENTION TO THE FOLLOWING JUDGMENTS IN SUPPORT OF HIS CONTENTION THAT SCOPE OF ENQUIRY WHILE GRANTING REGISTRATION UNDER SECTION 12AA OF THE ACT IS LIMITED WITH RESPECT TO THE OBJECTS OF THE TRUST: - 1 . CIT V. RED R OSE SCHOOL, 163 TAXMANN 19 (ALL.) 2 . SHREE KRISHNA EDUCATION & WELFARE TRUST V. CIT, 27 SOT 331 (DEL) 3 . FIFTH GENERATION EDUCATION SOCIETY V. CIT, 185 ITR 634 (ALL.) 4 . SMT. MANSUKHI DEVI BEHANI JAN HITKARI TRUST V. CIT, 94 ITD 1 (JODH.) 4 . THE LD. D.R., BESIDES PL ACING RELIANCE UPON THE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX, HAS CONTENDED THAT THE TRUST IS AN EXPANSION OF SAHARA GROUP OF COMPANIES AND THEIR OBJECT IS TO RUN BUSINESS OF EDUCATION UNDER THE GARB OF TRUST. THE LD. COMMISSIONER OF INCOME - TAX HAS RIGHTLY POINTED OUT IN HIS ORDER THAT THE OBJECT OF THE TRUST IS TO RUN A BUSINESS OF SCHOOLING IN THE GUISE OF TRUST. : - 4 - : 5 . HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF RECORD, WE FIND THAT THE MAIN OBJECTIONS FOR DENIAL OF REGISTRATION UNDER SECTION 12AA OF THE ACT RAISED BY THE LD. COMMISSIONER OF INCOME - TAX ARE (1) MAJORITY OF TRUSTEES ARE SUBRATA ROY FAMILY MEMBERS AND REMAINING EMPLOYEES ARE OF SAHARA GROUP OF COMPANIES; (2) TRUST HAS RECEIVED FREE HOLD LAN D AS DONATION FROM ONE OF THE GROUP OF COMPANIES, NAMELY M/S SAHARA PRIME CITY LTD. BUT THE LAND WAS TRANSFERRED IN THE NAME OF THE TRUST BY M/S RUKMINI SAHKARI GRIH NIRMAN SAMIT LTD., LUCKNOW WITHOUT EXECUTING THE TRANSFER DEED BY M/S SAHARA PRIME CITY LT D. AND (3) THERE IS NO CLAUSE INDICATING DISTRIBUTION OF ASSETS IN CASE OF DISSOLUTION OF THE TRUST. 6 . WHILE GRANTING REGISTRATION UNDER SECTION 12AA OF THE ACT, THE LD. COMMISSIONER OF INCOME - TAX IS REQUIRED TO EXAMINE THE OBJECTS OF THE TRUST WHETHER IT IS CHARITABLE OR NOT AND IN ORDER TO ARRIVE AT A CONCLUSION THE LD. COMMISSIONER OF INCOME - TAX IS EMPOWERED TO MAKE NECESSARY ENQUIRY/VERIFICATION. BUT NOWHERE IT HAS BEEN MENTIONED THAT THE TRUSTEES OF THE TRUST CANNOT BE FAMILY MEMBER OF A PARTICULAR PERS ON OR OF A SETTLER. THE REQUIREMENT OF LAW IS THAT REGISTRATION CAN ONLY BE GRANTED TO A TRUST WHICH IS FORMED FOR THE CHARITABLE PURPOSES. IT IS TOTALLY IRRELEVANT AS TO WHO ARE THE TRUSTEES OF THE TRUST. ONLY THE ACT OR THE FUNCTION OF THE TRUST IS TO BE EXAMINED. THEREFORE, IT CANNOT BE A VALID GROUND FOR REJECTION OF REGISTRATION OF THE TRUST UNDER SECTION 12AA OF THE ACT THAT MAJORITY OF TRUSTEES ARE SUBRATA ROY FAMILY MEMBERS AND REMAINING ARE THE EMPLOYEES OF SAHARA GROUP OF COMPANIES. ONLY A PER SON OF LIKEMINDED CAN RUN THE TRUST IN BETTER WAY . SO FAR AS THE OTHER OBJECTION OF THE LD. COMMISSIONER OF INCOME - TAX WITH REGARD TO PURCHASE OF LAND IN THE NAME OF THE TRUST IS CONCERNED, WE HAVE CAREFULLY EXAMINED THE TRUST DEED AND WE FIND THAT THE LA ND WAS SOLD TO THE TRUST IN ITS OWN NAME BY M/S RUKMINI SAHKARI GRIH NIRMAN SAMIT LTD., LUCKNOW AND THE SALE CONSIDERATION WAS : - 5 - : DIRECTLY PAID BY M/S SAHARA PRIME CITY LTD. THROUGH DEMAND DRAFT . M/S SAHARA PRIME CITY LTD. HAS CLARIFIED THAT THEY HAVE MADE P AYMENT TOWARDS THE LAND DIRECTLY THROUGH DEMAND DRAFT TO THE SELLER AND THIS DONATION OF LAND WAS TOWARDS CORPUS. THE METHOD ADOPTED BY M/S SAHARA PRIME CITY LTD. FOR DONATION OF ` 53,60,020 FOR PURCHASE OF LAND CANNOT BE CONSIDERED TO BE ILLEGAL UNDER THE EYES OF LAW AS THE DONATION OF AMOUNT OF ANY FIGURE TO A TRUST DOES NOT REQUIRE ANY EXECUTION OF REGISTERED DOCUMENT. A MERE LETTER STATING THE INTENTION OF THE DONOR IS SUFFICIENT. UNDISPUTEDLY THE LAND WAS PURCHASED IN THE NAME OF THE TRUST THROUGH TH E FUND RECEIVED FROM M/S SAHARA PRIME CITY LTD. ,FOR WHCIH PAYMENTS WERE DIRECTLY MADE BY M/S SAHARA PRIME CITY LTD. TO THE SELLER OF THE LAND. THEREFORE, UNDER ANY CIRCUMSTANCES , THIS TRANSACTION CANNOT BE CONSIDERED TO BE ILLEGAL FOR DENYING REGISTRATION UNDER SECTION 12AA OF THE ACT. 7 . THE THIRD OBJECTION OF THE LD. COMMISSIONER OF INCOME - TAX IS WITH RESPECT TO THE ABSENCE OF CLAUSE INDICATING DISTRIBUTION OF ASSETS IN CASE OF DISSOLUTION OF THE TRUST. IN THIS REGARD, WE HAVE CAREFULLY EXAMINED THE TRUST DEED AND WE FIND THAT THE TRUST IS IRREVOCABLE TRUST AND WHEN THE TRUST IS IRREVOCABLE THERE CANNOT BE A CLAUSE FOR DISTRIBUTION OF ASSETS ON DISSOLUTION OF THE TRUST. HAD IT BEEN THERE, IT WOULD BE A CONTRADICTORY CLAUSE IN THE TRUST DEED WHICH IS NOT PE RMISSIBLE. IN THE TRUST DEED, THE MODE OF APPOINTMENT OF TRUSTEES IN CASE OF ABSENCE OF A TRUST EE FOR A YEAR OR HIS/HER DEATH IS ALSO SPECIFIED IN THE TRUST DEED. THE RELEVANT CLAUSE I.E. CLAUSE NO. 6 & 11 ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENC E: - 6. THE TRUST HEREBY DECLARED SHALL BE IRREVOCABLE. 11. IF AND SO OFTEN AS ANY OF THE TRUSTEES H EREUNDER APPOINTED OR ANY FUTURE TRUSTEES OR TRUSTEE OF THESE PRESENTS HALL DIE OR SHALL LEAVE INDIA FOR MORE TH AN ONE YEAR OR SHALL DESIRE TO RETIRE, FR OM OR REFUSES TO ACT OR BECOME INCAPABLE TO ACT IN THE : - 6 - : TRUSTS OF THESE PRESENTS OR OTHERWISE , IT SHALL BE LAWFUL FOR THE SURVIVING OR CONT INUI NG TRUSTEE OR TRUSTEES FO R THE TIME BEING O F THESE PRESENTS (AND FOR THIS PURPOSE TO ACT IN THE EXECUTION OF THIS POWER BE CONSIDERED TO BE CO NTINUING TRUSTEE) OR FOR THE PROVING EXECUTORS OR ADMINISTRATORS OF THE LAST SURVIVING TRUSTEE TO APPOINT A NEW TR U STEE IN PLACE OF THE TRUSTEES OR TR U STEE SO DYING OR LEAVING INDIA OR DESIRIN G TO RETIRE F R OM THE TRUST OR OTHERW ISE T O APPOINT NEW OR ADDITIONAL TRUSTEE OR TRUSTEES AND UPON EVERY OR ANY SUCH APPOINT M ENT THE NUMBER OF TRUSTEES MAY BE AUGMENTED OR REDUCED AND UPON EVERY SUCH APPOINTMENT THE TRUST ESTATE SHALL BE TRANSFERRED SO THAT SAME BE VESTED IN THE TRUSTEE OR TR USTEES FOR THE TIME BEING OF THESE PRESENTS AND THE TRUSTEES OR TRUSTEE SO APPOINTED AS AFORESAID MAY BE WELL BEFORE AS AFTER SUCH TRANSFER OF THE TRUST ESTATE ACT OR ASSIST IN THE EXECUTION OF THE TRUSTS AND POWERS OF THESE PRESENTS AS FULLY AS EFFECTUALL Y AS IF HE HAD BEEN HEREBY APPOINTED AS TRUSTEE. (I) PROVIDED THAT THE NUMBER OF TRUSTEES OF THESE PRESENTS SHALL NOT BE LESS THAN 9 OR MORE THAN 15. (II) FURTHER PROVIDED THAT THE PRESENT TRUSTEES WHO HAVE EXECUTED THESE PRESENTS SHALL REMAIN TRUSTEES DUR ING THEIR LIFETIME OR UNTIL SUCH TIME AS THEY RETIRE OR BECOME INCAPABLE TO ACT AS SUCH. 8 . SINCE THE TRUST IS IRREVOCABLE, THERE CANNOT BE QUESTION OF DISTRIBUTION OF ASSETS ON ITS DISSOLUTION. THEREFORE, THE OBJECTION RAISED BY THE LD. COMMISSIONER OF IN COME - TAX WITH REGARD TO THE ABSENCE OF CLAUSE INDICATING THE DISTRIBUTION OF ASSETS OF THE TRUST IN CASE OF ITS DISSOLUTION IS NOT SUSTAINABLE AND CANNOT BE A VALID REASON FOR DENYING REGISTRATION UNDER SECTION 12AA OF THE ACT. 9 . WITH REGARD TO THE OBJECTS O F THE TRUST, THE LD. COMMISSIONER OF INCOME - TAX HAS NOT RAISED ANY OBJECTION. WE, HOWEVER, CAREFULLY EXAMINED : - 7 - : THE OBJECTS OF THE TRUST AND WE FIND THAT THE OBJECTS OF THE TRUST ARE FOR CHARITABLE PURPOSES AND NO INFERENCE CAN BE DRAWN FROM ANY OF THE CLAU SE THAT THE TRUST WAS CREATED ON COMMERCIAL LINES. FOR THE SAKE OF REFERENCE, WE EXTRACT THE OBJECTS OF THE TRUST AS UNDER: - A . TO OPEN, RUN, CONTINUE AN EDUCATIONAL AND VOCATIONAL INSTITUTION IN HEALTHY SURROUNDINGS . B . TO ENGAGE - TEACHERS, PROFESSORS, INSTRUCT ORS AND EXPERTS O F GOOD MORAL CHARACTER AN D CAPABLE TO IMPART EFFICIENTLY AND ECONOMICALLY UP - TO - DATE INSTRUCTION T O STUDENTS IN MODERN SCIENCES, INDUSTRIAL AVOCATIONS, RESEARCH WORK, INTELLECTUAL AN D OT H ER USUAL PURSUITS. C . TO ESTABLISH, MAINTAIN AND RUN A BOARDING HOUSE AND RESIDENTIAL ACCO M M O DATION FOR STUDENT S AND THOSE CONNECTED WITH THE INSTITUTION. D . TO DEVELOP A HEALTHY AS WELL AS CRITICAL ATTITUDE TOWARDS THE DEVELOPMENT OF MENTAL, PHYSICAL AND MORAL UPLIFT OF THE STUDENTS AND THOSE CONNECTED WI TH THE INSTITUTION SO AS TO MAKE THEM GOOD CITIZENS. E . TO ACCEPT DONATION, GRANTS, PRESENTS AND OTHER OFFERINGS AND TO DEAL WITH THE SAME FOR PURPOSE OF THIS TRUST. F . TO CHARGE MODERATE TUITIO N FEES AND OTHERWISE RECOUP THEM SELVES FOR THE OUTLAY AND EXPENSES INCURRED IN THE UPKEEP AND MAINTENANCE OF INSTITUTIONS ESTABLISHED OR ABOUT TO BE ESTABLISHED UNDER THIS DEED. G . TO TRAIN AND EQUIP THE PUPILS SO AS TO BE SELF - SUPPORTING IN AN HONOURABLE AND DECENT WAY OF LIFE SO AS TO DEVELOP INTO GOOD, HEALTHY AND PROGRESSIVE CIT IZENS. : - 8 - : H . TO DEVELOP DISCRETIONARY CONDUCT AND A HABIT TO OBSERVE THE RULE OF LAW AND SELF - RESTRAINT. I . TO BRING OUT, ENCOURAGE AND DEVELOP THE INVENTIVE, AND RESEARCH FACULTIES OF THE PUPILS AND TEACHERS AND TO AFFORD OPPORTUNITY FOR RESEARCH WORK IN ART, SCI ENCE AND INDUSTRIAL UNDERTAKINGS. J . TO PAY OUT SUCH STIPEND AND SCHOLARSHIP OH SUCH TERMS IF ANY AS THEY MAY DEEM FIT AS MAY BE COMMENSURATE WITH THE INCOME OF SUBJECT MATTER OF THE TRUST. K . FOR ADVANCEMENT OF ANY OTHER OBJECTS/OR OBJECTIVES T HAT ARE LEGALLY C HARITABLE AND FOR GENERAL PUBLIC UTILITY . 10 . OUR ATTENTION WAS ALSO INVITED TO VARIOUS JUDGMENTS WITH REGARD TO THE SCOPE OF ENQUIRY WHILE GRANTING REGISTRATION UNDER SECTION 12AA OF THE ACT BY THE LD. COMMISSIONER OF INCOME - TAX. 11 . IN THE CASE OF CIT V. RED RO SE SCHOOL (SUPRA), THE JURISDICTIONAL HIGH COURT HAS EXAMINED THE SCOPE OF ENQUIRY BY THE LD. COMMISSIONER OF INCOME - TAX WHILE GRANTING REGISTRATION UNDER SECTION 12A OF THE ACT AND THEIR LORDSHIPS HAVE HELD THAT SECTION 12AA OF THE ACT DOES NOT SPEAK ANYW HERE THAT THE LD. COMMISSIONER OF INCOME - TAX WHILE CONSIDERING THE APPLICATION FOR REGISTRATION SHALL ALSO SEE THAT THE INCOME DERIVED BY THE TRUST / INSTITUTION IS EITHER NOT BEING SPENT FOR CHARITABLE PURPOSES OR SUCH INSTITUTION IS EARNING PROFIT. THE RE LEVANT OBSERVATIONS OF THE JURISDICTIONAL HIGH COURT ARE EXTRACTED HEREUNDER: - SEC. 12A PRESCRIBED CONDITIONS FOR REGISTRATION OF TRUSTS AND OBLIGATES THE TRUST OR THE INSTITUTION TO SEEK REGISTRATION UNDER S. 12AA, IF SUCH TRUST OR INSTITUTION INTENDS T O HAVE THE BENEFIT OF THE : - 9 - : PROVISIONS OF S. 11 AND S. 12. THESE PROVISIONS THUS MAKE IT CLEAR THAT IF THE TRUST OR THE INSTITUTION IS NOT REGISTERED UNDER S. 12AA, IT WOULD NOT BE ABLE TO CLAIM ANY EXEMPTION OR EXCLUSION OF ITS INCOME FROM THE TOTAL INCOME OF THE PREVIOUS YEAR, EVEN IF SUCH INCOME IS OTHERWISE LIABLE TO BE EXCLUDED UNDER ANY OF THE CLAUSES OF S. 11 OR S. 12. THUS, IN A CASE WHERE REGISTRATION IS REFUSED, THE TRUST OR THE INSTITUTION WOULD NOT BE ALLOWED TO CLAIM ANY SUCH EXEMPTION OR EXCLUSI ON OF ITS INCOME FROM THE TOTAL INCOME OF THE PREVIOUS YEAR. A READING OF PROVISIONS OF SUB - C LS, (A) AND (B) OF S. 12AA MAKES IT CLEAR THAT THE CIT HAS TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION AND ALSO ABOUT TH E OBJECTS OF THE TRUST OR THE INSTITUTION. ON BEING SATISFIED ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION AND ALSO ABOUT ITS OBJECTS, THE CIT WOULD EITHER GRANT THE CERTIFICATE OR WOULD REJECT THE PRAYER. IN ORDER TO SATISFY HIM SELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION, HE CAN CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST OR THE INSTITUTION, AS HE THINKS NECESSARY AND HE IS ALSO EMPOWERED TO MAKE SUCH ENQUIRIES AS HE MAY DEEM NECESSARY I N THIS BEHALF. THE OBJECTS OF THE TRUST CAN BE HAD FROM THE BYE - LAWS OR THE DEED OF TRUST, AS THE CASE MAY BE AND UNLESS, OF COURSE, THE OBJECTS OF THE TRUST APPARENTLY MAKE OUT THAT THEY WERE NOT IN CONSONANCE WITH THE PUBLIC POLICY OR THAT THEY WERE NOT THE OBJECTS OF ANY CHARITABLE PURPOSE, REGISTRATION CANNOT BE REFUSED ACCORDINGLY ON THIS GROUND. IN REGARD TO THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION, WHOSE OBJECTS DO NOT RUN CONTRARY TO PUBLIC POLICY AND ARE, IN FACT, RELATED T O CHARITABLE PURPOSES, THE CIT IS AGAIN EMPOWERED TO MAKE ENQUIRIES AS HE THINKS FIT. IN : - 10 - : CASE THE ACTIVITIES ARE NOT GENUINE AND THEY ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST/SOCIETY OR THE INSTITUTION, OF COURSE, THE REGISTRAT ION 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 SOME APPREHENSION THAT THE SAME WOULD NOT BE USED IN THE PROPER MANNER AND FOR THE PURPOSES RELATING TO ANY CHARITABLE PURPOSE, REJECTION CANNOT BE MADE. SEC. 12AA, WHICH LAYS DOWN THE PROCEDURE FOR REGISTRATION, DOES NOT SPEAK ANYWHERE THAT THE CIT, WHILE CONSIDERING THE APPLICATION FOR REGISTRATION, SHALL ALSO SEE THAT THE INCOME DERIVED BY THE TRUST OR T HE INSTITUTION IS EITHER NOT BEING SPENT FOR CHARITABLE PURPOSE OR SUCH INSTITUTION IS EARNING PROFIT. THE LANGUAGE USED IN THE SECTION ONLY REQUIRES THAT ACTIVITIES OF THE TRUST OR THE INSTITUTION MUST BE GENUINE, WHICH ACCORDINGLY WOULD MEAN, THEY ARE IN CONSONANCE WITH THE OBJECTS OF THE TRUST/INSTITUTION, AND ARE NOT MERE CAMOUFLAGE BUT ARE REAL, PURE AND SINCERE, NOR AGAINST THE PROPOSED OBJECTS. THE PROFIT EARNING OR MISUSE OF THE INCOME DERIVED BY CHARITABLE INSTITUTION FROM ITS CHARITABLE ACTIVITIES , MAY BE A GROUND FOR REFUSING EXEMPTION ONLY WITH RESPECT TO THAT PART OF THE INCOME BUT CANNOT BE TAKEN TO BE A SYNONYM TO THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION. IT IS SIGNIFICANT TO MENTION THAT REGISTRATION UNDER S. 12AA DOE S NOT NECESSARILY ENTITLE THE ASSESSEE TO GET THE INCOME EXCLUDED FROM THE INCOME OF THE PREVIOUS YEAR FOR THE PURPOSE OF DETERMINATION OF TAX LIABILITY BUT IT ONLY ENTITLES THE ASSESSEE TO CLAIM SUCH EXEMPTION, WHICH OTHERWISE COULD NOT BE CLAIMED IN THE ABSENCE OF REGISTRATION. THE ENQUIRY BY THE CIT SHALL REMAIN RESTRICTED TO THE EXAMINATION, AS TO WHETHER THE ASSESSEE, WHO HAS MOVED THE APPLICATION FOR : - 11 - : REGISTRATION UNDER S. 12A, IS ACTUALLY IN THE ACTIVITIES WHICH ARE GENUINE. GENUINENESS OF THE ACTIVIT IES OF THE TRUST OR THE INSTITUTION HAS TO BE SEEN, KEEPING IN MIND THE OBJECTS THEREOF, WHICH NECESSARILY MEANS THAT THE CIT SHALL SATISFY HIMSELF ABOUT THE FACT THAT THE ACTIVITIES ARE GENUINE AND IN CONSONANCE WITH THE OBJECTS OF THE TRUST OR THE INSTIT UTION. IN OTHER WORDS, IF ESTABLISHING AND RUNNING 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 BEING IMPARTED AS PER RULES AND THE FACTUM OF ESTABLI SHMENT AND RUNNING SCHOOL IS A GENUINE ACTIVITY. THE ENQUIRY REGARDING GENUINENESS OF THE ACTIVITIES CANNOT BE STRETCHED BEYOND THIS. SUFFICIENT SAFEGUARDS HAVING BEEN GIVEN IN SS. 11, 12 AND 13 FOR ASSESSING THE INCOME WHICH HAS NOT BEEN APPLIED TO THE PU RPOSE OF THE TRUST OR THE INSTITUTION, THE INTENTION OF THE LAW MAKER AND THE SCOPE AND PURPORT OF THE PROVISION IS APPARENT WHILE CONSIDERING THE QUESTION OF REGISTRATION. 12 . SIMILAR VIEW WAS EXPRESSED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF FIFTH GENERATION EDUCATION SOCIETY V. CIT (SUPRA) BY HOLDING THAT AT THE STAGE OF REGISTRATION, ALL THAT THE LD. CIT(A) MAY EXAMINE IS WHETHER THE APPLICATION IS MADE IN ACCORDANCE WITH THE REQUIREMENT OF SECTION 12A READ WITH RULE 17A AND WHETHER FORM NO.10A HA S BEEN PROPERLY FILLED UP. HE IS ALSO TO SEE WHETHER THE OBJECTS OF THE TRUST ARE CHARITABLE OR NOT. AT THIS STAGE , THE LD. COMMISSIONER OF INCOME - TAX IS NOT REQUIRED TO EXAMINE THE APPLICATION OF INCOME. ALL THAT HE MAY EXAMINE IS WHETHER THE APPLICATI ON IS MADE IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 12A READ WITH RULE 17A OF THE ACT, AND WHETHER FORM NO.10A HAS BEEN PROPERLY FILLED UP. HE MAY ALSO SEE WHETHER THE OBJECTS OF THE TRUST ARE CHARITABLE OR NOT . : - 12 - : 13 . HON'BLE PUNJAB & HARYANA HIGH COURT H AVE ALSO EXPRESSED SIMILAR VIEWS IN THE CASE OF CIT V. SURYA EDUCATIONAL & CHARITABLE TRUST [2011] 203 TAXMAN 53 BY HOLDING THAT AT THE STAGE OF CONSIDERATION OF GRANT OF REGISTRATION UNDER SECTION 12A OF THE ACT TO A CHARITABLE TRUST IN ACCORDANCE WITH TH E PROCEDURE LAID DOWN IN SECTION 12AA OF THE ACT, THE LD. COMMISSIONER OF INCOME - TAX IS ONLY TO EXAMINE THE GENUINENESS OF THE OBJECTS OF THE TRUST AND NOT THE APPLICATION OF INCOME FOR CHARITABLE PURPOSE WHICH CAN BE EXAMINED AT THE STAGE WHEN THE TRUST F ILES ITS RETURN. THE RE LEVANT OBSERVATIONS OF HON'BLE C OURT ARE EXTRACTED HEREUNDER: - AS PER S. 12AA, AN APPLICATION FOR REGISTRATION OF THE TRUST AND INSTITUTION IS REQUIRED TO BE MADE WITHIN ONE YEAR FROM THE DATE OF CREATION OF THE TRUST OR THE ESTAB LISHMENT OF SUCH INSTITUTION. THE PROCEDURE FOR REGISTRATION OF THE TRUST OR INSTITUTION IS PRESCRIBED UNDER S. 12AA. IN TERMS OF CL. (A) OF S. 12AA, THE CIT IS TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST ON SUCH INQUIRIES AS HE MAY DEEM NECESSARY. SUB - SS. (1A) AND (2) OF S. 12AA, ARE PROCEDURAL IN NATURE, WHEREAS SUB - S. (3) OF S. 12AA, EMPOWERS THE CIT TO CANCEL THE REGISTRATION OF THE TRUST OR INSTITUTION, IF HE IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION. THEREFORE, THE OBJECT OF S. 12AA, IS TO EXAMINE THE GENUINENESS OF THE OBJECTS OF THE TRUST, BUT NOT THE INCOME OF THE TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES . THE STAG E FOR APPLICATION OF INCOME IS Y ET TO ARRIVE I.E. WHEN SUCH TRUST OR INSTITUTION FILES ITS RETURN. 14 . SCOPE OF ENQUIRY WAS ALSO CONSIDERED BY THE TRIBUNAL IN THE CASE OF PEOPLE EDUCATION & ECONOMIC DEVELOPMENT SOCIETY (PEEDS) V. ITO, 100 : - 13 - : ITD 87 (C HENNAI) (TM) AND IT WAS HELD BY MAJORITY VIEW THAT ENQUIRY INTO THE OBJECT S OF THE INSTITUTION CAN BE MADE UNDER SECTION 12A OF THE ACT AT THE STAGE OF FILING APPLICATION FOR REGISTRATION UNDER SECTION 12A OF THE ACT AND THE LD. COMMISSIONER OF INCOME - TAX IS NOT SUPPOSED TO EXAMINE THE APPLICATION OF INCOME ASPECT. ALL THAT HE MAY EXAMINE IS WHETHER APPLICATION IS MADE IN ACCORDANCE WITH THE REQUIREMENT OF SECTION 12A OF THE ACT READ WITH RULE 17A AND WHETHER FORM NO.10A HAS BEEN PROPERLY FILLED UP. HE MA Y ALSO SEE WHETHER THE OBJECTS OF THE TRUST ARE CHARITABLE OR NOT. AT THIS STAGE IT IS NOT NECESSARY TO EXAMINE THE APPLICATION ASPECT OF THE INCOME. WHILE HOLDING SO, THE TRIBUNAL HAS PLACED RELIANCE UPON THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF NEW LIFE CHRIST EVANGELISTIC ASSOCIATION V. CIT, 165 CTR (MAD) 446. 15 . THE SCOPE OF ENQUIRY WAS ALSO EXAMINED BY THE LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF ST. DON BOSCO EDUCATIONAL SOCIETY V. CIT, 90 ITD 477 (LUCK.) WHEREIN IT WAS HELD THAT THE LD. COMMISSIONER OF INCOME - TAX IS EMPOWERED TO SATISFY HIMSELF ABOUT THE OBJECTS OF THE TRUST AND ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST / INSTITUTION AND SUCH POWER DOES NOT EXTENT TO ELIGI BILITY OF THE TRUST/ INSTITUTION FOR EXEMPTION UNDER SECTI ON 11 READ WITH SECTION 13 OF THE ACT , WHICH FALLS UNDER THE DOMAIN OF THE ASSESSING OFFICER. 16 . THROUGH VARIOUS JUDICIAL PRONOUNCEMENTS, IT HAS BEEN REPEATEDLY HELD THAT WHILE GRANTING REGISTRATION UNDER SECTION 12AA OF THE ACT, SCOPE OF ENQUIRY IS VERY LI MITED AND THE LD. COMMISSIONER OF INCOME - TAX IS ONLY REQUIRED TO EXAMINE THE NATURE OF OBJECTS OF THE SOCIETY/TRUST AND ITS GENUINENESS. THE PURPOSE OR MODE OF APPLICATION OF FUND OF THE TRUST/SOCIETY CAN ONLY BE EXAMINED WHILE FRAMING A REGULAR ASSESSMEN T ON FILING OF RETURN OF INCOME BY THE TRUST/SOCIETY BY THE ASSESSING OFFICER AND I T IS HIS DOMAIN TO MAKE NECESSARY ENQUIRY WITH REGARD TO THE APPLICATION OF FUND. THE LD. COMMISSIONER OF INCOME - TAX IS ONLY REQUIRED TO EXAMINE THE : - 14 - : OBJECTS OF THE TRUST WH ETHER IT IS CHARITABLE OR NOT AND ITS GENUINENESS. WITHOUT POINTING OUT ANY INFIRMITY EITHER IN THE OBJECTS OR GENUINENESS OF THE TRUST, REGISTRATION UNDER SECTION 12AA SHOULD NOT BE DENIED. 17 . IN THE INSTANT CASE, THE TRUST WAS CREATED BY THE SETTLER , WITH CERTAIN AMOUNT AND THEREAFTER DONATION WAS RECEIVED FROM M/S SAHARA PRIME CITY LTD. FOR PURCHASE OF LAND THOUGH THE PAYMENT WAS MADE DIRECTLY TO THE SELLER AND THE LAND WAS PURCHASED IN THE NAME OF THE TRUST. THE TRUST WAS ALSO IRREVOCABLE AND THE MODE OF APPOINTMENT OF TRUSTEES IS ALSO SPECIFIED IN THE TRUST DEED. THEREFORE, WHATEVER OBJECTIONS RAISED BY THE LD. COMMISSIONER OF INCOME - TAX WHILE DENYING REGISTRATION UNDER SECTION 12AA OF THE ACT , AFTER HOLDING THAT THE TRUST IS NOT A GENUINE TRUST, DO NOT APPEAR TO BE VALID REASONS FOR DENIAL OF REGISTRATION. WE ARE, THEREFORE, OF THE CONSIDERED OPINION THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DENYING REGISTRATION UNDER SECTION 12AA OF THE ACT WHERE THE OBJECTS OF THE TRUST IS FOR CHARITABLE PURPOSE. WE, THEREFORE, HOLD THAT THE ASSESSEE - TRUST IS A GENUINE TRUST CREATED FOR CHARITABLE PURPOSE AND WE ACCORDINGLY SET ASIDE THE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX AND DIRECT HIM TO GRANT REGISTRATION TO THE ASSESSEE - TRUST UNDER SECTION 12AA OF THE ACT . 18 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.8.2012. S D/ - S D/ - [B. R. JAIN ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23.8.2012 JJ: 0208 : - 15 - : COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT RE GISTRAR