Maa Saraswati Education Society, Haryana V. CIT, Rohtak

ITA 4172/DEL/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4297 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 05-12-2016
• Assessment Year: misc
• Appeal Filed On: 28-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA ANAND
• Assessee Lawyers: ASHISH GOEL
• Keywords: Charitable institution; Opportunity of being heard; Principle of natural justice; Cancellation of registration; Capital expenditure
• Section: 80G; 12A; 12AA; 10B; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH E NEW DELHI BEFORE : SHRI I.C. SUDHIR, JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO S . 4172 & 4181/DEL./2014 MAA SARASWATI EDUCATIONAL SOCIETY, VS. COMMISSIONER OF INCOME - TAX, KALANAUR KHURD, ROHTAK. ROHTAK. (PAN: AABAM 6187 A) (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ASHISH GOEL, ADVOCATE RESPONDENT BY : ANUPAMA ANAND, CIT/DR DATE OF HEARING : 05.12.2016 DATE OF PRONOUNCEMENT : 13 .12.2016 ORDER PER L.P. SAHU, ACCOUNTANT MEMBER: THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME - TAX, ROHTAK, DATED 15.05.2014 AND 30.04.2014 WITH RESPECT TO REGISTRATION U/S. 12A AND APPROVAL U/S. 80G OF THE INCOME - TAX ACT (IN SHORT THE ACT ) ON THE FOLLOWING GROUNDS : GROUNDS IN ITA NO. 4172/DEL./2014: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (CIT) IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE APPLICATION OF THE ASSESSEE FOR GRANT OF REG ISTRATION UNDER SECTION 12AOF THE INCOME TAX ACT, 1961. ITA NO. 4172 & 4181 /DEL./2014 2 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED BOTH ON FACTS AND IN LAW IN IGNORING THE EXPLANATION AND EVIDENCES BROUGHT ON RECORD BY THE ASSESSEE TO PROVE THAT THE APPLICA NT TRUST IS ELIGIBLE FOR REGISTRATION. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED BOTH ON FACTS AND IN LAW IN HOLDING THE ACTIVITIES CONDUCTED BY THE ASSESSEE ARE PROFIT ORIENTED BUSINESS ACTIVITIES AND NOT A CHARITY INSTITUT E, DESPITE THE ASSESSEE BRINGING ALL THE MATERIAL AND EVIDENCE ON RECORD TO PROVE THAT ITS ACTIVITIES FALL WITHIN THE MEANING OF CHARITABLE PURPOSES. GROUNDS IN ITA NO. 4181 /DEL./2014: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (CIT) REJECTING THE APPLICATION FOR APPROVAL UNDER SECTION 80 G OF THE INCOME TAX ACT IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED BOT H ON FACTS AND IN LAW IN PASSING THE ORDER REJECTING THE APPLICATION FOR APPROVAL UNDER SECTION 80G OF THE ACT, WITHOUT GIVING ASSESSEE AN OPPORTUNITY OF BEING HEARD IN VIOLATION OF PRINCIPLE OF NATURAL JUSTICE . 3. ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT HAS REJECTED THE APPLICATION FOR APPROVAL UNDER SECTION 80 G OF THE ACT IN AN ARBITRARY MANNER, IGNORING THE EXPLANATION AND EVIDENCES BROUGHT ON RECORD BY THE APPELLANT. 2. SINCE BOTH THE APPEALS ARE INTERCONNECTED AND WERE HEARD TOGE THER, THEREFORE, THE SAME ARE BEING DECIDED BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NO. 4172 & 4181 /DEL./2014 3 3. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT FILED APPLICATIONS ON 04.11.2013 IN FORM NO. 10A AND 10G FOR SEEKING REGISTRATION U/S. 12 A AND 80G OF THE ACT RESPECTIVELY ALONG WITH COPY OF SOCIETY REGISTRATION CERTIFICATE DATED 24.02.2009 ISSUED BY REGISTRAR OF FIRMS & SOCIETIES, COPY OF MEMORANDUM & ARTICLES OF ASSOCIATION AND LIST OF OFFICE BEARERS OF THE SOCIETY AND ITS PAN OF SOCIETY, INCOME & EXPENDITURE ACCOUNT, BALANCE SHEET ALONG WITH AUDIT REPORTS IN FORM NO. 10B FOR F.Y. 2011 - 12, 2012 - 13 AND 2013 - 14. NOTICES WERE ISSUED FOR HEARING. A REPORT WAS CALLED FOR FROM THE ASSESSING OFFICER CONCERNED AS TO WHETHER THE APPELLAN T FULFILLED THE CONDITIONS REQUIRED FOR THE GRANT OF REGISTRATION / APPROVAL APPLIED FOR. IN RESPONSE, THE JCIT AND THE ASSESSING OFFICER DID NOT CLEARLY RECOMMEND THE CASE FOR REGISTRATION U/S. 12AA AND APPROVAL U/S. 80G AND LEFT THE MATTER TO BE DECIDED ON MERITS. THE LD. CIT REFERRING TO THE DEFINITION OF CHARITABLE PURPOSE REJECTED THE APPLICATIONS OF APPELLANT BY OBSERVING AS UNDER : 3. THE DEFINITION OF 'CHARITABLE PURPOSE' AS GIVEN IN THE INCOME TAX ACT, 1961 IS REPRODUCED BELOW : - 'CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, [PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OF OBJECTS OF ARTISTIC OR HISTORIC INTEREST,] AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR ITA NO. 4172 & 4181 /DEL./2014 4 BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY:]' THE APPLICANT'S REPLY DOES NOT SATIS FY THE VERY ESSENCE OF CHARITY WHICH IS NECESSARY FOR EARNING THE STATUS OF BEING - CHARITABLE AS IS REQUIRED IN VIEW OF SECTION 2(15) READ WITH SECTION 12AA OF THE INCOME TAX ACT, 1961. THE PROVISIONS OF SEC 11 AND 12 DO NOT ENVISAGE THAT A CHARITABLE INSTI TUTION SHALL PROVIDE CHARITY BY CHARGING FEES FROM PUBLIC AT LARGE. THE FEES RECEIVED ARE OUTSIDE THE SCOPE OF SEC 11 AND 12 AND SHALL, THEREFORE, BE TAXABLE. FEES IMPLY DIRECT INVOLVEMENT OF CONSIDERATION FOR THE SERVICES RENDERED. FEES CAN NOT BE VOLUNTA RY AND ARE, THEREFORE, TAXABLE UNDER THE HEAD PROFIT AND GAINS OF THE BUSINESS OR PROFESSION. THE CHARGING OF FEE IS ALSO IN VIOLATION OF THE CONTENTS OF PARA 13 OF MEMORANDUM OF SOCIETY. THE SOCIETY IS RUNNING ITS INSTITUTIONS ON PURELY COMMERCIAL LINES A ND EARNING PROFITS/SURPLUSES SYSTEMATICALLY YEAR AFTER YEAR BY CHARGING FEES FROM THESTUDENTS AND MAKING PROFITS. THUS, THE ASSESSEE TRUST IS PROFIT ORIENTED BUSINESS ENTITY AND NOT A CHARITABLE INSTITUTE. KEEPING IN VIEW OF THE ABOVE, THE APPLICATION OF THE ASSESSEE TRUST DOES NOT DESERVE FOR REGISTRATION. 4. T HE SOCIETY IS JUST LIKE A PRIVATE DISCRETIONARY SOCIETY CONTROLLED BY THE PRESIDENT, SECRETARY AND EXECUTIVE BODY MEMBER OF THE SOCIETY WHO ARE BROTHERS HAVING CLOSE FAMILY RELATIONS WITH OTHER MEM BERS. COMPLETE AND UPDATED LIST OF MEMBERS AS WELL AS OFFICE BEARERS WERE FURNISHED. AS PER THE MEMORANDUM OF THE APPLICANT SOCIETY, IT DOES NOT CONTAIN ANY INTERNAL CHECK ON THE AUTOCRATIC FUNCTIONING OF THE OFFICE BEARERS WHO ARE ALL - POWERFUL CREATING AN IMPRESSION OF ONE FAMILY SHOW IN THE SOCIETY. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE; THIS FAD IS ABUNDANTLY CLEAR THAT MOST OF THE MEMBERS OF THE SOCIETY BELONG TO SAME FAMILY, THEREBY, CLOSELY RELATED TO EACH OTHER. AH THE PROPERTIES OF THE SOCIETY AS WELL AS ABSOLUTE FINANCIAL CONTROL STILL REMAINS IN THE HANDS OF THE MEMBERS AND ALSO THE CRUCIAL POWERS TO TRANSFER THE ASSETS OF THE SOCIETY TO ANY OR MANY MEMBERS OF THE OFFICE BEARERS, THEREBY, CLEARLY ALLOWS THE MEMBERS TO GET THE PROP ERTY OF THE SOCIETY IN QUESTION ITA NO. 4172 & 4181 /DEL./2014 5 TRANSFERRED IN THEIR NAMES. THIS FACT IS ALSO CLEARLY SHROUDS IN DOUBT AND AMBIGUITY WHETHER IN CASE OF TRANSFER OF ANY OF THE LEASED ASSET BACK TO ITS OWNER, ANY COMPENSATION OR CONSIDERATION WILL BE OBTAINED BY THE SOCIETY IN QUESTION FROM ITS OWNER OR NOT? 5. ON PERUSAL OF THE INCOME AND EXPENDITURE ACCOUNT SUPPLIED BY THE ASSESSEE FOR THE FINANCIAL YEAR 2011 - 12 IT IS NOTICED THAT THE INSTITUTION HAS MADE EXPENDITURE ON ADVERTISEMENT AMOUNTING TO RS. 68,531 & THIS EXPENDI TURE IS CERTAINLY NOT FOR THE PURPOSE OF EDUCATION & THE EXPENDITURE HAS BEEN INCURRED TO PROCURE MORE ADMISSION WITH THE SOLE MOTIVE OF EARNING MORE PROFITS AND HENCE THE CONDITION THAT THE EXPENDITURE SHOULD BE INCURRED SOLELY FOR THE PURPOSE OF EDUCATIO N IS ALSO NOT SATISFIED. THUS, THE ASSESSEE SOCIETY IS PROFIT ORIENTED BUSINESS ENTITY AND NOT A CHARITY INSTITUTE. KEEPING IN VIEW OF THE ABOVE, THE APPLICATION OF THE ASSESSEE TRUST DOES NOT DESERVE FOR REGISTRATION KEEPING IN VIEW THE AFORESAID FACTS AND CIRCUMSTANCES, NEITHER AIMS/OBJECTS AND TERMS OF MEMORANDUM ARE OF THE CHARITABLE NATURE, NOR ARE THERE ANY ACTIVITIES WHICH MAY BE PUT TO A TEST OF GENUINENESS. CONSEQUENTLY, THE REQUEST OF THE APPLICANT SOCIETY FOR REGISTRATION U/S 12AA OF THE INCOME TAX ACT CANNOT BE ACCEDED TO AND THE APPLICATION IN FORM 10A IS, THEREFORE, REJECTED ACCORDINGLY U/S 12AA(L)(B)(II) OF THE INCOME TAX ACT, 1961. 4. DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITTED A WRITTEN SYNOPSIS CHALLENGING THE IMP UGNED ORDERS, WHICH IS BEING REPRODUCED AS UNDER : 7 . LEARNED CIT IN THE ORDER IN PG. 2 LAST PARA HAS MADE THE ALLEGATION THAT THE ASSESSEE HAS CHARGED HEFTY FEES FROM THE PUBLIC AT LARGE AND THEREFORE SOCIETY IS RUNNING ITS INSTITUTION ON PURELY COMMER CIAL LINES AND EARNING PROFITS/ SURPLUSES. IN THIS REGARD IT IS SUBMITTED THAT APPLICANT WAS NOT OPERATIONAL AT THAT TIME AND DID NOT RECEIVE ANY SINGLE RUPEE IN RESPECT OF FEES FROM THE STUDENTS AS IS EVIDENT FROM THE LAST THREE YEARS AUDITED BALANCE SHEE T AND INCOME & EXPENDITURE A/C AND THEREFORE THE ALLEGATION MADE BY THE L D. CIT IS COMPLETELY WRONG AND AGAINST THE FACTS OF THE CASE. ITA NO. 4172 & 4181 /DEL./2014 6 8. THIS ACTION CLEARLY SHOWS THAT LD. CIT REJECTED THE APPLICATION WITHOUT EVEN GOING THROUGH THE DOCUMENTS FILED BY TH E ASSESSEE. 9. FIRSTLY, IT IS A SETTLED LAW THAT CHARGING OF FEES BY A SCHOOL CANNOT BE A GROUND FOR HOLDING THAT THE SCHOOL IS NOT FOR CHARITABLE PURPOSES. THIS ISSUE HAS COME UP BEFORE HON'BLE SUPREME COURT IN THE CASE OF QUEEN'S EDUCATIONAL SOCIETY VS. CIT (2015) 8 SCC 47, WHERE THE COURT HAS HELD AS UNDER: 'THE FINAL CONCLUSION THAT IF A SURPLUS IS MADE BY AN EDUCATIONAL SOCIETY AND PLOUGHED BACK TO CONSTRUCT ITS OWN PREMISES WOULD FALL OUT OF SECTION 10(23 - C) IS TO IGNORE THE LANGUAGE OF THE SECTION AND TO IGNORE THE TESTS LAID DOWN IN SURAT ART SILK CLOTH CASE [CIT V. SURAT ART SILK CLOTH MANUFACTURERS' ASSN. (1980) 2 SCC 31], ADITANAR CASE [ADITANAR EDUCATIONAL INSTITUTION V. CIT [(1997) 3 SCC 346] AND AMERICAN HOTEL & LODGING CASE [AMERICAN HOTEL & LODGING ASSN. EDUCATIONAL INSTITUTE V. CBDT [(2008) 10 SCC 509]. IT IS CLEAR THAT WHEN A SURPLUS IS PLOUGHED BACK FOR EDUCATIONAL PURPOSES, THE EDUCATIONAL INSTITUTION EXISTS SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT' 10. IN ANOTHER JUDGMENT RECENTLY DELIVERED BY THE HON'BLE SUPREME COURT IN THE CASE OF VISVESVARAYA TECHNOLOGICAL UNIVERSITY VS. ACIT IN CIVIL APPEAL NOS. 4361 - 4366 OF 2016, THE ABOVE POSITION HAS BEEN REITERATED, AND THE COURT HAS HELD AS UNDER: 'THERE CAN, HOWEVER, B E NO MANNER OF DOUBT THAT THE SURPLUS ACCUMULATED OVER THE YEARS HAS BEEN PLOUGHED BACK FOR EDUCATIONAL PURPOSES. IN SUCH A SITUATION, FOLLOWING THE CONSISTENT PRINCIPLES LAID DOWN BY THIS COURT REFERRED TO EARLIER AND SPECIFICALLY WHAT HAS BEEN SAID IN PA RAGRAPH 19 IN QUEEN'S EDUCATIONAL SOCIETY (SUPRA), EXTRACTED ABOVE, IT MUST BE HELD THAT THE FIRST REQUIREMENT OF SECTION 10(23C) (IIIAB), NAMELY, THAT THE APPELLANT UNIVERSITY EXISTS 'SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT' IS SATI SFIED. THE EXEMPTION GRANTED IN RESPECT OF THE UNIVERSITY UNDER SECTION 80G OF THE ACT, QUA THE DONATIONS MADE TO IT ALSO CANNOT BE IGNORED IN VIEW OF AN INBUILT RECOGNITION IN SUCH EXEMPTION WITH REGARD TO THE CHARITABLE NATURE OF THE INSTITUTION I.E. THE APPELLANT UNIVERSITY' 11. WITHOUT PREJUDICE TO THE ABOVE, LD. CIT HAS FAILED TO CONSIDER THAT THE AIMS AND OBJECTIVES AND ACTIVITIES OF THE ASSESSEE SOCIETY ARE ENTIRELY IN LINE WITH THE REQUIREMENTS OF SECTION 2 (15) OF THE ACT AND ORDER PASSED BY HIM DOES NOT CONTAIN ANY OBJECTION OF THE L D. CIT ON THE ASSESSEE'S OBJECTS. 12. RELIANCE IS BEING PLACED ON THE CIRCULAR NO. 11 OF 2008 WHICH CLEARLY STATES THAT THE PROVISO TO SECTION 2(15) DOES NOT APPLY IN THE CASE OF EDUCATION AND WHERE THE PURPOSE OF A TRUST OR INSTITUTION IS EDUCATION, IT WILL CONSTITUTE 'CHARITABLE PURPOSE' EVEN IF IT INCIDENTALLY INVOLVES IN CARRYING ON OF COMMERCIAL ACTIVITIES. 13. FROM THE ABOVE, IT IS EVIDENT THAT THE TRUST OR INSTITUTION WHICH IS CARRYING ON EDUCATIONAL ACTIVITIES WILL FALL WITHIN THE AMBIT OF CHARITABLE PURPOSE UNDER SECTION 2(15) EVEN IF IT INCIDENTALLY INVOLVES THE CARRYING ON OF COMMERCIAL ACTIVITIES. THUS, ITA NO. 4172 & 4181 /DEL./2014 7 EV EN IF THE ASSESSEE IS CHARGING THE FEES AS BEING CHARGED BY THE COLLEGES RUNNING ON COMMERCIAL BASIS, STILL IT WOULD FALL WITHIN THE DEFINITION OF 'CHARITABLE PURPOSE1 AS PER THE CIRCULAR OF CBDT. 14. THIS ISSUE IS SQUARELY COVERED BY THE ORDER OF DELHI I TAT IN THE CASE OF SRI GIAN GANGA VOCATIONAL AND EDUCATION SOCIETY VS. CIT ROHTAK (2013) 154 ITR (T) 74 WHEREIN IT HAS BEEN HELD THAT '7. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE L D. CIT HAS NOT RAISED ANY OBJE CTION AGAINST THE OBJECTS OF THE ASSESSEE SOCIETY. THE MAIN OBJECT OF THE ASSESSEE SOCIETY IS EDUCATION, WHICH, UNDENIABLY, IS OF CHARITABLE NATURE, IN LINE WITH THE PROVISIONS OF SECTION 2 (15) OF THE ACT. FURTHER, THE ID. CIT HAS TAKEN RECOURSE TO THE RT E ACT TO REJECT THE ASSESSEE'S APPLICATION. NOW, AS CORRECTLY CONTENDED, IT IS NOT WITHIN THE CIT'S PURVIEW TO DO SO. UNDER SECTION 12AA, WHAT IS REQUIRED TO BE SEEN BY THE ID. CIT WHILE CONSIDERING AN APPLICATION FOR GRANT OF REGISTRATION, IS AS TO WHETHE R THE OBJECT OF THE APPLICANT IS CHARITABLE AND AS TO WHETHER ITS ACTIVITIES ARE GENUINE ANY FURTHER. THE JURISDICTION AND COMPETENCE TO EXAMINE AN ISSUE UNDER THE RTE ACT OBVIOUSLY LIES WITH THE AUTHORITIES MENTIONED THEREIN. THEN, THE CBDT CIRCULAR NO.11 OF 2008 (SUPRA) CLEARLY STATES, INTER ALIA, THAT THE PROVISO TO SECTION 2 (15) DOES NOT APPLY IN THE CASE OF EDUCATION AND WHERE THE PURPOSE OF A TRUST OR INSTITUTION IS EDUCATION, IT WILL CONSTITUTE 'CHARITABLE PURPOSE' EVEN IF IT INCIDENTALLY INVOLVES I N CARRYING ON OF COMMERCIAL ACTIVITIES. 8. IN SHRI SAIN JI DHARMARTH TRUST (SUPRA), IT HAS BEEN HELD, AT THE STAGE OF GRANTING OR REFUSING REGISTRATION, CIT IS NOT REQUIRED TO EXAMINE AS TO WHAT AMOUNT SHOULD FORM CORPUS OF TRUST, IN WHAT MANNER ACCOUNTS WERE MAINTAINED AND WHAT SHOULD APPEAR IN BALANCE SHEET. 9. IN 'ST. DON BOSCO EDUCATIONAL SOCIETY' (SUPRA), IT HAS BEEN HELD THAT MERE CHARGING OF HIGH FEES IS NOT NO GROUND OF REFUSING REGISTRATION, WHERE THE CIT HAS NOT DOUBTED THE OBJECTS AND GENUINE NESS OF THE ASSESSEE'S ACTIVITIES. 10. IN 'SURYA EDUCATIONAL & CHARITABLE TRUST' (SUPRA) RENDERED BY THE JURISDICTIONAL HIGH COURT SO FAR AS REGARDS THE PRESENT ASSESSEE, IT HAS BEEN HELD THAT U/S 12AA OF THE ACT, THE CIT IS ONLY TO EXAMINE THE GENUINENES S 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 FILES ITS RETURN. 11. IN 'BABA GANDHA SINGH EDUCATION TRUST (SUPRA), IT HAS BEEN HELD THAT MERELY BECAUSE THE ASSESSE E HAS GENERATED SURPLUS INCOME AFTER MEETING EXPENDITURE ON ITS EDUCATIONAL ACTIVITIES, SUCH ACTIVITY CANNOT BE REGARDED AS 'EDUCATION, TRADE AND COMMERCE IN THE NAME OF EDUCATION' SO AS TO INVITE CANCELLATION OF REGISTRATION; AND THAT EDUCATION IS A CHARI TABLE PURPOSE IN ITSELF. WHILE RENDERING THIS DECISION, THE ID. CHANDIGARH BENCH OF THE TRIBUNAL TOOK INTO CONSIDERATION 'AERONAUTICAL ENGINEERING AND EDUCATIONAL SOCIETY', 26 DTR (UK) 193 (RELIED ON BY THE ID. CIT), WHEREIN, IT WAS HELD THAT MERE IMPARTIN G EDUCATION FOR PRIMARY PURPOSE OF EARNING PROFITS CANNOT BE SAID TO BE A CHARITABLE ACTIVITY. THE CHANDIGARH BENCH OF THE TRIBUNAL HELD, FOLLOWING ITA NO. 4172 & 4181 /DEL./2014 8 'PINEGROVE INTERNATIONAL CHARITABLE TRUST V. UNION OF INDIA , [2010 ] 188 TAXMAN 402 (PUN. &HAR.) (RENDERED B Y THE HON'BLE JURISDICTIONAL HIGH COURT SO FAR AS REGARDS THE PRESENT ASSESSEE ALSO), THAT MERELY BECAUSE AN INSTITUTION HAS EARNED PROFITS, IT WOULD NOT BE A DECIDING FACTOR TO CONCLUDE THAT SUCH AN EDUCATIONAL INSTITUTION EXISTS FOR PROFIT AND THAT MEREL Y BECAUSE PROFITS HAVE RESULTED FROM THE ACTIVITY OF IMPARTING EDUCATION, IT WOULD NOT RESULT IN CHANGE OF CHARACTER OF THE INSTITUTION THAT EXISTS SOLELY FOR EDUCATIONAL PURPOSES. 12. IN 'RELIABLE EDUCATIONAL ALLIANCE SOCIETY' (SUPRA) (AUTHORED BY ONE OF US - THE JM), IT HAS BEEN HELD THAT AT THE TIME OF GRANTING REGISTRATION, THE CIT IS REQUIRED ONLY TO SATISFY HIMSELF ABOUT THE OBJECTS OF THE TRUST AND THE GENUINENESS OF ITS ACTIVITIES, AND NO FURTHER. 13. IN 'DREAM LAND EDUCATIONAL TRUST' (SUPRA) (AUT HORED BY ONE OF US - THE JM), IT HAS BEEN HELD, AGAIN, IN ACCORDANCE WITH THE SECTION 12AA OF THE ACT, THE CIT IS REQUIRED TO SATISFY HIMSELF ONLY ABOUT THE OBJECTS OF THE TRUST AND THE GENUINENESS OF ITS ACTIVITIES AND WHERE THE CIT HAS RECORDED NO DISSAT ISFACTION ON EITHER OF THESE ASPECTS, HE IS NOT JUSTIFIED IN REFUSING GRANT OF REGISTRATION ON EXTRANEOUS CONSIDERATIONS. 14. NO DECISION TO THE CONTRARY HAS BEEN BROUGHT TO OUR NOTICE ON BEHALF OF THE DEPARTMENT. 15. IN VIEW OF THE ABOVE, THE ORDER PASS ED BY THE ID. CIT IS HEREBY CANCELLED. WE DIRECT THE ID. CIT TO GRANT REGISTRATION TO THE SOCIETY ON VERIFYING THE ORIGINAL DOCUMENT OF ESTABLISHMENT OF THE ASSESSEE TRUST, WHICH HAS BEEN SHOWN TO US. 16. AS SUCH, THE APPEAL FILED BY THE ASSESSEE IS ALLOW ED. 15. SIMILAR ISSUE WAS DECIDED BY THE DELHI ITAT IN THE CASE OF CHAUDHARY BISHAMBHER SINGH EDUCATION SOCIETY V. COMMISSIONER OF INCOME - TAX, NOIDA, WHEREIN IT HAS BEEN HELD THAT '7. FROM THE ABOVE, IT IS EVIDENT THAT THE TRUST OR INSTITUTION WHI CH IS CARRYING ON EDUCATIONAL ACTIVITIES WILL FALL WITHIN THE AMBIT OF CHARITABLE PURPOSE UNDER SECTION 2(15) EVEN IF IT INCIDENTALLY INVOLVES THE CARRYING ON OF COMMERCIAL ACTIVITIES. THUS, EVEN IF THE ASSESSEE IS CHARGING THE FEES AS BEING CHARGED BY THE COLLEGES RUNNING ON COMMERCIAL BASIS, STILL IT WOULD FALL WITHIN THE DEFINITION OF 'CHARITABLE PURPOSE AS PER THE CIRCULAR OF CBDT. HOWEVER, THE REVENUE HAS NOT PRODUCED ANY EVIDENCE IN SUPPORT OF ITS CLAIM THAT THE ASSESSEE IS CHARGING FEES SIMILAR TO CO MMERCIAL COLLEGES. ON THE OTHER HAND, THE ASSESSEE PRODUCED THE EVIDENCE THAT IT IS CHARGING THE FEES AS APPROVED BY THE PRESCRIBED RELEVANT AUTHORITIES OF GOVERNMENT OF UTTAR PRADESH THROUGH THEIR OFFICE ORDERS EVERY YEAR. THEREFORE, THE ALLEGATION OF THE REVENUE, THAT THE ASSESSEE IS CHARGING HEAVY FEES OR THE FEES IS SIMILAR TO BEING CHARGED BY COMMERCIAL COLLEGES, HAS NEITHER BEEN FACTUALLY PROVED TO BE CORRECT NOR CAN BE A BASIS LEGALLY IN VIEW OF THE BOARD'S CIRCULAR FOR DENYING THE REGISTRATION OF TR UST UNDER SECTION 12A. AS PER SECTION 12AA, THE CIT HAS TO SATISFY HIMSELF ONLY ABOUT THE OBJECT OF THE TRUST AND THE GENUINENESS OF ACTIVITIES. THERE IS NO DISPUTE THAT THE OBJECT OF THE TRUST IS EDUCATION ITA NO. 4172 & 4181 /DEL./2014 9 AND THE ASSESSEE IS RUNNING TWO EDUCATIONAL INSTI TUTIONS - ONE, FOR ENGINEERING COURSES AND ANOTHER, FOR B.ED COURSES. THEREFORE, IT IS ESTABLISHED THAT THE OBJECT OF THE TRUST IS EDUCATION WHICH IS CHARITABLE AND THE ASSESSEE IS GENUINELY PURSUING THE SAME. THEREFORE, IT HAS DULY FULFILLED THE CONDITION S NECESSARY FOR REGISTRATION UNDER SECTION 12AA. SO FAR AS THE ISSUE OF VERIFICATION OF CORPUS FUNDS OR DONATIONS IS CONCERNED, THIS EXERCISE IS TO BE CARRIED OUT BY THE ASSESSING OFFICER WHILE MAKING THE ASSESSMENT OF EVERY YEAR. SIMILARLY, WHETHER THERE IS A VIOLATION OF SECTION 13(3) OR NOT, THIS ASPECT IS TO BE EXAMINED BY THE ASSESSING OFFICER EVERY YEAR. IN ANY YEAR IF THERE IS AN UNVERIFIABLE DONATION OR IF THERE IS VIOLATION OF SECTION 13(3), THE CONSEQUENCE WILL FOLLOW IN THE ASSESSMENT OF THAT YEA R BUT THE VERIFICATION OF THE DONATION OR VERIFICATION OF VIOLATION OF SECTION 13(3) IS NOT THE RELEVANT CONSIDERATION FOR REGISTRATION OF TRUST UNDER SECTION 12AA. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER OF LEARNED CIT AND DIRECT HIM TO GRANT REGISTR ATION TO THE ASSESSEE TRUST.' 16. AGAIN THIS ISSUE WAS DISCUSSED IN DELHI ITAT IN THE CASE OF J K EDUCATION SAMITI VS CIT ROHTAK 2015(5) TMI 814 IN WHICH IT HAS BEEN HELD THAT 5. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT SECTION 12AA DEALS WITH THE PROCEDURE FOR REGISTRATION WHICH INTER ALIA PROVIDES THAT ON AN APPLICATION FILED BY ASSESSEE, THE COMMISSIONER OF INCOME TAX WILL MAKE CERTAIN QUERIES AS HE MAY DEEM NECESSARY IN THIS RESPECT AND AFTER G ETTING SATISFIED ABOUT THE OBJECTS OF THE SOCIETY/INSTITUTION AND THE GENUINENESS OF ACTIVITIES, HE SHALL PASS AN ORDER IN WRITING REGISTERING THE INSTITUTION OR ON NON SATISFACTION, REFUSING THE REGISTRATION THEREOF AS THE CASE MAY BE. HOWEVER, BEFORE PAS SING ORDER FOR REFUSAL OF REGISTRATION, THE ASSESSEE WILL BE PROVIDED REASONABLE OPPORTUNITY OF BEING HEARD. THEREFORE, FROM THE ABOVE PROVISION OF LAW, WE FIND THAT AT THE TIME OF REGISTRATION U/S 12AA, THE COMMISSIONER IS ONLY REQUIRED TO EXAMINE THE OBJ ECTS OF THE SOCIETY / INSTITUTION AS WELL AS GENUINENESS OF ACTIVITIES OF THE ASSESSEE AND IF HE FINDS THAT THE OBJECTS OF THE SOCIETY ARE CHARITABLE, AND THE ACTIVITIES AS STATED IN THE OBJECT CLAUSE OF THE SOCIETY ARE BEING CARRIED OUT, THEN HE IS BOUND TO GRANT REGISTRATION U/S 12AA OF THE ACT. HON'BLE HIGH COURT OF UTTARAKHAND AS RELIED UPON BY LD. D.R. IN THE CASE OF CIT VS NATIONAL INSTITUTE OF AERONAUTICS AND EDUCATION 181 TAXMAN 205 HAS HELD THAT WHERE THE ASSESSEE WAS EARNING PROFITS BY CHARGING HE FTY FEES, THE ASSESSEE CANNOT BE SAID TO BE ENGAGED IN CHARITABLE ACTIVITIES AND WAS NOT ELIGIBLE FOR REGISTRATION U/S 12AA OF THE ACT HOWEVER, THE HON'BLE SUPREME COURT IN THE CASE OF QUEENS' EDUCATIONAL SOCIETY VS CIT 245 CTR 449 HAS HELD THAT MERE EARNI NG OF PROFIT CANNOT BE THE REASON FOR NOT ALLOWING REGISTRATION UNDER THE PROVISIONS OF SECTION 12AA. THE FINDINGS OF HON'BLE SUPREME COURT AS CONTAINED IN PARA 19 ARE REPRODUCED BELOW: 'IT IS CLEAR, THEREFORE, THAT THE UTTARAKHAND HIGH COURT HAS ERRED BY QUOTING A NON - EXISTENT PASSAGE FROM AN APPLICABLE JUDGMENT, NAMELY, ADITANAR AND QUOTING A PORTION OF A PROPERTY TAX JUDGMENT WHICH EXPRESSLY STATED AT RULINGS ARISING OUT OF THE INCOME TAX ACT WOULD NOT BE APPLICABLE. QUITE APART FROM THIS, IT ALSO WENT ON TO FURTHER QUOTE FROM A PORTION OF THE SAID PROPERTY TAX JUDGMENT WHICH WAS RENDERED IN THE CONTEXT OF WHETHER AN EDUCATIONAL SOCIETY IS SUPPORTED WHOLLY OR IN PART BY VOLUNTARY CONTRIBUTIONS, SOMETHING WHICH IS ITA NO. 4172 & 4181 /DEL./2014 10 COMPLETELY FOREIGN TO SECTION 10(23C) (II IAD). THE FINAL CONCLUSION THAT IF A SURPLUS IS MADE BY AN EDUCATIONAL SOCIETY AND PLOUGHED BACK TO CONSTRUCT ITS OWN PREMISES WOULD FALL FOUL OF SECTION 10(23C) IS TO IGNORE THE LANGUAGE OF THE SEC 'ON AND TO IGNORE THE TESTS LAID DOWN IN THE SURAT ART SI LK CLOTH CASE, ADITANAR CASE AND THE AMERICAN HOTEL AND LODGING CASE. IT IS CLEAR THAT WHEN A SURPLUS IS PLOUGHED BACK FOR EDUCATIONAL PURPOSES, THE EDUCATIONAL INSTITUTION EXISTS SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT. IN FACT, IN S.RM.M.CT.M.TIRUPPANI TRUST V. COMMISSIONER OF INCOME TAX, (1998) 2 SCC 584, THIS COURT IN THE CONTEXT OF BENEFIT CLAIMED UNDER SECTION 11 OF THE ACT HELD' 6. THOUGH, THE ABOVE FINDINGS OF HON'BLE SUPREME COURT ARE WITH REFERENCE TO SECTION 10(23C)(IIIAD) AND NOT IN RESPECT OF SECTION 11 AND 12 YET THE RATIO OF DECISION IS THAT MERE EARNING OF PROFIT IN THE COURSE OF CARRYING OUT CHARITABLE ACTIVITIES CANNOT BE A REASON FOR NOT GRANTING REGISTRATION U/S 12AA OF THE ACT.' THE ABOVE JUDGMENT IS CONSIDERED R ECENTLY IN THE CASE OF SHREE BALAJI EDUCATION TRUST C/O ANIL ASHOK & ASSOCIATES VS CIT DEHRADUN 2016 (3)TML 969 WHERE IN IT HAS BEEN HELD THAT '10. IT IS RELEVANT TO MENTION THAT GRANT OF REGISTRATION UNDER SECTION 12A OF THE ACT DOES NOT AUTOMATICALLY MAKE ELIGIBLE THE APPLICANT FOR EXEMPTION UNDER SECTION 11 AND OTHER RELEVANT PROVISIONS OF THE ACT DURING THE ASSESSMENT PROCEEDINGS WHILE CONSIDERING SUCH CLAIM OF ASSESSEE THE AO IS FULLY EMPOWERED TO EXAMINE AND VERIFY THESE FACTS THAT WHETHER THE ASSE SSEE/APPLICANT HAS APPLIED ITS RECEIPTS TOWARDS ITS CHARITABLE OBJECTS AND THE AO IS ALSO EMPOWERED TO VERIFY AS TO WHETHER THE APPLICANT ASSESSEE IS CONDUCTING ANY ACTIVITY IN THE NAME OF CHARITABLE WHICH IS ACTUALLY IN THE NATURE OF TRADE COMMERCE OR BUS INESS. THESE SOVEREIGN POWERS OF THE TAX AUTHORITIES ARE PERPETUAL WHICH CANNOT BE TAKEN AWAY ONLY BY GRANT OF REGISTRATION UNDER SECTION 12A OF THE ACT. IT IS ALSO RELEVANT TO MENTION THAT THE GRANT OF REGISTRATION UNDER SECTION 12A OF THE ACT MERELY A PR E - QUALIFICATION FOR CLAIMING EXEMPTION UNDER SECTION 11 AND OTHER RELEVANT PROVISIONS OF THE ACT, WHICH SHOULD BE GRANTED BY RECORDING SATISFACTION AS REQUIRED UNDER THE SAID PROVISION. 11. FINALLY, WE HOLD THAT THE CIT DISMISSED APPLICATION FOR REGISTRAT ION WITHOUT ANY JUSTIFIED REASON AND BY CONSIDERING INCORRECT AND IRRELEVANT FACTS AND THE ID. CIT(A) HAS NOT BROUGHT ANY ADVERSE FINDING ON RECORD TO SHOW THAT HE OBJECTS OF THE TRUST ARE NOT CHARITABLE OR NON GENUINE. AT THE SAME TIME, WE NOTE THAT THE A PPLICANT SUCCESSFULLY ESTABLISHED THAT IT WAS CREATED WITH CHARITABLE OBJECTS AND PURPOSES, ACTIVITIES ARE GENUINE AND IN CONSONANCE WITH THE CHARITABLE OBJECTS AND ALL RECEIPTS/INCOME SURPLUS IS BEING USED FOR EDUCATION PURPOSES. THEREFORE, WE SET ASIDE T HE IMPUGNED ORDER AND THUS CONCLUSION OF THE CIT IS DEMOLISHED. CONSEQUENTLY, THE CIT IS DIRECTED TO GRANT REGISTRATION UNDER SECTION 12A OF THE ACT TO THE APPLICANT TRUST.' ITA NO. 4172 & 4181 /DEL./2014 11 15. THE SECOND ALLEGATION OF THE LEARNED CIT IN PARA 4 IS THAT THERE ARE MOST OF THE MEMBERS BELONG TO THE SAME FAMILY AND THEREFORE CLOSE TO EACH OTHER. THIS ALLEGATION OF THE LD. CIT DOES NOT FIND ANY CO - RELATION WITH THE FACTS OF THE CASE. THE MEMBERS ARE NOT AT ALL RELATED TO EACH OTHER. WITHOUT PREJUDICE TO THE SAME WHERE THE OBJE CTS OF THE ASSESSEE ARE PURELY CHARITABLE IN NATURE REGISTRATION CANNOT BE REJECTED MERELY BECAUSE THERE WOULD BE PERPETUAL SUCCESSION TO THE PROPERTY TRUST. THERE IS NO BAR UNDER THE LAW THAT THE FAMILY MEMBERS CANNOT BE MEMBERS OF A SOCIETY. THERE IS NO SUCH RESTRICTION UNDER THE SOCIETY REGISTRATION ACT, 1860 AND UNDER THE INCOME TAX ACT. 16. A SIMILAR ISSUE HAS BEEN DEALT WITH BY THIS HON'BLE TRIBUNAL IN THE CASE OF DDIT(E) VS. INSTITUTE OF MARKETING AND MANAGEMENT IN ITA NO. 4182/DEL/2013 DATED 21.0 2.2014, WHEREIN THE HON'BLE TRIBUNAL HAS HELD AS UNDER: '11. AS PER THE PROVISIONS OF SECTION 13, THERE ARE CERTAIN CONDITIONS WHICH, IF VIOLATED, WOULD LEAD TO DENIAL OF THE BENEFIT UNDER SECTION 11, IF SOME ADVANTAGE OR BENEFIT HAS BEEN TAKEN BY THE PER SONS WHO ARE IN THE GOVERNANCE OF THE INSTITUTION. HOWEVER, THERE IS NO CONDITION SPECIFIED, THAT THE PERSONS IN GOVERNANCE SHOULD NOT BE RELATIVES. THE FUNCTIONING OF THE INSTITUTION CANNOT BE CONSIDERED TO BE UNDEMOCRATIC, IF TWO RELATIVES ARE OCCUPYING THE POSITION IN THE MANAGEMENT. IN FACT, SECTION 13 ITSELF PROVIDES FOR PAYMENT OF SALARY, AND ALLOWANCE TO THE PERSONS IN THE MANAGEMENT, IN CASE SUCH PAYMENT DOES NOT EXCEED WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES. THUS, WE ARE IN AGREEMENT WITH CI T(A) THAT THERE IS NO SUCH RESTRICTION IN SECTION 13 REGARDING RELATIVES HOLDING POSITION IN THE CHARITABLE SOCIETY OR INSTITUTION.' 17. THIS ISSUE ALSO CROPPED UP BEFORE ITAT DELHI IN THE CASE OF NLB CHARITABLE TRUST VS CIT, MEERUT (ITA NO. 1707/D/2009) WHEREIN IT HAS BEEN HELD THAT '12. THESE CLAUSES DESCRIBE ONLY REIMBURSEMENTS OF OUT - OF - POCKET EXPENSES INCURRED BY THE TRUSTEES IN THE COURSE OF DISCHARGING THE OBJECTS OF THE TRUST AND FOR PAYMENT OF HONORARIUM FOR THE WORK A PARTICULAR TRUSTEE DO FOR C ARRYING OUT THE ACTIVITIES OF THE TRUST AND HONORARIUM WILL HAVE TO HAVE THE APPROVAL OF BOARD OF TRUSTEES AND OTHER CLAUSE DEALS WITH INDEMNIFICATION AND REIMBURSEMENT FOR THE LAWFUL ACTS IN THE DISCHARGE OF OBJECTS OF THE TRUST. THE TRUSTEES ARE PROHIBIT ED FROM DERIVING ANY DIRECT OR INDIRECT PECUNIARY ADVANTAGE OUT OF TRUST PROPERTIES, INCOME OR APPLICATION THEREOF FOR THEMSELVES AND THEIR RELATIVES AND ASSOCIATES. THE SPENDING OF TRUST PROPERTIES ON ANY OBJECT WHICH IS NOT ENUMERATED IN THE OBJECTS OF T RUST WAS ALSO PROHIBITED AND THE TRUSTEES' ACT AGAINST THE INTEREST OF TRUST IS ALSO PROHIBITED. THUS, ACCORDING TO THE PROHIBITION CLAUSE TRUSTEES CANNOT DERIVE ANY DIRECT OR INDIRECT PECUNIARY ADVANTAGE EITHER OUT OF PROPERTY OF THE TRUST OR FROM INCOME OR APPLICATION THEREOF NOT ONLY FOR THEMSELVES, BUT FOR THEIR RELATIVES AND ASSOCIATES. IN ANY CASE, IF LATER ON IT IS FOUND BY THE DEPARTMENT THAT TRUSTEES OR THEIR RELATIVES OR THEIR ASSOCIATES ARE DERIVING ANY DIRECT OR INDIRECT PECUNIARY ADVANTAGE OUT OF TRUST PROPERTY OR ITS INCOME AND IF ANY SUCH PROPERTY OR INCOME IS APPLIED FOR THAT PURPOSE, THEN IT WILL BE CONTRAVENTION OF THE TRUST DEED. THEREFORE, IN OUR OPINION, THE SIMPLE FACT THAT THERE IS PERPETUAL SUCCESSION IN THE APPOINTMENT OF TRUSTEE, CA NNOT DISENTITLE THE ASSESSEE INSTITUTION FROM GETTING REGISTRATION. MOREOVER, THE TRUST DEED HAS TO BE READ AS A WHOLE ACCORDING TO WELL ITA NO. 4172 & 4181 /DEL./2014 12 ESTABLISHED LAW. IT HAS BEEN STATED IN CLAUSE 2(0) THAT IF ANY OF THE FIRST TRUSTEES RESIGNED DURING HIS/HER LIFETIME, THE VACANT SEAT WILL BE FILLED BY THE BOARD OF FIRST TRUSTEES WITH 3/4TH MAJORITY AND, THUS, NOMINATED WILL ALSO BE CALLED FIRST TRUSTEE. CLAUSE 2(III) PROVIDES THAT THE NUMBER OF TRUSTEES COULD BE INCREASED BY MOVING AN AMENDMENT OF THE TRUST AND GETTING APPROVAL OF 3/4TH NUMBER OF FIRST TRUSTEES, HOWEVER, THE TOTAL NUMBER OF TRUSTEES CANNOT EXCEED 10. IN VIEW OF THIS CLAUSE ALSO IT CANNOT BE SAID THAT THERE IS PERPETUAL SUCCESSION OF THE POST OF THE TRUSTEE.' IN THE PRESENT CASE ALSO, IN THE MEMORANDUM OF SOCIETY THERE ARE CONDITIONS STIPULATED FOR THE MEMBERS THAT INCOME AND PROPERTY OF THE SOCIETY SHALL BE SOLELY APPLIED TOWARDS THE PROMOTION OF SOCIETY. IN THE EVENT OF DISSOLUTION OF THE SOCIETY, NO PROPERTY SHALL BE PAID OR DISTRIBUTED AMONG THE MEMBERS OF THE SOCIETY, BUT SHALL BE GIVEN OR TRANSFERRED TO THE INSTITUTION HAVING OBJECTS SIMILAR TO THE OBJECTS OF THE SOCIETY. 18. THUS AGAIN THE ORDER HAS BEEN PASSED BY THE CIT IN HASTE WITHOUT GOING THROUGH THE MEMORANDUM AND RULES AND REGULATIONS OF THE SOCIETY. 1 9. THE THIRD ALLEGATION OF THE LEARNED CIT IN PG. 3 PARA 5 IS THAT THE ASSESSES HAS INCURRED EXPENDITURE AMOUNTING TO RS. 68,531/ - NOT FOR THE PURPOSE OF EDUCATION, AND THE EXPENDITURE HAS BEEN INC URRED TO PROCURE MORE ADMISSIONS WITH THE SOLE MOTIVE OF EARNING PROFITS AND HENCE THE EXPENDITURE SHOULD BE INCURRED SOLELY FOR THE PURPOSE OF EDUCATION IS NOT SATISFIED. 20. IN THIS REGARD IT IS SUBMITTED THAT PERUSAL OF THE ADVERTISEMENT REVEALS THAT T HE EXPENDITURE WAS INCURRED FOR HIRING OF DIRECTORS. PROFESSORS, ASSOCIATE PROFESSORS/ ASSISTANT PROFESSORS FOR THE VARIOUS SUBJECTS OF ENGINEERING I.E., COMPUTER SCIENCE, ELECTRONICS & COMMUNICATIONS, MECHANICAL, ELECTRICAL, CIVIL, PHYSICS, CHEMISTRY, MAT HEMATICS, ENGLISH IT BRANCHES. 21. LEARNED CIT IS COMPLETELY WRONG IN DRAWING THE CONCLUSION THAT THE ADVERTISEMENT WAS DONE TO PROCURE ANY ADMISSION SINCE THE EXPENDITURE IS DONE FOR HIRING THE PROFESSORS WHICH IS DIRECTLY RELATED TO THE ACTIVITIES OF TH E SOCIETY. 22. THEREFORE, CONSIDERING ALL THE ABOVE THREE ALLEGATIONS, THE ABOVE ACTION OF THE LD. CIT IN REJECTING THE APPLICATION FILED BY THE ASSESSEE IS INVALID AND AGAINST THE PROVISIONS STIPULATED IN THE LAW. 23. IT IS A TRITE LAW THAT THE CIT IS EMPOWERED TO SATISFY HIMSELF ABOUT THE OBJECTS OF THE TRUST AND THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION AND SUCH POWERS DOES NOT EXTEND TO THE ELIGIBILITY OF THE TRUST/ INSTITUTION FOR EXEMPTION U/S 11 R.W.S 13 WHICH FALLS IN THE DOMA IN OF THE AO. ONCE HE HAS NOT DOUBTED ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE ASSESSEE NOR DOUBTED ITS CHARITABLE OBJECT, HIS POWERS UNDER SECTION 12AA END. ITA NO. 4172 & 4181 /DEL./2014 13 24. AS REGARD TO APPLICATION FILED U/S 80G OF THE INCOME TAX ACT, IT WAS REJECTED ON THE GR OUND THAT SINCE THE ASSESSEE IS NOT REGISTERED U/S 12AA, ASSESSEE IS NOT ELIGIBLE U/S 80G(5)(VI) OF THE ACT . 25. IN THIS REGARD IT IS SUBMITTED THAT SINCE THE ASSESSEE IS ELIGIBLE FOR REGISTRATION U/S 12AA, CONSEQUENTLY 80G CANNOT BE REJECTED. 5. THE LD . DR RELIED ON THE ORDER OF THE LD. CIT. HE FURTHER SUBMITTED THAT THE SOCIETY HAS NOT UNDERTAKEN ANY CHARITABLE ACTIVITY. DRAWING OUR ATTENTION TO THE BALANCE SHEET OF THE SOCIETY FOR THE ASSESSMENT YEAR 2012 - 13 AND 2013 - 14 AND THE INCOME AND EXPENDITURE ACCOUNT, IT WAS SUBMITTED THAT THE SOCIETY IS INCURRING ONLY CAPITAL EXPENDITURE AND NOT FOR ANY ACTIVITY AS PER RULES AND REGULATIONS OF THE SOCIETY. 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIALS AVAILABLE ON RECORD, WE FIND NO JUSTIFICAT ION TO SUPPORT TH E ORDERS OF THE LD. CIT REFUSING TO GRANT REGISTRATION U/S. 12A. IT APPEARS THAT THE CONCLUSION REACHED BY THE CIT THAT THE ASSESSEE TRUST IS PROFIT ORIENTED ENTITY AND NOT THE CHARITABLE INSTITUTE, IS BASED ONLY ON THE GROUND THAT THE ASS ESSEE WOULD CHARGE HEFTY FEES FROM THE STUDENTS. THE LD. CIT HAS FAILED TO THROW ANY LIGHT ON THE AIMS AND OBJECTS OF THE SOCIETY AND TO EXAMINE WHETHER THE ACTIVITIES OF THE SOCIETY ARE TO ACHIEVE THE AIMS AND OBJECTS AS PER ITS MEMORANDUM. SIMPLY BECAUSE THE APPELLANT WILL CHARGE FEE FROM THE STUDENTS, IN OUR OPINION, IT DOES NOT GO TO SUGGEST REFUSAL OF REGISTRATION TO THE ASSESSEE SOCIETY. THE LD. CIT HAS ALSO OBSERVED ITA NO. 4172 & 4181 /DEL./2014 14 THAT GOVERNING BODY OF THE SOCIETY BELONGS TO CLOSE FAMILY MEMBERS, WHICH ALSO DOES N OT BAR FOR THE FORMATION OF SOCIETY. THE SOCIETY IS A SEPARATE ENTITY FROM ITS MEMBERS AND IS GOVERNED BY THE SOCIETIES REGISTRATION ACT, 1960 AND EACH SOCIETY MAKES SEPARATE RULES AND REGULATIONS. THE LD. CIT HAS FURTHER NOTED THAT A SUM OF RS.68,531/ - HA S BEEN INCURRED TOWARDS ADVERTISEMENT EXPENDITURE FOR THE PURPOSE OTHER THAN EDUCATION. IN THIS REGARD, THE LD.AR CLARIFIED THAT IT WAS INCURRED FOR HIRING OF FACULTY MEMBERS FOR RUNNING THE INSTITUTE. THEREFORE, THE EXPENSES INCURRED ON ADVERTISEMENT FOR HIRING TALENTED FACULTY MEMBERS CANNOT BE SAID TO HAVE INCURRED FOR OTHER THAN EDUCATIONAL PURPOSE . THEREFORE, THE ALLEGATION MADE BY THE LD. CIT THAT THE ASSESSEE INCURRED ADVERTISEMENT EXPENDITURE FOR PROCURING MORE ADMISSION OF THE STUDENTS WITH SOLE MO TIVE OF EARNING PROFIT, IS WRONG. IN VIEW OF THE ABOVE, MATERIALS ON RECORD AND CASE LAWS RELIED ON BY THE ASSESSEE, WE FIND NO JUSTIFICATION TO REFUSE THE REGISTRATION TO THE ASSESSEE SOCIETY. WE ACCORDINGLY, ALLOW THE APPEAL OF ASSESSEE FOR REGISTRATION U/S. 12AA OF THE IT ACT. 7. THE APPELLANT HAD ALSO APPLIED FOR REGISTRATION U/S. 80G. AFTER PERUSING THE ORDER OF THE CIT, WE FIND THAT THE CIT HAS NOTED THAT THE ASSESSEE WAS GIVEN OPPORTUNITY FOR HEARING ON 02.04.2014, 16.04.2014, 23.04.2014 AND 28.04. 2014. ON THE DATE OF FINAL HEARING, NOBODY ATTENDED THE PROCEEDINGS NOR ITA NO. 4172 & 4181 /DEL./2014 15 ANY WRITTEN REPLY WAS RECEIVED BY CIT. IN OUR OPINION, THE ASSESSEE SHOULD BE GIVEN ONE MORE OPPORTUNITY OF HEARING BEFORE THE LD. CIT TO PUT ITS CASE AND COMPLY WITH THE NOTICES ISSUE D TO HIM BEFORE FINALLY DECIDING THE ISSUE OF APPROVAL U/S. 80G. WE ACCORDINGLY RESTORE THE MATTER OF APPROVAL U/S. 80G TO THE FILE OF CIT FOR DECIDING THE SAME AFRESH AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASSESSEE IS DIRECTED TO APP EAR BEFORE THE LD. CIT AND TO FURNISH THE DETAILS/MATERIAL REQUIRED BY THE LD. CIT BY WAY OF NOTICES ISSUED TO HIM . ACCORDINGLY, THE APPEAL OF THE ASSESSEE RELATING TO APPROVAL U/S. 80G IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL NO. 4172/DEL./2014 IS ALLOWED AND APPEAL NO. 4181/DEL. 2014 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13.12.2016 . SD/ - SD/ - I.C. SUDHIR ) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 13.12.2016 *AKS/ - COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI