M/s Jiwan Dass Kartar Singh Charitable Trust, Karnal V. CIT(E), Chandigarh

ITA 426/CHANDI/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6635 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 06-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR GULSHAN RAJ
• Assessee Lawyers: RAJEEV SACHDEVA
• Keywords: Charitable institution; Opportunity of being heard
• Section: 12A; 12AA; 205; 250

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BEN CH A, CHANDIGARH , . '.., # $, %& BEFORE: SH. SANJAY GARG, JM & DR. B.R.R. KUMAR, AM ITA NO. 426/CHD/2018 ASSESSMENT YEAR : 2017-18 M/S JIWAN DASS KARTAR SINGH CHARITABLE TRUST, CHAWLA NIWAS SECTOR-12, KARNAL THE CIT(E) CHANDIGARH PAN NO: AACTJ0965H APPELLANT RESPONDENT !' ASSESSEE BY : SHRI. RAJEEV SACHDEVA #!' REVENUE BY : DR. GULSHAN RAJ $ %! & DATE OF HEARING : 11/02/2019 '()*! & DATE OF PRONOUNCEMENT : 01/05/2019 %'/ ORDER PER DR. B.R.R. KUMAR, A.M THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. CIT(E), CHANDIGARH DT. 30/11/2017. 2. THE APPEAL HAS BEEN FILED BY THE ASSESSEE WITH THE DELAY OF 58 DAYS. THE LD. AR SUBMITTED THAT THE DELAY WAS DUE TO ABYSMALL Y DETERIORATING HEALTH CONDITION OF THE TRUSTEE AND FILED MEDICAL REPORTS TO THAT EXTENT. HENCE THE DELAY IS CONDONED. 3. BEFORE US THE ASSESSEE HAS TAKEN ONLY ONE GROUND THAT THE LD. CIT(E) IS NOT JUSTIFIED IN DISALLOWING THE EXEMPTION UNDER SECTIO N 12AA OF INCOME TAX ACT,1961. 4. THE STATED AIMS AND OBJECTS OF THE TRUST ARE TO WORK FOR UPLIFTMENT OF QUALITY EDUCATION I.E. TECHNICAL EDUCATION, BASIC E DUCATION, HIGHER EDUCATION, PROFESSIONAL EDUCATION, ANCIENT YOGIC AND SPIRITUAL EDUCATION AND MEDICAL/HEALTH EDUCATION ETC. AND TO PROMOTE & DEVE LOP EDUCATION, EMPLOYMENT, SCIENCE AND TECHNOLOGY AND PROSPERITY O F HUMANITY BY WAY OF ESTABLISHMENT OF DIFFERENT EDUCATIONAL RESEARCH & T RAINING INSTITUTIONS. THE INSTITUTIONS CAN BE OPENED IN ANY STATE/ UNION TERR ITORY/ABROAD UNDER ANY NAME AS PER RESOLUTION PASSED BY THE FOUNDER TRUSTEES FR OM TIME TO TIME, TO HELP THE POOR/NEEDY AND INTELLIGENT STUDENTS FOR THEIR WELFA RE AND TO SPREAD EDUCATION IN 2 THE SOCIETY AT LARGE, SPECIAL EMPHASIS SHALL BE DON E FOR WELFARE OF POOR SECTION OF THE SOCIETY. 5. THE LD. CIT(E) AFTER GOING THROUGH THE SUBMISSIO NS HELD THAT THE ASSESSEE IS A FRANCHISOR OF ZEE LEARN LTD. AND THE INTELLECTUAL PROPERTY RIGHTS IS VESTED WITH THE FRANCHISOR, THE ZEE LEARN LIMITED AND THE APPLI CANT TRUST MERELY REMAINS AN AGENT TO THE FRANCHISOR COMPANY FOR PROMOTING ITS B USINESS ON COMMERCIAL BASIS ON THE TERMS AND CONDITIONS SET BY THE FRANCHISOR C OMPANY FOR ITS OWN BENEFIT, BEING A COMMERCIAL ENTERPRISE. HE HELD THAT THIS FA CT TOTALLY NEGATES THE ESSENCE OF CHARITY AND THE APPLICANT TRUST'S CLAIMS OF BEING CHARITABLE GET IMPINGED BY THE ARRANGEMENT THAT CATERS TO ENHANCIN G THE RECEIPTS OF THE FRANCHISOR. INDEPENDENCE OF THE APPLICANT TO PURSUE ACTIVITIES, CLAIMED TO BE CHARITABLE IS SEVERELY IMPINGED IN LIGHT OF THE OVE RARCHING CONTROL OF THE FRANCHISOR IN PRACTICALLY ASPECTS. 6. IT WAS ALSO HELD THAT THE HEADS OF EXPENSES AS S HOWN IN THE INCOME & EXPENDITURE ACCOUNT FOR THE LAST TWO YEARS SINCE IN CEPTION DO NOT EVIDENCE CARRIAGE OF ANY ACTIVITY OUT OF THE SIXTEEN POINT A IMS & OBJECTS MENTIONED IN THE TRUST DEED OF THE APPLICANT TRUST. IT HAS BEEN REVE ALED THAT THE TERMS OF THE AGREEMENT, THE FEE STRUCTURE ETC ARE ALL ALIGNED TO MAXIMISING THE PROFITS AND ITS SHARING BETWEEN THE FRANCHISOR AND THE FRANCHISEE. THE STRUCTURE OF THE TRUST, ITS CHARACTER IN TERMS OF TRUSTEES ETC ARE ALL CONTROLL ED WITHIN A FAMILY. LACK OF REPRESENTATION FROM OTHER SECTIONS DOESNT IMPART T HE CHARACTER OF AN ENTITY AMENABLE TO PUBLIC CHARITY. 7. BASED ON THE SUBMISSIONS OF THE ASSESSEE TRUST I T WAS HELD THAT THE TRUSTEES IS RUNNING A FRANCHISE PURELY ON COMMERCIAL BASIS W ITH NO INTENT OF IMPARTING EDUCATION TO PUBLIC AT LARGE. IN THE INSTANT CASE T HE REGULATIONS ARE PREDOMINANTLY THOSE OF THE FRANCHISOR AND AIMED TO MAXIMIZE ITS RETURNS/ RECEIPTS FROM THE ARRANGEMENTS. HOLDING THUS THE LD . CIT(E) DENIED GRANT OF REGISTRATION UNDER SECTION 12AA. 8. BEFORE US, THE LD. AR ARGUED THAT THE TRUST HAS 250 STUDENTS AND THEY BELONG TO DIFFERENT SECTIONS OF THE SOCIETY AND ALS O TO FINANCIALLY POOR STUDENTS. 9. THE TRUST HAS BEEN FORMED FOR THE PURPOSE OF PRO VIDING EDUCATION TO THE MASSES AND FOR UPLIFTMENT OF EDUCATION HENCE IT IS A PUBLIC CHARITABLE TRUST AND REGISTRATION OUGHT TO HAVE BEEN GRANTED. HE RELIED ON THE CASE OF MERITTA WELFARE TRUST VS. CIT 44 ITR 600. HE ARGUED THAT TH E TRUST RUN BY THE FAMILY MEMBERS CANNOT BE AN IMPEDIMENT FOR GRANT OF REGIST RATION AS THE FAMILY 3 MEMBERS ARE LOOKING AFTER THE AFFAIRS OF THE TRUST IN THE POSITION OF TRUSTEES BUT NOT FOR ANY PERSONAL FINANCIAL GAINS. IT WAS ARGUED THAT MERE ENTERING INTO FRANCHISEE AGREEMENT WITH FRANCHISOR TO SET UP SCHO OL CANNOT BE A GROUND TO CONCLUDE THAT EARNING PROFIT IS THE MAIN MOTIVE OF THE ASSESSEE TRUST. IT WAS CONTENDED THAT THE CIT(E) HAS TO RESTRICT HIMSELF T O THE OBJECTS OF THE TRUST AND GENUINENESS OF THE ACTIVITIES AND SINCE THERE IS NO DISPUTE ABOUT THE ACTIVITIES OF THE INSTANT CASE THE REGISTRATION SHOULD BE GRANTED . HE PLACED RELIANCE ON VARIOUS CASE LAWS IN HIS PAPER BOOK IN SUPPORT OF H IS ARGUMENT. 10. THE LD. AR ALSO RELIED ON THE CASE OF CIT VS. H IGHLANDERS EDUCATIONAL ACADEMY IN ITA NO. 142 OF 2007. FURTHER HE EXTENSIV ELY QUOTED THE PROVISIONS OF SECTION 2(15) PERTAINING TO THE CHARITABLE PURPOSE IN SUPPORT OF HIS ARGUMENT AND FILED PAPER BOOK OF 213 PAGES CONSISTING OF SUB MISSIONS BEFORE THE LOWER AUTHORITIES, FRANCHISEE AGREEMENT AND CASE LAWS. 11. AGAINST THE ARGUMENT OF THE LD. AR, THE DEPARTM ENTAL REPRESENTATIVE HEAVILY RELIED ON THE ORDER OF THE LD. CIT(E) IN RE JECTING THE REGISTRATION AND SUBMITTED THAT DECISIONS IN THE CASE OF RAJAH SIR A NNAMALAI CHETTIAR FOUNDATION VS CIT 15 TAXMANN 313, CIT VS. NATIONAL INSTITUTE O F AERONAUTICAL ENGINEERING SOCIETY 181 TAXMANN 205 SUPPORT THE REJECTION OF TH E REGISTRATION. 12. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH T HE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AIMS AND OBJ ECTIVE OF THE TRUST HAVE BEEN PERUSED. THEY CONSIST OF TO WORK FOR UPLIFTMENT OF QUALITY EDUCATION I.E. TECHNICAL EDUCATION, BASIC EDUCATION, HIGHER EDUCATION, PROFE SSIONAL EDUCATION, ANCIENT YOGIC AND SPIRITUAL EDUCATION AND MEDICAL/HEALTH ED UCATION ETC. AND TO PROMOTE & DEVELOP EDUCATION, EMPLOYMENT, SCIENCE AN D TECHNOLOGY AND PROSPERITY OF HUMANITY BY WAY OF ESTABLISHMENT OF D IFFERENT EDUCATIONAL RESEARCH & TRAINING INSTITUTIONS. THE INSTITUTIONS CAN BE OPENED IN ANY STATE/ UNION TERRITORY/ABROAD UNDER ANY NAME AS PER RESOLU TION PASSED BY THE FOUNDER TRUSTEES FROM TIME TO TIME, TO HELP THE POOR/NEEDY AND INTELLIGENT STUDENTS FOR THEIR WELFARE AND TO SPREAD EDUCATION IN THE SOCIET Y AT LARGE, SPECIAL EMPHASIS SHALL BE DONE FOR WELFARE OF POOR SECTION OF THE SO CIETY IN ADDITION TO THE OTHER CLAUSES PERTAINING TO DISSOLUTION, DONATION, PROPER TIES AND APPLICATION OF FUNDS. REGARDING THE PRIMARY AIMS AND OBJECTIVES LIKE TECH NICAL EDUCATION, BASIC EDUCATION, HIGHER EDUCATION, SPIRITUAL EDUCATION TH E ASSESSEE IS NOT FOUND TO BE UNDERTAKING OR IN THE PROCESS OF UNDERTAKING ANY OF THE ACTIVITIES MENTIONED IN THE TRUST DEED. THE ONLY ACTIVITY THE ASSESSEE INVO LVED IS OBTAINING A FRANCHISEE OF ZEE LEARN LTD. THE FRANCHISEE AGREEMENT OF THE Z EE LEARN LTD. UNDISPUTEDLY 4 SHOWS THE COMMERCIAL NATURE OF THE ACTIVITIES BETWE EN THE FRANCHISEE AND THE FRANCHISOR. THE RELEVANT PORTION OF THE FRANCHISEE AGREEMENT IS AS UNDER: (A) IT IS EXPRESSLY AGREED BY THE PARTIES THAT THE FRAN CHISEE SHALL BE RESPONSIBLE FOR COLLECTING THE ANNUAL FEES FROM ALL STUDENTS, AT THE TIME OF ADMISSION ON BEHALF OF THE FRANCHISOR. SUCH ANNUAL FEES SHALL BE DETERMINED BY THE FRANCHISOR AND MAY BE AMENDED FROM TIME TO TIME AT THE FRANCHISORS SOLE DISCRETION. (B) IN ADDITION TO THE ABOVE THE STUDENT SHALL ALSO PAY MONTHLY TUITION FEES TO THE FRANCHISEE BEFORE THE COMMENCEMENT / COMPLETION OF THE COURSE. THE FRANCHISEE SHALL CHARGE AND RECOVER SUCH FEES FROM THE STUDENTS FOR DIFFERENT LEVELS OF ENTRY INCLUSIVE OF SUCH TAXES AS MAY BE A PPLICABLE FROM TIME TO TIME. THE FRANCHISEE MAY BE REQUIRED TO CHARGE IN ADDITION TO THE TUITION FEES ANY OTHER SUCH CHARGES AS INDICATED BY THE FRANCHISOR FROM TI ME TO TIME. (C) THE FRANCHISEE HEREBY AGREES TO ENSURE THAT THE MONTHLY TUITION / ACTIVITY FEES AS DECIDED BY THE FRANCHISOR SHALL BE COLLECTED BY TLW FRANCHISEE ON A QUARTERLY / HALF YEARLY BASIS IN ADVANCE. 9. THE TERMS OF AGREEMENT CLEARLY INDICATE THAT THE APPLICANT TRUST IS NOT FREE TO TAKE ITS DECISION IN TERMS OF COLLECTION OF FEE FOR PROVIDING SERVICES HIRED FROM THE COMPANY. THE SAME GETS FURTHER BOLSTERED FROM CONTE NTS OF PARA 7.2 OF THE FRANCHISE AGREEMENT REPLICATED AS UNDER:- (A) NON-REFUNDABLE 'FRANCHISE LICENSE FEE/FRANCHISE FEE ' (INCLUDING FEES FOR THE USE OF INTELLECTUAL PROPERTY RIGHTS) AS MENTION ED IN SECTION 3 OF THE INFORMATION SCHEDULE WHICH SHALL BE INCLUSIVE OF SE RVICE TAXES AT THE TIME OF EXECUTION OF THIS AGREEMENT. THE SAID FRANCHISEE FE E AND THE TAX THEREON ARE NON-REFUNDABLE AND THE FRANCHISEE SHALL NOT BE ENTI TLED TO CLAIM A REFUND OF THE SAME FOR ANY REASON WHATSOEVER, INCLUDING BUT NOT L IMITED TO EARLIER TERMINATION OF THIS AGREEMENT. (B) WITHOUT LIMITING THE FRANCHISOR'S RIGHT TO TERMINAT E THIS AGREEMENT PURSUANT TO CLAUSE 15, IN THE EVENT THAT/ANY AMOUNT IS NOT P AID BY THE FRANCHISEE TO THE FRANCHISOR WHEN DUE SUCH AMOUNT WILL BEAR LATE PAYM ENT INTEREST CALCULATED ON A DAILY BASIS FROM THE DUE DATE FOR PAYMENT AT THE RATE OF 24% (TWENTY FOUR PERCENT) PER ANNUM. (C) THE FRANCHISEE SHALL COLLECT FEES FROM THE STUDENTS FOR THE RELEVANT PROGRAMS IN ACCORDANCE WITH THE PRESCRIBED FEE SCHE DULE PROVIDED BY THE FRANCHISOR FROM TIME TO TIME. THE FRANCHISEE SHALL UNDER NO CIRCUMSTANCES VARY FROM THE FEE RANGE AS INDICATED BY THE FRANCHISOR U NLESS CHANGES ARE APPROVED BY THE FRANCHISOR. THE FRANCHISEE IS ALSO NOT AUTHO RIZED TO OFFER DISCOUNTS TO STUDENTS EXCEPT AS APPROVED IN WRITING BY THE FRANC HISOR. IN THE EVENT THE FRANCHISEE DEVIATES FROM THE QUANTUM OF FEES AS AGR EED UPON BY THE FRANCHISOR AND THE FRANCHISEE, THEN THE FRANCHISEE SHALL BE LI ABLE TO PAY SUCH DAMAGES, PENALTIES, LOSSES, ETC. TO THE FRANCHISEE, AS MAY B E DECIDED BY THE FRANCHISOR. (D) THE FRANCHISEE SHALL NOT OFFER ANY CREDIT FACILITIE S TO ANY STUDENTS. (E) NOTWITHSTANDING THE ABOVE, THE FRANCHISOR RESERVES THE RIGHT TO MAKE AMENDMENTS, ALTERATIONS TO THE COLLECTION PROCEDURE S AND TO THE AMOUNTS MENTIONED IN THIS AGREEMENT, TO BE FOLLOWED BY THE FRANCHISEE FROM TIME TO TIME, AS SITUATIONS DEMAND AND FRANCHISEE SHALL EXECUTE T HE SAME, IMPLEMENT AND CO- OPERATE IN IMPLEMENTING THOSE CHANGES. THESE MAY AL SO INCLUDE DIRECTIONS TO COLLECT THE PROGRAMS FEES IN THE NAME OF THE FRANCH ISOR AND TO DEPOSIT THE SAME DIRECTLY IN THE FRANCHISOR'S BANK ACCOUNT OR INSTRU CTION RECEIVED FROM THEM, IF THE FRANCHISOR SO DESIRES AT A LATER DATE FOR BANKING A ND OPERATIONAL CONVENIENCE. 13. THE FOLLOWING POINTS EMERGE OUT OF THE ABOVE AG REEMENT: A. IT IS THE RESPONSIBILITY OF THE TRUST TO COLLECT TH E ANNUAL FEE ON BEHALF OF FRANCHISOR. 5 B. THE FEE WOULD BE DETERMINED BY THE FRANCHISOR. THE TRUST WOULD HAVE NO SAY IN DETERMINING THE FEE STRUCTURE. C. ALL THE STUDENTS MUST PAY THE MONTHLY TUITION FEE B EFORE THE COMPLETION OF THE COURSE. D. THERE IS A PROVISION FOR COLLECTION OF ADDITIONAL C HARGE. E. THE FRANCHISEE FEE IS NON REFUNDABLE. F. THE PROVISION FOR PAYMENT OF INTEREST CALCULATED ON DAILY BASIS IN CASE OF DELAYED PAYMENT. G. THE TRUST CANNOT VARY THE FEE RANGE OR NOT AUTHORIZ ED TO GIVE ANY DISCOUNT AND THE TRUST IS LIABLE TO DAMAGES AND PENALTY CLAI MED BY THE FRANCHISEE IN CASE OF ANY DEVIATION OF THE FEE STRUCTURE. H. THE TRUST CANNOT OFFER ANY CREDIT TO STUDENTS. FROM THE ABOVE IT CAN BE SEEN THAT THE TRUST IS OPE RATING ON A COMMERCIAL BASIS IN CONDUCTING OF ITS AFFAIRS WHICH CONSISTS M AINLY RUNNING OF KID ZEE .THERE IS NO PROVISION FOR ANY TYPE OF FREE OR CONCESSIONA L EDUCATION TO THE POOR AND NEEDY STUDENTS. RATHER THE CLAUSES IN THE FRANCHISE E AGREEMENT MAKES IT BINDING ON THE TRUST NOT TO OFFER ANY DISCOUNTS OR CONCESSIONS AS OTHERWISE PROVIDED IN THE AGREEMENT. AS PER THE CLAUSE C & D OF THE AGREEMENT ABOVE THE TRUST CANNOT EVEN GRANT CREDIT TO THE NEEDY STU DENTS IN CASE OF FINANCIAL CRISIS AND THE INTEREST IS LIABLE TO BE CHARGED ON DAY TO DAY BASIS. SUCH TYPE OF ACTIVITY CANNOT BE CONSIDERED AS CHARITABLE ACTIVIT Y. IN THE BACKGROUND OF THESE FACTS EMANATING THE PROV ISIONS OF THE SECTION 2(15) ARE BEING REVISITED. THIS SECTION READS AS UN DER: '2(15) 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, [PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF A RTISTIC OR HISTORIC INTEREST,] AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CAR RYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIV ITY 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, UNLESS (I) SUCH ACTIVITY IS UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY AND (II) THE AGGREGATE RECEIPTS FROM SUCH ACTIVITY OR ACTIVI TIES DURING THE PREVIOUS YEAR, DO NOT EXCEED TWENTY PER CENT OF THE TOTAL RE CEIPTS, OF THE TRUST OR INSTITUTION UNDERTAKING SUCH ACTIVITY OR ACTIVITIES OF THAT PRE VIOUS YEAR. 6 14. THUS WHEN THE PROVISIONS OF THE SECTION ARE REA D WITH REGARD TO THE ACTIVITIES OF THE ASSESSEE WE FIND THAT EITHER BY T HE AIMS AND OBJECTIVE OR BY THE CONDUCT OR IMPLEMENTATION OF THE OBJECTIVE OF THE T RUST, IT DO NOT QUALIFY FOR REGISTRATION UNDER SECTION 12AA. IT COULD BE WELL E VIDENT THAT THE TRUST IS RUNNING WITH A PRIMARY OBJECTIVE OF EARNING THE PROFITS. TH E CO-ORDINATE BENCH OF ITAT CHENNAI HELD IN THE CASE OF RAJAH SIR ANNAMALAI CHE TTIAR FOUNDATION (SUPRA) HELD THAT THE INSTITUTIONS RUN BY THE CHARITABLE SO CIETIES MAY COLLECT FEES AND SERVICE CHARGES DOES NOT MEAN THAT THE INSTITUTIONS CAN CHARGE FEES, ETC., AT COMMERCIAL RATES FROM ALL THE PEOPLE WITHOUT GIVING ANY ELEMENT OF CHARITY TO NEEDY PEOPLE. THE CHARITABLE PURPOSE DEFINED AND MA NIFESTED AS INCLUDING RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, ETC. , IS TO PROTECT THE BASIC CONCEPT OF CHARITY. PRESENCE OF REAL CHARITY CANNOT BE DILU TED. CHARITY ALWAYS MEANS HELPING THE NEEDY SUPPORTING THE POOR, WORKING WITH COMPASSION AND DEDICATION FOR THE SOCIETY. RUNNING OF AN INSTITUTI ON WITHOUT ANY OF THE ABOVE VIRTUES CANNOT BE CONSIDERED AS A CHARITABLE INSTIT UTION. THE OBJECT OF THE ASSESSEE-TRUST IS TO ESTABLISH A NUMBER OF EDUCATIO NAL INSTITUTIONS IN A BRAND NAME AND RUN IT ON COMMERCIAL LINES. THIS CANNOT BE A CHARITABLE ACTIVITY. 14.1 THE ACTIVITIES OF THE INSTANT CASE ALSO DO NOT GIVE ANY EVIDENCE OR BRING OUT ANY FACT TO PROVE THAT THE TRUST IS RUNNING FOR A CHARITABLE PURPOSE. 14.2 SIMILARLY THE RATIO LAID DOWN IN THE CASE OF C IT VS NATIONAL INSTITUTE OF AERONAUTICAL ENGINEERING EDUCATIONAL SOCIETY [2009] 181 TAXMAN 205 (UTTARANCHAL) WHERE HON'BLE UTTARANCHAL HIGH COURT HELD THAT IN EXPRESSION 'CHARITABLE PURPOSE', CHARI TY IS SOUL OF EXPRESSION AND MERE TRADE AND COMMERCE IN EDUCATION CANNOT BE SAID TO BE A CHARITABLE PURPOSE ENTITLING A SOCIETY TO GRANT OF REGISTRATIO N UNDER SECTION 12AA. IT WAS HELD AS UNDER: 'SECTION 12AA PROVIDES PROCEDURE FOR REGISTRATION C LAUSE (A) OF SECTION 12AA(1)(A) EMPOWERS THE COMMISSIONER TO CALL FOR SUCH DOCUMENT S OR INFORMATION FROM THE TRUST OR AN INSTITUTION, AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR AN IN STITUTE AND MAY ALSO MAKE SUCH INQUIRIES, AS HE MAY DEEM NECESSARY IN THIS BEHALF. SAID PROVISION IN SECTION 12AA MAKES IT CLEAR THAT THE COMMISSIONER IS NOT SUPPOSED TO ALLO W THE REGISTRATION WITH BLIND EYES. IN THE INSTANT CASE, THE ORDER PASSED BY THE COMMISSIONER SHOWED T HAT HE HAD CONSIDERED THE INCOME AND EXPENDITURE ACCOUNT OF THE SOCIETY FOR T HE FINANCIAL YEARS 2000-01 TO 2002-03, AND CONCLUDED THAT THE ASSESSEE WAS NOT CA RRYING ON ANY CHARITABLE ACTIVITY AS ITS DOMINANT OBJECT WAS TO EARN PROFITS UNDER THE GARB OF 'EDUCATION'. THE COMMISSIONER HAD FURTHER OBSERVED THAT THE ASSESSEE WAS CHARGING SUB STANTIAL FEE FROM THE STUDENTS AND WAS MAKING HUGE PROFITS. THE ORDER PASSED BY TH E COMMISSIONER FURTHER DISCLOSED THAT THE SURPLUS HAD BEEN TRANSFERRED TO THE CAPITAL FUND OF THE ASSESSEE. IT HAD BEEN FURTHER CLARIFIED IN THE FIND ING OF THE COMMISSIONER THAT NO EXPENDITURE WAS MADE BY THE ASSESSEE FOR THE CHARIT ABLE PURPOSE. MERE IMPARTING EDUCATION FOR PRIMARY PURPOSE OF EAR NING PROFIT CANNOT BE SAID TO BE A CHARITABLE ACTIVITY AS INTERPRETED BY THE APEX COURT IN MUNICIPAL CORPN. OF DELHI V. CHILDREN BOOK TRUST [1992] 3 SCC 390. IN T HE EXPRESSION 'CHARITABLE 7 PURPOSE', CHARITY IS SOUL OF THE EXPRESSION. MERE T RADE AND COMMERCE IN EDUCATION CANNOT BE SAID TO BE A CHARITABLE PURPOSE '. 15. FOR GETTING THE BENEFIT OF REGISTRATION UNDER S ECTION 12AA OF THE ACT, MOTIVE SHOULD BE VERY CLEAR THAT IS CHARITABLE IN N ATURE FOR THE BENEFIT OF PUBLIC IN GENERAL NOT FOR SELF AGGRANDIZEMENT OF THE FAMIL Y OF THE TRUSTEES. IN THIS CASE, WE ARE OF THE OPINION THAT THE OBJECTIVES OF THE TR UST ARE NOT FOUND TO BE CHARITABLE IN NATURE. THE RELEVANT PROVISIONS FOR REGISTRATION OF THE TRU ST UNDER SECTION 12AA ARE AS UNDER: .. .. I. THE COMMISSIONER ON RECEIPT AN APPLICATION FOR REGISTRATION OF A TRUST SHALL CALL FOR THE DOCUMENTS AND INFORMATION AS HE THINKS NECE SSARY TO SATISFY ABOUT THE GENUINENESS OF THE ACTIVITIES OF TRUST. II. HE SHALL PASS AN ORDER IN WRITING AFTER SATISFY ING HIMSELF ABOUT THE OBJECTS OF TRUST. III. IF HE IS NOT SATISFIED, HE SHALL PASS AN ORDER IN WRITING REFUSING TO REGISTER THE TRUST. APPLICANT SHALL BE GIVEN OPPORTUNITY OF BEING HEARD BEFORE PASSING ORDER OF REFUSAL. IV. ORDER GRANTING OR REFUSING REGISTRATION SHALL B E PASSED BEFORE THE EXPIRY OF SIX MONTHS FROM THE END OF MONTH IN WHICH APPLICATION W AS RECEIVED UNDER SECTION 12A. IN CASE OF REFUSAL TO GRANT THE REGISTRATION, AN OP PORTUNITY OF HEARING IS MUST. IN CASE THE ASSESSING OFFICER REFUSES TO GRANT THE REG ISTRATION, THEN HE MUST PASS SPEAKING ORDER RECORDING THE REASONS FOR REFUSAL. NOTE: SECTION 12A HAS NOT MADE ANY DISTINCTION WITH REGA RD TO CHARITABLE OR RELIGIOUS TRUST. THEREFORE, THE SCHEME OF EXEMPTION IS APPLICABLE TO CHARITABLE AS WELL AS RELIGIOUS TRUSTS. D) DEEMED REGISTRATION: AS PER SECTION 12AA(2) EVERY ORDER GRANTING OR REFU SING REGISTRATION SHALL BE PASSED BEFORE THE EXPIRY OF SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE APPLICATION WAS RECEIVED. 16. AFTER GOING TO THE TRUST DEEDS, FRANCHISEE AGRE EMENT AS WELL AS THE PROVISIONS OF SECTION 12A AND SECTION 12AA OF THE I NCOME TAX ACT,1961 AS WELL AS THE IMPUGNED ORDER PASSED BY THE LD. CIT(E),WE A RE OF THE CONSIDERED OPINION THAT ACCORDING TO SECTION 12AA, THE COMMISS IONER, ON RECEIPT OF APPLICATION FOR REGISTRATION OF TRUST OR INSTITUTIO N SHALL HAVE TO EXAMINE THE DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE ALONG WITH THE APPLICATION FO R GRANTING REGISTRATION. THE COMMISSIONER CAN CALL FOR ANY TYPE OF DOCUMENTARY EVIDENCE OR INFORMATION FROM THE TRUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION. IF HE HAS ANY DOUBT IN HIS MIND THEN HE MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY. BEFORE GRANTING THE REGISTRATION TO ANY TRUST OR INSTITUTION , 8 COMMISSIONER SHOULD BE SATISFIED ABOUT THE GENUINEN ESS OF ACTIVITIES OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE. 17. WE HAVE ALSO GONE THROUGH ALL THE JUDGMENTS QUO TED BY THE LD. AR AS WELL AS DR AND FOUND THAT IN THE FACTS AND CIRCUMST ANCES OF THE PRESENT CASE, WE ARE OF THE VIEW THAT MERELY WRITING AIMS AND OBJ ECTIVES AS CHARITABLE IN NATURE IN THE TRUST DEED DOESNT ENTITLE THE TRUST TO BE CHARITABLE PER SE. IT HAS TO BE PROVED BEYOND DOUBT THAT THE ACTIVITIES OF THE T RUST ARE CHARITABLE IN NATURE AND GENUINE. THERE SHOULD BE SOME EVIDENCE TO SATIS FY THE AUTHORITIES CONCERNED BEFORE GRANTING THE REGISTRATION UNDER SE CTION 12AA OF THE ACT. IT IS NOT A CASE WHERE THE TRUST HAS NOT STARTED ITS ACTI VITIES, HENCE THE BURDEN WAS ON THE TRUST TO PROVE THAT ITS OBJECTS AS WELL AS ACTI VITIES ARE CHARITABLE IN NATURE. BUT THE TRUST IN THE INSTANT CASE HAS NOT PRODUCED ANY EVIDENCE TO THE SATISFACTION OF THE LD. CIT (E) ABOUT ITS REAL CHAR ITABLE CHARACTER. ON THE OTHER HAND THE LD. CIT (E) COULD PROVE COGENTLY THE NON C HARITABLE AND COMMERCIAL NATURE OF THE WORK UNDERTAKEN BY THE ASSESSEE TRUST . IN VIEW OF THE FOREGOING DISCUSSION NO INTERFERENCE IS REQUIRED IN THE IMPUG NED ORDER. ACCORDINGLY WE UPHOLD THE ORDER OF THE LD. CIT(E). 18. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- . '.., # $, (SANJAY GARG ) ( DR. B.R.R. KUM AR, AM) / JUDICIAL MEMBER %& / ACCOUNTANT MEMBER AG DATE:01/05/2019 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE