Late Shri C.L.Chouksey Shri Nathu Singh Yadav, Bhopal V. The CIT, Bhopal

ITA 469/IND/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1487 (ITAT-INDORE)
• Duration Of Justice: 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-10-2009
• Assessment Year: misc
• Appeal Filed On: 01-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K KARAN
• Assessee Lawyers: AJAY K CHHAJED
• Keywords: Gift; Charitable institution; Opportunity of being heard; Competent authority
• Section: 12A; 12AA; 11

Judgement Text

PAGE 1 OF 12 IN THE INCOME TAX APPELATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI M.L. GUSIA, AM ITA NO.469/IND/2009 UNDER SECTION 12A(1)(B)(II) OF THE ACT LATE SHRI C.L. CHOUKSEY SHRI NATHU SINGH YADAV SMRITI EDUCATION & SOCIAL WELFARE SOCIETY, 53-OLD ASHOKA GARDEN, BHOPAL-462 023 (PAN AAATL 7050 M) ..APPELLANT V/S. CIT, BHOPAL ..RESPONDENT ASSESSEE BY : SHRI AJAY K. CHHAJED, ADV. DEPARTMENT BY : SHRI V.K. KARAN, SR. DR ORDER PER JOGINDER SINGH, JM THIS APPEAL IS BY THE ASSESSEE CHALLENGING THE ORDE R OF LD. CIT, BHOPAL DATED 31.8.2009 ON THE GROUND THAT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT ERRED IN NOT CONSIDERING ALL DOCU MENTS, WRITTEN SUBMISSIONS, OBJECTS OF THE SOCIETY AND CONSEQUENT DENIAL OF REG ISTRATION U/S 12AA OF THE ACT, IGNORING VARIOUS JUDICIAL PRONOUNCEMENTS. 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD LD. REPRESENTATIVES OF BOTH SIDES AND CONSIDERED THE ARGUMENTS ADVANCED BY THEM . THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE ASS ESSEE SOCIETY WAS FORMED PAGE 2 OF 12 AND REGISTERED WITH THE REGISTRAR OF SOCIETIES ON 1 8.11.2008, APPLIED FOR REGISTRATION U/S 12A/12AA OF THE ACT ON 16.2.2009. OUR ATTENTION WAS INVITED TO THE MAIN OBJECTS OF THE ASSESSEE WHICH INCLUDES TO RUN AND MANAGE EDUCATIONAL INSTITUTION FOR THE UPLIFTMENT OF PUBLI C AT LARGE FOR WHICH THE ASSESSEE SOCIETY IS TO ESTABLISH ENGINEERING COLLEG ES, MEDICAL & DENTAL COLLEGES AND PHARMACY COLLEGES. ONE OF THE OBJECTS IS TO PRO VIDE EDUCATION TO THE WEAKER SECTION OF THE SOCIETY AND TO HELP THE GOVT. TO EXECUTE ITS SCHEME FOR THE DEVELOPMENT OF EDUCATION/SOCIAL EDUCATION AT AL L LEVEL. IT WAS PLEADED THAT AT THE INITIAL STAGE, THE CONSTRUCTION ACTIVITY IS IN FULL SWING. PLEA WAS ALSO RAISED THAT THE CHARITABLE ACTIVITIES CARRIED OUT, THOUGH INITIALLY AT SMALL SCALE, WERE BROUGHT TO THE NOTICE TO THE REVENUE AUTHORITI ES. THE DENIAL OF REGISTRATION U/S 12AA/12A WAS CHALLENGED. THE LD. C OUNSEL ALSO RELIED UPON CERTAIN JUDICIAL DECISIONS WHICH WE WILL CONSIDER W HILE CONCLUDING THE ISSUE. ON THE OTHER HAND, THE LD. SR. DR STRONGLY DEFENDED TH E IMPUGNED ORDER BY CONTENDING THAT NO DETAILS WERE FURNISHED BY THE AS SESSEE, ONLY CONSTRUCTION ACTIVITY HAS BEEN STARTED, THEREFORE, THE DENIAL OF REGISTRATION BY THE LD. CIT WAS DEFENDED. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON THE FIL E. BRIEF FACTS ARE THAT THE ASSESSEE SOCIETY WAS REGISTERED WITH THE REGISTRAR OF SOCIETIES, BHOPAL VIDE REGISTRATION NO.01/01/01/19695/08 (PAGE 3 OF THE PA PER BOOK) DATED 18.11.2008. THE ASSESSEE SOCIETY APPLIED FOR REGIST RATION U/S 12A/12AA AND PAGE 3 OF 12 MOVED APPLICATION U/S 12A(A) OF THE ACT ON 16.2.200 9 ALONG WITH MEMORANDUM OF ASSOCIATION, RULES AND REGULATIONS, L IST OF MEMBERS/EXECUTIVE MEMBERS AND OBJECTS OF THE ASSESSEE SOCIETY WITHIN THE STIPULATED PERIOD. WITHOUT GOING FURTHER, WE ARE SUPPOSED TO ANALYSE T HE OBJECTS OF THE ASSESSEE WHICH ARE MAINLY AS UNDER: (I) TO RUN AND MANAGE THE EDUCATIONAL ACTIVITIES AN D SOCIAL CULTURE FOR UPLIFTMENT OF THE SOCIETY. (II) TO ESTABLISH EDUCATIONAL INSTITUTIONS FOR TECH NICAL EDUCATION, ESPECIALLY ENGINEERING COLLEGES, MEDICAL COLLEGES, DENTAL COLLEGES AND PHARMACY COLLEGES. (III) TO GIVE ALL TYPE OF EDUCATION ESPECIALLY FOR CHILDREN OF SCHEDULED CASTES, TRIBES AND OTHER BACKWARD CLASSES . (IV) TO HELP THE GOVT. IN THE SCHEMES FOR DEVELOPME NT OF EDUCATION ON SOCIAL, AND OTHER LEVELS. (V) TO HELP SCHEDULED CASTES, TRIBES, LAME, HANDICA PPED ETC. PERSONS TO PROVIDE NECESSARY ASSISTANCE. (VI) TO WORK FOR ENVIRONMENTAL ACTIVITIES. (VII) TO WORK FOR ABOLITION OF DRUGS ABUSE AND OTHE R TOXIC ACTIVITIES. BEFORE THE LD. CIT, THE ASSESSEE FURNISHED THE DETA ILS OF CHARITABLE ACTIVITIES CARRIED OUT BY THE ASSESSEE DURING THE PERIOD 2007- 08 & 2008-09 IN RESPECT OF EDUCATIONAL ACTIVITIES BY OPENING THREE COLLEGES I. E. ENGINEERING COLLEGE, PHARMACY COLLEGE AND ONE MANAGEMENT COLLEGE AT GWAL IOR. THE LETTER OF APPROVAL FROM THE CONCERNED AUTHORITIES WAS ALSO SU BMITTED BEFORE THE LD. CIT (PAGES 19 TO 32 OF THE PAPER BOOK). THE REGISTRATIO N WAS REFUSED ON THE GROUND THAT THE COPY OF ACCOUNTS FOR THE YEAR 2008- 09 WAS NOT SUBMITTED BY THE ASSESSEE, CONSEQUENTLY, THE ACTIVITIES CARRIED OUT BY THE ASSESSEE COULD PAGE 4 OF 12 NOT BE VERIFIED. THE LD. CIT ALSO MENTIONED THAT TH E ACTIVITIES OF THE SOCIETY ARE YET TO START, THEREFORE, THE CLAIM OF THE ASSES SEE IS NOT JUSTIFIED, THEREFORE, THE REGISTRATION WAS DENIED. 4. IF THE AFOREMENTIONED OBJECTS OF THE ASSESSEE AR E ANALYSED, THERE IS NO DENIAL TO THE FACT THAT THE OBJECTS OF THE ASSESSEE ARE OF CHARITABLE NATURE WHICH ARE FOR THE BENEFIT OF PUBLIC AT LARGE. IF TH E DETAILS OF THE ACTIVITIES FURNISHED BEFORE THE LD. CIT, CLAIMED TO BE CARRIED OUT BY THE ASSESSEE, DURING THE YEAR 2007-08 & 2008-09 ARE ANALYSED, IT IS SEEN THAT FIRSTLY APPROVAL WAS GRANTED BY THE COMPETENT AUTHORITY AND DURING THE F IRST YEAR, ADMISSIONS WERE GRANTED TO VARIOUS STUDENTS AND ALSO FILED COPY OF BANK STATEMENTS. THE ASSERTION OF THE LD. SR. DR IS THAT ONLY BUILDING C ONSTRUCTION ACTIVITY WAS IN PROGRESS. WE ARE OF THE VIEW THAT FOR MEETING THE O BJECTS OF THE ASSESSEE, BUILDING IS A FIRST STEP FOR MAKING ARRANGEMENT FOR THE ADVANCEMENT OF EDUCATION, THEREFORE, IT CANNOT BE SAID THAT NOTHIN G WAS DONE BY THE ASSESSEE. EVEN OTHERWISE, WHILE CONSIDERING THE ASSESSEES AP PLICATION FOR GRANT OF REGISTRATION U/S 12A ALL THAT THE LD. CIT IS SUPPOS ED TO EXAMINE WHETHER THE APPLICATION IS MADE IN ACCORDANCE WITH REQUIREMENT OF THAT SEC. R.W. RULE 17A AND ALSO WHETHER FORM 10A HAS BEEN PROPERLY FILLED UP. HE MAY ALSO SEE WHETHER THE OBJECTS OF THE TRUST ARE CHARITABLE OR NOT. AT THAT STAGE, IT IS NOT PROPER TO EXAMINE THE APPLICATION OF INCOME. OUR VI EW FURTHER FINDS SUPPORT FROM THE RATIO LAID DOWN BY THE CHANDIGARH BENCH OF THE TRIBUNAL IN COMMAND AREA DEVELOPMENT AUTHORITY (ITA NO.282/CHD/ 2009), WHEREIN, ONE PAGE 5 OF 12 OF US (JM) IS SIGNATORY TO THE ORDER. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREWITH: THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 29.1.2009 ON THE GROUND THAT THE ORDER OF THE LEARNED COMMISSIONER ARE ERRONEOUS, DEVOID OF MERITS HAS BE EN PASSED IN HASTE WITHOUT CONSIDERING THE TRUE FACTS AND CONSEQUENT D ENIAL OF REGISTRATION UNDER SECTION 12A OF THE ACT. 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD SHR I SANJAY MEHTANI, LD COUNSEL FOR THE ASSESSEE AND SMT SUNITA PURI, LEARNED CIT DR. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSE E IS THAT THE ASSESSEE SOCIETY WAS SET UP BY THE GOVERNMENT OF HA RYANA AND ITS MAIN OBJECTS ARE TO DRAW PLANS FOR WATER UTILIZATION AND INTEGRATED AREA DEVELOPMENT IN IRRIGATION INCLUDING MODERNIZATION O F WATER DISTRIBUTION SYSTEM / MAINTENANCE AND OPERATION OF IRRIGATION SYSTEM. IT WAS FURTHER PLEADED THAT NO NON-CHARITABLE ACTI VITY WAS DONE BY THE ASSESSEE. OUR ATTENTION WAS ALSO INVITED TO PAGE 1 6 & 18 OF THE PAPER BOOK. ON THE OTHER HAND, THE LEARNED CIT DR CONTEN DED THAT NO SUCH ACTIVITY, AS CLAIMED WAS DONE BY THE ASSESSEE AND T HE STATED OBJECTS WERE NEVER CARRIED OUT, THEREFORE, THE DENIAL OF RE GISTRATION UNDER SECTION 12 A OF THE ACT WAS DEFENDED. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON THE FILE. BRIEF FACTS ARE TH AT THE ASSESSEE SOCIETY WAS ESTABLISHED ON 19.8.1994 BY GOVERNMENT OF HARYA NA AND ITS MAIN OBJECTS WERE CLAIMED TO BE AS UNDER:- I) TO DRAW PLANTS FOR WATER UTILIZATION AND INTEGRATED AREA DEVELOPMENT IN THE IRRIGATION COMMAND, INCLUDING MODERNIZATION OF THE DISTRIBUTION SYSTEM, THE PROVISION OF DRAINAGE AND THE MAINTENANCE AND OPERATION OF BOTH THE DISTRIBUTION AND DRAINAGE SYSTEMS, AND INVESTMENT AND PRODUCTION ACTIVITIES T O BE UNDERTAKEN BY THE FARMERS WITHIN ITS AREA OF OPERAT ION: II) TO EXECUTE THE ABOVE PLANTS FOR THE BENEFITS OF THE FARMERS EITHER DIRECTLY OR THROUGH THE BENEFICIARIE S OF THOUGH OTHER SOURCES. III) TO REVIEW THE PROGRESS OF THE EXECUTION OF THE VARI OUS SCHEMES UNDERTAKEN AND THE EVALUATION THEREOF. B) TO ATTAIN THE ABOVE MAIN OBJECTIVES, THE SOCIETY MAY TAKE UP THE FOLLOWING ACTIVITIES/PROGRAMMES: I) MODERNIZATION, MAINTENANCE OF THE MAIN AND INTERMED IATE DRAINAGE SYSTEM. II) DEVELOPMENT AND MAINTENANCE OF THE MAIN AND INTERME DIATE DRAINAGE SYSTEM. III) DIGGING AND DEVELOPMENT OF FIELD CHANNELS AND FIELD DRAINS WITHIN THE COMMAND. IV) LAND LEVELING FOR THE TYPE OF IRRIGATED CROP THAT I S TO BE GROWN. V) CONSOLIDATION OF HOLDINGS AND RE-DRAWING OF FIELD B OUNDARIES IN THE COMMAND AREA. PAGE 6 OF 12 VI) ENFORCEMENT OF A PROPER SYSTEM OF BARABANDI AND F AIR DISTRIBUTION OF WATER TO INDIVIDUAL FIELDS. VII) DEVELOPMENT OF GROUNDWATER OF SUPPLEMENT SURFACE IR RIGATION. SELECTION AND INTRODUCTION OF SUITABLE CROPPING PA TTERN. VIII) SUPPLY OF INPUTS AND SERVICES, INCLUDING CREDIT. IX) DEVELOPMENT OF MARKETING AND PROCESSING FACILITIES AND COMMUNICATIONS. X) PREPARING INDIVIDUAL PROGRAMMES OF ACTION FOR SMALL FARMERS, MARGINAL FARMERS AND AGRICULTURAL LABOUR. XI) TO GIVE SUCH ASSISTANCE TO SMALL AND MARGINAL FARME RS AND OTHER DISADVANTAGEOUS FARMERS INCLUDING GRANTS AS M AY BE NECESSARY FOR FURTHERING THE PURPOSES OF THE PLANS AND SCHEMES UNDERTAKEN OR SUPPORTED BY THE SOCIETY. XII) DIVERSIFICATION OF AGRICULTURE AND DEVELOPMENT OF A CTIVITIES LIKE ANIMAL HUSBANDRY INCLUDING SHEEP BREEDING, POULTRY DIARY AND FARM FORESTRY. XIII) SOIL CONSERVATION AND AFFORESTATION. XIV) TO TRAIN FARMERS. XV) TO ORGANIZE AGRICULTURAL EXTENSION SERVICES, FARMER S SERVICES, FARMERS SERVICES SOCIETIES ETC. XVI) TO PURCHASE, TAKE ON LEASE, ACCEPT AS GIFT, CONSTRU CT OR OTHERWISE ACQUIRE ANY PROPERTY WHICH MAY BE NECESSA RY OR USEFUL FOR THE SOCIETY. XVII) TO RECEIVE/RAISE LOANS FOR THE PURPOSES OF THE SOCI ETY. XVIII) TO EMPLOY DIRECTLY OR INDIRECTLY BY GIVING GRANTS T O OTHER INSTITUTIONS/DEPARTMENTS OF THE GOVERNMENT, PERSONS TO FURTHER THE PROGRAMMES TO BE UNDERTAKEN/SUPPORTED B Y THE SOCIETY. XIX) TO SET UP OR ESTABLISH ANY SPECIAL SERVICE SUCH AS A DISPENSARY, LABORATORY OR PROCESSING PLANT ETC., IN FURTHERANCE OF THE OBJECTIVES OF THE SOCIETY. XX) TO SELL, LEASE, EXCHANGE AND OTHERWISE TRANSFER ANY PROPERTY OF THE SOCIETY OR PORTION THEREOF. XXI) TO SELL, LEASE EXCHANGE AND OTHERWISE TRANSFER ANY PROPERTY OF THE SOCIETY OR PORTION THEREOF. 3. THE ASSESSEE MOVED APPLICATION BEFORE THE LEARNE D COMMISSIONER FOR GRANT OF REGISTRATION UNDER SECTIO N 12A BY CLAIMING THAT THE OBJECTS SQUARELY FALLS WITHIN THE SCOPE AS LAID DOWN UNDER SECTION 2 (15) OF THE ACT. AS CLAIMED BY THE ASSE SSEE, THE NECESSARY DETAILS INCLUDING BOOKS OF ACCOUNT / FINANCIAL STAT EMENTS WERE DULY FURNISHED BEFORE THE LEARNED COMMISSIONER. HOWEVE R, THE LEARNED COMMISSIONER EXAMINED THE INCOME AND EXPENDITURE ST ATEMENT OF THE ASSESSEE AND WAS OF THE VIEW THAT THE INCOME CREDI TED IN EXPENDITURE ACCOUNT DOES NOT RELATE TO ANY VOLUNTARY CONTRIBUTI ON EITHER, THEREFORE, THE SAID INTEREST INCOME IS TAXABLE, CONSEQUENTLY, DOES NOT FALL WITHIN THE PURVIEW OF SECTION 12(1) OF THE ACT, THEREFORE, THE REGISTRATION UNDER SECTION 12AA (1)(B) WAS DENIED, WHICH IS UNDE R CHALLENGE BEFORE THIS TRIBUNAL. BEFORE COMING TO ANY CONCLUSION, W E ARE REPRODUCING HEREWITH SUB CLAUSE (15) OF SECTION 2 OF THE ACT. CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, [ PRESERVATION OF ENVIRONMENT (INCLUDING PAGE 7 OF 12 WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTO RIC INTEREST, ] AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERA L PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, I F IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR 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;] IF THE AFORESAID SECTION IS ANALYSED, THE CHARITABL E PURPOSES INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND P RESERVATION OF ENVIRONMENT INCLUDING WATER SHEDS FOREST AND WILD L IFE AND THE ADVANCEMENT OF ANY OTHER OBJECTS OF GENERAL PUBLIC UTILITY SUBJECT TO PROVISO THAT IT SHOULD NOT INCLUDE ANY TRADE COMMER CE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION T O ANY TRADE, COMMERCE OR BUSINESS FOR A CONSIDERATION. 4. IF THE AFOREMENTIONED OBJECTS OF THE SOCIETY ARE KEPT IN JUXTAPOSITION WITH THE REQUIREMENT OF SUB CLAUSE (1 5) TO SECTION 2 OF THE ACT, WE HAVE NOT FOUND ANY ACTIVITY, WHICH IS O F NON-CHARITABLE NATURE. THE CONDITION UNDER SECTION 12A FOR APPLICA BILITY OF SECTIONS 11 & 12 OF THE ACT ARE AS UNDER:- 12A. [(1)] THE PROVISIONS OF SECTION 11 AND SECTION 12 SHALL NOT APPLY IN RELATION TO THE INCOME OF ANY TRUST OR INSTITUTION UNLESS THE FOLLOWING CONDITIONS ARE FULFILLED, NAMELY: (A) THE PERSON IN RECEIPT OF THE INCOME HAS MADE AN APPLICATION FOR REGISTRATION OF THE TRUST OR INSTITUTION IN THE PRE SCRIBED FORM AND IN THE PRESCRIBED MANNER TO THE [***] COMMISSIONER BEFORE THE 1ST DAY OF JULY, 1973, OR BEFORE THE EXPIRY OF A PERIOD OF ONE YEAR FROM THE DATE OF THE CREATION OF THE TRUST OR THE ESTABLISHM ENT OF THE INSTITUTION, [WHICHEVER IS LATER AND SUCH TRUST OR INSTITUTION IS REGISTERED UNDER SECTION 12AA ] : [ PROVIDED THAT WHERE AN APPLICATION FOR REGISTRATION OF THE TRUST OR INSTITUTION IS MADE AFTER THE EXPIRY OF THE PERIOD AFORESAID, THE PROVISIONS OF SECTIONS 11 AND 12 SHALL APPLY IN RELATION TO THE INCOME OF SUCH TRUST OR INSTITUTION, (I) FROM THE DATE OF THE CREATION OF THE TRUST OR THE ESTABLISHMENT OF THE INSTITUTION IF THE COMMISSIONE R IS, FOR REASONS TO BE RECORDED IN WRITING, SATISFIED THAT T HE PERSON IN RECEIPT OF THE INCOME WAS PREVENTED FROM MAKING THE APPLICATION BEFORE THE EXPIRY OF THE PERIOD AFORESAID FOR SUFFICIENT REASONS; (II) FROM THE 1ST DAY OF THE FINANCIAL YEAR IN WHICH THE APPLICATION IS MADE, IF THE COMMISSIONER IS NOT SO SATISFIED:] (III) PAGE 8 OF 12 [ PROVIDED FURTHER THAT THE PROVISIONS OF THIS CLAUSE SHALL NOT APPLY IN RELATION TO ANY APPLICATION MADE ON OR AFTER THE 1ST DAY OF JUNE, 2007;] [(AA) THE PERSON IN RECEIPT OF THE INCOME HAS MADE AN APPLICATION FOR REGISTRATION OF THE TRUST OR INSTITUTION ON OR AFTE R THE 1ST DAY OF JUNE, 2007 IN THE PRESCRIBED FORM AND MANNER TO THE COMMISSIONER AND SUCH TRUST OR INSTITUTION IS REGISTERED UNDER SECTION 12AA ;] (B) WHERE THE TOTAL INCOME OF THE TRUST OR INSTIT UTION AS COMPUTED UNDER THIS ACT WITHOUT GIVING EFFECT TO [THE PROVISIONS O F SECTION 11 AND SECTION 12 EXCEEDS THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX IN ANY PREVIOUS YEAR], THE ACCOUNTS OF T HE TRUST OR INSTITUTION FOR THAT YEAR HAVE BEEN AUDITED BY AN A CCOUNTANT AS DEFINED IN THE EXPLANATION BELOW SUB-SECTION (2) OF SECTION 288 AND THE PERSON IN RECEIPT OF THE INCOME FURNISHES ALONG WITH THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR THE REPO RT OF SUCH AUDIT IN THE PRESCRIBED FORM DULY SIGNED AND VERIFIED BY SUCH ACCOUNTANT AND SETTING FORTH SUCH PARTICULARS AS MAY BE PRESCR IBED.] (C) [(2) WHERE AN APPLICATION HAS BEEN MADE ON OR AFTER THE 1ST DAY OF JUNE, 2007, THE PROVISIONS OF SECTIONS 11 AND 12 SHALL APPLY IN RELATION TO THE INCOME OF SUCH TRUST OR INSTITUTION FROM THE ASSESSMENT YEAR IMMEDIATELY FOLLOWING THE FINANCIAL YEAR IN WHICH SUCH APPLICATION IS MADE.] 12AA. (1) THE COMMISSIONER, ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUTION MADE UNDER C LAUSE (A) [OR CLAUSE (AA) OF SUB-SECTION (1)] OF SECTION 12A , SHALL (A) CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRU ST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABO UT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTION AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS 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 TRUST OR INSTITUTION; (II) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORD ER IN WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTION, AND A COPY OF SUCH ORDER SHALL BE SENT TO THE AP PLICANT : PROVIDED THAT NO ORDER UNDER SUB-CLAUSE (II) SHALL BE PASSE D UNLESS THE APPLICANT HAS BEEN GIVEN A REASONABLE OPPORTUNITY O F BEING HEARD. (1A) ALL APPLICATIONS, PENDING BEFORE THE CHIEF COM MISSIONER ON WHICH NO ORDER HAS BEEN PASSED UNDER CLAUSE (B) OF SUB-SE CTION (1) BEFORE THE 1ST DAY OF JUNE, 1999, SHALL STAND TRANSFERRED ON T HAT DAY TO THE COMMISSIONER AND THE COMMISSIONER MAY PROCEED WITH SUCH APPLICATIONS UNDER THAT SUB-SECTION FROM THE STAGE AT WHICH THEY WERE ON THAT DAY.] PAGE 9 OF 12 (2) EVERY ORDER GRANTING OR REFUSING REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) SHALL BE PASSED BEFORE THE E XPIRY OF SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE APPLICATION WAS RECEIVED UNDER CLAUSE (A) [OR CLAUSE (AA) OF SUB-SECTION (1)] OF SECTION 12A .] [(3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANT ED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) AND SUBSEQUENTL Y THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR I NSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SH ALL PASS AN ORDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUST O R INSTITUTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASSE D UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REASONAB LE OPPORTUNITY OF BEING HEARD.] AN AMENDMENT WAS MADE IN THE FINANCE ACT, 2008 W.E. F. 1.4.2009 I.E. FOR ASSESSMENT YEARS 2009-10 TO EXCLUDE THE ACTIVITIES OF TRADE, COMMERCE OR BUSINESS FROM THE AMBIT OF CHARITABLE PURPOSES IN R ELATION TO CESS OR FEE OR ANY OTHER CONSIDERATION IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF INCOME FROM SUCH ACTIVITIES. THE DEFI NITION WAS FURTHER AMENDED FROM ASSESSMENT YEAR 2009-10 SO AS TO SEPAR ATELY LIST THE PRESERVATION OF ENVIRONMENT INCLUDING WATER SHEDS F OREST AND WILD LIFE. THE ACTIVITIES OF THE ASSESSEE ARE TO BRIDGE THE GA P BETWEEN THE IRRIGATION POTENTIAL CREATED AND UTILIZED THROUGH MICRO LEVEL INFRASTRUCTURE DEVELOPMENT AND EFFECTIVE FARM WATER MANAGEMENT TO ENHANCE AGRICULTURAL PRODUCTION / PRODUCTIVITY SO THAT THE SOCIO ECONOMIC CONDITIONS OF THE FARMERS MAY IMPROVE. EVEN OTHER WISE, FOR THE PURPOSES OF SECTION 12AA OF THE ACT, THE LEARNED COMMISSIONE R AT THE STAGE OF REFUSING OR GRATING REGISTRATION IS NOT SUPPOSE TO EXAMINE AS TO WHAT AMOUNT SHOULD FORM CORPUS OF TRUST AND WHAT AMOUNT SHOULD APPEAR IN BALANCE SHEET OF THE ASSESSEE AND ALSO IN WHAT MANN ER ACCOUNTS RELATING TO PERIOD PRIOR AND POST CONSTITUTION OF TRUST SHOU LD BE MAINTAINED BECAUSE AS PER SECTION 12AA READ WITH RULE 17-A, TH E LEARNED COMMISSIONER IS SUPPOSED TO SATISFY HIMSELF AS TO W HETHER OBJECTS AND GENUINENESS OF ACTIVITIES OF TRUST ARE CHARITABLE O R RELIGIOUS OR NOT. OUR VIEW IS FORTIFIED BY THE DECISION IN SHRI SAIN JI D HARMARATH TRUST VS. CIT (2006) 8 SOT 446 (DEL.), DHARMA SANSATHAPAK SANGTH (NIYAS) VS. CIT (2009) 28 SOT 1 (DEL.) URO, CIT VS. RADHA SWAMY SAT SANG (201 ITR 493)(ALL), HAZRAT PIR MOHD. SAHA SAHIB ROZA COMMITT EE VS. CIT (63 ITR 490)(SC), SHRI SAI SAMPARAN TRUST COMPANY VS. CIT ( 2009) 27 SOT 423(DEL.). WHILE CONSIDERING THE APPLICATION FOR GRANT OF REGISTRATION UNDER SECTION 12A, ALL THAT THE COMMISSIONER MAY EX AMINE IS WHETHER THE APPLICATION IS MADE IN ACCORDANCE WITH THE REQUIREM ENT OF THAT SECTION READ WITH RULE 17A AND ALSO WHETHER FORM NO. 10-A H AS BEEN PROPERLY FILLED UP. HE MAY ALSO SEE THE OBJECTS OF THE TRUS T BUT IT IS NOT PROPER TO EXAMINE APPLICATION OF INCOME AS WAS HELD IN 5 TH GENERATION EDUCATION SOCIETY VS. CIT (185 ITR 634)(ALL). IN THE LIGHT O F THIS DISCUSSION AND JUDICIAL PRONOUNCEMENTS, WE ARE REPRODUCING HEREWIT H THE CONCLUDING PARA OF THE IMPUGNED ORDER: PAGE 10 OF 12 IN REALITY, IT IS SEEN THAT THE ASSESSEE SOCIETY I S MERELY AN EXTENSION / DEPARTMENT OF THE STATE GOVT OF HARYANA . THIS IS ALSO EVIDENT FROM THE SANCTION ORDER OF THE GRANT I N AID ORDERS REFERRED ABOVE. HAVING REGARD TO THE OBJECTS OF TH E SOCIETY AND THE FACTS AS ABOVE, I AM SATISFIED THAT THE ASSESSE E SOCIETY IS NOT HAVING ANY CHARITABLE ACTIVITY WITH THE MEANING OF 2(`15) OF THE I.T. ACT, 1961 READ WITH SECTION 12(1) OF THE I .T.ACT, 1961 CARRIED OUT DURING THE PERIOD 1.4.2005 TO 31.3.2008 AND REGISTRATION UNDER SECTION 12AA(1)(B) CANNOT BE ACC ORDED TO AND THE APPLICATION IS ACCORDINGLY DISMISSED. IF THE AFORESAID CONCLUSION IS ANALYSED, IT MERELY SAYS THAT THE ASSESSEE SOCIETY IS EXTENSION OF GOVERNMENT OF HARYANA AND I S NOT HAVING ANY CHARITABLE ACTIVITY WITHIN THE MEANING OF SECTION 2 (15) READ WITH SECTION 12(1) OF THE ACT. WE ARE NOT IN AGREEMEN T WITH SUCH FINDING FIRSTLY BECAUSE THERE IS A NO BAR THAT ANY DEPARTME NT OF THE STATE, IF ANY, HAVING ACTIVITIES OF CHARITABLE NATURE, CANNOT BE GRANTED REGISTRATION AND SECONDLY, IF THE OBJECTS AND ACTIV ITIES ARE ANALYSED, IT CLEARLY FALLS WITHIN THE AMBIT OF CHARITABLE ACTIVI TIES OF GENERAL PUBLIC UTILITY. IT IS NOT THE CASE THAT THE FUNDS HAVE BE EN MISUSED IN ANY MANNER. IN THE LIGHT OF THESE FACTS AND THE JUDIC IAL PRONOUNCEMENTS, DISCUSSED ABOVE, WE ARE OF THE VIEW, THAT IT IS A F IT CASE FOR GRANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT. THE LEARNED COMMISSIONER IS DIRECTED TO GRANT REGISTRATION TO T HE ASSESSEE. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. OUR VIEW IS FURTHER FORTIFIED BY THE DECISION FROM HONBLE ALLAHABAD HIGH COURT IN FIFTH GENERATION EDUCATION SOCIETY VS. CIT (185 ITR 634) (ALL). THE CONSTRUCTION OF BUILDING IS A FIRST STEP TO ACHIEVE THE DESIRED OBJECTS. IT IS NOT THE CASE THAT NONE OF THE ACTIVITY WAS CARRIED OUT BY THE ASSESSEE. FOR THE PURPOSE OF REGISTRATION U/S 12AA, WHAT THE LD. CIT IS TO SATISFY HIMSELF ABOUT THE GENUINENESS AND OBJECTS OF THE ACTIVITIES OF TH E TRUST. EVEN OTHERWISE, MERE REGISTRATION U/S 12AA WOULD NOT ITSELF BE A GR OUND, MUCH LESS A CONCLUSIVE PROOF, FOR EXCLUDING SUCH INCOME DESCRIB ED IN SEC. 11 & 12 FROM THE TOTAL INCOME OF THE ASSESSEE OR TRUST FROM THE INCOME OF THE PREVIOUS YEAR. IF THE TRUST OR INSTITUTION IS NOT REGISTERED U/S 12AA, IT WOULD NOT BE ABLE TO CLAIM ANY EXEMPTION OR EXCLUSION OF ITS INCOME F ROM THE TOTAL INCOME OF THE PAGE 11 OF 12 PREVIOUS YEAR, EVEN IF SUCH INCOME IS OTHERWISE LIA BLE TO BE EXCLUDED UNDER ANY OF THE CLAUSES OF SEC. 11 OR SEC. 12 OF THE ACT . A READING OF PROVISION OF SUB-CLAUSES (A) AND (B) OF SEC. 12AA MAKES IT CLEAR THE CIT HAS TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION AND ALSO ABOUT THE OBJECTS OF THE TRUST OR SUCH INSTITU TION. ON MERE PRESUMPTION AND ON SURMISES THAT INCOME DERIVED BY THE TRUST OR INSTITUTION IS BEING MISUSED THE APPLICATION OF THE ASSESSEE CANNOT BE R EJECTED. SEC. 12AA WHICH LAID DOWN THE PROCEDURE FOR REGISTRATION DOES NOT S PEAK ANYWHERE THAT THE COMMISSIONER, WHILE CONSIDERING THE APPLICATION FOR REGISTRATION SHALL ALSO SEE THAT THE INCOME DERIVED BY THE TRUST OR INSTITUTION IS EITHER NOT BEING SPENT FOR CHARITABLE PURPOSES OR SUCH INSTITUTION EARNING PRO FIT. A CUMULATIVE READING OF SEC. 11, 12 & 13 LEAVES NO MANNER OF DOUBT THAT EXE MPTION UNDER THE PROVISION CAN BE CLAIMED WITH RESPECT TO THE INCOME DERIVED BY THE TRUST OR INSTITUTION WHICH IS BEING RUN FOR A CHARITABLE PUR POSES, THEREFORE, WHILE CONSIDERING THE REGISTRATION U/S 12AA, THE SCOPE OF INQUIRY BY THE LD. COMMISSIONER WOULD BE LIMITED TO THE AFORESAID EXTE NT. THE ASSESSEE ALSO GETS STRENGTH FROM THE RATION LAID DOWN IN H.S. GHO DA CHARITABLE TRUST VS. DIRECTORATE OF INCOME TAX (EXEMPTION) (155 TAXMAN 4 66) (KAR), CIT VS. RED ROSE SCHOOL (2007) (163 TAXMAN 19) (ALL), SHIYA DAW OODI BOHRA JAMAT, NEEMUCH VS. CIT, 9 ITJ 409 (ITAT, INDORE), SARDARIL AL OBERAI MEMORIAL TRUST VS. ITO, 106 TTJ (DEL) 468, DREAMLAND EDUCATION TRU ST VS. CIT, 109 TTJ (ASR) 850, AND ACHARYA SEVA NYAS, UTTRANCHAL VS. CIT, 105 TTJ (DEL) 761. IT IS NOT PAGE 12 OF 12 THE CASE THAT THE FUNDS WERE MISUTILISED BY THE ASS ESSEE OR UTILISED AGAINST THE OBJECTS OF THE ASSESSEE TRUST OR NO ACTIVITY WA S STARTED FOR THE FULFILMENT OF THE OBJECTS OF THE TRUST. CONSTRUCTION OF BUILDING IS A FIRST STEP FOR THE FULFILMENT OF THE OBJECTS I.E. PROVIDING EDUCATION TO THE PUBLIC AT LARGE. SINCE THE OBJECTS OF THE ASSESSEE ARE CLEARLY OF CHARITAB LE NATURE, CONSEQUENTLY, THE LD. CIT IS NOT JUSTIFIED IN DENYING THE REGISTRATIO N TO THE ASSESSEE, THEREFORE, THE LD. CIT IS DIRECTED TO GRANT REGISTRATION TO TH E ASSESSEE, AS CLAIMED. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON .10.2009. (M.L. GUSIA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: .10.2009 !VYAS! COPY TO: APPELLANT/RESPONDENT/CIT/CIT(A)/DR