M/s Rajiv Gandhi Proudyogik Vishwavidhalya, Bhopal V. CIT Exemption, Bhopal

ITA 614/Ind/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4609 (ITAT-INDORE)
• Duration Of Justice: 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 02-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Assessee Lawyers: AYUSH GUPTA A RS
• Keywords: Charitable institution
• Section: 12A; 12AA; 147; 12; 10; 11

Judgement Text

[ITA NO.614/IND/2018] [RAJIV GANDHI PROUDYOGIKI VISHWAVIDYALAYA, BHOPAL] , , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.614/IND/2018 ASSESSMENT YEAR: NA (12AA) RAJIV GANDHI PROUDY OGIKI VISHWAVIDYALAYA BHOPAL / VS. CIT (EXEMPTION) ( APPELLANT ) ( REVENUE ) P.A. NO. AABTR7174F APPELLANT BY SHRI SUMIT NEMA & SHRI AYUSH GUPTA, A.RS RESPONDENT BY SMT. ASHIMA GUPTA, D.R. DATE OF HEARING: 01.01.2019 DATE OF PRONOUNCEMENT: 08.02.2019 / O R D E R PER KUL BHARAT, J.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER O F THE CIT(EXEMPTION), BHOPAL DATED 27.4.2018. THE ASSE SSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- [ITA NO.614/IND/2018] [RAJIV GANDHI PROUDYOGIKI VISHWAVIDYALAYA, BHOPAL] 2 1. THAT THE ORDER DATED 27.4.2018 PASSED BY THE LD. C IT DECLINING REGISTRATION U/S 12AA TO THE APPELLANT IS VITIATED IN LAW AND ON FACTS. 2. THAT THE ORDER OF LD. CIT IS PERVERSE ON ACCOUNT OF CONSIDERATION OF FACTS WHICH ARE NOT RELEVANT FOR DECIDING AN APPLICATION U/S 12AA AND ALSO VITIATED ON ACCOUNT OF NON-CONSIDERATION OF VITAL I NFORMATION GIVEN BY THE APPELLANT. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE COMMISSIONER (EXEMPTION) HAS GROSSLY ERRED IN DENYI NG REGISTRATION TO THE ASSESSEE SOCIETY UNDER SECTION 12AA OF THE INCO ME TAX ACT, 1961 (THE ACT) AS CLAIMED. AS THE STAGE OF GRANT OF R EGISTRATION UNDER SECTION 12A, LEARNED COMMISSIONER IS SUPPOSED TO EXAMINE ON LY THE OBJECTS OF THE SOCIETY/TRUST AND IT IS NOT APPROPRIATE ON THE PART OF THE COMMISSIONER TO EXAMINE THE ASPECT OF APPLICATION O F INCOME AT THE STAGE OF GRANTING REGISTRATION UNDER SECTION 12AA, WHICH IS TO BE EXAMINED BY THE ASSESSING OFFICER ON A YEAR TO YEAR BASIS AT THE TIME OF CLAIMING EXEMPTIONS UNDER SECTION 11 OF THE INCOME TAX ACT. 4. THAT SECTION 2(15) DEFINES THE TERM CHARITABLE PUR POSE IN AN INCLUSIVE MANNER AND INCLUDES WITHIN ITS AMBIT RELIEF OF POOR , EDUCATION, MEDICAL RELIEF AND ADVANCEMENT OF ANY OTHER OBJECT OF GENER AL PUBLIC UTILITY. EDUCATION PER SE IS A CHARITABLE PURPOSE JUST LIKE RELIEF OF POOR OR MEDICAL RELIEF AND THE APPELLANT UNIVERSITY ALSO DO ES NOT EXIST FOR PROFIT AS THERE IS NO CLAUSE FOR DISTRIBUTION OF PROFITS O R NET ASSETS IN CASE OF DISSOLUTION TO MEMBERS AS IT IS FULLY GOVERNMENT OW NED. THUS THE EMPHASIS OF THE LD. CIT ON PROFITS AND FDRS WAS MI SPLACED BOTH ON FACTS AND IN LAW IN SO FAR AS DECIDING THE APPLICAT ION U/S 12AA WAS CONCERNED. 5. THAT THE LD. COMMISSIONER HAS PICKED UP OBJECTS AT S.NO.(C)(D) AND(E) FROM THE OBJECT CLAUSE TO ARRIVE AT THE CONCLUSION THAT THE OBJECTS ARE NOT CHARITABLE. THESE OBJECTS (C),(D) AND (E) ARE MERE LY INCIDENTAL OBJECTS AND ARE WELL CONNECTED WITH THE MAIN OBJECT OF PROV IDING TECHNICAL EDUCATION. THE CONCENTRATION OF THE LD. CIT ON INC IDENTAL OBJECTS IS CONTRARY TO THE RATIO IN SURAT ART SILKS WHEREIN T HE SUPREME COURT HAS THAT IF THE PRIMARY OR DOMINANT PURPOSE OF A TRUST IS CHARITABLE ANOTHER OBJECT WHICH BY ITSELF MAY NOT BE CHARITABLE BUT WH ICH IS MERELY ANCILLARY OR INCIDENTAL TO THE PRIMARY OR DOMINANT PURPOSE WOULD NOT PREVENT IT FROM BEING VALID CHARITY. 6. THAT THE TEST WHICH HAS TO BE APPLIED IS WHETHER TH E OBJECT WHICH IS SAID TO BE NON CHARITABLE IS THE MAIN OR PRIMARY OB JECT OF THE TRUST OR INSTITUTION OR ITS IS ANCILLARY OR INCIDENTAL TO TH E DOMINANT OR PRIMARY OBJECT WHICH IS CHARITABLE AND IN THE CASE OF THE A PPELLANT UNIVERSITY THE MAIN OBJECT IS CLEARLY EDUCATION WHICH IS CHARITABL E OBJECT AS PER SECTION 2(15) OF THE INCOME TAX ACT, 1961. [ITA NO.614/IND/2018] [RAJIV GANDHI PROUDYOGIKI VISHWAVIDYALAYA, BHOPAL] 3 2. THE FACTS GIVING RISE TO THE PRESENT APPEAL ARE THAT AN APPLICATION FOR REGISTRATION U/S 12AA OF THE INCOME TA X ACT, 1961 (HEREINAFTER CALLED AS THE ACT) IN FORM NO .10A WAS SUBMITTED ON 3.10.2017 TO THE OFFICE OF THE LD. COMMISSIONER OF INCOME TAX (EXEMPTION). THE SAID APPLICATION WAS REJECTED BY THE LD. CIT AFTER GIVING OPPORTUNITY TO THE ASSESSEE OF HEARING AND CONSIDERING THE SUBMISSION OF THE ASSESSEE. LD. CIT REJECTED THE APPLICATION ON THE BASIS THAT ACTIVITY OF THE ASSESSEE C ANNOT BE TERMED AS CHARITABLE AS IT HAS BEEN SYSTEMATIC GENERATING SURPLUS FROM YEAR TO YEAR AND THE AMOUNT HAS NOT BEEN APPLIED FOR ITS OBJECTIVES. FURTHER, THE AC COUNTS ARE NOT AUDITED AND HIGHER INTEREST INCOME HAS BEEN EARNED FROM THE SURPLUS SO GENERATED, ETC. 3. THE EFFECTIVE GROUND OF APPEAL IS AGAINST REJECTION OF APPLICATION BY THE LD. CIT(EXEMPTION). THE LD. COUNS EL FOR THE ASSESSEE SUBMITTED THAT THE REASONING FOR REJECTIO N OF [ITA NO.614/IND/2018] [RAJIV GANDHI PROUDYOGIKI VISHWAVIDYALAYA, BHOPAL] 4 THE APPLICATION IS CONTRARY TO THE SETTLED LAW. HE SU BMITTED THAT THE ORDER IS EX-FACIE PERVERSE AND CONTRARY TO THE RECORDS. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARG UED THAT AT THE STAGE OF REGISTRATION U/S 12AA OF THE ACT, THE APPLICATION OF FUND BY THE ASSESSEE OR GENERATION OF T HE FUND BY THE ASSESSEE SHOULD NOT BE THE GROUND FOR ALL OWING OR REJECTING OF THE APPLICATION. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(EXEMPTION) HAS NOT GIVEN AN Y FINDING ON THE OBJECTIVES OF THE ASSESSEE. HE SUBMI TTED THAT MERELY BECAUSE THE ASSESSEE IS GENERATING SURPLUS SHOULD NOT BE A GROUND FOR REJECTION OF APPLICATION AND IT CANNOT BE THE BASIS FOR INFERRING THAT ASSESSEE IS NOT CARRYING OUT ACTIVITIES FOR CHARITABLE PURPOSES. LD. S R. COUNSEL IN SUPPORT OF THE ARGUMENTS RELIED UPON VARIO US JUDGEMENTS, MORE PARTICULARLY, JUDGEMENT OF THE HON'B LE M.P. HIGH COURT RENDERED IN THE CASE OF CIT VS. DPR CHARITABLE TRUST (2011) 61 DTR (M.P.) (410). HE SUBM ITTED [ITA NO.614/IND/2018] [RAJIV GANDHI PROUDYOGIKI VISHWAVIDYALAYA, BHOPAL] 5 THAT THE ASSESSEE IS A GOVERNMENT ORGANIZATION. IT CANNO T BE BY ANY STRETCH OF IMAGINATION INFERRED THAT THE ASSES SEE IS CREATED FOR THE PURPOSE OF MAKING PROFIT. LD. COU NSEL FOR THE ASSESSEE ALSO PLACED RELIANCE ON THE JUDGEMENT OF HON'BLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF FIFTH GENERATION EDUCATION SOCIETY VS. CIT (1990) 185 ITR 6 34 (ALLAHABAD). 4. PER CONTRA, LD. CIT(DR) VEHEMENTLY OPPOSED THE SUBMISSIONS AND SUPPORTED THE ORDER OF THE LD. CIT(EXEMPTION). LD. D.R. SUBMITTED THAT FROM THE FAC TS AVAILABLE ON RECORDS, IT CANNOT BE INFERRED THAT THE ASS ESSEE IS CARRYING OUT ANY CHARITABLE ACTIVITIES, WHERE IT HAS ACCUMULATED HUGE SURPLUS FUNDS, WHICH HAVE NOT BEEN UTILIZED FOR ANY EDUCATIONAL OR CHARITABLE PURPOSES. 5. IN REJOINDER, LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE SUBMISSION OF THE LD. CIT(DR) THAT NO EDUCATI ONAL ACTIVITY WAS CARRIED OUT IS PATENTLY WRONG. HE SUBMI TTED [ITA NO.614/IND/2018] [RAJIV GANDHI PROUDYOGIKI VISHWAVIDYALAYA, BHOPAL] 6 THAT A DETAILED NOTE OF ACTIVITY CONDUCTED BY THE ASSESS EE UNIVERSITY IN LAST 3 YEARS AS WELL AS THE PURPOSE OF FU ND ACCUMULATED WAS GIVEN TO THE CIT(EXEMPTION) WHICH HAS BEEN CONVENIENTLY IGNORED TO BE MENTIONED IN THE OR DER. LD. COUNSEL DREW OUR ATTENTION TO THE STATEMENT OF FAC TS, WHEREIN THE CONTENTS OF THE NOTES PLACED BEFORE LD. CIT IS REPRODUCED. FURTHER, HE SUBMITTED THAT THE OBJECTIO N OF THE LD. CIT(EXEMPTION) THAT BOOKS ARE NOT AUDITED IS AL SO PATENTLY FALSE AND PERVERSE. HE SUBMITTED THAT ALL THE BOOKS ARE REGULARLY MAINTAINED AND SHOW COMPLETE DETAILS OF INCOME AND EXPENDITURE AND BALANCE AT THE END OF THE YEAR. THE ACCOUNTS OF A SOCIETY ARE NOT REQUIRED TO ADH ERE TO SECTION 145A OF THE ACT ARE FOR BUSINESS OR PROFE SSIONAL INCOME AND ARE NOT APPLICABLE TO SOCIETIES AND TRUSTS, IN FACT THE BOOKS HAVE BEEN SCRUTINIZED BY C&AG AUDIT TEAM AND NO DISCREPANCIES HAVE BEEN POINTED OUT. [ITA NO.614/IND/2018] [RAJIV GANDHI PROUDYOGIKI VISHWAVIDYALAYA, BHOPAL] 7 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORDS AND GONE THROUGH THE ORDER S OF THE AUTHORITIES BELOW. THE LD. CIT (EXEMPTION) H AS REJECTED THE APPLICATION ON THE FOLLOWING GROUNDS: 7. IN THE LIGHT OF ABOVE FINDINGS, IT CAN BE BRIEFL Y SUMMARIZED AS UNDER: I. THERE IS CONSISTENT AND SYSTEMATIC GENERATION OF SU RPLUS/PROFITS FROM YEAR TO YEAR. II. THE ASSESSEE HAS ACCUMULATED FUNDS OF ALMOST RUPEES ONE THOUSAND RUPEES FROM PROFITS GENERATED OVER THE YEA RS. III. THE PROFITS EARNED FROM YEAR TO YEAR ARE NOT BEING PLOUGHED BACK FOR CHARITABLE PURPOSES. IV. THE PROFITS EARNED ARE INVESTED IN EVER INCREASING FDRS TO EARN INTEREST INCOME INSTEAD OF UTILIZING FOR CHARITABLE PURPOSES. V. THE BOOKS OF ACCOUNT ARE NOT BEING REGULARLY/PROPER LY MAINTAINED AND MIXED SYSTEM OF ACCOUNTING IS FOLLOWED BY THE A SSESSEE AS PER ITS SWEET WISH. VI. THE BOOKS OF ACCOUNT ARE NOT REGULARLY AUDITED BY A NY AUDITOR; IN FACT IT WAS LAST AUDITED FOR FY 2009-10. VII. THERE ARE SEVERAL DISCREPANCIES POINTED OUT BY THE AUDITORS IN WORKING OF THE UNIVERSITY. VIII. THE AUDITORS POINTED OUT THAT EXCESS UNREASONABLE P AYMENT WAS MADE TO SPECIFIED PERSON U/S 13(3) OF THE ACT. IX. THERE ARE SEVERAL NON CHARITABLE OBJECTS IN THE OBJ ECT CLAUSE. X. THE MAJOR ACTIVITIES DO NOT COME UNDER PURVIEW OF T HE TERM EDUCATION AS USED IN SECTION 2(15) OF THE ACT. IN FACT, MAJOR RECEIPTS ARE FROM SUCH ACTIVITIES WHEREIN HUGE PROFITS HAVE BEEN GENERATED CONSISTENTLY WHICH SHOW THE COMMERCIAL NATURE OF AC TIVITIES. XI. THERE IS NEGLIGIBLE INVESTMENT IN FIXED ASSETS AS C OMPARED TO INVESTMENTS IN FDRS OR PLOUGHING BACK INTO EDUCATIO N OR OTHER CHARITABLE ACTIVITY. [ITA NO.614/IND/2018] [RAJIV GANDHI PROUDYOGIKI VISHWAVIDYALAYA, BHOPAL] 8 XII. THE MAJOR APPLICATION OF SURPLUS SO FAR HAS BEEN TO INVEST IN FDRS AND EARN INTEREST THEREUPON AND SUCH BENEFITS ARE N OT BEING PASSED ON TO THE STUDENTS BY REDUCING THE FEES THAT THE AP PLICANT IS COLLECTING FROM STUDENTS AND EDUCATIONAL INSTITUTIO NS. 7. THE MOOT QUESTION FOR OUR CONSIDERATION IS THAT WHETHER APPLICATION WAS RIGHTLY REJECTED SEEKING REGISTRATION U/S 12AA OF THE ACT ON THE BASIS OF THE REASONS STATED HEREIN ABOVE. FOR THE SAKE OF CLARITY, RELEVANT PROVISION OF LAW IS REPRODUCED HEREIN BELOW:- SECTION 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 FOLLO WING 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 PRESCRIBED 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 ESTABLISHMENT OF THE INSTITUTION, [WHICHEVER IS LATER AND SUCH TR UST OR INSTITUTION IS REGISTERED UNDER SECTION 12AA ] : [PROVIDED THAT WHERE AN APPLICATION FOR REGISTRATION OF THE T RUST 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 TR UST OR INSTITUTION, (I) FROM THE DATE OF THE CREATION OF THE TRUST OR T HE ESTABLISHMENT OF THE INSTITUTION IF THE [***] COMMISSIONER IS, FOR REASONS TO BE REC ORDED IN WRITING, SATISFIED THAT THE PERSON IN RECEIPT OF THE INCOME WAS PREVENTED F ROM MAKING THE APPLICATION BEFORE THE EXPIRY OF THE PERIOD AFORESAID FOR SUFFI CIENT REASONS; (II) FROM THE 1ST DAY OF THE FINANCIAL YEAR IN WHIC H THE APPLICATION IS MADE, IF THE [***] COMMISSIONER IS NOT SO SATISFIED:] [PROVIDED FURTHER THAT THE PROVISIONS OF THIS CLAUS E SHALL NOT APPLY IN RELATION TO ANY APPLICATION MADE ON OR AFTER THE 1ST DAY OF JUN E, 2007;] [(AA) THE PERSON IN RECEIPT OF THE INCOME HAS MADE AN APPLICATION FOR REGISTRATION OF THE TRUST OR INSTITUTION ON OR AFTER THE 1ST DAY OF JUNE, 2007 IN THE PRESCRIBED [ITA NO.614/IND/2018] [RAJIV GANDHI PROUDYOGIKI VISHWAVIDYALAYA, BHOPAL] 9 FORM AND MANNER TO THE COMMISSIONER AND SUCH TRUST OR INSTITUTION IS REGISTERED UNDER SECTION 12AA;] FOLLOWING CLAUSE (AUTHORITIES BELOW) SHALL BE INSER TED AFTER CLAUSE (AA) OF SUB- SECTION (1) OF SECT5ION 12A BY THE FINANCE ACT, 201 7 W.E.F. 1.4.2018: (AB) THE PERSON IN RECEIPT OF THE INCOME HAS MADE A N APPLICATION FOR REGISTRATION OF THE TRUST OR INSTITUTION, IN A CASE WHERE A TRUS T OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER SECTION 12AA OR HAS ITS AMENDMENT BY THE FINANCE (NO.2) ACT, 1996 (33 OF 1996)], AND, SUBSEQUENTLY, IT HAS ADOPTED OR UNDERTAKEN MODIFICATIONS OF THE OBJECTS WHICH DO NOT CONFORM T O THE CONDITIONS OF REGISTRATION, IN THE PRESCRIBED FORM AND MANNER, WITHIN A PERIOD OF THIRTY DAYS FROM THE DATE OF SAID ADOPTION OR MODIFICATION, TO THE PRINCIPAL COMMISSIONER OR COMMISSIONER AND SUCH TRUST OR INSTITUTION IS REGISTERED UNDER S ECTION 12AA; (B) WHERE THE TOTAL INCOME OF THE TRUST OR INSTITUT ION AS COMPUTED UNDER THIS ACT WITHOUT GIVING EFFECT TO [THE PROVISIONS OF SECTION 11 AND SECTION 12 EXCEEDS THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TA X IN ANY PREVIOUS YEAR], THE ACCOUNTS OF THE TRUST OR INSTITUTION FOR THAT Y EAR HAVE BEEN AUDITED BY AN ACCOUNTANT AS DEFINED IN THE EXPLANATION BELOW SUB- SECTION (2) OF SECTION 288 AND THE PERSON IN RECEIPT OF THE INCOME FURNISHES A LONG WITH THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR THE REPORT OF SUCH AUDIT IN THE PRES-CRIBED FORM DULY SIGNED AND VERIFIED BY SUCH ACCOUNTANT AND SET TING FORTH SUCH PARTICULARS AS MAY BE PRESCRIBED.] (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 IMMED IATELY FOLLOWING THE FINANCIAL YEAR IN WHICH SUCH APPLICATION IS MADE.] [ PROVIDED THAT WHERE REGISTRATION HAS BEEN GRANTED TO THE TRU ST OR INSTITUTION UNDER SECTION 12AA, THEN, THE PROVISIONS OF SECTION S 11 AND 12 SHALL APPLY IN RESPECT OF ANY INCOME DERIVED FROM PROPERTY HELD UN DER TRUST OF ANY ASSESSMENT YEAR PRECEDING THE AFORESAID ASSESSMENT YEAR, FOR W HICH ASSESSMENT PROCEEDINGS ARE PENDING BEFORE THE ASSESSING OFFICE R AS ON THE DATE OF SUCH REGISTRATION AND THE OBJECTS AND ACTIVITIES OF SUCH TRUST OR INSTITUTION REMAIN THE SAME FOR SUCH PRECEDING ASSESSMENT YEAR: PROVIDED FURTHER THAT NO ACTION UNDER SECTION 147 SHALL BE TAKEN BY THE ASSESSING OFFICER IN CASE OF SUCH TRUST OR INSTITUT ION FOR ANY ASSESSMENT YEAR PRECEDING THE AFORESAID ASSESSMENT YEAR ONLY FOR NO N REGISTRATION OF SUCH TRUST OR INSTITUTION FOR THE SAID ASSESSMENT YEAR: PROVIDED ALSO THAT PROVISIONS CONTAINED IN THE FIRST AND SECOND P ROVISO SHALL NOT APPLY IN CASE OF ANY TRUST OR INSTITUTION WHICH WAS REFUSED REGISTRATION OR THE REGISTRATION GRANTED TO IT WAS CANCELLED AT ANY TIM E UNDER SECTION 12AA.] [ITA NO.614/IND/2018] [RAJIV GANDHI PROUDYOGIKI VISHWAVIDYALAYA, BHOPAL] 10 SECTION 12AA: (1) THE [PRINCIPAL COMMISSIONER OR] COMMISSIONER, ON RE CEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUTION MADE UND ER CLAUSE (A) [OR CLAUSE (AA) [OR CLAUSE (AUTHORITIES BELOW)] 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 T RUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, HE (I) SHALL PASS AN ORDER IN WRITING REGISTERING THE TRUS T OR INSTITUTION; (II) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORDER IN WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTION, AND A COPY OF SUCH ORDER SHALL BE SENT TO THE APPLI CANT: PROVIDED THAT NO ORDER UNDER SUB-CLAUSE (II) SHALL BE PASSED UNLESS THE APPLICANT HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HE ARD. [(1A) ALL APPLICATIONS, PENDING BEFORE THE [PRINCIP AL CHIEF COMMISSIONER OR] CHIEF COMMISSIONER ON WHICH NO ORDER HAS BEEN PASSED UNDE R CLAUSE (B) OF SUB SECTION (1) BEFORE THE 1 ST DAY OF JUNE, 1999 SHALL STAND TRANSFERRED ON THAT DAY TO THE [PRINCIPAL COMMISSIONER OR] COMMISSIONER AND THE [P RINCIPAL COMMISSIONER OR]COMMISSIONER MAY PROCEED WITH SUCH APPLICATIONS UNDER THAT SUB-SECTION FROM THE STAGE AT WHICH THEY WERE ON THAT DAY.] (2) EVERY ORDER GRANTING OR REFUSING REGISTRATION U NDER CLAUSE (B) OF SUB-SECTION (1) SHALL BE PASSED BEFORE THE EXPIRY OF SIX MONTHS FRO M THE END OF THE MONTH IN WHICH THE APPLICATION WAS RECEIVED UNDER CLAUSE (A) [OR CLAUSE (AA) [OR CLAUSE (AB)] OF SUB-SECTION (1)] OF SECTION 12A]. [(3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANT ED REGISTRATION UNDER CLAUSE (B) OF SECTION (1) [OR HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A [AS IT STOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO.2) AC T, 1996 (33 OF 1996)]] AND SUBSEQUENTLY THE [PRINCIPAL COMMISSIONER OR] COMMIS SIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GEN UINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INST ITUTION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELLING THE REGIS TRATION OF SUCH TRUST OR INSTITUTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASSE D UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REASONABLE OPPORTUN ITY OF BEING HEARD.] [ITA NO.614/IND/2018] [RAJIV GANDHI PROUDYOGIKI VISHWAVIDYALAYA, BHOPAL] 11 [(4) WITHOUT PREJUDICE TO THE PROVISIONS OF SUB-SEC TION (3), WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER CLA USE (B) OF SUB-SECTION (1) OR HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A [AS IT STOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO.2) ACT, 1996 (33 OF 19 96)] AND SUBSEQUENTLY IT IS NOTICED THAT THE ACTIVITIES OF THE TRUST OR THE INS TITUTION ARE BEING CARRIED OUT IN A MANNER THAT THE PROVISIONS OF SECTIONS 11 AND 12 DO NOT APPLY TO EXCLUDE EITHER WHOLE OR ANY PART OF THE INCOME OF SUCH TRUST OR IN STITUTION DUE TO OPERATION OF SUB-SECTION (1) OF SECTION 13, THEN, THE PRINCIPAL COMMISSIONER OR THE COMMISSIONER MAY BY AN ORDER IN WRITING CANCEL THE REGISTRATION OF SUCH TRUST OR INSTITUTION: PROVIDED THAT THE REGISTRATION SHALL NOT BE CANCELLED UNDER THIS SUB-SECTION, IF THE TRUST OR INSTITUTION PROVES THAT THERE WAS A REASON ABLE CAUSE FOR THE ACTIVITIES TO BE CARRIED OUT IN THE SAID MANNER.] 8. AS PER THE AFOREMENTIONED PROVISION, THE CIT(E) H AS TO SATISFY HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INS TITUTION AND THE GENUINENESS OF ITS ACTIVITIES. FOR TESTING T HIS, THE LD. CIT(E) IS EMPOWERED TO CALL FOR SUCH DOCUMENTS O R INFORMATION AS HE THINKS NECESSARY AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF . IN THE BACK DROP OF THESE PROVISIONS, IT HAS TO BE EXAMI NED AS TO WHETHER THE OBJECTS OF THE ASSESSEE ARE NOT CHARITA BLE AND ALSO THE ACTIVITIES UNDERTAKEN ARE GENUINE OR NOT. UNDISPUTEDLY, THE ASSESSEE IS AN INSTITUTION CREATED B Y THE GOVERNMENT OF MADHYA PRADESH. LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON THE JUDGEMENT OF HON'BL E [ITA NO.614/IND/2018] [RAJIV GANDHI PROUDYOGIKI VISHWAVIDYALAYA, BHOPAL] 12 M.P. HIGH COURT IN THE CASE OF CIT VS. D.P.R. CHARITAB LE TRUST (2011) 61 ITR (M.P.) 410, WHEREIN THE HON'BLE HIGH COURT HAS HELD AS UNDER: [ITA NO.614/IND/2018] [RAJIV GANDHI PROUDYOGIKI VISHWAVIDYALAYA, BHOPAL] 13 9. LD. COUNSEL FOR THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE JUDGEMENT OF THE KERALA HIGH COURT IN THE CASE OF ANJANEYA MEDICAL TRUST VS. CIT, KOZHIKODE (2016) 382 I TR 399 (KERALA), WHEREIN THE HON'BLE HIGH COURT HAS HELD AS UNDER: 10. IT IS CLEAR FROM A PLAIN READING OF SECTIONS 1 2A AND 12AA OF THE ACT THAT WHAT IS INTENDED THEREBY IS ONLY A REGISTRATIO N SIMPLICITER OF THE ENTITY OF A TRUST. THIS HAS BEEN MADE A CONDITION PRECEDENT FO R THE CLAIMING OF BENEFITS UNDER THE OTHER PROVISIONS OF THE ACT REGARDING EXE MPTION OF INCOME, CONTRIBUTION, ETC. NO EXAMINATION OF THE MODUS OF THE APPLICATIO N OF THE FUNDS OF THE TRUST OR AN EXAMINATION OF THE ETHICAL BACKGROUND OF ITS SET TLERS IS CALLED FOR WHILE CONSIDERING AN APPLICATION FOR REGISTRATION. THE S TAGE FOR CONSIDERATION OF THE RELEVANCE OF THE OBJECT OF THE TRUST AND THE APPLIC ATION OF ITS FUNDS ARISES AT THE TIME OF THE ASSESSMENT. WHERE BENEFITS ARE CLAIMED BY ASSESSEES IN TERMS OF SECTIONS 11 AND 12 OF THE ACT, THE QUESTION AS TO T HE NATURE OF SUCH CONTRIBUTION AND INCOME CAN BE LOOKED INTO. AT THE TIME OF REGI STRATION OF THE TRUST, GOING BY THE BINDING JUDGEMENTS OF THE APEX COURT, WHAT IS T O BE LOOKED INTO IS WHETHER THE TRUST IS A GENUINE ONE AND WHETHER IT IS A SHAM INS TITUTION FLOATED ONLY TO AVAIL [ITA NO.614/IND/2018] [RAJIV GANDHI PROUDYOGIKI VISHWAVIDYALAYA, BHOPAL] 14 THE BENEFITS OF EXEMPTION UNDER THE ACT. THERE IS NO SUCH FINDING IN THE IMPUGNED ORDER. 10. THE RELIANCE IS ALSO PLACED ON THE HON'BLE ALLAHABA D HIGH COURT RENDERED IN THE CASE OF FIFTH GENERATION EDUCATION SOCIETY VS. CIT (1990) 185 ITR 634 (ALLAHABAD ) WHEREIN THE HON'BLE HIGH COURT HAS HELD AS UNDER: 3. IT IS EVIDENT THAT AT THIS STAGE, THE COMMISSI ONER IS NOT TO EXAMINE THE APPLICATION OF INCOME. ALL THAT HE MAY EXAMINE IS WHETHER THE APPLICATION IS MADE IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 12A READ WITH RULE 17A AND WHETHER FORM 10A HAS BEEN PROPERLY FILLED UP. HE MAY ALSO SEE W HETHER THE OBJECTS OF THE TRUST ARE CHARITABLE OR NOT. AT THI S STAGE, IT IS NOT PROPER TO EXAMINE THE APPLICATION OF INCOME. 11. FURTHER RELIANCE IS PLACED ON THE JUDGEMENT OF TH E HON'BLE HIGH COURT OF PUNJAB & HARYANA, WHEREIN THE HON'BLE HIGH COURT FOLLOWED THE JUDGEMENT OF THE OT HER BRANCH OF THE SAME HIGH COURT RENDERED IN THE CASE OF CIT VS. SURYA EDUCATIONAL & CHARITABLE TRUST, WHEREIN THE HON'BLE HIGH COURT HELD THAT THE OBJECT OF SECTION 1 2AA OF THE ACT, IS TO EXAMINE THE GENUINENESS OF THE OBJECT S OF THE TRUST, BUT NOT THE INCOME OF THE TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES. THE STAGE OF APPLICATION OF INCOM E IS [ITA NO.614/IND/2018] [RAJIV GANDHI PROUDYOGIKI VISHWAVIDYALAYA, BHOPAL] 15 WHEN SUCH TRUST OR INSTITUTION FILES ITS RETURN. T HE LD. COUNSEL HAS ALSO PLACED RELIANCE ON THE DECISION OF TH E COORDINATE BENCH RENDERED IN THE CASE OF DIVINE SIKSH A SAMITHI VS. CIT IN ITA NO.1034/IND/2016, WHERE THE COORDINATE BENCH OF THIS TRIBUNAL FOLLOWING THE DECIS ION OF THE OTHER COORDINATE BENCH DIRECTED THE LD. CIT TO G RANT REGISTRATION U/S 12AA OF THE ACT. FROM THE READING O F THE CASE LAWS AS RELIED BY THE LD. COUNSEL FOR THE ASSESSE E, IT EMERGES THAT AT THE AGE OF GRANTING REGISTRATION, THE LD . CIT HAS TO RESTRICT HIMSELF TO THE OBJECTS OF THE ASSESSE E AND GENUINENESS OF THE ACTIVITIES. AT THE STAGE OF GRANTI NG REGISTRATION, THE CIT HAS NOT TO EXAMINE WHETHER THE F UNDS HAVE BEEN APPLIED OR NOT. IN THE CASE IN HAND, THE LD. CIT REJECTED THE APPLICATION SUBSTANTIALLY ON THE BASIS THAT THE ASSESSEE HAS ACCUMULATED FUNDS WHICH ARE NOT BEEN PLOUGHED BACK FOR CHARITABLE PURPOSES. THE PROFITS EAR NED ARE INVESTED IN EVER INCREASING FDRS TO EARN INTEREST [ITA NO.614/IND/2018] [RAJIV GANDHI PROUDYOGIKI VISHWAVIDYALAYA, BHOPAL] 16 INCOME INSTEAD OF UTILIZING FOR CHARITABLE PURPOSES. THE EXPLANATION OF THE ASSESSEE FOR ACCUMULATING THE FUNDS I S THAT IT PLANNED FOR FUTURE EXPANSION OF TECHNICAL EDUCAT ION IN STATE. THE ASSESSEE HAS ALSO APPLIED FUNDS FOR CONSTRUCTING THE HOTELS FOR BOYS AND GIRLS, AUDITORIU M WITH THE SITTING CAPACITY OF 3000, CAMPUS DEVELOPMENT TO ESTABLISH GREEN CAMPUS. THE ASSESSEE HAS ALSO ESTABLISHE D UITS AT JHABUA & SHADOL FOR WHICH THE CAPITAL EXPENDITU RE WILL BE APPROXIMATELY RS.100 CRORES. IN OUR CONSIDER ED VIEW, THE LD. CIT HAS NOT CONSIDERED THE EXPLANATION I N THE LIGHT OF THE BINDING PRECEDENTS. WE THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(E) AND RESTORE THE ISSUE OF GRAN TING OF REGISTRATION TO HIS FILE TO CONSIDER THE SAME AFTER CONSIDERING THE FACTS AS STATED IN THE NOTE ON ACTIVITY AND THE RATIO LAID DOWN IN THE BINDING PRECEDENT AS RELIED BY THE LD. COUNSEL FOR THE ASSESSEE. GROUNDS RAISED IN THIS APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. [ITA NO.614/IND/2018] [RAJIV GANDHI PROUDYOGIKI VISHWAVIDYALAYA, BHOPAL] 17 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 08 . 02.2019. SD/- (MANISH BORAD) SD/- (KUL BHARAT) A CCOUNTANT MEMBER JUDICIALMEMBER INDORE; DATED : 08/02/2019 VG/SPS COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUAR D FILE. BY ORDER ASSISTANT REGISTRAR, INDORE