M/s. Kanchan Singh Bhuli Devi Shiksha Prasar Samiti, V. CIT, Kanpur

ITA 706/LKW/2010

• Counselvise Citation: 70623714 RSA 2010
• Duration Of Justice: 1 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-05-2012
• Assessment Year: misc
• Appeal Filed On: 30-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C MEENA
• Keywords: Charitable institution; Rule of consistency; Cancellation of registration
• Section: 143(3); 80G; 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI S. V. MEHROTRA , ACCOUNTANT MEMBER ITA NO. 706 & 707/LKW/2010 M/S KANCHAN SINGH BHULI DEVI SHIKSHA PRASAR SAMITI VILLAGE BHIKAN PUR, POST MINAYAN DISTRICT KANPUR DEHAT V. CIT - I KANPUR PAN: AAATK9919L (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. SWARAN SINGH, C.A. RESPONDENT BY: SHRI. K. C. MEENA, D.R. DATE OF HEARING: 17.05.2012 DATE OF PRONOUNCEMENT: 26.06.2012 O R D E R PER S UNIL KUMAR YADAV : THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE RESPECTIVE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX REFUSING REGISTRATION UNDER SECTION 12AA(1) AND EXEMPTION UNDER SECTION 80G(5) OF THE INCOME - TAX ACT, 1961 (HEREINAFT ER CALLED IN SHORT THE ACT). 2 . THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ASSESSEE - SOCIETY WAS REGISTERED WITH THE REGISTRAR OF SOCIETIES, KANPUR ON 13.12.2001. THE ASSESSEE - SOCIETY IS ENGAGED IN PROVIDING EDUCATION BY RUNNING EDUCATIONAL I NSTITUTION IN THE NAME OF M/S KANCHAN SINGH BHOOLI DEVI P.G. COLLEGE AT VILLAGE BHIKHANPUR, SARWANKHERA, KANPUR. THE ASSESSEE - SOCIETY IS PROVIDING EDUCATION TO ABOUT 2900 CHILDREN BY VARIOUS EDUCATION DEGREES LIKE B.A., B.SC., B.ED., B.P.ED. ETC. AND CHAR GING FEES FROM THE STUDENTS. THE ASSESSEE - SOCIETY HAS APPLIED FOR REGISTRATION UNDER : - 2 - : SECTION 12AA(1) OF THE ACT AND A REPORT WAS CALLED FOR BY THE LD. COMMISSIONER OF INCOME - TAX. THE LD. COMMISSIONER OF INCOME - TAX NOTICED THE FINANCIAL POSITION OF THE AS SESSEE - SOCIETY FOR THE LAST THREE YEARS WHICH ARE AS UNDER: - SL.NO. F.Y. GROSS RECEIPT PROFIT/SURPLUS 1 2006 - 07 76,78,873.00 29,84,250.45 2 2007 - 08 99,16,083.54 45,53,345.38 3 2008 - 09 1,65,34,914.83 54,57,083.52 3 . FROM THE AFORESAID FINA NCIAL POSITION, THE LD. COMMISSIONER OF INCOME - TAX OBSERVED THAT THE ASSESSEE - SOCIETY IS CARRYING ON ITS ACTIVITIES IN SUCH A MANNER THAT IT IS IN THE NATURE OF A COMMERCIAL ENTERPRISE AND NOT FOR CHARITABLE PURPOSE. THE ASSESSEE - SOCIETY STATED THAT IT IS ENGAGED IN THE CHARITABLE ACTIVITIES LIKE CONDUCTING COMBINED MARRIAGE OF POOR GIRLS AND CHARGE SUBSIDIZE D FEES FROM STUDENTS. FROM THE PERUSAL OF THE BALANCE SHEETS, THE LD. COMMISSIONER OF INCOME - TAX OBSERVED THAT THE ASSESSEE - SOCIETY IS NOT SPENDING M ONEY ON CHARITABLE PURPOSES. RELYING UPON THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF MUNICIPAL CORPORATION OF DELHI V. CHILDREN BOOK TRUST [1992] 3 SCC 390, THE LD. COMMISSIONER OF INCOME - TAX DENIED REGISTRATION TO THE ASSESSEE - SOCIETY UNDER SE CTION 12AA(1) OF THE ACT. 4 . FOLLOWING HIS ORDER REFUSING REGISTRATION UNDER SECTION 12AA(1) OF THE ACT, THE LD. COMMISSIONER OF INCOME - TAX ALSO REJECTED THE APPLICATION FOR GRANT OF EXEMPTION UNDER SECTION 80G OF THE ACT. : - 3 - : 5 . AGAINST BOTH THE ORDERS, THE ASSESSE E - SOCIETY HAS PREFERRED APPEALS BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT THE ASSESSEE - SOCIETY IS ENGAGED IN CHARITABLE ACTIVITIES BY IMPARTING EDUCATION IN VARIOUS COURSES. THE LD. COMMISSIONER OF INCOME - TAX HAS DENIED REGISTRATION UNDER SECTION 12AA AND EXEMPTION UNDER SECTION 80G OF THE ACT WITHOUT BRINGING ANYTHING ON RECORD THAT THE ASSESSEE - SOCIETY WAS EVER ENGAGED IN COMMERCIAL ACTIVITIES. THE SURPLUS FORMED IN A PARTICULAR YEAR CANNOT BE THE BASIS FOR DENIAL OF REGISTRATION UNDER SECTION 12AA O F THE ACT. WHAT IS TO BE SEEN WHILE GRANTING REGISTRATION UNDER SECTION 12A OF THE ACT AND APPROVAL UNDER SECTION 80G OF THE ACT IS ONLY THE OBJECT S OF THE SOCIETY/TRUST AND ITS ACTIVITIES. IF ANYTHING IS FOUND CONTRARY TO THE CHARITABLE OBJECT S OF THE S OCIETY/TRUST, THE LD. COMMISSIONER OF INCOME - TAX IS REQUIRED TO EXAMINE THAT ASPECT AND MAKE OUT A CASE THAT THE SOCIETY/TRUST WAS ENGAGED IN THE ACTIVITIES OTHER THAN CHARITABLE. IT WAS FURTHER ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE THAT GRANT OF REG ISTRATION UNDER SECTION 12A OF THE ACT DOES NOT ENTITLE THE ASSESSEE - SOCIETY TO CLAIM EXEMPTION UNDER SECTION 11 OF THE ACT. THIS EXEMPTION CAN ONLY BE ALLOWED SUBJECT TO FULFILLMENT OF P RER EQUISITE CONDITIONS ENSHRINED IN SECTION 13 OF THE ACT. GRANT OF REGISTRATION UNDER SECTION 12A OF THE ACT IS A FIRST STEP TOWARDS THE CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON VARIOUS JUDGMENTS OF THE JURISDICTIONAL HIGH COU RT AND OTHER HIGH COURTS AND ALSO OF THE TRIBUNAL. THE SAME ARE AS UNDER: - 1 CIT V. RED ROSE SCHOOL [2007] 212 CTR 394 2 PINEGROVE INTERNATIONAL CHARITABLE TRUST V. UNION OF INDIA AND OTHERS [2010] 327 ITR 73 (P&H) 3 CITY MONTESSORI SCHOOL V. UNION OF INDIA AND OTHERS [2009] 315 ITR 481 (ALL.) : - 4 - : 4 VANITA VISHRAM TRUST V. CCIT [2010] 327 ITR 121 (BOM.) 5 RAEBAREILY POLYTECHNIC ASSOCIATION V. CIT [2010] 48 DTR 1 6 DR. VIRENDRA SWARUP EDUCATIONAL FOUNDATION V. CIT [2010] 43 DTR 267 7 CIT V. GAUR BRAHM IN VIDYA PRACHARINI SABHA INCOME TAX APPEAL NO.759 OF 2010 8 ITO(E), TRUST WARD III V. DHARAMSHILA CANCER FOUNDATION AND RESEARCH CENTRE [2010] 8 TAXMAN.COM 285 (DELHI ITAT) 9 ST. LAWRENCE EDUCATIONAL SOCIETY & ANOTHER V. CIT WRIT PETITION (C) 1254/2010, ORDER DATED 4.2.2011. 10 AMERICAN HOTEL AND LODGING ASSOCIATION EDUCATIONAL INSTITUTE V. CBDT AND OTHERS [2008] 301 ITR 86 (SC) 6 . THE LD. D.R., ON THE OTHER HAND, HAS SUBMITTED THAT THE ASSESSEE - SOCIETY HAS BEEN CHARGING SUBSTANTIAL FEE FROM THE STUDENTS RESULTING INTO SURPLUS PROFIT AND THIS FACT IS EVIDENT FROM THE FINANCIAL STATEMENTS OF THE ASSESSEE - SOCIETY . THEREFORE, THE ASSESSEE - SOCIETY IS NOT ENGAGED IN CHARITABLE ACTIVITIES. NOTHING IS PLACED ON RECORD TO SHOW THAT AT ANY POINT OF TIME THE ASS ESSEE HAD IMPARTED EDUCATION AT FREE OF COST TO THE POOR AND NEEDY. SINCE THE ASSESSEE HAS BEEN RUNNING THE SOCIETY FOR EARNING PROFIT AND ALSO IN THE NATURE OF COMMERCIAL ENTERPRISE, THE LD. COMMISSIONER OF INCOME - TAX HAS RIGHTLY DENIED REGISTRATION UNDE R SECTION 12AA OF THE ACT AND APPROVAL FOR EXEMPTION UNDER SECTION 80G OF THE ACT. 7 . HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX, WE FIND THAT ON THE BAS IS O F FINANCIAL STATEMENTS FURNISHED BY THE ASSESSEE - SOCIETY , THE LD. COMMISSIONER OF INCOME - TAX HAS MADE OUT A CASE : - 5 - : THAT IN EACH FINANCIAL YEAR THERE WAS SURPLUS FUND/PROFIT WITH THE ASSESSEE - SOCIETY. BESIDES, HE HAS NOT BROUGHT ANYTHING ON RECORD TO FORTIF Y HIS CONCLUSION THAT THE ASSESSEE - SOCIETY IS ENGAGED IN COMMERCIAL ACTIVITIES BY IMPARTING EDUCATION IN VARIOUS COURSES. UNDER THESE CIRCUMSTANCES, THE MO O T QUESTION ARISES BEFORE US IS I.E. WHETHER REGISTRATION UNDER SECTION 12A OF THE ACT CAN BE DENIED WHEN THE ASSESSEE HAS SUBSTANTIAL SURPLUS / PROFIT IN A PARTICULAR FINANCIAL YEAR. THIS ASPECT WAS EXAMINED AT DIFFERENT POINT S OF TIME BY VARIOUS HIGH COURTS AND ALSO BY VARIOUS BENCH ES OF THE TRIBUNAL. 8 . IN THE CASE OF CIT V. RED ROSE SCHOOL (SUPRA), THEIR LORDSHIPS OF J URISDICTIONAL HIGH COURT HAS EXAMINED THE SCOPE OF ENQUIRY WHILE GRANTING REGISTRATION UNDER SECTION 12A OF THE ACT AND HELD THAT WHILE CONSIDERING THE APPLICATION FOR REGISTRATION UNDER SECTION 12AA OF THE ACT, THE LD. COMMISSIONER OF INCOM E - TAX WAS EMPOWERED ONLY TO SEE THE GENUINENESS OF THE TRUST OR INSTITUTION AND ITS OBJECT AND THE SCOPE OF ENQUIRY COULD NOT BE STRETCHED TO THE MISUSE OF THE FUNDS OR EARNING OF PROFIT. THAT WILL BE TAKEN CARE OF BY SECTIONS 11 AND 12 OF THE ACT WHILE G RANTING EXEMPTION UNDER THE SAID SECTIONS. THE RELEVANT OBSERVATIONS OF THEIR LORDSHIPS ARE EXTRACTED HEREUNDER: - MERE REGISTRATION UNDER SECTION 12AA WOULD NOT, IN ITSELF, BE A GROUND, MUCH LESS A CONCLUSIVE PROOF, FOR EXCLUDING SUCH INCOME FROM THE TO TAL INCOME OF THE PERSON/ASSESSEE OR TRUST FROM INCOME OF THE PREVIOUS YEAR. BUT THE PROVISIONS OF SECTION 12A, WHICH IS UNDER THE HEADING (CONDITIONS AS TO REGISTRATION OF TRUSTS ETC.), DISENTITLES ANY TRUST OR INSTITUTION FROM CLAIMING ANY BENEFIT OF THE PROVISIONS OF SECTION 11 AND SECTION 12, IN RELATION TO ITS INCOME, UNLESS, THE PERSON IN RECEIPT OF THE INCOME, HAS MADE AN APPLICATION FOR REGISTRATION OF THE TRUST OR INSTITUTION IN THE PRESCRIBED FORM AND IN : - 6 - : THE PRESCRIBED MANNER TO THE COMMISSIONER B EFORE THE 1 - 7 - 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 TRUST OR INSTITUTION IS REGISTERED UNDER SECTION 12AA. REST OF THE PROVISIONS O F SECTION 12A. [PARA 18] SECTION 12A THUS, PRESCRIBED CONDITIONS FOR REGISTRATION OF TRUSTS AND OBLIGATES THE TRUST OR THE INSTITUTION TO SEEK REGISTRATION UNDER SECTION 12AA, IF SUCH TRUST OR INSTITUTION INTENDS TO HAVE THE BENEFIT OF THE PROVISIONS OF SE CTION 11 AND SECTION 12. [PARA 19] THESE PROVISIONS THUS, MAKE IT CLEAR THAT IF THE TRUST OR THE INSTITUTION IS NOT REGISTERED UNDER SECTION 12AA, IT WOULD NOT BE ABLE TO CLAIM ANY EXEMPTION OR EXCLUSION OF ITS INCOME FROM THE TOTAL INCOME OF THE PREVIOUS YEAR, EVEN IF SUCH INCOME IS OTHERWISE LIABLE TO BE EXCLUDED UNDER ANY OF THE CLAUSES OF SECTION 11 OR SECTION 12. [PARA 20] THUS, IN A CASE WHERE REGISTRATION IS REFUSED, THE TRUST OR THE INSTITUTION WOULD NOT BE ALLOWED TO CLAIM ANY SUCH EXEMPTION OR EXC LUSION OF ITS INCOME FROM THE TOTAL INCOME OF THE PREVIOUS YEAR. [PARA 21] THE PROVISION OF SECTION 12AA CONFERS POWER ON THE CIT WHILE CONSIDERING THE APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUTION MADE UNDER CLAUSE (A) OF SECTION 12A TO CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTION, AND ALSO TO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF AND AFTE R SATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, HE SHALL PASS AN ORDER IN WRITING REGISTERING THE TRUST OR INSTITUTION AND IF HE IS NOT SATISFIED, HE WOULD REFUSE THE REGISTRATION. [PARA 23] SUB - SEC TION (3) INSERTED WITH EFFECT FROM 1 - 10 - 2004, GAVE POWER OF CANCELLATION OF REGISTRATION TO THE COMMISSIONER, IF SUBSEQUENTLY HE FINDS AND IS SATISFIED THAT ACTIVITIES OF SUCH TRUST OR : - 7 - : INSTITUTION ARE NOT GENUINE [PARA 24] POWER OF CANCELLATION OF REGISTRA TION HAS BEEN CONFERRED WITH A VIEW TO ENSURE THAT IF ONCE A REGISTRATION HAS BEEN GRANTED UNDER SECTION 12AA, THE TRUST OR THE INSTITUTION MAY NOT TAKE LIBERTY OF MISUSING THE PROVISION AND CONSEQUENTLY GO HAYWIRE IN FURTHERING THE OBJECT OF THE TRUST OR ITS ACTIVITIES DO NOT REMAIN GENUINE ANY FURTHER. [PARA 25] ON A READING OF PROVISIONS OF SUB - CLAUSES (A) AND (B) OF SECTION 12AA, IT MAKES CLEAR THAT THE COMMISSIONER HAS TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTI ON AND ALSO ABOUT THE OBJECTS OF THE TRUST OR THE INSTITUTION. [PARA 30] ON BEING SATISFIED ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTRUCTION AND ALSO ABOUT ITS OBJECTS, THE COMMISSIONER WOULD EITHER GRANT THE CERTIFICATE OR WOULD REJ ECT THE PRAYER. IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION, HE CAN CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST OR THE INSTITUTION, AS HE THINKS NECESSARY AND HE IS ALSO EMPOWERED TO MAKE SU CH ENQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF. [PARA 31] THE OBJECTS OF THE TRUST CAN BE HAD FROM THE BYE - LAWS OR THE DEED OF TRUST, AS THE CASE MAY BE AND UNLESS, OF COURSE, THE OBJECTS OF THE TRUST APPARENTLY MAKE OUT THAT THEY WERE NOT IN CONSONA NCE WITH THE PUBLIC POLICY OR THAT THEY WERE NOT THE OBJECTS OF ANY CHARITABLE PURPOSE, REGISTRATION CANNOT BE REFUSED ACCORDINGLY ON THIS GROUND. [PARA 32] IN REGARD TO THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION, WHOSE OBJECTS DO NO T RUN CONTRARY TO PUBLIC POLICY AND ARE, IN FACT, RELATED TO CHARITABLE PURPOSES, THE COMMISSIONER IS AGAIN EMPOWERED TO MAKE ENQUIRIES AS HE THINKS FIT. IN CASE THE ACTIVITIES ARE NOT GENUINE AND THEY ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJEC TS OF THE TRUST/SOCIETY OR THE INSTITUTION, OF COURSE, THE REGISTRATION CAN AGAIN BE REFUSED. BUT ON MERE PRESUMPTIONS AND ON : - 8 - : SURMISES THAT INCOME DERIVED BY THE TRUST OR THE INSTITUTION IS BEING MISUSED OR THAT THERE IS SOME APPREHENSION THAT THE SAME WOU LD NOT BE USED IN THE PROPER MANNER AND FOR THE PURPOSES RELATING TO ANY CHARITABLE PURPOSE, REJECTION CANNOT BE MADE. [PARA 33] SECTION 12 AA, WHICH LAYS DOWN THE PROCEDURE TOR REGISTRATION, DOES NOT SPEAK ANYWHERE THAT THE COMMISSIONER, WHILE CONSIDERING THE APPLICATION FOR REGISTRATION, SHALL ALSO SEE THAT THE INCOME DERIVED BY THE TRUST OR THE INSTITUTION IS EITHER NOT BEING SPENT FOR CHARITABLE PURPOSE OR SUCH INSTITUTION IS EARNING PROFIT. THE LANGUAGE USED IN THE SECTION ONLY REQUIRES THAT ACTIVITIES OF THE TRUST OR THE INSTITUTION MUST BE GENUINE, WHICH ACCORDINGLY WOULD MEAN, THEY ARE IN CONSONANCE WITH THE OBJECTS OF THE TRUST/INSTITUTION, AND ARE NOT MERE CAMOUFLAGE BUT ARE REAL, PURE AND SINCERE, NOR AGAINST THE PROPOSED OBJECTS. THE PROFIT EARNI NG OR MISUSE OF THE INCOME DERIVED BY CHARITABLE INSTITUTION FROM ITS CHARITABLE ACTIVITIES, MAY BE A GROUND FOR REFUSING EXEMPTION ONLY WITH RESPECT TO THAT PART OF THE INCOME BUT CANNOT BE TAKEN TO BE A SYNONYM TO THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION. [PARA 34] A CUMULATIVE READING OF THE PROVISIONS LEAVES NO MANNER OF DOUBT THAT EXEMPTION UNDER THE AFORESAID PROVISIONS CAN BE CLAIMED WITH RESPECT TO THE INCOME DERIVED BY THE TRUST OR THE INSTITUTION, WHICH IS BEING RUN FOR A CHARITABLE PURPOSE AND, THEREFORE, WHILE CONSIDERING THE REGISTRATION UNDER SECTION 12AA, THE SCOPE OF ENQUIRY OF THE COMMISSIONER, WOULD BE LIMITED TO THE AFORESAID EXTENT. [PARA 42] SINCE IN THE ABSENCE OF SUCH REGISTRATION, THE TRUST OR THE INSTITUTION WOULD NOT BE ENTITLED TO CLAIM ANY EXEMPTION OF THE INCOME DERIVED, THOUGH IT IS BEING RUN FOR CHARITABLE PURPOSES, THE REGISTRATION HAS TO BE CONSIDERED IN THE LIGHT OF THE SPECIFIC PROVISIONS AFORESAID AND IN THE MANNER THAT IT FURTHERS THE OBJECT OF THE SCHEME OF REGISTRATION AND, OF COURSE, EXEMPTION OF THE ENTIRE INCOME OR THE : - 9 - : PART OF THE INCOME, AS THE CASE MAY BE, OF A CHARITABLE TRUST OR INSTITUTION HAS TO BE CONSIDERED DURING ASSESSMENT PROCEEDINGS. [PARA,43]. IT IS SIGNIFICANT TO MENTION THAT REGI STRATION UNDER SECTION 12AA, DOES NOT NECESSARILY ENTITLE THE ASSESSEE TO GET THE INCOME EXCLUDED FROM THE INCOME OF THE PREVIOUS YEAR FOR THE PURPOSE OF DETERMINATION OF TAX LIABILITY BUT IT ONLY ENTITLES THE ASSESSEE TO CLAIM SUCH EXEMPTION, WHICH OTHERW ISE COULD NOT BE CLAIMED IN THE ABSENCE OF REGISTRATION. THE ENQUIRY BY THE COMMISSIONER SHALL REMAIN RESTRICTED TO THE EXAMINATION, AS TO WHETHER THE ASSESSEE, WHO HAS MOVED THE APPLICATION FOR REGISTRATION UNDER SECTION 12A, IS ACTUALLY IN THE ACTIVITIES WHICH ARE GENUINE. GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION HAS TO BE SEEN, KEEPING IN MIND THE OBJECTS THEREOF, WHICH NECESSARILY MEANS THAT THE COMMISSIONER SHALL SATISFY HIMSELF ABOUT THE FACT THAT THE ACTIVITIES ARE GENUINE AND IN CONSONANCE WITH THE OBJECTS OF THE TRUST OR THE INSTITUTION. IN OTHER WORDS, IF ESTABLISHING AND RUNNING A SCHOOL IS THE OBJECT OF THE SOCIETY, AS GIVEN IN ITS BYE - LAWS, IT HAS TO BE SATISFIED THAT THE SOCIETY HAS ESTABLISHED THE SCHOOL, WHERE EDUCATION I S BEING IMPARTED AS PER RULES AND THE FACTUM OF ESTABLISHMENT AND RUNNING SCHOOL IS A GENUINE ACTIVITY. THE ENQUIRY REGARDING GENUINENESS OF THE ACTIVITIES CANNOT BE STRETCHED BEYOND THIS. [PARA 44] SUFFICIENT SAFEGUARDS HAVING BEEN GIVEN IN SECTIONS 11, 1 2 AND 13 FOR ASSESSING THE INCOME WHICH HAS NOT BEEN APPLIED TO THE PURPOSE OF THE TRUST OR THE INSTITUTION, THE INTENTION OF THE LAW MAKER AND THE SCOPE AND PURPORT OF THE PROVISION IS APPARENT WHILE CONSIDERING THE QUESTION OF REGISTRATION. [PARA 45] THE TRIBUNAL HAS RIGHTLY FOUND THAT THE OBJECTS SHOW THAT NONE OF THE OBJECTS WERE AGAINST PUBLIC POLICY AND THE MAIN ACTIVITY OF THE SAID SOCIETY WAS TO PROVIDE EDUCATION TO CHILDREN FROM PRIMARY SECTION TO DEGREE LEVEL AND TO IMPROVE THE MENTAL, : - 10 - : SOCIAL AND OTHER DEVELOPMENT OF THE STUDENTS. [PARA 47] A PROVISION HAS ALSO BEEN MADE WITH RESPECT TO UNDER - PRIVILEGED CHILDREN PROVIDING FOR THEIR PROTECTION AND REHABILITATION AND ALSO PHYSICAL DEVELOPMENT THROUGH EXERCISE AND SPORTS, BESIDES PROVIDING LIBRARY AND READING ROOM FOR THE DEVELOPMENT OF THE STUDENTS. THE OBJECTS, THEREFORE, CANNOT BE SAID TO BE THE OBJECTS, WHICH RUN AGAINST PUBLIC POLICY OR DO NOT FALL WITHIN THE CATEGORY OF ACTIVITIES, WHICH ARE FOR CHARITABLE PURPOSES. EDUCATION IN ITSELF IS A CHARI TABLE PURPOSE AND ACTIVITIES RELATED THERETO, WHICH INCLUDE, BOTH PHYSICAL AND MENTAL DEVELOPMENT AND ALSO INSTILLING OF A FEELING OF SELF - CONFIDENCE THROUGH EXERCISE, SPORTS AND EXTENSIVE READING OF GOOD BOOKS, CANNOT, IN ANY MANNER, BE DESCRIBED AS A NON - CHARITABLE PURPOSE OR MUCH LESS A NON - EDUCATIONAL ACTIVITY. EDUCATION A MEANS AND INCLUDES NOT ONLY KNOWLEDGE OF TEXT BOOKS OR PRESCRIBED EDUCATIONAL COURSES BUT OVERALL DEVELOPMENT OF THE CHILD, WHICH INCLUDES PERSONALITY DEVELOPMENT AND HIS PHYSICAL FIT NESS, APART FROM HIS CAPACITY TO ANALYSE THINGS AND REACH TO LOGICAL CONCLUSION ON A GIVEN ISSUE. SCHOOLS MAY, FOR THE PURPOSE, ORGANIZE VARIOUS CULTURAL AND EDUCATIONAL ENTERTAINMENT PROGRAMMES, SPORTS MEET, DEBATES AND SEMINARS ETC. AND ALL SUCH ACTIVITI ES SHALL FORM PART OF EDUCATION. [ PARA 48] THUS THE OBJECTS OF THE SOCIETY WERE WELL IN CONSONANCE WITH THE SCHEME OF THE ACT. [ PARA 49] THE PURCHASE OF BOOKS WORTH RS. 1 LAKH IN THE NAME OF NCK HAS BEEN FOUND TO BE SHADY, FIRSTLY BECAUSE THESE BOOKS WERE OF A VERY HIGH STANDARD, NOT MEANT FOR THE STUDENTS UP TO XII CLASS AND SECONDLY THEY WERE PURCHASED IN THE NAME OF NCK, WHICH IS A SEPARATE SOCIETY. [PARA 52] THE TRIBUNAL HAS RIGHTLY FOUND THAT NCK IS A SOCIETY, WHICH HAS BEEN FORMED FOR MAINTAINING THE LIBRARY FOR THE BENEFIT OF THE STUDENTS, BEING RUN BY THE ASSESSEE SOCIETY AND IF THE BOOKS OF HIGH STANDARD HAVE BEEN : - 11 - : PURCHASED, IT CANNOT BE PRESUMED THAT NO PURCHASE WAS MADE NOR IT IS THE CASE OF THE REVENUE THAT BOOKS WORTH THE AMOUNT WERE NOT PURCHAS ED OR THE PAYMENTS WERE NOT MADE. IT HAS ALSO NOT BEEN DISPUTED BY THE REVENUE THAT NCK, A SOCIETY WHICH HAS BEEN FORMED ONLY FOR RUNNING THE LIBRARY FOR THE INSTITUTION, IS NOT RUNNING THE LIBRARY. [PARA 53] THE PLEA OF THE REVENUE THAT SOME FUNDS HAVE BE EN GIVEN TO NAV CHETNA KENDRA, WHICH CASTS DOUBT ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE ASSESSEE INSTITUTION, IS ALSO OF NO SUBSTANCE, AS ADMITTEDLY THE OBJECT OF THE NAV CHETNA KENDRA SOCIETY, IS NOT AGAINST ANY PUBLIC POLICY AND IT HAS ALSO BEEN BROUGHT ON RECORD THAT THE AMOUNT ADVANCED BY THE ASSESSEE TO THE NAV CHETNA KENDRA WAS NOT FOR ANY OTHER OBJECT, EXCEPT THAT MENTIONED IN THE OBJECTS OF THAT SOCIETY. THERE IS NOTHING ON RECORD TO SHOW THAT MONEY SO ADVANCED WAS FOR PERSONAL BENEFIT OF AN Y OFFICE BEARERS OF THE ASSESSEE SOCIETY OR ANY OTHER PERSON. IT NOT BEING IN DISPUTE THAT NCK SOCIETY RUNS THE LIBRARY OF THE INSTITUTION, AN OBJECT RELATED TO CHARITABLE PURPOSE, WHERE THE MONEY HAS BEEN ADVANCED BY THE ASSESSEE SOCIETY IN FURTHERANCE OF THE SAID OBJECT, I.E. FOR RUNNING A LIBRARY, WHICH IS AGAIN AN EDUCATIONAL PURPOSE, IT CANNOT BE A GROUND FOR REFUSING REGISTRATION OF THE ASSESSEE SOCIETY. [PARA 54] THERE IS NO FINDING THAT THE AFORESAID ACTIVITIES OF THE SOCIETY WERE NOT GENUINE. THE T RIBUNAL HAS ALSO CONSIDERED THAT THE BALANCE SHEET COULD NOT BE RECONCILED AS EARLIER THE BALANCE SHEET WAS NOT AUDITED AND THE AUDITED BALANCE SHEETS, WHICH WERE FILED BEFORE THE CIT, DID NOT SHOW ANY DISCREPANCY. [PARAS 55 & 56] SO FAR THE NON - DEDUCTION OF PROVIDENT FUND FROM THE SALARY PAID TO CERTAIN EMPLOYEES IS CONCERNED, THAT IN ITSELF AGAIN WOULD NOT CONSTITUTE A GROUND FOR REJECTION, AS NO SUCH REQUIREMENT STANDS SPELT OUT FROM PROVISIONS OF SECTION 12AA NOR IT MAKES THE ACTIVITIES OF THE INSTITUTI ON AS NON - : - 12 - : GENUINE. IN CASE THE INSTITUTION HAS DEFAULTED OR DEFAULTS IN THE MATTER OF DEPOSING, CONTRIBUTIONS OF THE EMPLOYEES PROVIDENT FUND, THE ACT CONCERNED SHALL TAKE CARE OF SUCH DEFAULT BUT IN NO CASE IT CAN BE A GROUND FOR REFUSAL OF REGISTRATION. [PARA 57] SO FAR THE CHARGE OF FEE IS CONCERNED, IT WAS ON RECORD THAT THE FEE WAS BEING CHARGED, WHICH WAS PREVAILING IN OTHER SCHOOLS AND TUITION FEE ETC. RANGED FROM RS.225 TO RS.700, EXCLUDING CONVEYANCE ALLOWANCE, WHICH CANNOT BE SAID TO BE ARBITRARY AND EXCESSIVE. [PARA 59] THE OBJECTS OF THE ASSESSEE SOCIETY UNDOUBTEDLY ARE FOR CHARITABLE PURPOSES AND NOT AGAINST PUBLIC POLICY. THE GENUINENESS OF ITS ACTIVITIES IS PROVED BY THE AFORESAID FACTS, WHICH CONCLUSIVELY SHOW THAT THE SOCIETY HAS ESTABLISHED A SCHOOL FOR THE CHILDREN IN THE YEAR 1982 AND THEREAFTER IT HAS OPENED ITS TWO MORE BRANCHES RAISING THE STANDARD OF THE SCHOOL UP TO CBSE, DELHI BOARD AND SUBSEQUENTLY UP TO CLASS XII, WITH A LARGE NUMBER OF STUDENTS AND SUFFICIENT STAFF TO WHOM SALARY IS BEING PAID. [PARA 16] THE ACTIVITIES AFORESAID CANNOT BE DOUBTED NOR CAN BE SAID TO BE NON - GENUINE WITHIN THE MEANING OF THE PROVISIONS OF SECTION 12AA. [PARA 61] THE SCHEME OF SECTION 12A AND SECTION 12AA DOES NOT ALLOW ANY PERSON/TRUST OR INSTITUTION TO TAKE BENEFIT OF THE PROVISIONS OF SECTION 11, SECTION 12, AS THE CASE MAY BE, UNLESS REGISTRATION UNDER SECTION 12AA IS OBTAINED AND THAT SUB - CLAUSE (3) OF SECTION 12AA PUTS COMPLETE CONTROL OVER THE ACTIVITIES OF THE TRUST OR THE INSTITUTION AND IF IT IS FOUND AT ANY SUBSEQUENT STAGE, THAT ITS ACTIVITIES ARE NOT BEING CARRIED AS PER THE OBJECTS OR THEY DO NOT REMAIN GENUINE, ACTION FOR CANCELLATION OF REGISTRATION CAN BE TAKEN. [PARA 62] FOR THE REASONS STATED ABOVE, THERE IS NO ILLEGALITY OR INFIRMITY IN THE ORDER PASSED BY THE TRIBUNAL. [PARA 63] : - 13 - : 9 . SIMILAR VIEWS WERE EXPRESSED BY HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUST V. UNION OF INDIA AND OTHERS (SUPRA). WHILE DEALING WITH THE ISSUE OF WITHDRAWAL O F EXEMPTION UNDER SECTION 10(22) OF THE ACT, THEIR LORDSHIPS HAVE HELD THAT AS LONG AS AN INSTITUTION EXISTS SOLELY FOR EDUCATIONAL PURPOSES, IT WOULD QUALIFY FOR GRANT OF EXEMPTION UNDER SECTION 10(23C) (VI) OF THE ACT . M ERELY BECAUSE THE PROFITS HAVE RE SULTED FROM THE ACTIVITY OF IMPARTING EDUCATION THAT WOULD NOT CHANGE THE CHARACTER OF THE INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSE. 10 . AGAIN IN THE CASE OF CITY MONTESSORI SCHOOL V. UNION OF INDIA AND OTHERS (SUPRA), THEIR LORDSHIPS OF HON'BLE JUR ISDICTIONAL HIGH COURT HAVE HELD THAT THE WORD EDUCATION USED IN SECTION 2(15) OF THE ACT MEANS SYSTEMATIC INSTRUCTION, SCHOOLING OR TRAINING GIVEN TO THE YOUNG IN PREPARATION FOR THE WORK OF LIFE. SIMILARLY, EXTENDING FINANCIAL ASSISTANCE, SCHOLARSHIP, ETC., TO STUDENTS FOR THEIR EDUCATIONAL PURPOSE WOULD FALL WITHIN THE CONNOTATION OF EDUCATION. 11 . IN THE CASE OF VANITA VISHRAM TRUST V. CCIT (SUPRA), THEIR LORDSHIPS OF HON'BLE BOMBAY HIGH COURT HAVE OBSERVED WHILE DEALING WITH THE ISSUE OF REJECTION OF APPROVAL UNDER SECTION 10(23C) OF THE ACT THAT THOUGH THE MEMORANDUM OF ASSOCIATION CONTAINS VARIED OBJECTS , SO LONG AS THE RECORD DEMONSTRATES THAT THE ASSESSEE ONLY CONDUCTS EDUCATIONAL INSTITUTIONS, IT MUST BE REGARDED AS EXISTING SOLELY FOR THE PURPOSE OF EDUCATION. NO OTHER ACTIVITY IS CARRIED ON. SECONDLY THE FACT THAT A SURPLUS MAY INCIDENTALLY ARISE FROM THE ACTIVITIES OF THE TRUST AFTER MEETING THE EXPENDITURE INCURRED FOR CONDUCTING EDUCATIONAL ACTIVITIES WOULD NOT DISENTITLE THE TRUST OF THE BE NEFIT OF THE PROVISIONS OF SECTION 10 (23C) OF THE ACT. : - 14 - : 12 . AN IDENTICAL ISSUE CAME UP FOR CONSIDER ATION BEFORE THE LUCKNOW BENCH OF THE APPELLATE TRIBUNAL IN THE CASE OF RAEBAREILY POLYTECHNIC ASSOCIATION V. CIT (SUPRA) IN WHICH SUBSTANTIAL SURPLUS AMOUNT/PRO FIT WAS GENERATED IN TWO FINANCIAL YEARS I.E. 2004 - 05 AND 2005 - 06 AT ` 10,88,741 AND ` 12,09,095 RESPECTIVELY. THE REGISTRATION UNDER SECTION 12A OF THE ACT WAS DENIED BY THE LD. COMMISSIONER OF INCOME - TAX AFTER HAVING OBSERVED THAT THE ASSESSEE - SOCIETY IS BEING RUN ON COMMERCIAL LINE FOR THE PURPOSE OF PROFIT WITHOUT THERE BEING ANY BASIS TO HOLD SO OR THERE BEING ANY MATERIAL OR INFORMATION ON RECORD THAT THE APPELLANT IS NOT CARRYING OUT ANY CHARITABLE ACTIVITY. WHILE DEALING WITH THE ISSUE, THE TRIBUNAL HAS DISCUSSED THE SCOPE OF ENQUIRY AT THE TIME OF REGISTRATION UNDER SECTION 12A OF THE ACT AND FINALLY CONCLUDED THAT THE PRESENCE OF PROFIT IN THE FINANCIAL STATEMENT REFERRED TO BY THE LD. COMMISSIONER OF INCOME - TAX IS NOT A DISQUALIFICATION FOR THE PU RPOSE OF GRANTING REGISTRATION UNDER SECTION 12A OF THE ACT. THE TRIBUNAL ACCORDINGLY DIRECTED THE LD. COMMISSIONER OF INCOME - TAX TO ISSUE A FORMAL CERTIFICATE GRANTING REGISTRATION UNDER SECTION 12AA OF THE ACT AS REQUESTED FOR BY THE ASSESSEE. THE RELE VANT OBSERVATIONS OF THE TRIBUNAL MENTIONED IN THE HEAD NOTE ARE EXTRACTED HEREUNDER: - REGISTRATION UNDER SECTION 12A. SCOPE OF ENQUIRY BY CIT -- A PLAIN READING OF SECTION 12A GOES TO SHOW THAT, AT THE TIME OF GRANTING REGISTRATION WHAT THE CIT IS REQUI RED TO EXAMINE IS AS TO WHETHER THE OBJECTS OF THE APPLICANT ARE OF CHARITABLE NATURE OR NOT, I.E., AS TO WHETHER THE OBJECTS ARE COVERED BY THE DEFINITION OF CHARITABLE PURPOSES AS GIVEN IN SECTION 2(15) OR NOT, AND SECONDLY THAT THE ACTIVITIES BEING CARR IED ON OR ARE TO BE CARRIED ON ARE GENUINE, I.E., ARE FOR ACHIEVING THE OBJECTS, FOR WHICH HE CAN MAKE ENQUIRIES, AS ARE NECESSARY. HOWEVER, HIS DISCRETION TO MAKE SUCH ENQUIRIES AS HE MAY DEEM NECESSARY IS ALSO LIMITED TO SATISFY HIMSELF ABOUT THE : - 15 - : GENUINE NESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTIONAL, AS STANDS CLARIFIED BY THE PHRASE IN THIS BEHALF APPEARING IN THE SAID CLAUSE ITSELF. PRESENCE OF SURPLUS AS A RESULT OF SUCH ACTIVITIES AND WHETHER EXEMPTION UNDER SECTION 11 CAN BECOME AVAILABLE TO SU CH SURPLUS, ARE THE SUBJECT - MATTER OF ASSESSMENT, I.E., IT IS THE AO WHO IS REQUIRED TO EXAMINE AT THE TIME OF MAKING ASSESSMENT SUCH ISSUES. THE CIT, AT THE TIME OF GRANTING REGISTRATION UNDER SECTION 12A, IS NOT REQUIRED TO GO INTO THESE ASPECTS. SO FAR AS THE ISSUE RELATING TO ONE HAVING INCOME OR SURPLUS IS CONCERNED, THE PROVISION ITSELF ENVISAGES THE AVAILABILITY OF THE INCOME/SURPLUS OTHERWISE, THE PROVISIONS OF SECTIONS 11, 12 AND 13 BECOME REDUNDANT. THE ONLY EXCEPTION IS THAT SUCH INCOME/SURPLUS M UST BE APPLIED, EITHER IN THAT VERY YEAR OR IN SUBSEQUENT YEAR, FOR CHARITABLE PURPOSES. THUS, PRESENCE OF INCOME IN THE CASE OF AN INSTITUTION EXISTING FOR CHARITABLE PURPOSES (EDUCATION INCLUDED THEREIN) IS ENVISAGED BY THE LEGISLATION AND TO GRANT EXEMP TION OF SUCH INCOME FROM TAXATION, THE LEGISLATURE ITSELF HAS PROVIDED AN ELABORATE CODE AS HAS BEEN LAID DOWN IN SECTION 11 AND RULES MADE THEREUNDER. IN CASE PRESENCE OF INCOME IN A PARTICULAR YEAR IS TREATED AS DISQUALIFICATION FOR THE PURPOSES OF REGIS TRATION UNDER SECTION 12A, THE PROVISION OF SECTION 11 GRANTING EXEMPTION OF INCOME SHALL BE RENDERED AS OTIOSE, WHICH IS NOT THE INTENTION OF LAW. ACCORDINGLY, PRESENCE OF PROFIT IN THE FINANCIAL STATEMENTS REFERRED TO BY THE CIT IS NOT A DISQUALIFICATION FOR THE PURPOSES OF GRANTING REGISTRATION UNDER SECTION 12A. THE VIEW TO THE CONTRARY IS LIABLE TO BE REJECTED AND, THEREFORE, REJECTION OF ASSESSEES CLAIM OF REGISTRATION ON THIS GRO UND WAS ILLEGAL AND BAD IN LAW. : - 16 - : REASON WHICH IS BASED ON FACT OF THERE BEING HUGE PROFIT IS ABSOLUTELY IRRELEVANT FOR THE PURPOSES OF DECIDING THE APPELLANTS CLAIM FOR REGISTRATION UNDER SECTION 12A. A PLAIN READING (SIC - OF) TO SECTION 12A GOES TO SHOW THAT, AT THE TIME OF GRANTING REGISTRATION WHAT THE CIT IS REQUIRED TO EXAMINE IS AS TO WHETHER THE OBJECTS OF THE APPLICANT ARE OF CHARITABLE NATURE OR NOT, I.E., AS TO WHETHER THE OBJECTS ARE COVERED BY THE DEFINITION OF CHARITABLE PURPOSES AS GIVEN IN SECTION 2(15) OR NOT AND SECONDLY THAT THE ACTIVITIES BEING CARRIED ON O R ARE TO BE CARRIED ON ARE GENUINE, I.E., ARE FOR ACHIEVING THE OBJECTS, FOR WHICH HE CAN MAKE ENQUIRIES, AS ARE NECESSARY. HOWEVER, HIS DISCRETION TO MAKE SUCH ENQUIRIES AS HE MAY DEEM NECESSARY IS ALSO LIMITED TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION, AS STANDS CLARIFIED BY THE PHRASE IN THIS BEHALF APPEARING IN THE SAID CLAUSE ITSELF. PRESENCE OF SURPLUS AS A RESULT OF SUCH ACTIVITIES AND WHETHER EXEMPTION UNDER SECTION 11 CAN BECOME AVAILABLE TO SUCH SURPLUS , ARE THE SUBJECT - MATTER OF ASSESSMENT, I.E., IT IS THE AO WHO IS REQUIRED TO EXAMINE AT THE TIME OF MAKING ASSESSMENT SUCH ISSUES. THE CIT AT THE TIME OF GRANTING REGISTRATION UNDER SECTION 12A, IS NOT REQUIRED TO GO INTO THESE ASPECTS, [PARA 8.4] SO FAR AS THE ISSUE RELATING TO ONE HAVING INCOME OR SURPLUS IS CONCERNED, THE PROVISION ITSELF ENVISAGES THE AVAILABILITY OF THE INCOME/SURPLUS OTHERWISE, THE PROVISIONS OF SECTIONS 11,12 AND 13 BECOME REDUNDANT. THE ONLY EXCEPTION IS THAT SUCH INCOME/SURPLUS MU ST BE APPLIED, EITHER IN THAT VERY YEAR OR IN SUBSEQUENT YEAR, FOR CHARITABLE PURPOSES. [PARA 8.7] THUS, PRESENCE OF INCOME IN THE CASE OF AN INSTITUTION EXISTING FOR CHARITABLE PURPOSES (EDUCATION INCLUDED THEREIN) IS ENVISAGED BY THE LEGISLATION AND TO G RANT EXEMPTION OF SUCH INCOME FROM TAXATION, THE LEGISLATURE ITSELF HAS PROVIDED AN ELABORATE CODE AS HAS BEEN LAID DOWN IN SECTION 11 : - 17 - : AND RULES MADE THEREUNDER. [PARA 8.8] IF SUCH AN INCOME CAN BE TREATED AS EXEMPT UNDER SECTION 11, THEN IT CANNOT BE HELD TO BE DISQUALIFICATION FOR THE PURPOSES OF REGISTRATION UNDER SECTION 12A, WHICH HAS BEEN BROUGHT ON THE STATUTE BOOK SIMPLY FOR LAYING DOWN A PROCEDURE FOR CLAIMING SUCH AN EXEMPTION, AND VIEW EXPRESSED BY THE CIT AND SOUGHT TO BE SUPPORTED BY THE DEPART MENTAL REPRESENTATIVE, IS WHOLLY FALLACIOUS AT THE VERY FACE OF IT. IN CASE PRESENCE OF INCOME IN A PARTICULAR YEAR IS TREATED AS DISQUALIFICATION FOR THE PURPOSES OF REGISTRATION UNDER SECTION 12A, THE PROVISION OF SECTION 11 GRANTING EXEMPTION OF INCOME SHALL BE RENDERED AS OTIOSE, WHICH IS NOT THE INTENTION OF LAW. FURTHER, THE TEN WORDS READING AS NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT OCCURRING AT THE END OF SECTION 2 (15) HAD BEEN OMITTED BY THE FINANCE ACT, 1983 WITH EFFECT FROM 1 - 4 - 1984 AND SUCH AN OMISSION, CONTINUES TO REMAIN SO OMITTED (AS PROVISO BELOW SECTION 2(15) BY THE FINANCE ACT, 2008 ALSO DOES NOT COVER EDUCATION OR ACTIVITIES CONNECTED WITH THE EDUCATION. THIS ANALYSIS ITSELF GOES TO NULLIFY THE VIEW TAKEN BY THE CIT IN THE ORDER UNDER CHALLENGE. ACCORDINGLY, PRESENCE OF PROFIT IN THE FINANCIAL STATEMENTS REFERRED TO BY THE CIT IS NOT A DISQUALIFICATION FOR THE PURPOSES OF GRANTING REGISTRATION UNDER SECTION 12A. THE VIEW TO THE CONTRARY IS LIABLE TO BE REJECTED AND, THER EFORE, REJECTION OF ASSESSEES CLAIM OF REGISTRATION ON THIS GROUND WAS ILLEGAL AND BAD IN LAW. [PARA 8.9] IT IS CLEAR THAT THERE IS A JUDICIAL CONSENSUS TO THE EFFECT THAT AN EDUCATIONAL INSTITUTION CANNOT BE SAID TO BE EXISTING FOR THE PURPOSES OF PROFIT IF SURPLUS EARNED BY IT FROM EDUCATIONAL AND OTHER RELATED ACTIVITIES HAS BEEN UTILISED FOR THE PURPOSES OF EDUCATIONAL ACTIVITIES ONLY. [PARA 8.11] ALTHOUGH THERE WAS HUGE SURPLUS (SO TO SAY) FOR THE YEARS ENDING ON 31 - 3 - 2005 AND 31 - 3 - 2006, THE SAME HAS BEEN APPLIED IN CREATING NECESSARY : - 18 - : INFRASTRUCTURE DURING THE SUBSEQUENT YEARS ENDING ON 31 - 3 - 2007 AND 31 - 3 - 2008 AS IS CLEAR THAT INVESTMENT ON BUILDING ALONE MEANT FOR EDUCATIONAL PURPOSES DURING SUBSEQUENT YEARS HAS BEEN CLAIMED TO BE AS UNDER: FINANCIAL YEAR 2006 - 07 RS. 2,02,46,637; FINANCIAL YEAR 2007 - 08 RS. 1,11,87,490. [PARA 8.12] THE CIT IS DIRECTED TO ISSUE A FORMAL CERTIFICATE GRANTING REGISTRATION UNDER SECTION 12AA AS REQUESTED FOR BY THE ASSESSEE SUBJECT, HOWEVER, TO THAT AS A RESULT OF AMENDMENT MADE IN CLAUSE (A) OF SUB SECTION (1) OF SECTION 112A BY THE FINANCE ACT, 2007 WITH EFFECT FROM 1 - 6 - 2007, AS A RESULT OF WHICH THE CIT,S POWER TO CONDONE THE DELAY BEYOND THE FIRST DAY OF THE FINANCIAL YEAR IN WHICH THE APPLICATION HAS BEEN MADE, HAS BEEN TAKEN AWAY, THE PRESENT ASSESSEE IS ENTITLED TO REGISTRATION ONLY WITH EFFECT FROM 1 - 4 - 2008 (APPLICATION OF REGISTRATION IS TOLD TO HAVE BEEN FILED ONLY ON 26 - 12 - 2008). CONSEQUENTLY, THE CERTIFICATE TO BE ISSUED BY THE CIT WILL HAVE EFFECT OF REGISTRATION ONLY WITH EFFECT FROM 1 - 4 - 2008. [PARA 8.13] 13 . SIMILAR VIEW WAS AGAIN EXPRESSED BY THE LUCKNOW BENCH OF THE APPELLATE TRIBUNAL IN THE CASE OF DR. VIRENDRA SWARUP EDUCATIONAL FOUNDATION V. CIT (SUPRA) WHILE DEALING WITH AN ISSUE OF DENIAL OF APPROVAL UNDER SECTION 80G(5) OF THE ACT AND THE TRIBUNAL AGAIN REITERATED THAT GENERATION OF SURPLUS OR PROFIT ON VARIOUS EDUCATIONAL ACTIVITIES CANNOT BE A GROUND FOR DENIAL OF APPROVAL UNDER SECTION 80G(5) OF THE ACT. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXT RACTED HEREUNDER: - RECOGNITION UNDER SECTION 80 G(5) -- CHARITABLE PURPOSE OF EDUCATION VIS - A - VIS PROFIT MOTIVE THE ASSESSEE - SOCIETY WAS CARRYING ON THE ACTIVITY OF RUNNING VARIOUS EDUCATIONAL INSTITUTIONS. ASSESSEE HAD BEEN GRANTED REGISTRATION UNDER SECTI ON 12A AND WAS ALSO GRANTED : - 19 - : EXEMPTION UNDER SECTION 80G FROM 1 - 4 - 2007 TO 31 - 3 - 2009, FOR THE ASSESSMENT YEAR 2010 - 11, CIT DENIED THE APPROVAL UNDER SECTION 80G(5) TO ASSESSEE FOR THE REASON THAT THERE WAS HUGE SURPLUS AVAILABLE WITH ASSESSEE AND A COMMERCIA L INSTITUTION. ON THE OTHER HAND, AO IN THE ASSESSMENT ORDERS FOR THE ASSESSMENT YEARS 2005 - 06 TO 2007 - 08 PASSED UNDER SECTION 143(3) CLEARLY STATED THAT THE SURPLUS WAS NIL AFTER CONSIDERING THE PROVISIONS OF SECTIONS 11 AND 11(2). IT HAD CATEGORICALLY BE EN STATED IN THE SAID ASSESSMENT ORDERS THAT THE INCOME APPLIED WAS MORE THAN 85 PER CENT OF THE GROSS RECEIPTS AS PER THE PROVISIONS OF THE ACT. AS SUCH THE ASSESSMENT WAS COMPLETED ON NIL INCOME, THEREFORE, THIS CANNOT BE A GROUND TO DENY THE EXEMPTION U NDER SECTION 80G THAT ASSESSEE WAS HAVING SURPLUS. FURTHERMORE, THE APPROVAL FOR EXEMPTION UNDER SECTION 80G(5) WAS GRANTED TO ASSESSEE UPTO 31 - 3 - 2009, HOWEVER WITHOUT BRINGING ANY MATERIAL ON RECORD THAT THERE WAS A CHANGE IN THE FACTS FOR THE YEAR UNDER CONSIDERATION VIS - A - VIS THE EARLIER YEARS, THE APPROVAL FOR THE YEAR UNDER CONSIDERATION UNDER SECTION 80G(5) HAD BEEN DENIED. IN THE INSTANT CASE NOTHING WAS BROUGHT ON RECORD THAT THE EDUCATION IN THE INSTITUTES RUN BY ASSESSEE WAS ON COMMERCIAL LINES. T HEREFORE, MERELY ON THIS BASIS THAT THERE WAS A SURPLUS, WHICH WAS UTILIZED AS PER THE PROVISIONS CONTAINED IN SECTION 11 APPROVAL UNDER SECTION 80G(5) CANNOT BE DENIED. CONSIDERING THE TOTALITY OF THE FACTS ASSESSEE WAS ENTITLED TO RENEWAL OF APPROVAL UND ER SECTION 80G. THE CIT DENIED THE APPROVAL UNDER SECTION 80G(5) TO THE ASSESSEE FOR THE REASON THAT THERE WAS HUGE SURPLUS AVAILABLE WITH THE ASSESSEE. ON THE OTHER HAND, THE AO IN THE ASSESSMENT ORDERS FOR THE ASSESSMENT YEARS 2005 - 06 TO 2007 - 08 PASSED U NDER SECTION 143(3) CLEARLY STATED THAT THE SURPLUS WAS NIL AFTER CONSIDERING THE : - 20 - : PROVISIONS OF SECTION 11 AND 11(2). IT HAD CATEGORICALLY BEEN STATED IN THE SAID ASSESSMENT ORDERS THAT THE INCOME APPLIED WAS MORE THAN 85 PER CENT OF THE GROSS RECEIPTS AS PER THE PROVISIONS OF THE ACT. AS SUCH THE ASSESSMENT WAS COMPLETED ON NIL INCOME, THEREFORE, THIS CANNOT BE A GROUND TO DENY THE EXEMPTION UNDER SECTION 80G THAT THE ASSESSEE WAS HAVING SURPLUS. FURTHERMORE, THE APPROVAL FOR EXEMPTION UNDER SECTION 80G(5 ) WAS GRANTED TO THE ASSESSEE UP TO 31 - 3 - 2009, HOWEVER WITHOUT BRINGING ANY MATERIAL ON RECORD THAT THERE WAS A CHANGE IN THE FACTS FOR THE YEAR UNDER CONSIDERATION VIS - A - VIS THE EARLIER YEARS THE APPROVAL FOR THE YEAR UNDER CONSIDERATION UNDER SECTION 80G (5) HAD BEEN DENIED. IF THERE IS NO MATERIAL CHANGE IN THE FACTS IN THE YEAR UNDER CONSIDERATION VIS - A - VIS THE EARLIER YEARS, THEN KEEPING IN VIEW THE PRINCIPLE OF CONSISTENCY, THE ASSESSEE WAS ELIGIBLE FOR APPROVAL OF REGISTRATION UNDER SECTION 80G. IN TH E INSTANT CASE NOTHING IS BROUGHT ON RECORD TO SUBSTANTIATE THAT THE ASSESSEE RECEIVED ANY CAPITATION FEES FROM THE STUDENTS AND DONATION FROM ANYONE OR HEFTY AMOUNT WAS RECEIVED FROM THE STUDENTS ON ACCOUNT OF FEES/FUNDS. THEREFORE, MERELY ON THIS BASIS T HAT THE ASSESSEE WAS HAVING SURPLUS, THE APPROVAL UNDER SECTION 80G CANNOT BE DENIED PARTICULARLY WHEN THE ASSESSEE WAS HAVING SIMILAR SURPLUS IN THE EARLIER YEARS, I.E., PRIOR TO 31 - 3 - 2009 FOR WHICH THE APPROVAL FOR EXEMPTION UNDER SECTION 80G HAS BEEN GR ANTED TO THE ASSESSEE. [PARA 6] IN THE INSTANT CASE NOTHING IS BROUGHT ON RECORD THAT THE EDUCATION IN THE INSTITUTES RUN BY THE ASSESSEE WAS ON COMMERCIAL LINES. THEREFORE, MERELY ON THIS BASIS THAT THERE WAS A SURPLUS, WHICH WAS UTILIZED AS PER THE PROVI SIONS CONTAINED IN SECTION 11 APPROVAL UNDER SECTION 80G(5) OF THE FACTS AS DISCUSSED HEREINABOVE, THE ASSESSEE WAS ENTITLED TO RENEWAL OF APPROVAL UNDER SECTION 80G. IN THAT VIEW OF THE MATTER , THE IMPUGNED ORDER OF THE CIT IS SET ASIDE : - 21 - : AND HE IS DIRECTED TO GRANT THE APPROVAL UNDER SECTION 80G (5). [PARA 6.2] 14 . HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. GAUR BRAHMIN VIDYA PRACHARINI SABHA (SUPRA) IN INCOME TAX APPEAL NO.759 OF 2010 VIDE ITS JUDGMENT DATED 3.10.2011 HAS CATEGORICALLY HELD TH AT MERE MAKING OF PROFIT CANNOT BE A GROUND TO DENY REGISTRATION ONCE THE OBJECTS OF THE SOCIETY ARE OF CHARITABLE NATURE AND ESPECIALLY IN THE PRESENT CASE WHERE FIVE EDUCATIONAL INSTITUTIONS ARE BEING RUN BY THE RESPONDENT WHICH IS REGISTERED ON 29.9.198 0 UNDER THE SOCIETIES REGISTRATION ACT AND SOLELY BECAUSE THE RESPONDENT WAS CHARGING FEES AND WAS GETTING SURPLUS WOULD NOT BE THE REASON TO DENY REGISTRATION IN VIEW OF THE JUDGMENT OF THIS COURT IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUST V. UNION OF INDIA AND OTHERS (SUPRA). WHILE DEALING WITH THE ISSUE, THEIR LORDSHIPS HAVE ALSO FOLLOWED THE JUDGMENT S OF HON'BLE APEX COURT IN THE CASE OF CIT (ADDL.) V. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION [1980] 121 ITR 1 (SC) AND ADITANAR EDUCAT IONAL INSTITUTION V. ACIT [1997] 224 ITR 310 AND HELD THAT MERELY IF AN INSTITUTION IS MAKING A PROFIT IT WOULD NOT RENDER ITSELF INELIGIBLE FOR REGISTRATION UNDER THE PROVISIONS OF SECTION 10(23C)(VI) OF THE ACT. THE SAID PRINCIPLE CAN ALSO BE FULLY APPL IED TO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. MERELY BECAUSE THERE ARE SOME SURPLUS WITH THE RESPONDENT, THIS SHOULD NOT BE A GROUND TO DENY THE REGISTRATION UNDER SECTION 80G(5)(VI) OF THE ACT. 15 . SIMILAR VIEWS WERE EXPRESSED BY THE DELHI BENCH OF THE APPELLATE TRIBUNAL IN THE CASE OF ITO(E), TRUST WARD III V. DHARAMSHILA CANCER FOUNDATION AND RESEARCH CENTRE (SUPRA). 16 . SIMILAR VIEWS WERE ALSO EXPRESSED BY HON'BLE DELHI HIGH COURT IN THE CASE OF ST. LAWRENCE EDUCATIONAL SOCIETY & ANOTHER V. CIT (SU PRA) IN WRIT PETITION NO.1254/2010 VIDE ITS ORDER DATED 4.2.2011 HOLDING THEREIN : - 22 - : THAT THE CHIEF COMMISSIONER HAS ERRED IN ASSUMING THAT FOR EXEMPTION THERE SHOULD NOT BE ANY SURPLUS, OTHERWISE THE INSTITUTION SOCIETY EXISTS FOR PROFIT AND NOT CHARITY I.E. EDUCATION IN THE PRESENT CASE. 17 . TURNING TO THE FACTS OF THE PRESENT CASE, NOTHING HAS BEEN BROUGHT ON RECORD EXCEPT SURPLUS GENERATED DURING FINANCIAL YEARS 2006 - 07 TO 2008 - 09 THAT THE ASSESSEE WAS EVER ENGAGED IN THE ACTIVITIES OTHER THAN EDUCATIONAL OR TH E OBJECT S OF THE SOCIETY. SINCE IT HAS BEEN REPEATEDLY HELD BY VARIOUS HIGH COURTS AND DIFFERENT BENCHES OF THE TRIBUNAL THAT MERE GENERATION OF S URPLUS/ PROFIT IN A PARTICULAR YEAR CANNOT BE A GROUND FOR DENIAL OF REGISTRATION UNDER SECTION 12AA OF THE AC T AND ALSO GRANT OF APPROVAL FOR EXEMPTION UNDER SECTION 80G OF THE ACT , DENIAL OF REGISTRATION UNDER SECTION 12A OF THE ACT AND REFUSAL OF GRANT OF APPROVAL UNDER SECTION 80G(5) OF THE ACT BY THE LD. COMMISSIONER OF INCOME - TAX IS NOT PROPER AND WE THEREFO RE SET ASIDE THE ORDER S OF THE LD. COMMISSIONER OF INCOME - TAX AND DIRECT HIM TO GRANT REGISTRATION UNDER SECTION 12AA OF THE ACT AND APPROVAL UNDER SECTION 80G(5) OF THE ACT TO THE ASSESSEE - SOCIETY . 18 . IN THE RESULT, APPEALS OF THE ASSESSEE STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.6.2012. SD/ - SD/ - [ S. V. MEHROTRA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26.6.2012 JJ: 0606 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR