Baba Amarnath Educational Society (Regd.), Moga V. CIT-III, Ludhiana

ITA 825/CHANDI/2011

• Counselvise Citation: 82521514 RSA 2011
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 22-11-2011
• Assessment Year: misc
• Appeal Filed On: 29-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: P N ARORA
• Keywords: Charitable institution; Opportunity of being heard; Competent authority
• Section: 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 825/CHD/2011 BABA AMARNATH EDUCATIONAL V CIT-III, SOCIETY (REGD.), SATYA YOG NIWAS, LUDHIANA. GILL ROAD, MOGA. PAN: AAAAB-7523L & ITA NO. 826/CHD/2011 ACE EDUCATIONAL & V CIT-III, CHARITABLE SOCIETY (REGD.) LUDHIANA. 48/8, NEW TOWN, MOGA. PAN : AABAA-4439R (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.N.ARORA RESPONDENT BY : SMT.JAISHREE SHARMA DATE OF HEARING : 22.11.2011 DATE OF PRONOUNCEMENT : 29.12.2011 ORDER PER MEHAR SINGH, AM THE PRESENT TWO APPEAL FILED BY DIFFERENT ASSESSEE SOCIETIES ARE DIRECTED AGAINST THE SEPARATE ORDER, DATED 28.06.2011 PASSED BY THE LD. COMMISSIONER OF INCOME -TAX U/S 12AA(1)(B)(II) OF THE INCOME-TAX ACT,1961 (IN S HORT 'THE ACT'). THE FACTS OF THE APPEALS AND GROUNDS OF APP EAL ARE IDENTICAL, WE THEREFORE, FIND IT CONVENIENT TO DISP OSE OF THE SAME BY A CONSOLIDATED ORDER. 2. IN BOTH THE APPEALS, THE ASSESSEE APPELLANTS RAI SED THE FOLLOWING SIMILAR GROUNDS OF APPEAL: 1. THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX III LUDHIANA, THEREBY REFUSING TO 2 REGISTRATION OF THE SOCIETY IS ILLEGAL, INVALID AND VOID AB-INITIO AND THE SAME IS LIABLE TO BE CANCELLED. 2. THAT NO REASONABLE & PROPER OPPORTUNITY OF BEING HEARD HAS BEEN ALLOWED BEFORE REFUSING TO REGISTER THE SOCIETY. THE LD. CIT EITHER SHOULD HAVE DISCLOSED HIS MIND OR HE SHOULD HAVE ALLOWED REASONABLE OPPORTUNITY OF BEING HEARD BEFORE REFUSING TO REGISTER THE SOCIETY. AS SUCH, THE ORDER OF THE LD. CIT IS ILLEGAL AND INVALID AND IS LIABLE TO BE CANCELLED. 3. THAT THE LD. CIT DID NOT APPRECIATE THAT THE CONDITIONS LAID DOWN UNDER SECTION 12A OF THE INCOME-TAX ACT,1961 WERE DULY FULFILLED AND AS SUCH THE REGISTRATION AS CLAIMED SHOULD HAVE BEEN ALLOWED. 4. THAT THE LD. CIT DID NOT APPRECIATE THAT THE OBJECTS OF THE SOCIETY ARE AS UNDER: A) TO ESTABLISH AND PROMOTE ESTABLISHMENT OF OR TO RENDER AID TO SCHOOL, COLLEGE, EDUCATIONAL INSTITUTIONS, TECHNICAL EDUCATION INSTITUTIONS, TRAINING INSTITUTIONS IN ONE OR ALL FIELDS OF ENGINEERING RESEARCH, MEDICAL, COMMERCE, ARTS OR ANY OTHER SYSTEM OF EDUCATION. B) TO PROMOTE EDUCATION, VOCATIONAL, TECHNICAL AND OTHERWISE THE DIFFUSION OF USEFUL KNOWLEDGE, MEDICAL RELIEF, INDUSTRIAL TRAINING INCLUDING ALL ASPECTS OF RURAL RECONSTRUCTION AND SOCIAL WELFARE PROJECTS IRRESPECTIVE OF RACE, CASTE, COMMUNITY OR CREED. C) TO ENGAGE IN SOCIAL WELFARE ACTIVITIES AIMED AT IMPROVING LIVING CONDITIONS AND GENERAL WELFARE OF THE POOR AND INDIGENT PERSONS OF WHAT SO EVER OCCUPATION, IRRESPECTIVE OF RACE, CASTE, COMMUNITY OR CREED. 3 AND THERE IS NO VIOLATION OF THE OBJECTS OF THE SOCIETY AND THE SOCIETY ULTIMATELY PURCHASED THE LAND AND STARTED CONSTRUCTION FOR THE OBJECTS FOR WHICH IT WAS CREATED. 5. THAT THE LD. CIT DID NOT APPRECIATE THAT THERE WAS NO VIOLATION OF ANY PROVISIONS OF THE SOCIETY AS NO NON-CHARITABLE PURPOSE WAS CARRIED ON DURING THE YEAR UNDER CONSIDERATION AND THE LD. CIT HAS NOT APPRECIATED THAT THE SOCIETY STARTED THE EDUCATIONAL INSTITUTION AND IT WAS CARRIED ON IN THE SUBSEQUENT YEAR. AS SUCH THE REGISTRATION AS CLAIMED SHOULD HAVE BEEN ALLOWED BY THE LD. CIT AND THE ORDER OF THE LD CIT DESERVES TO BE CANCELLED AND THE REGISTRATION MAY KINDLY BE GRANTED. 6. THAT THE LD. CIT DID NOT APPRECIATE THAT THE SOCIETY IS DULY REGISTERED WITH THE ADDL.REGISTRAR OF SOCIETIES AND IT FULFILLED ALL TH E CONDITIONS LAID DOWN UNDER SECTION 12A OF THE INCOME-TAX ACT,1961 AND THERE WAS NO JUSTIFICATION IN REFUSING TO REGISTER THE SOCIETY. 7. THAT THE TRUST WAS CREATED FOR THE CHARITABLE PURPOSES AND EVEN FOR CLAUSE NO.(T) OF THE OBJECTS CLAUSE THERE WAS NO VIOLATION OF ANY PROVISION WITHIN THE MEANING OF SECTION 2(15) OF THE INCOME-TAX ACT,1961. 8. THAT THE LD. CIT DID NOT APPRECIATE, THAT THE AMENDMENT MADE WAS CLEARLY APPLICABLE RETROSPECTIVELY AND AS SUCH REGISTRATION TO THE SOCIETY SHOULD HAVE BEEN ALLOWED. 9. THAT THE LD. CIT DID NOT APPRECIATE, THAT THE VOLUNTARY CONTRIBUTIONS FORMING PART OF THE CORPUS OF THE SOCIETY ARE NOT TAXABLE AS PER INCOME TAX LAW AND AS SUCH REGISTRATION OF THE SOCIETY SHOULD BE ALLOWED AS CLAIMED. 4 10. ANY OTHER GROUND OF APPEAL WHICH MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL. 3. LD. 'AR' SUBMITTED THAT THE SUBMISSIONS MADE BEF ORE THE BENCH ARE APPLICABLE TO BOTH THE APPEALS. IN TH E COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. 'AR' CONTENDE D THAT THE REAL ACTIVITIES UNDERTAKEN BY THE APPELLANT, INTEND ED TO ACHIEVE THE PRIMARY OBJECT OF THE SOCIETIES AND THE SAME IS COVERED BY THE DEFINITION OF CHARITABLE PURPOSE A S PROVIDED U/S 2(15) OF THE ACT. HE VEHEMENTLY CONTENDED THAT THE PROVISO ADDED TO SECTION 2(15) OF THE ACT, BY FINAN CE ACT, 2008 W.E.F. 01.04.2009, IS NOT APPLICABLE TO THE FIRST THREE LIMBS OF THE CHARITABLE PURPOSE ENUMERATED IN THE SAID DEFINITION. HE, FURTHER, CONTENDED THAT A FURTHER PROVISO INSERTED BELOW SECTION 2(15) OF THE ACT, SU PPORTS HIS CASE. THE SAID PROVISO MANDATES THAT THE FIRST PROV ISO SHALL NOT APPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FR OM THE ACTIVITIES REFERRED TO THEREIN IS OR LESS THAN THE PRESCRIBED LIMIT. IN THE PRESENT CASE, OBJECT MARKED AS CLAUSE T WAS NEVER IMPLEMENTED AND REMAINED ON PAPER, WHICH WAS EVEN DELETED FROM THE OBJECTS OF THE APPELLANTS BEFORE THE CONCLUSION OF PROCEEDINGS BEFORE THE CIT . LD. 'AR', FURTHER, CONTENDED THAT THE IMPUGNED ASSESSEE APPELLANTS NAMELY BABA AMARNATH EDUCATIONAL SOCIETY AND ACE EDUCATIONAL & CHARITABLE SOCIETY ARE CARRYING O N SIMILAR ACTIVITIES, WITH SIMILAR OBJECTS AND THE MA IN OBJECTIVES OF BOTH THE APPELLANTS ARE TO IMPART EDU CATION INCLUDING TECHNICAL AND VOCATIONAL EDUCATION. HE SPECIFICALLY MADE A MENTION OF THE CONCRETE ACTIVIT IES 5 CARRIED OUT BY THE ASSESSEE, WITH A VIEW TO ACHIEVI NG THE STATED OBJECTS. IN THIS CONTEXT, HE REFERRED TO PAG E 31 OF THE PAPER BOOK CONTAINING DETAILS OF ACTIVITIES UNDERTA KEN BY THE APPELLANT. THE CIT PASSED ORDER U/S 12A READ W ITH SECTION 12AA OF THE ACT, ON 28.06.2011, DECLINING G RANT OF REGISTRATION IN BOTH THE CASES. THE LD. 'AR', FURTH ER, ARGUED THAT APPLICATION IN BOTH THE CASES WAS FILED, ON 20 .12.2010, AND THE DELETION OF THE OBJECT CLAUSE T WAS CARRI ED OUT, ON 10.6.2011, IN THE CASE OF BABA AMARNATH EDUCATIONAL SOCIETY AND ON 11.6.2011, IN THE CASE OF ACE EDUCAT IONAL & CHARITABLE SOCIETY. ACCORDINGLY, CLAUSE (T) OF THE MEMORANDUM OF ASSOCIATION WAS VALIDLY DELETED FOLLO WING THE PRESCRIBED PROCEDURE UNDER THE SOCIETIES REGIST RATION ACT. HE ALSO REFERRED TO PAGE 33 OF THE PAPER BOOK WHEREIN IT WAS CONTENDED BY THE APPELLANT THAT THE LANGUAGE OF THE OBJECT CLAUSE MARKED AS (T) SUFFERED FROM CLARITY A ND REAL INTENTION WAS TO SET UP TECHNICAL EDUCATION AND THE REBY PRODUCING TECHNOCRATS WHO WILL PROMOTE EXPORTS OF COMPUTER, HARDWARE, SOFTWARE, TELECOMMUNICATION ETC . THE RELEVANT COMMUNICATION CLARIFYING THE INTENTION OF THE APPELLANT VIDE LETTER DATED 15.6.2011,, AS APPEARIN G AT PAGE 30 OF THE PAPER BOOK, IS REPRODUCED HEREUNDER: THAT THE CLAUSE (T) OF THE OBJECT CLAUSE OF MEMORANDUM OF ASSOCIATION I.E. TO PROMOTE EXPORTS OF COMPUTERS HARDWARE/SOFTWARE, TELECOMMUNICATION, INTERNET, E-COMMERCE AND ALLIED SERVICE HAS BEEN ADOPTED BY THE SOCIETY WIT H THE INTENTION THAT BEING EDUCATIONAL SOCIETY THEY WILL SETUP TECHNICAL INSTITUTION AND THEREBY PRODUCING TECHNOCRATS WHO WILL PROMOTE EXPORTS OF 6 COMPUTERS, HARDWARE/SOFTWARE, TELECOMMUNICATION, INTERNET, E-COMMERCE AND ALLIED SERVICE AND CONTRIBUTE TO THE GROWTH OF THE ECONOMY OF THE COUNTRY. THE LANGUAGE OF THE CLAUSE(T) AS MENTIONE D IN THE MEMORANDUM IS NOT SO MUCH CLEAR AND DOES NOT REPRESENT INTENTION OF THE SOCIETY PRECISELY. HENCE KEEPING IN MIND THE MAIN OBJECTS OF THE SOCIETY THE MANAGEMENT HAS DECIDED TO DROP THE OBJECT CLAUSE (T) AND ACCORDINGLY FILED AN APPLICAT ION FOR DELETION OF SUCH OBJECT IN CLAUSE (T) BY PASSIN G A RESOLUTION. THE COPIES OF ACKNOWLEDGEMENT FOR APPLICATION FILED WITH THE REGISTRAR OF SOCIETY AND RESOLUTION PASSED IN THE BOARD MEETING TO DELETE THE OBJECT CLAUSE (T) IS ENCLOSED HEREWITH FOR YOUR CONSIDERATION. THAT THE COPIES OF THE VOUCHERS RELATING TO RECEIPT OF CORPUS DONATIONS ARE ENCLOSED HEREWITH 4. THE LD. 'AR', FURTHER, MENTIONED THAT THE ACTIVITIE S OF THE APPELLANT ARE AT ITS INITIAL STAGE AND CONCRETE ACTIVITIES WERE CARRIED OUT WITH A VIEW TO ACHIEVING THE MAIN OBJECT OF IMPARTING EDUCATION. HE ANNEXED VARIOUS EVIDENCES TO SUPPORT HIS CLAIM AND THE RELEVANT DETAILS OF SUCH ACTIVITIES AS CARRIED OUT BY THE APPELLANT ARE REPRODUCED HERE UNDER (PAPER BOOK PAGE 31): ACE EDUCATIONAL & CHARITABLE SOCIETY IS A SOCIETY REGISTER ED UNDER SOCIETIES REGISTRATION ACT, 1860 VIDE R.NO. 51 OF 2009. THE MAIN OBJECTS OF THE SOCIETY ARE TO ESTABLISH AND PROMOTE ESTABLISHMENT OF OR TO RENDER AID TO SCHOOL, COLLEGES, EDUCATIONAL INSTITUTIONS, TECHNICAL EDUCATION INSTITUTIONS, TRAINING INSTITUTIONS IN ONE OR ALL FIELDS OF ENGINEERING, RESEARCH, MEDICAL, COMMERCE, ARTS OR ANY OTHER SYSTEM OF EDUCATION. TO FULFILL THEIR OBJECT, THE SOCIETY DECIDED TO ESTABLISH AN ENGINEERING & MANAGEMENT COLLEGE UNDER THE NAME AND STYLE OF LUDHIANA GROUP OF COLLEGES. IN THE YEAR 2009-10 THEY PURCHASED A PIECE OF LAND MEASURING 10.76 ACRES AND STARTED CONSTRUCTION O F 7 BUILDING, AS REQUIRED UNDER THE NORMS OF AICTE TO SETUP A N ENGINEERING & MANAGEMENT COLLEGE. THEY INCURRED A SUM OF R S. 134.05 LACS FOR PURCHASE OF LAND AND RS. 148.89 LACS TOW ARDS CONSTRUCTION OF BUILDING IN THE FINANCIAL YEAR 2009-10. THE AMOUNT WAS SPENT OUT OF THE SPECIFIED DONATIONS OF RS. 288 .00 LACS RECEIVED FROM VARIOUS EDUCATIONAL INSTITUTIONS, TO FORM P ART OF THE CORPUS FUNDS AND UNSECURED LOANS FROM MEMBERS TO THE TUNE OF RS. 146.00 LACS. THE SOCIETY RECEIVED ANOTHER SPE CIFIED DONATIONS TO THE TUNE OF RS. 216.00 LACS IN THE YEAR 200 9-10 TO BE FORM PART OF CORPUS FUND. FURTHER THE SOCIETY RECEIVE D UNSECURED LOANS FROM THE MEMBERS TO THE TUNE OF RS. 14 1.00 LACS. THE AMOUNT SO RECEIVED BY WAY OF DONATION AND LOAN S, INCURRED FOR THE COMPLETION OF BUILDING PURCHASE OF VARIOUS EQUIPMENTS ETC, NECESSARY FOR THE APPROVAL OF THE ENGINEE RING COLLEGE AS PER AICTE NORMS AND FOR MEETING DEFICIT FOR THE YEAR 2009-10. THE SOCIETY GOT APPROVAL TO START ENGINEERING & MANAGEMENT COLLEGE IN MAY 2009 AND GOT IT AFFILIATED WITH PUNJAB TECHNICAL UNIVERSITY JALANDHAR. THE SOCIETY STARTE D AN ENGINEERING COLLEGE AND MANAGEMENT COLLEGE UNDER THE NAME OF LUDHIANA GROUP OF COLLEGES AT VPO CHOWKIMAN, DISTT.LUDHIANA. BOTH OF THESE INSTITUTES ARE DULY APPROVED BY ALL INDIA COUNCIL OF TECHNICAL EDUCATION (AICTE), NEW DELHI AND GOVT. OF PUNJAB. THE COLLEGE OF ENGINEERING & TECHNOLOGY IS AFFILIATED WITH PUNJAB TECHNICAL UNIVERSITY, JALANDHAR FOR RUNNING THE BTECH COURSES IN COMPUTER SCIENCE, ELECTRONIC S & COMMUNICATION, ELECTRICAL ENGINEERING, MECHANICAL ENGINEERING AND INFORMATION TECHNOLOGY. SIMILARLY THE FEROZEPUR INSTITUTE OF MANAGEMENT IS ALSO AFFILIATED WITH PU NJAB TECHNICAL UNIVERSITY TO RUN THE COURSES NAMELY BBA, BCA AND MBA & MCA. THE FIRST SESSION STARTED IN THE YEAR JULY 2 010. THE ENGINEERING COLLEGE MADE AN ADMISSION OF 63 STUDENTS REMAINING 193 SEATS VACANT. THE ADMISSION WERE MADE DIREC TLY AS THE APPROVAL OF COLLEGE WAS RECEIVED LATE AFTER LAST CO UNSELING OF PTU. THE FEE WAS RECEIVED AS PRESCRIBED BY THE STATE GOVT. THE FEE RECEIVED DURING THE YEAR 2010-11 WAS INSUFFICIENT T O MEET THE EXPENSES TO RUN THE OF THE COLLEGE AND THE SO CIETY INCURRED A DEFICIT OF RS. 73.39LACS WHICH THEY MEET OUT OF THE 8 CORPUS FUNDS AND UNSECURED LOANS. THE CONSTRUCTION WOR K OF THE BUILDING IS STILL GOING ON. THE COLLEGE HAS TO BUILT YEARWISE INFRASTRUCTURE AS PER AICTE NORMS. THE NEXT SESSION OF 2 011- 12 IS TO BE STARTED IN JULY 2011. 5. LD. 'AR' FURNISHED A LONG LIST OF CASE LAWS TO S UPPORT HIS CONTENTION THAT THE SOCIETY IS ELIGIBLE FOR REGISTR ATION U/S 12A R.W. SECTION 12AA OF THE ACT, WHICH IS REPRODUCED H EREUNDER: ( ITA 825/826/CHD/2011) 1. DIGEMBER JAIN SOCIETY FOR CHILD WELFARE V DIRECTOR GENERAL OF INCOME-TAX (EXEMPTIONS) (2010) 329 ITR 459 (DEL) 2. M/S PINEGROVE INTERNATIONAL CHARITABLE TRUST V UNION OF INDIA & OTHERS (2010) 327 ITR 73 (P&H) 3. ACIT V THANTHI TRUST (2001) 247 ITR 785 (S.C) 4. ICAI ACCOUNTING RESEARCH FOUNDATION & ANOTHER V DIRECTOR GENERAL OF INCOME TAX (EXEMPTIONS) & ORS. (2009) 226 CTR 27 (DEL) 5. OXFORD ACADEMY FOR CAREER DEVELOPMENT V CHIEF COMMISSIONER OF INCOME TAX & OTHERS (2009) 315 ITR 382 (ALL) 6. AMERICAN HOTEL & LODGING ASSOCIATION EDUCATIONAL INSTITUTE V CENTRAL BOARD OF DIRECT TAXES & OTHERS (2008) 301 ITR 86 (S.C) 7. CIT V DHARMODAYAM CO. (1998) 233 ITR 250 (KER) 8. ADDL.CIT, GUJRAT V SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (1980) 121 ITR 1 (S.C) 9. ADITANAR EDUCATIONAL INSTITUTION V ADDL.CIT (1997) 224 ITR 310 (S.C) 10. HARYANA STATE COUNSELING SOCIETY V CHIEF CIT (2010) 40 DTR 169 (P&H) 11. RAEBAREILY POLYTECHNIC ASSOCIATION V CIT (2010) 48 DTR 1 (LUCKNOW)(TRIB) 12. SAINT KABIR EDUCATIONAL TRUST V CIT (2010) 41 DTR 267 (ASR)(TRIB) 13. DCIT-1 JALANDHAR V M/S JYOTI PROVINCE SACRED RANGE HEART CONGREGATION ITA NO.534(ASR)2009 ORDER DATED 21.05.2010 A.Y. 2006-07. 14. VANITA VISHRAM TRUST V CHIEF CIT & ANOTHER 327 ITR 121 (BOM) 9 15. CIT-II CHD V SURYA EDUCATIONAL& CHARITABLE TRUST, ITA NO. 701 OF 2010 ORDER DATED 05.10.2011 (P&H) 16. CIT BATHINDA V BABA DEEP SINGH EDUCATIONAL SOCIETY, ITA NO. 881 OF 2010 ORDER DATED 13.10.2011 (P&H) 17. IILM FOUNDATINO ACADEMY V CIT, 44 SOT PAGE 37 (ITAT DELHI) 18. CIT V HYDERABAD RACE CLUB CHARITABLE TRUST, 262 ITR 194 (AP) 19. MAHESH MEMORIAL CHARITABLE TRUST V CIT, ITA NO.906/CHD/2009 (ITAT CHANDIGARH) 6. LD. 'DR' STATED THAT THE SUBMISSIONS MADE ARE APPLICABLE IN BOTH THE APPEALS. SHE CONTENDED THAT NONE OF THE CASE LAWS CITED BY THE LD. 'AR', IN THE LONG LIST ANNEXED, TO THE PAPER BOOK IS APPLICABLE, TO THE FA CTS OF THE PRESENT CASES. LD. 'DR' PLACED RELIANCE ON THE ORDER OF THE CIT. 7. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND THE RELEVANT CASE-LAWS CITED ON THE MATTER. IN BOTH THE CASES UNDER APPEAL, THE ASSESSE E FILED APPLICATION ON 20.12.2010 FOR REGISTRATION U/S 12A( AA) OF THE ACT, IN THE PRESCRIBED FORM, COMPLYING WITH THE REQUIRED STATUTORY FORMALITIES. THE ORDER REJECTING THE GRANT OF REGISTRATION IN SUCH CASES WAS PASSED BY T HE CIT, ON 28.06.2011. A BARE PERUSAL OF THE RESPECTIVE OR DERS PASSED BY THE CIT, IN RESPECT OF THE APPELLANTS REV EALS THAT TEXT AND FINDINGS OF THE CIT ARE ALMOST SIMILAR. TH EREFORE, AS STATED BY THE LD. 'AR' AND LD. 'DR', THE SUBMISS IONS MADE BEFORE US ARE APPLICABLE TO BOTH THE APPEALS. 8. LD. CIT PRIMARILY DECLINED TO GRANT REGISTRATION U/S 12AA OF THE ACT, IN VIEW OF THE NON-CHARITABLE OBJE CT 10 APPEARING AT OBJECT CLAUSE (T) ALONGWITH VARIOUS OT HER CHARITABLE OBJECTS. THE LD. CIT PLACED RELIANCE, ON THE DECISION OF THE HON'BLE SUPREME COURT, IN THE CASE OF YOGI RAJ CHARITIES TRUST V CIT 103 ITR 777 (S.C) AND IN THE CASE OF EAST INDIA INDUSTRIES (MADRAS) PVT.LTD. V C IT 65 ITR 611 (S.C) TO SUPPORT HIS FINDINGS. 8(1) THE CIT PLACED RELIANCE, ON THE DECISION OF TH E HON'BLE APEX COURT, IN THE CASE OF YOGI RAJ CHARITI ES TRUST V CIT (SUPRA). A CAREFUL PERUSAL THEREOF REVEALS T HAT IN THAT CASE, INCOME TAX AUTHORITIES FOUND THAT THE VA RIOUS INDUSTRIAL AND COMMERCIAL CONCERNS WERE NOT STARTED BY RAM KRISHAN DALMIA, IN FURTHERANCE OF THE OBJECTS O F THE TRUST. THE CONCERNS WERE STARTED FOR THE PURPOSE O F EARNING PROFITS, WHICH WERE TO BE DISTRIBUTED TO TH E SHAREHOLDERS WHO INVESTED SHARE MONEY IN THOSE CONC ERNS. IT IS SUBMITTED WITH UTMOST RESPECT THAT THE RATIO OF THE HON'BLE APEX COURT IS NOT APPLICABLE TO THE PRESENT CASE AS THE FACTS ARE MATERIALLY DIFFERENT AND DISTINGUI SHABLE. IN THE PRESENT CASE, THE OBJECT EARMARKED AS CLAUSE (T) REMAINED ON ONLY PAPER AND WAS NOT AT ALL IMPLEMENT ED, WHEREAS IN THE DECISION RELIED UPON BY THE CIT, THE CONCERNS WERE STARTED BY THE TRUST. FURTHER, IN THE PRESENT CASE, THE APPELLANTS UNDERTOOK ONLY CHARITA BLE ACTIVITIES PERTAINING TO THE OBJECT OF IMPARTING E DUCATION, AS IS EVIDENT FROM THE CONTENTS OF PAGE 31 OF PAPER BOOK REPRODUCED EARLIER. IN VIEW OF THIS, THE DECISION RELIED UPON BY THE CIT IS NOT APPLICABLE TO THE FACTS OF T HE PRESENT CASE. IT IS, FURTHER, MENTIONED THAT THE H ON'BLE 11 APEX COURT DISCUSSED THE DECISION, IN THE CASE OF E AST INDIA INDUSTRIES (MADRAS) P.LTD., 65 ITR 611, WHILE RENDERING DECISION IN THE CASE OF YOGI RAJ CHARITIE S TRUST (SUPRA) RELIED UPON BY THE CIT. IT IS, FURTHER, PER TINENT TO MENTION HERE THAT THE DECISION RENDERED BY THE HON' BLE SUPREME COURT, PERTAINED TO THE PERIOD PRIOR TO AMENDMENT TO SECTION 2(15) OF THE ACT INSERTED BY T HE FINANCE ACT, 2008 W.E.F. 1.4.2009. 9. A BARE PERUSAL OF THE ACTUAL AND REAL ACTIVITIES UNDERTAKEN BY THE ASSESSEE APPELLANT, CLEARLY REVEA LS ITS INTENTION, TO ACHIEVE THE OBJECT OF ESTABLISHING TE CHNICAL INSTITUTIONS AND IMPARTING EDUCATION, BOTH TECHNICA L AND VOCATIONAL EDUCATION. THE REGISTRATION OF THE ASSE SSEE APPELLANTS UNDER THE SOCIETIES REGISTRATION ACT, 18 60 ARE NOT IN DISPUTE. THE MAIN OBJECTS OF THE SOCIETY AR E TO PROMOTE, ESTABLISHMENT OR TO GRANT AID TO SCHOOLS, COLLEGES, TECHNICAL INSTITUTIONS, TECHNICAL EDUCATIONAL INSTI TUTIONS, TRAINING INSTITUTIONS, IN ONE OR ALL FIELDS TO ENGI NEERING, RESEARCH, MEDICAL, COMMERCE, ARTS OR OTHER EDUCATIO NAL INSTITUTIONS. THE SOCIETY DECIDED TO ESTABLISH ENG INEERING & MANAGEMENT COLLEGE, IN THE NAME AND STYLE OF LUDHIA NA GROUP OF COLLEGES AND, TO ACHIEVING SUCH AN OBJECT, THE SOCIETY, IN THE YEAR 2009-2010, PURCHASED A PIECE O F LAND MEASURING 10.76 ACRES AND STARTED CONSTRUCTION OF A BUILDING, AS REQUIRED UNDER THE NORMS OF AICTE, TO SET-UP ENGINEERING & MANAGEMENT COLLEGE. THE SOCIETY INCUR RED THE EXPENSES OUT OF DONATION AND LOANS FOR THE PURP OSE OF CONSTRUCTION OF REQUIRED BUILDINGS, PURCHASE OF VAR IOUS 12 EQUIPMENTS ETC., NECESSARY FOR APPROVAL OF ENGINEER ING COLLEGE AS PER AICTE NORMS. THE SOCIETY GOT APPROV AL TO START ENGINEERING & MANAGEMENT COLLEGE IN MAY,2009 AND GOT IT AFFILIATED WITH PUNJAB TECHNICAL UNIVERSITY, JALANDHAR. THE SOCIETY STARTED AN ENGINEERING & MANAGEMENT COLLEGE, UNDER THE NAME OF LUDHIANA GROU P OF COLLEGES AT VILLAGE & PO CHOWKIMAN, DISTT. LUDHIANA . BOTH THE INSTITUTIONS ARE DULY APPROVED BY ALL INDIA COU NCIL OF TECHNICAL EDUCATION, NEW DELHI AND GOVT.OF PUNJAB. THE TECHNICAL EDUCATION IN VARIOUS DISCIPLINES IS PROVI DED BY THE ENGINEERING COLLEGE AND THE FIRST SESSION STARTED I N THE YEAR 2010. THE ENGINEERING COLLEGE MADE AN ADMISSION OF 63 STUDENTS, REMAINING 237 SEATS WERE VACANT. MANAGEM ENT COLLEGE MANAGED TO GET ADMISSION OF 67 STUDENTS, RE MAINING 193 SEATS VACANT. THE ADMISSION WAS MADE DIRECTLY AS THE APPROVAL OF COLLEGE WAS RECEIVED LATE AFTER LAST CO UNSELING OF PTU. THE FEE WAS RECEIVED AS PRESCRIBED BY THE STA TE GOVERNMENT. IN VIEW OF DETAILED LIST OF ACTIVITIES CARRIED ON BY THE APPELLANT, AS REPRODUCED ABOVE, IT IS EVIDEN T THAT THE SOCIETY HAS CARRIED OUT ACTIVITIES, PERTAINING TO A CHIEVING THE CHARITABLE OBJECTS INCORPORATED UNDER THE MEMOR ANDUM OF ASSOCIATION. DELETED OBJECT CLAUSE AT T REMAINED PURELY ON PAPER. 10. A BARE PERUSAL OF THE IMPUGNED ORDER PASSED BY THE CIT REVEALS THAT HE DID NOT APPRECIATE THE AMENDMEN T EFFECTED TO THE DEFINITION OF CHARITABLE PURPOSE, AS PROVIDED U/S 2(15) OF THE ACT. SIMILARLY, THE APPL ICABILITY OF THE AMENDED PROVISIONS OF SECTION 2(15), BY WAY OF 13 INSERTIONS OF FIRST AND SECOND PROVISO HAS NOT BEEN CONSIDERED BY THE CIT, IN THE CONTEXT OF FACTUAL-MA TRIX OF THE CASE. THE CIT HAS NOT DOUBTED THE GENUINENESS OF THE ACTIVITIES AND IDENTITY OF THE ASSESSEE APPELLANTS. THE ASSESSEE HAS CARRIED OUT CONCRETE ACTIVITIES, TO AC HIEVE THE CHARITABLE PURPOSE OF IMPARTING EDUCATION, AS DISCU SSED ABOVE AND THE FIRST SESSION COMMENCED, IN THE YEAR 2010. IT IS UNDISPUTED FACT THAT THE ASSESSEE APPELLANT H AS NOT CARRIED OUT ANY ACTIVITY, IN PURSUANCE OF OBJECT CL AUSE (T). THE ASSESSEE HAS ONLY CARRIED OUT CHARITABLE ACTIVITIES OF IMPARTING EDUCATION, AS CONTEMPLATED IN THE DEFINITION OF CHARITABLE PURPOSE PROVIDED UND ER SECTION 2(15) OF THE ACT. THE AMENDED PROVISION OF SECTION 2(15), BY WAY OF INSERTION OF FIRST PROVISO IS NOT APPLICABLE TO THE FIRST THREE OBJECTS ENUMERATED IN THE SAID DEFINITION. THE ASSESSEE IS PURSUING THE OBJE CT OF IMPARTING ALL KINDS OF EDUCATION, TECHNICAL OR OTHE RWISE. THEREFORE, PROVISO TO SECTION 2(15) OF THE ACT IS N OT APPLICABLE, TO THE CHARITABLE OBJECT OF IMPARTING EDUCATION, PURSUED BY THE PRESENT APPELLANTS. 11. IT IS ESSENTIAL TO APPRECIATE THAT THE ACTUAL A CTIVITIES CARRIED OUT IN PURSUANCE OF ACHIEVING THE CHARITABL E OBJECTS ARE ALONE RELEVANT. SIMILARLY, THE IMPUGNED SINGLE OBJECT NOT ACTED UPON BY THE APPELLANT IS IRRELEVANT AND IMMATERIAL. THERE SHOULD BE NO DENIAL OF REGISTRATI ON, IF ACTUAL ACTIVITIES CARRIED ON BY THE ASSESSEE APPELL ANT ARE CHARITABLE WITHIN THE MEANING OF SECTION 2(15) OF T HE ACT. IT IS IMPERATIVE TO HAVE A HOLISTIC READING OF THE OBJ ECTS FOR THE 14 PURPOSE OF PROPER APPRECIATION OF THE REAL INTENTIO N. IT IS PERTINENT TO MENTION HERE THAT IF THE ASSESSEE WAS ENGAGED IN THE ACTIVITIES, TO ACHIEVE THE ULTIMATE GOAL, IT MERITS REGISTRATION, ON THE GROUND THAT IT IS NO T THE LETTER OR LANGUAGE OF THE SINGLE OBJECT CLAUSE THAT IS CONCLUSIVE BUT THE ACTIVITY OF THE APPELLANTS. IT IS WELL ESTABLISHED THAT MERELY BECAUSE AN OBJECT IS BENEVO LENT, THE TRUST SOCIETY DOES NOT GET REGISTRATION, IF ITS ACTIVITY IS OTHERWISE. IT FOLLOWS THAT WHERE THE ACTIVITY IS BENEVOLENT OR CHARITABLE AND FALLS U/S 2(15) OF THE ACT, THE L IMITATION IN LANGUAGE NEED NOT COME, IN THE WAY OF ITS RIGHT TO REGISTRATION AVAILABLE FOR SUCH ACTIVITY. NEEDLESS TO SAY THAT OBJECTS SHOULD NOT BE UNDERSTOOD IN ISOLATION, PART ICULARLY IGNORING THE ACTUAL ACTIVITIES CARRIED ON BY THE AS SESSEE. THE SINGLE INOPERATIVE OBJECT CANNOT ECLIPSE THE WH OLE RANGE OF OTHER CHARITABLE OBJECTS AND ACTUAL CONDUCT OF CHARITABLE ACTIVITIES BY THE APPELLANT. IT IS ALSO RELEVANT TO DRAW A DISTINCTION BETWEEN THE OBJECTS AND THE POWERS, WIT H A VIEW TO PROPERLY APPRECIATING THE OBJECTS OF THE INSTITU TION OR TRUST OR FUND. 12. INCOME-TAX ACT 1961, PROVIDES THE INCLUSIVE DEF INITION OF THE TERM CHARITABLE PURPOSE UNDER SECTION 2(15 ) OF THE ACT. BY THE AMENDMENT TO SECTION 2(15), BY WAY OF INSERTION OF A PROVISO, TO THE DEFINITION OF CHARI TABLE PURPOSE BY THE FINANCE ACT, 2008, THE SCOPE OF THE EXPRESSION ADVANCEMENT OF ANY OTHER OBJECT OF GENE RAL PUBLIC UTILITY HAS BEEN RESTRICTED, AS IS EVIDENT FROM A BARE 15 PERUSAL OF THE PROVISO REPRODUCED HEREUNDER: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTI VITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR AN Y ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO AN Y TRADE, COMMERCE OR BUSINESS FOR A CESS OR FREE OR A NY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SU CH ACTIVITY: PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT A PPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TEN LAKH RUPEES O R LESS IN THE PREVIOUS YEAR. 13. IN SIMPLE LANGUAGE, THE ACTIVITIES INCORPORATED IN THE NEWLY INSERTED PROVISO ARE EXCLUDED FROM THE DEFIN ITION OF CHARITABLE PURPOSE PROVIDED U/S 2(15) OF THE ACT A) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS B) ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO TRADE, COMMERCE OR BUSINESS C) IF FEE OR CESS OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF SUCH INCOME BY THE CONCERNED ENTITY. THE AFORESAID PROVISO WILL BE OPERATIVE FROM 1.4.2009 AND WILL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2009-10 AND SUBSEQUENT ASSESSMENT YEARS. 14. THE FINANCE MINISTER HAS AMENDED THE DEFINITIO N OF CHARITABLE PURPOSE PROVIDED UNDER SECTION 2(15) O F THE ACT BY THE FINANCE ACT,2008, WITH EFFECT FROM 1.4.2009, BY ADDING A PROVISO, TO THE SECTION OF JUST FIVE LINES , WHICH WILL 16 AFFECT THE EXEMPTION OF CHARITABLE TRUSTS FOR ADVA NCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY VERY SUBSTANTIALLY. 15. IN PARA 180 OF THE BUDGET SPEECH, THE FINANCE MINISTER STATED AS FOLLOWS: CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THESE ACTIVITIES ARE TAX EXEMPT, AS THEY SHOULD BE. HOWEVER, SOME ENTITIES CARRYING ON REGULAR TRADE, COMMERCE OR BUSINESS OR PROVIDING SERVICES IN RELATION TO ANY TRADE COMMERC E OR BUSINESS AND EARNING INCOME HAVE SOUGHT TO CLAIM THAT THEIR PURPOSE WOULD ALSO FALL UNDER CHARITABLE PURPOSE. OBVIOUSLY, THIS WAY NOT THE INTENTION OF PARLIAMENT AND, HENCE, I PROPOSE TO AMEND THE LAW TO EXCLUDE THE AFORESAID CASES. GENUINE CHARITABLE ORGANIZATIONS WILL NOT IN ANY WAY BE AFFECTED. 15(1) IT WILL, THUS, BE NOTED THAT THE INTENTI ON OF FINANCE MINISTER WAS ONLY TO EXCLUDE FROM EXEMPTION, ENTITI ES CARRYING ON BUSINESS AND EARNING INCOMES FOR WHICH EXEMPTION WAS CLAIMED ON THE BASIS THAT THE PURPOSE WOULD FALL UNDER CHARITABLE PURPOSE AS DEFINED IN THE LAS T LIMB OF THE DEFINITION U/S 2(15) OF THE ACT. 16. THE CENTRAL BOARD OF DIRECT TAXES HAS ISSUED TH E CIRCULAR NO.11/2008 DATED 19.12.2008, STATING THAT THE FOLLOWING IMPLICATIONS ARISE FROM THE AMENDMENT, 17 THE NEWLY INSERTED PROVISO TO SECTION 2(15) WILL NOT APPLY IN RESPECT OF THE FIRST THREE LIMBS OF SECTION 2(15) I.E. RELIEF OF THE POOR, EDUCATION OR MEDICAL RELIEF. CONSEQUENTLY WHERE THE PURPOSE OF A TRUST OR INSTITUTION IS RELIEF OF THE POOR, EDUCATION OR MEDICAL RELIEF, IT WILL CONSTITUTE CHARITABLE PURPOSE, EVEN IF IT INCIDENTALLY INVOLVES THE CARRYING ON OF COMMERCIAL ACTIVITIES. THE CIRCULAR STATES FURTHER AS FOLLOWS: 3. THE NEWLY INSERTED PROVISO TO SECTION 2(15) WILL APPLY ONLY TO ENTITIES WHOSE PURPOSE IS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY I.E. THE FOURTH LIMB OF THE DEFINIT ION OF THE CHARITABLE PURPOSE CONTAINED IN SECTION 2(15). HENCE SUCH ENTITIES WILL NOT BE ELIGIBLE U/S 11 OR U/S 10(23C) OF THE ACT IF THEY CARRY ON COMMERCIAL ACTIVITY. WHETHER SUCH AN ENTITY IS CARRYING ON AN ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS IS A QUESTION OF FACT WHICH WILL BE DECIDED BASED ON THE NATURE, SCOPE, EXTENT AND FREQUENCY OF THE ACTIVITY. 17. SECTION 119 OF THE INCOME-TAX ACT,1961, CONFERS JURISDICTION, ON THE CENTRAL BOARD OF DIRECT TAXES (CBDT), TO ISSUE SUCH ORDERS, DIRECTIONS AND INSTRUCTIONS A S IT MAY DEEM FIT, FOR THE PROPER ADMINISTRATION OF THE ACT. IT IS PROVIDED IN THE SAID SECTION THAT THE AUTHORITIES A ND ALL OTHER PERSONS EMPLOYED IN THE EXECUTION OF THE ACT SHALL OBSERVE AND FOLLOW THE CIRCULARS ISSUED BY THE BOAR D. THE CIRCULARS ISSUED ARE BASICALLY INTERPRETATION OF TH E TAX LAW AND ARE MEANT TO GUIDE THE OFFICERS ADMINISTERING T HE ACT AND BRING ABOUT UNIFORMITY ABOUT SUCH ADMINISTRATIO N. IT 18 IS WELL SETTLED PRINCIPLE OF LAW THAT SUCH CIRCULAR S ARE BINDING ON THE INCOME TAX AUTHORITIES AND THIS VIEW IS FORTIFIED BY THE DECISIONS OF SUPREME COURT, IN THE FOLLOWING CASES; NAVNEET LAL C.JHAVERI V K.K.SEN AAC (1965) 56 ITR 198 (S.C); ELLERAMN LINES LTD. V CIT (1971) 82 ITR 913 (S.C); K.P.VARGHESE V ITO (1981) 131 ITR 597 (S.C); UCO BANK V CIT (1999) 237 ITR 889 (S.C) ETC. 17(1). THE PRINCIPLES EMERGED FROM THE DECISIONS OF THE APEX COURT, ARE THAT THE CIRCULARS ISSUED BY THE CB DT ARE BINDING ON DEPARTMENTAL AUTHORITIES, EVEN IF THE CI RCULARS SO ISSUED ARE INCONSISTENT WITH THE STATUTORY PROVI SIONS. FURTHER, THE DEPARTMENT IS PRECLUDED FROM CHALLENGI NG THEIR CORRECTNESS. THE COURTS, FURTHER, HELD THAT THE CI RCULARS QUITE APART FROM THEIR BINDING CHARACTER, ARE CLEAR LY IN THE NATURE OF CONTEMPORANEA EX-POSITIO FURNISHING LEGIT IMATE AID IN THE INTERPRETATION OF THE STATUTES. THE COU RT HELD THAT A STATUTE MAY BE INTERPRETED BY REFERENCE TO T HE EX- POSITION, IT HAS RECEIVED FROM CONTEMPORARY AUTHORI TY. 18. AT THE STAGE OF CONSIDERING THE APPLICATION FOR REGISTRATION U/S 12A READ WITH SECTION 12AA OF THE ACT, THE COMMISSIONER IS NOT REQUIRED TO EXAMINE THE APPLICA TION OF INCOME OF THE INSTITUTION, BUT WHETHER THE APPLICAT ION FORM FOR REGISTRATION IS MADE, IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 12A READ WITH RULE 17A AND WHETHER FORM NO.10A HAS BEEN PROPERLY FILLED UP. T HE ONLY PURPOSE FOR WHICH REGISTRATION IS REQUIRED U/S 12A READ WITH SECTION 12AA OF THE ACT IS FOR ESTABLISHING IT S IDENTITY, 19 AS AN INSTITUTION WITH GENUINENESS OF ACTIVITIES, I N CONSONANCE WITH THE OBJECTS. SUCH REQUIREMENTS ARE DULY COMPLIED WITH BY THE APPELLANTS. 19. IT IS SETTLED PROPOSITION THAT REGISTRATION BY ITSELF WOULD NOT CONFER THE RIGHT TO EXEMPTION. THE REGIS TRATION IS GRANTED BY THE CIT U/S 12A READ WITH SECTION 12AA O F THE ACT, WHEREAS EXEMPTION IS GRANTED BY THE AO, ON THE SATISFACTION OF STATUTORY CONDITION AS LAID DOWN UN DER SECTION 11, 12 AND 13 OF THE ACT. FURTHER, AS PER SECTION 12AA(3) OF THE ACT, CIT IS COMPETENT TO CANCEL THE REGISTRATION OF AN ASSESSEE IF SATISFIED THAT ITS A CTIVITIES ARE NOT GENUINE. THE REGISTRATION U/S 12A READ WITH 12 AA, IS ONE OF THE CONDITIONS FOR EXEMPTION AND NOT THE ONL Y CONDITION FOR EXEMPTION. IN THIS SPECIFIC CONTEXT, THE CIT, IS REQUIRED TO APPRECIATE THE REAL ACTIVITIES AND OBJE CTS BUT NOT THE ENABLING POWERS TO ACHIEVE THE OBJECTS. 20. THE OBSERVATION OF THE LD. CIT THAT AMENDMENT F OR THE PURPOSE OF DELETION OF THE OBJECT CLAUSE MARKED (T) REMAINS TO BE ESTABLISHED, AS CARRIED OUT, VALIDLY BY THE A SSESSEE. SUCH OBSERVATION OF THE CIT IS NOT BASED ON ANY COG ENT AND CREDIBLE MATERIAL BROUGHT ON RECORD. HOWEVER, THE ASSESSEE PRODUCED BEFORE THE CIT FORM NO.II, CERTIFICATE OF FILING, DATED 06.07.2011 ISSUED BY THE ADDITIONAL REGISTRAR OF SOCIETIES, MOGA MENTIONING THEREIN THAT THE AMENDMENT/DELETION IN OBJECT CLAUSE MADE AS PER PROVISIONS OF SECTION 12 & 12A OF THE SOCIETI ES REGISTRATION ACT,1860. THE SAID CERTIFICATE AS 20 ANNEXED AT PAGE 42 OF THE PAPER BOOK IS REPRO DUCED HEREUNDER : CERTIFICATE OF FILING R.NO.50/2008-09 OFFICE OF ADDITIONAL REGISTRAR OF SOCIETIES MOGA THE ADDITIONAL REGISTRAR OF SOCIETIES, MOGA ACKNOWL EDGE THE RECEIPT OF THE UNDER MENTIONED DOCUMENT(S) RELATING TO BABA AMARNATH EDUCATIONAL SOCIETY, SATYA YOG NIWAS, GILL ROAD, MOGA. (DESCRIPTION OF DOCUMENT(S) 1. RESOLUTION FOR DELETION OF OBJECT CLAUSE T OF THE MEMORANDUM OF ASSOCIATION (DATE OF FILING 13.06.2011) 2. AMENDED MEMORANDUM OF ASSOCIATION OF BABA AMARNATH EDUCATIONAL SOCIETY (DATE OF FILING 17.06.2011) REMARKS : THE RESOLUTION AMENDING (DELETION) OF OBJ ECT CLAUSE T PLACED ON RECORD AND CLAUSE T OF THE O BJECT CLAUSE IN MEMORANDUM OF ASSOCIATION STAND DELETED F ROM THE DATE OF THE RESOLUTION. THE CERTIFIED COPY OF AMENDED MEMORANDUM OF ASSOCIATION ISSUED ON REQUEST. FURTHER THE AMENDMENT/DELETION IN OBJECT CLAUSE MAD E AS PER THE PROVISIONS OF SECTION 12 AND 12A OF SOCIETI ES REGISTRATION ACT,1860. SD/- ADDITIONAL REGISTRAR OF SOCIETIES, MOGA DATED : 06.07.2011 21. SIMILARLY, SUCH DOCUMENTARY EVIDENCE HAS BEEN F ILED BY THE ASSESSEE, IN THE CASE OF ACE EDUCATIONAL & 21 CHARITABLE SOCIETY, MOGA, AS IS EVIDENT FROM THE PE RUSAL OF PAPER BOOK PAGE 39. 22. A PERUSAL OF THE RULES & REGULATION OF THE SOCI ETY REVEALS THAT ITS CLAUSE BEARING NO. 19 CONFERS POWE R TO MAKE AMENDMENT IN THE MEMORANDUM, RULES AND REGULATIONS, IN ACCORDANCE WITH SECTION 12 AND 12A OF THE SOCIETIES REGISTRATION ACT, 1860, AS APPLICABLE TO THE STATE OF PUNJAB. THIS IS EVIDENT FROM THE REPRODUCTION OF THE SAID C LAUSE (19). THE SAID CLAUSE IS REPRODUCED HEREUNDER : 19 AMENDMENT ANY AMENDMENT IN MEMORANDUM, RULES & REGULATIONS WILL BE CARRIED OUT IN ACCORDANCE WITH SECTION 12 AND 12A OF THE SOCIETIES REGISTRATION AC T, 1860 AS APPLICABLE TO THE STATE OF PUNJAB. 23. THE LD. 'AR' PLACED RELIANCE, ON VARIOUS DECISI ONS, AS LISTED HEREIN BEFORE, BUT HE DISCUSSED THE DECISION OF THE AMRITSAR BENCH, IN THE CASE OF ST.KABIR EDUCATIONAL TRUST V CIT (2010) 41 DTR (ASR)(TRI) 267; DECISION OF THE A MRITSAR BENCH IN THE CASE OF DCIT V M/S JYOTI PROVINCE SACR ED RANGE HEART CONGREGATION IN ITA NO.534 (ASR)2009 OR DER DATED 21.05.2010; DECISION OF THE HON'BLE SUPREME COURT, IN THE CASE OF ADDL.CIT, GUJRAT V SURAT ART SILK CL OTH MANUFACTURERS ASSOCIATION 121 ITR (1980) 1 (S.C); T HE DECISION OF THE JURISDICTIONAL HIGH COURT, IN THE C ASE OF PINE GROVE INTERNATIONAL CHARITABLE TRUST V UNION OF IND IA & OTHERS (2010) 327 ITR 73 (P&H). IN THE DECISION, I N THE CASE OF ST.KABIR EDUCATIONAL TRUST (SUPRA), THE SCOPE AN D NATURE OF ENQUIRIES AT THE STAGE OF GRANT OF REGISTRATION HAS BEEN 22 DEFINED. IT HAS BEEN HELD THEREIN THAT THE CIT HAS NO JURISDICTION, TO CONDUCT ENQUIRIES, WHICH FALLS BEY OND THE PALE OF SUCH STATUTORY PRESCRIPTIONS. IT WAS HELD THEREIN THAT THE STATUTORY CONDITIONS PRESCRIBED FOR ELIGIB ILITY OF EXEMPTION U/S 11 & 12 ARE NOT TO BE LOOKED INTO, BY THE CIT WHILE CONSIDERING A CASE U/S 12AA FOR THE PURPOSE O F GRANTING REGISTRATION. IN THE PRESENT CASE, THE CI T HAS FOCUSED ON THE DELETED AND UNIMPLEMENTED OBJECT CLA USE MARKED AT T, IGNORING THE ACTUAL ACTIVITIES CONDU CTED BY THE ASSESSEE. 24. THE DECISION RELIED UPON BY THE ASSESSEE, IN TH E CASE OF M/S JYOTI PROVINCE SACRED RANGE HEART CONGREGATION (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE, AS THE FIRST APPELLATE AUTHORITY, DEALT WITH EXEMPTION U/S 11 IN THIS CASE. WE ARE DEALING WITH A CASE OF GRANT OF REGIS TRATION U/S 12AA OF THE ACT. THE GRANTING OF EXEMPTION U/S 11 IS DIFFERENT AND DISTINCT VIS--VIS THE GRANT OF REGIS TRATION U/S 12AA OF THE ACT. 25. THE ASSESSEE RELIED ON THE DECISION, IN THE CAS E OF PINEGROVE INTERNATIONAL CHARITABLE TRUST V UNION OF INDIA (SUPRA), THE HON'BLE PUNJAB & HARYANA HIGH COURT WH ERE IT WAS HELD AS UNDER: EVEN AFTER THE NEW DISPENSATION FROM APRIL 1,1999, THE TEST OF PRE-DOMINANT OBJECT OF THE ACTIVITY CONTINU ES TO APPLY AS UNDER SECTION 1-(22) OF THE ACT. AS LONG AS AN INSTITUTION EXISTS SOLELY FOR EDUCATIONAL PURPOSES, IT WOULD QUALIFY FOR GRANT OF EXEMPTION U/S 10(23C)(VI ) OF THE ACT. MERELY BECAUSE PROFITS HAVE RESULTED FROM THE 23 ACTIVITY OF IMPARTING EDUCATION, THAT WOULD NOT CHA NGE THE CHARACTER OF THE INSTITUTION EXISTING SOLELY FO R EDUCATIONAL PURPOSE. AT THE INITIAL STAGE, WHEN THE APPLICATION FOR EXEM PTION IS FILED BY AN EDUCATIONAL INSTITUTION, THE SCOPE O F INQUIRY IS RESTRICTED ONLY TO ASCERTAINING THE GENUINENESS OF THE ACTIVITIES OF SUCH AN INSTITUTIO N. SUCH AN INQUIRY MAY EVEN EXTEND TO THE EXAMINATION OF ACCOUNTS OF THE INSTITUTION, APPLICATION OF ITS INC OME TO THE OBJECT AND PURPOSES OF EDUCATION AND THE OTHER COGNATE ASPECTS. ONCE ON THE BASIS OF GENUINENESS O F THE ACTIVITIES OF AN EDUCATIONAL INSTITUTION APPROV AL IS GRANTED FOR EXEMPTION THE WORDS NOT FOR THE PURPOSES OF PROFIT ACCOMPAN YING THE WORDS EXISTING SOLELY FOR EDUCATIONAL PURPOSES HAVE TO BE READ AND INTERPRETED IN VIEW OF THIRD PR OVISO TO SECTION 10(23C)(VI). 26. THE ASSESSEE RELIED ON THE DECISION IN THE CASE OF ADDL. CIT GUJRAT V SURAT ART SILK CLOTH MANUFACTURERS ASS OCIATION (SUPRA). THE HON'BLE SUPREME COURT HAS HELD AS UND ER : (II) THE REQUIREMENT OF S. 2(15) IS SATISFIED WHER E THERE IS EITHER A TOTAL ABSENCE OF THE PURPOSE OF PROFIT- MAKING OR IT IS SO INSIGNIFICANT COMPARED TO THE PURPOSE O F ADVANCEMENT OF THE OBJECT OF GENERAL PUBLIC UTILITY THAT THE DOMINATING ROLE OF THE LATTER RENDERS THE FORME R UNWORTHY OF ACCOUNT. IF THE PROFIT MAKING PURPOSE HOLDS A DOMINATING ROLE OR EVEN CONSTITUTES AN EQUAL COMPONENT WITH THE PURPOSE OF ADVANCEMENT OF THE GENERAL PUBLIC UTILITY, THEN CLEARLY THE DEFINITION IN S. 2(15) IS NOT SATISFIED. (III) IF THE PURPOSE IS CHARITABLE IN REALITY, THE MODE ADOPTED MUST BE ONE WHICH IS DIRECTED TO CARRYING O UT THE CHARITABLE PURPOSE. IT WOULD INCLUDE A BUSINESS 24 ENGAGED IN FOR CARRYING OUT THE CHARITABLE PURPOSE OF THE TRUST OR INSTITUTION. THE CARRYING ON OF SUCH A BU SINESS DOES NOT DETRACT FROM THE PURPOSE WHICH PERMEATES I T, THE END RESULT OF THE BUSINESS ACTIVITY BEING THE EFFECTUATION OF THE CHARITABLE PURPOSE. (IV) THE REAL QUESTION WHETHER A TRUST IS CREATED OR AN INSTITUTION IS ESTABLISHED FOR A CHARITABLE PURPOSE FAILS TO BE DETERMINED BY REFERENCE TO THE REAL PURPOSE O F THE TRUST OR THE INSTITUTION AND NOT BY THE CIRCUMSTANC E THAT THE INCOME DERIVED CAN BE MEASURED BY STANDARDS USUALLY APPLICABLE TO A COMMERCIAL ACTIVITY. THE QUANTUM OF INCOME IS NO TEST IN ITSELF. IT MAY BE T HE RESULT OF AN ACTIVITY PERMISSIBLE UNDER A TRULY CHA RITABLE PURPOSE FOR A PROFITABLE ACTIVITY IN WORKING OUT TH E CHARITABLE PURPOSE IS NOT EXCLUDED. 27. THE DECISION OF THE HON'BLE SUPREME COURT, IS APPLICABLE TO THE EXTENT OF CHARITABLE OBJECT OF THE ASSESSEE. 28. IN VIEW OF THE ABOVE LEGAL AND FACTUAL-DISCUSSI ONS, IT IS EVIDENT THAT THE REAL INTENTION OF THE ASSESSEE APP ELLANT IS DISCERNIBLE, FROM THE NATURE OF ACTIVITIES UNDERTAK EN BY IT, IN PURSUANCE OF THE CHARITABLE OBJECT OF IMPARTING EDUCATION. THIS INTENTION HAS NOT BEEN IN DISPUTE AND DOUBT. THE OBJECT CLAUSE MARKED AT T HAS SINCE B EEN DELETED IN ACCORDANCE WITH SECTION 12 & 12A OF THE SOCIETIES REGISTRATION ACT, 1860, AS IS APPLICABLE TO THE STA TE OF PUNJAB. THIS FACTUM OF DELETION HAS BEEN DULY RECO RDED BY THE COMPETENT AUTHORITY IN CERTIFICATE OF FILING DA TED 6.7.2011, REPRODUCED IN THE FOREGOING PARA OF THIS ORDER. THE SINGLE NON-OPERATIVE AND DELETED OBJECT MARKED AS T CANNOT OBLITERATE THE WHOLE RANGE OF CHARITABLE OBJ ECTS AND 25 THE ACTUAL ACTIVITIES UNDERTAKEN BY THE ASSESSEE AP PELLANTS, IN PURSUANCE OF SUCH OBJECTS. 28(1) IN THE LIGHT OF THE ABOVE DISCUSSIONS, FINDI NGS OF THE LD. CIT CANNOT BE SUSTAINED. CONSEQUENTLY, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE CIT AND DIRECT THA T REGISTRATION APPLIED FOR BY THE ASSESSEE APPELLANTS U/S 12AA OF THE ACT BE GRANTED. 28(2) IN VIEW OF THE ABOVE FINDING, THE FIRST 8 GR OUNDS OF APPEAL, BEING INTER-CONNECTED, AND REVOLVE AROUND T HE SINGLE ISSUE OF DECLINING OF THE GRANT OF REGISTRATION, BY THE CIT, STAND DISPOSED OF. 28(3) GROUND NO.9, RAISED BY THE ASSESSEE APPELLAN T PERTAINS TO THE CONTENTION THAT CIT DID NOT APPRECI ATE THAT VOLUNTARY CONTRIBUTION FORMING PART OF THE CORPUS O F THE ASSESSEE ARE NOT TAXABLE INCOME AS PER INCOME TAX L AW AND SUCH REGISTRATION OF THE SOCIETY SHOULD BE ALLOWED AS CLAIMED. WE ARE OF THE CONSIDERED OPINION THAT THE VOLUNTARY CONTRIBUTION, FORMING PART OF THE CORPUS OF THE ASSESSEE IS NOT WITHIN THE CONTEMPLATION OF SECTION 12A R.W.S. 12AA OF THE ACT. SUCH SUBJECT MATTER IS TO B E CONSIDERED AND ADJUDICATED BY THE AO, AT THE TIME O F FRAMING THE ASSESSMENT. THE CIT, WHILE CONSIDERING REGISTRATION U/S 12AA OF THE ACT IS NOT COMPETENT, TO ADJUDICATE SUCH ISSUE AND SUCH ISSUE DOESNT ARISE FROM THE IMPUGNED ORDER PASSED BY THE CIT. CONSEQUENTLY, TH E ISSUE RAISED BY THE ASSESSEE, IN THIS GROUND OF APPEAL IS DISMISSED. 26 29. GROUND NO., 10 RAISED BY THE ASSESSEE IS GENERA L IN NATURE AND, HENCE, NEEDS NO SEPARATE ADJUDICATION. 30. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DEC.,2011. SD/- SD/- (SUSHMA CHOWLA (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMB ER DATED: 29 TH DEC.,2011. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH