M/s Krupanidhi Educational Trust, Bangalore V. DIT, Bangalore

ITA 86/BANG/2012

• Counselvise Citation: 8621114 RSA 2012
• Duration Of Justice: 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 23-01-2012
• Court: TRIBUNAL
• Department Lawyers: FARHAT HUSSAIN QURESHI CITII
• Assessee Lawyers: S VENKATESAN
• Keywords: Charitable institution; Opportunity of being heard; Cancellation of registration
• Section: 12A; 12AA; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRI BNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.86(BNG.)/2012 (ASSESSMENT YEAR : NA ) M/S KRUPANIDHI EDUCATIONAL TRUST, THE DIRECTOR OF INCOME TAX (EXMP.), CHIKKABELANDUR, CIRCL E-1(1), CARMELARAM POST, BANGAL ORE VARTHUR HOBLI, OFF: SARJAPUR ROAD, BANGALORE-560 035 PAN NO. AAATK1211R VS APPELLANT RESPONDENT ASSESSEE BY : SHRI S. VENKATESAN, CA REVENUE BY : SHRI FARHAT HUSSAIN QURESHI, CIT-II DATE OF HEARING : 0 5-09-2012 DATE OF PRONOUNCEMENT : 14- 09-2012 O R D E R PER SHRI N.V.VASUDEVAN, JM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 23- 11- 2011OF DIT(E), BANGALORE, PASSED U/S 12AA(3) OF THE IT ACT, 1961, WHEREBY THE REGISTRATION GRANTED TO THE ASSES SEE U/S 12A OF ITA NO.86(B)/2012 2 THE ACT WAS CANCELLED BY THE DIT( E), BANGALORE, WI TH EFFECT FROM ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE IS A CHARITABLE TRUST. IT WAS GRA NTED REGISTRATION U/S 12A OF THE ACT ON 02-06-1986. THERE WAS A SUR VEY CONDUCTED IN THE PREMISES OF THE ASSESSEE ON 16-09-2011. ACC ORDING TO THE DIT(E) THE SURVEY REVEALED THAT THE ASSESSEE WAS RU NNING THE EDUCATIONAL INSTITUTION ON COMMERCIAL BASIS AND ALS O VIOLATED PROVISIONS OF SEC.13(1)(C ) OF THE IT ACT, 1961. F URTHER, THE DIT(E) NOTICED THAT THE ASSESSEE HAD CARRIED OUT AMENDMENT TO THE TRUST DEED WITHOUT PRIOR APPROVAL OF THE DEPARTMENT. FOR THE ABOVE REASONS, THE DIT(E) WANTED TO CANCEL THE REGISTRATI ON ALREADY GRANTED TO THE ASSESSEE U/S 12A OF THE ACT. ACCORDINGLY, T HE DIT(E) ISSUED A SHOW CAUSE NOTICE. 3. ONE OF THE COMPLAINTS IN THE SHOW CAUSE NOTICE WAS THAT THE ASSESSEE WAS PAYING COMMISSION TO PERSONS WHO SOLIC IT STUDENTS TO JOIN THE ASSESSEES INSTITUTION FOR STUDIES. IN RE PLY TO THE ABOVE ALLEGATION IN THE SHOW CAUSE NOTICE, THE ASSESSEE S UBMITTED THAT THE ASSESSEE PAID COMMISSION TO SEVERAL PERSONS WHO BRO UGHT STUDENTS FROM ACROSS THE COUNTRY FOR STUDYING IN THE ASSESSE ES INSTITUTION. THE ASSESSEE SUBMITTED THAT THE PAYMENT OF SUCH CON SIDERATION WILL NOT IN ANY WAY AFFECT THE CHARITABLE OBJECTIVE OF E DUCATION, WHICH THE ASSESSEE WAS PURSUING. THE ASSESSEE ALSO POINTED O UT THAT THE PAYMENT IN QUESTION WHICH IS BEING CALLED COMMISSIO N WAS IN FACT REIMBURSEMENT OF EXPENSES INCURRED BY THE RECIPIENT FOR TRAVELING DIFFERENT PART OF THE COUNTRY AND EDUCATE PEOPLE TH E BENEFITS OF ITA NO.86(B)/2012 3 GETTING EDUCATION FROM THE ASSESSEES INSTITUTION W HICH HAS GOOD INFRASTRUCTURE FACILITIES. 4. ANOTHER COMPLAINT IN THE SHOW CAUSE NOTICE WAS THAT THE ASSESSEE WAS GENERATING SURPLUS FUNDS. WITH THOSE FUNDS THE ASSESSEE WAS PURCHASING PROPERTIES TO ESTABLISH INT ERNATIONAL SCHOOL. THE ASSESSEE HAD ALSO PURCHASED A BMW CAR. THE ASSE SSEE SUBMITTED THAT THE ABOVE ACTIVITIES REINFORCE THE F ACT THAT THE ASSESSEE WAS PURSUING EDUCATION WHICH WAS A CHARITA BLE PURPOSE. ON THE PURCHASE OF A BMW CAR THE ASSESSEE SUBMITTED THAT THE CAR WAS USED BY THE TRUSTEES FOR RECEIVING IMPORTANT DI GNITARIES AND WAS A NECESSARY STATUS SYMBOL TO CONVINCE PARENTS, STUD ENTS OF THE ABILITIES AND ACHIEVEMENTS OF THE ASSESSEE. 5. ANOTHER ALLEGATION IN THE SHOW CAUSE NOTICE WAS THAT THE ASSESSEE WAS AVAILING LOANS IN CASH (FROM SINDHI FINANCERS) AND WAS REPAYING LOANS IN CASH. THE ASSESSEE SUBMITTED THAT IT DID NOT AVAIL ANY LOAN FROM SINDHI FINANCIERS AND THAT WHATEVER WERE THE B ORROWINGS BY THE ASSESSEE, WERE MADE BY PERSONS DULY AUTHORIZED BY THE TRUST DEED AND AFTER PROPER DOCUMENTATION. THE ASSESSEE E XPLAINED TO THE DIT(E.) THAT CANCELLED CHEQUES THAT WERE FOUND DURI NG THE COURSE OF SURVEY CANNOT BE A BASIS TO TAKE ANY ADVERSE CONCLU SION AGAINST THE ASSESSEE. THE ASSESSEE ALSO GAVE DETAILS OF THE CA NCELLED CHEQUES AND THE REASONS FOR THE CANCELLATION. 6. ONE OF THE COMPLAINTS IN THE SHOW CAUSE NOTICE WAS THAT THE ACCOUNTS OF THE ASSESSEE WERE NOT MAINTAINED ON A R EGULAR BASIS. ITA NO.86(B)/2012 4 ON THIS ALLEGATION, THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS MIGRATING FROM A PARTICULAR SOFTWARE TO ANOTHER SOF TWARE NAMELY TALLY ACCOUNTING AND BECAUSE OF THIS MIGRATION THE ACCOUN TS WERE NOT UP TO DATE. THE ASSESSEE SUBMITTED THAT AFTER MIGRATI ON THE ACCOUNTS WERE BEING MAINTAINED REGULARLY. 7. ANOTHER COMPLAINT IN THE SHOW CAUSE NOTICE WAS THAT THERE WAS VIOLATION OF SEC.13(1)(C ) OF THE IT ACT. ON SUCH ALLEGATION, THE ASSESSEE SUBMITTED THAT THE TRUSTEES WERE PROPERLY REMUNERATED FOR THE SERVICES RENDERED AND THERE WAS NO VIOLATION OF PROVISIONS OF SEC.13(1)(C ) OF THE IT ACT. 8. YET ANOTHER COMPLAINT IN THE SHOW CAUSE NOTICE WAS THAT THE ORIGINAL TRUST DEED DATED 10-01-1985 WAS AMENDED BY A DEED DATED 07-03-2005. THE ASSESSEE SUBMITTED THAT THE SAID A MENDMENT DOES NOT IN ANY WAY DILUTE THE CHARITABLE NATURE OF THE ASSESSEE. THE ASSESSEE POINTED OUT THAT CERTAIN OBJECTS WHICH WER E NOT SECULAR IN CHARACTER IN THE ORIGINAL TRUST DEED WERE DELETED. THE ASSESSEE THUS, SUBMITTED THAT THIS ASPECT WILL HAVE NO IMPACT WHAT SOEVER ON THE CHARITABLE NATURE OF THE ASSESSEE. 9. THE ASSESSEE FURTHER SUBMITTED THAT IT WAS ORIG INALLY GRANTED REGISTRATION AFTER DUE SATISFACTION THAT THE ASSESS EE TRUST WAS ESTABLISHED FOR CHARITABLE PURPOSE AND THAT THERE W AS NO CHANGE WHATSOEVER. THE ASSESSEEE ALSO POINTED OUT U/S 12A A(3) OF THE ACT, 1961, REGISTRATION ALREADY GRANTED CAN BE CANCELLED ONLY IF ACTIVITIES OF THE ASSESSEE ARE SHOWN TO BE NOT GENUINE OR ARE NOT BEING ITA NO.86(B)/2012 5 CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE T RUST. THE ASSESSEE POINTED OUT THAT NEITHER OF THE ABOVE CONDITIONS EX ISTED IN THE CASE OF THE ASSESSEE WARRANTING INVOCATION OF PROVISIONS OF SEC.12AA(3) OF THE IT ACT. THE ASSESSEE SUBMITTED THAT GENERATIN G SURPLUS DOES NOT IN ANY WAY MAKE THE ASSESSEE NON-CHARITABLE. T HE ASSESSEE ALSO POINTED OUT THAT THE ELEEMOSYNARY ELEMENT IS NOT ES SENTIAL ELEMENT OF CHARITY. IT WAS SUBMITTED THAT IT IS NOT A NEC ESSARY ELEMENT IN A CHARITABLE PURPOSE THAT IT SHOULD PROVIDE SOMETHING FOR NOTHING OR FOR LESS THAN IT COSTS OR FOR LESS THAN THE ORDINAR Y PRICE. IT WAS SUBMITTED THAT SURPLUS GENERATED, IF IT IS HELD FOR CHARITABLE PURPOSE AND APPLIED FOR CHARITABLE PURPOSE OF THE ASSESSE, AND THEN THE ASSESSEE HAS TO BE CONSIDERED AS EXISTING FOR A CHA RITABLE PURPOSE. THE ASSESSEE ALSO POINTED OUT THAT IT IS NOT POSSIB LE TO REVIEW THE CHARITABLE NATURE OF A ORGANIZATION IN A PROCEEDING U/S 12AA(3) OF THE ACT FOR CANCELLATION OF REGISTRATION ALREADY GR ANTED. IN THIS REGARD, THE ASSESSEE DREW ATTENTION TO THE DECISION S OF THE LUCKNOW BENCH OF THE TRIBUNAL IN THE CASE OF BHARAT JYOTI V S CIT (2011) 63 DTR (LUCK.)(TRIB.) 409 AND MAULANA MOHAMMED ALI JAU HAR TRUST 63 DTR 416. FURTHER, RELIANCE WAS ALSO PLACED ON TH E DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF DIT VS VA LLAL MD SESHADRI TRUST 46(I) ITCL 360(MAD.)-HC, WHEREIN IT WAS HELD THAT THE CANCELLATION OF REGISTRATION U/S 12AA(3) CAN BE DON E ONLY AFTER A FINDING THAT THE TRUST WAS NOT GENUINE. 10. THE DIT(E) HOWEVER, DID NOT AGREE WITH THE SUB MISSIONS MADE ON BEHALF OF THE ASSESSEE. HE REFERRED TO THE DECI SION OF THE ITAT ITA NO.86(B)/2012 6 CHENNAI BENCH IN THE CASE OF M/S RAJA SIR ANNAMALAI CHETTRIAR FOUNDATION S DIT(E) 40 SOT 502(CHENNAI) WHEREIN T HE CHENNAI BENCH OF THE TRIBUNAL UPHELD THE ORDER OF DIT(E) RE JECTING AN APPLICATION FOR REGISTRATION U/S 12AA OF THE IT ACT , 1961 ON THE GROUND THAT THE EDUCATIONAL INSTITUTION DID NOT GIV E FREE, CONCESSION EDUCATION TO THE DOWNTRODDEN OF THE SOCIETY OR ANY OTHER DESERVING SECTIONS OF THE SOCIETY. THE TRIBUNAL HELD THAT RU NNING OF EDUCATIONAL INSTITUTION BY ITSELF IS NOT A CHARITAB LE PURPOSE. RELYING ON THE AFORESAID DECISION, THE DIT(E) HELD THAT THE ASSESSEE DID NOT EXISTS FOR A CHARITABLE PURPOSE. 11. THE DIT(E) THEREAFTER HELD THAT THE ASSESSEE W AS PAYING COMMISSION FOR DEVELOPING THE BRAND NAME OF THE ASS ESSEE AND FOR BRINGING STUDENTS TO STUDY IN THE ASSESSEES INSTIT UTION. THE DIT(E) THEREFORE, CONCLUDED THAT THE ASSESSEE WAS COMMERCI ALLY EXPLOITING EDUCATION. THE DIT(E) THEREAFTER, REFERRED TO THE D ECISION OF THE UTTARAKHAND HIGH COURT IN THE CASE OF CIT VS NATIO NAL INSTITUTE OF AERONAUTICAL ENGINEERING EDUCATIONAL SOCIETY 315 IT R 428 WHEREIN IT WAS HELD THAT ANY TRADE OR COMMERCE IN THE NAME OF EDUCATION CANNOT BE SAID TO BE FOR CHARITABLE PURPOSE. IT MA Y BE MENTIONED THAT THE AFORESAID DECISION IS AGAIN IS IN THE CONT EXT OF GRANT OF REGISTRATION U/S 12A OF THE IT ACT. THE DIT(E) W AS OF THE VIEW THAT THE FACT THAT THE SURPLUS USED FOR ESTABLISHING EDU CATIONAL INSTITUTION WILL NOT BE SUFFICIENT TO HOLD THAT THE ASSESSEE WAS ENGAGED IN THE CHARITABLE ACTIVITIES, BECAUSE THE A SSESSEE WAS RUNNING THE EDUCATIONAL INSTITUTION ON COMMERCIAL B ASIS. THE ITA NO.86(B)/2012 7 DIT(E) ALSO EXPRESSED HIS OPINION THAT THE PURCHASE OF BMW CAR WAS NOT WARRANTED AND THAT EVERY PAISE COLLECTED SHOULD BE OF BEST USE AND NOT FOR INDIVIDUAL COMFORTS. THE DIT(E) ALSO GAVE FINDINGS WITH REGARD TO VIOLATION OF SEC.13(1) (C ) OF THE ACT, B ECAUSE THE SALARY PAID TO SMT.GEETHA NAGPAL AND SHRI SURESH NAGPAL OF THE TRUST WERE EXCESSIVE AND UNREASONABLE. 12. WITH REGARD TO THE AMENDMENT OF TRUST DEED, TH E DIT(E) WAS OF THE VIEW THAT THE ASSESSEE OUGHT TO HAVE INFORMED T HE DEPARTMENT AND OUGHT TO HAVE GOT THEIR PERMISSION, BEFORE CARR YING OUT AMENDMENT TO THE TRUST DEED. IN THIS REGARD, THE L EARNED DIT(E) REFERRED O THE DECISION OF THE HONBLE ALLAHABAD HI GH COURT IN THE CASE OF ALLAHABAD AGRICULTURAL INSTITUTE VS UNION OF INDIA, 163 TAXMAN 67(ALHD.) WHEREIN IT WAS HELD WHERE THE OBJE CTIVES OF THE TRUST ON THE BASIS OF WHICH THE REGISTRATION WAS OR IGINALLY GRANTED OR ACTED AFTER SUCH GRANT OF REGISTRATION WHEREBY THE VERY NATURE OF INSTITUTION CHANGES ITS CHARACTER, THE REVOCATION O F REGISTRATION GRANTED BY INVOKING SEC.12AA(3) OF THE ACT WAS VALI D. FOLLOWING THE AFORESAID DECISION, THE DIT(E) WAS OF THE VIEW THAT THE ASSESSEE HAD ALTERED ITS OBJECTIVES WITHOUT INTIMATION TO THE DE PARTMENT AND EVEN ON THIS GROUND THE REGISTRATION WAS LIABLE TO BE CA NCELLED. FOR ALL THE ABOVE REASONS, THE DIT(E) CANCELLED THE REGISTRATIO N ALREADY GRANTED TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE DI T(E), THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNA L. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEAR NED COUNSEL FOR THE ASSESSEE REITERATED THE STAND OF THE ASSESSEE A S REFLECTED IN THE ITA NO.86(B)/2012 8 SUBMISSIONS MADE BEFORE THE DIT(E). THE LEARNED DR REITERATED THE STAND OF THE REVENUE AS REFLECTED IN THE ORDER OF T HE DIT(E). 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE POWER TO CANCEL REGISTRATION ALREADY GRANTED U/S.12AA OF THE ACT IS CONTAINED IN SEC.12AA (3) OF THE ACT AND IT READS AS FOLLOWS: (3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANT ED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) AND SUBSEQUENTL Y THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SU CH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIE D OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS TH E 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 PASSED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A R EASONABLE OPPORTUNITY OF BEING HEARD. 15. A PERUSAL OF THE ABOVE PROVISIONS SHOWS THAT T HE POWER TO CANCEL REGISTRATION ALREADY GRANTED CAN BE DONE IN TWO SIT UATIONS; (A) SATISFACTION OF THE COMMISSIONER THAT THE ACTIV ITIES OF THE TRUST OR INSTITUTION ARE NOT GENUINE (B) SATISFACTION OF THE COMMISSIONER THAT THE ACTIV ITIES OF THE TRUST OR INSTITUTION ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION. 16. IN THE IMPUGNED ORDER THERE IS NO FINDING ON T HE SATISFACTION OF ANY OF THE ABOVE TWO CONDITIONS. THE OBJECTS OF THE APPEL LANT ARE CHARITABLE AND ON THIS ASPECT THERE IS NO DISPUTE OR DOUBT. THERE IS NO FINDING THAT THE OBJECTS OF THE TRUST AFTER THE AMENDMENT OF THE TRUST DEED ARE NOT CHARITABLE. WE HAVE PERUSED THE AMENDMENT TO THE TRUST DEED AND AR E OF THE VIEW THAT THE CHARITABLE NATURE OF THE TRUST REMAINS INTACT. A M ERE FINDING THAT THE ITA NO.86(B)/2012 9 OBJECTS OF THE APPELLANT HAVE BEEN ALTERED WITHOUT THE CONSENT OF THE DEPARTMENT WOULD NOT BE SUFFICIENT TO EXERCISE THE POWER U/S.12AA (3) OF THE ACT WITHOUT GIVING A FINDING THAT THE APPELLANTS O BJECTS ARE NO LONGER CHARITABLE. ON THIS SCORE THE IMPUGNED ORDER IS LI ABLE TO SET ASIDE. 17. APART FROM THE ABOVE, WE ALSO AGREE WITH THE S UBMISSION ON BEHALF OF THE APPELLANT THAT THE OBJECTS OF THE APPELLANT EVE N AFTER THE AMENDMENT OF THE TRUST DEED CONTINUE TO BE CHARITABLE. THE AMEN DMENT IS A MERE POWER CONFERRED ON THE TRUST OR OTHER INSTITUTION. IT HA S TO BE SHOWN ON FACTS THAT ANY AMENDMENT TO THE OBJECTS CLAUSE HAS RESULTED IN THE TRUST OR INSTITUTION BECOMING NON CHARITABLE IN CHARACTER. THERE IS NO SUCH FINDING IN THE IMPUGNED ORDER AND EVEN ON THIS GROUND THE IMPUGNED ORDER IS LIABLE TO BE SET ASIDE. THE DECISION OF THE HONBLE ALLAHA BAD HIGH COURT IN OUR VIEW IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. AS RIGHTLY CONTENDED ON BEHALF OF THE APPELLANT IN THAT CASE THERE WAS A DR ASTIC CHANGE OF OBJECTS. THE HONBLE HIGH COURT HAS SPECIFICALLY NOTED THE F AILURE OF THE ASSESSEE IN THAT CASE TO SHOW THAT THE ALTERED OBJECTS AND THE ORIGINAL OBJECTS WERE THE SAME AND THAT THEY WERE CHARITABLE. THE RATIO LAID DOWN IN THE SAID CASE HAS TO BE READ IN THE CONTEXT OF THE ABOVE FACTS OF THE SAID CASE. IN THE CASE OF THE APPELLANT THE OBJECTS CONTINUE TO BE THE SAM E EVEN AFTER AMENDMENT OF THE TRUST DEED AND THEREFORE THE VERY FOUNDATION ON WHICH THE REGISTRATION WAS GRANTED TO THE APPELLANT IS NOT REMOVED. 18. WE ARE ALSO OF THE VIEW THAT NONE OF THE REASO NS GIVEN BY THE DIT(E) IN THE ORDER U/S 12AA(3) CAN BE THE BASIS TO CANCEL THE REGISTRATION ALREADY GRANTED TO THE ASSESSEE. IN THIS REGARD, WE ARE OF THE VIEW THAT THE ASSESSEE WAS ALREADY GRANTED R EGISTRATION U/S ITA NO.86(B)/2012 10 12A OF THE ACT, 1961. IT ONLY GOES TO SHOW THAT THE REVENUE WAS SATISFIED THAT THE OBJECTS OF THE ASSESSEE TRUST WE RE CHARITABLE. THE QUESTION IS WHETHER THE AMENDMENT OF THE TRUST DEED IN ANY WAY MAKES THE ASSESSEE NON-CHARITABLE. WE HAVE PERUSED THE DEED OF AMENDMENT OF THE TRUST DATED 07-03-2005. THE AMEN DMENT TALKS ABOUT SUBSTITUTION OF SUB-CLAUSE-A OF CLAUSE-3 OF O RIGINAL DEED. THE SUBSTITUTED CLAUSE REFERS TO IMPARTING EDUCATION IN CLUDING TECHNICAL AND MEDICAL AMONG THE MASSES IN ALL THE FIELDS, SUB JECTS, CULTURE AND LITERATURE, IRRESPECTIVE OF RELIGION, CASTE OR CREED. SIMILARLY, SUB- CLAUSE-D, OF CLAUSE-3 WAS SUBSTITUTED WHEREBY SCHOL ARSHIP TO THE POOR AND NEEDY AND MERITORIOUS STUDENTS HAVE TO BE AWARDED. SIMILARLY, SUB-CLAUSE ( E) OF CLAUSE-3 OF ORIGINAL DEED WAS AMENDED TO MAKE THE BENEFITS OF THE TRUST OPEN TO ALL CASTE, C REED AND RELIGION. WE FAIL TO SEE HOW THE ABOVE AMENDMENT WILL MAKE TH E ASSESSEE NOT EXISTING FOR THE PURPOSE OF EDUCATION OR NOT EXISTI NG FOR CHARITABLE PURPOSES. AS ALREADY MENTIONED IN THE DECISION OF T HE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF IN THE CASE OF ALLAHABAD AGRICULTURAL INSTITUTE VS UNION OF INDIA, 163 TAXM AN 67(ALHD.) SUPRA THERE WAS A TOTAL CHANGE OF THE OBJECTIVES OF THE CHARITABLE INSTITUTIONS, IT WAS IN THOSE CIRCUMSTANCES, THAT T HE HONBLE ALLAHABAD HIGH COURT HELD THAT IT WAS NOT IN A POSI TION TO INTERFERE IN EXERCISE OF DISCRETIONARY JURISDICTION UNDER ARTICL E 226 OF THE CONSTITUTION OF INDIA FOR QUASHING THE ORDER U/S 12 AA(3) OF THE IT ACT, 1961. IN THE PRESENT CASE, AS WE HAVE ALREADY OBSERVED THAT THERE WAS NO WHOLESOME CHANGE IN THE OBJECTIVE OF T HE ASSESSEE. WE ARE ALSO OF THE VIEW THAT THE DECISION OF THE CHENN AI BENCH OF THE ITA NO.86(B)/2012 11 TRIBUNAL AND THE HONBLE UTTARAKHAND HIGH COURT ARE THE CASES WHERE THE CHALLENGE WAS TO REFUSAL TO GRANT REGISTR ATION U/S 12A OF THE ACT. IN THE PRESENT CASE, AS WE HAVE ALREADY SEEN, THE REVENUE WAS FULLY SATISFIED WITH THE OBJECTS OF THE ASSESSE E WAS CHARITABLE AND REGISTRATION U/S 12A OF THE ACT WAS ALREADY GRA NTED. IN PROCEEDINGS U/S 12AA(3) IT WAS NOT OPEN TO THE REVE NUE TO REVIEW ITS EARLIER REGISTRATION GRANTED U/S 12A OF THE ACT. WE ARE ALSO OF THE VIEW THAT THE COMPLAINT WITH REGARD TO VIOLATION OF SEC.13(1)(C ) OF THE ACT ARE NOT RELEVANT FOR THE PURPOSE OF THE PROCEED INGS U/S 12AA(3) OF THE ACT AND AS RIGHTLY SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US, IT WAS OPEN TO THE AO TO EXAMIN E ANY SUCH VIOLATION IN THE ASSESSMENT PROCEEDINGS FOR THE REL EVANT ASSESSMENT YEAR OF THE ASSESSEE. 19. WE ARE ALSO OF THE VIEW THAT THE OTHER REASONS GIVEN BY THE DIT(E) IN THE ORDER U/S 12AA(3) OF THE ACT, DO NOT MAKE OUT ANY CASE, WHICH CAN SHOW THE ACTIVITIES OF THE ASSESSEE ARE N OT GENUINE OR THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT BEING CARRIE D OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION. THE FACT THAT THE ASSESSEE WAS PAYING COMMISSION TO PERSONS WHO SOLIC IT STUDENTS FOR STUDYING IN THE ASSESSEES INSTITUTION CANNOT LEAD TO THE CONCLUSION THAT THE ASSESSEE IS NOT IMPARTING EDUCATION. SIMI LARLY PURCHASE OF A BMW CAR, BORROWING OF LOANS FROM SINDHI FINANCIER S, NON MAINTENANCE OF REGULAR BOOKS OF ACCOUNTS, VIOLATION S OF PROVISIONS OF SEC.13(1)( C) OF THE ACT IN AS MUCH AS THE TRUSTEES WERE PAID ENORMOUS SALARY ARE ALL BY WAY OF PASSING REFERENCE HAVING NO ITA NO.86(B)/2012 12 RELEVANCE TO WHETHER OR NOT THE ASSESSEE WAS PURSUI NG EDUCATION AS ITS MAIN OBJECT. THERE ARE NO FACTS BROUGHT OUT IN THE IMPUGNED ORDER REGARDING THE GENUINENESS OF THE ACTIVITIES O F THE TRUST OR AS TO WHETHER THE OBJECT OF EDUCATION WAS NOT PURSUED BY THE ASSESSEE AS ITS MAIN AND PREDOMINANT ACTIVITY. IN FACT, THE O RDER OF THE DIT(E) DOES NOT ANYWHERE SHOW THAT THE ASSESSEE IS NOT IMP ARTING EDUCATION. THE COMPLAINT OF THE REVENUE SEEMS TO B E THAT EDUCATION IS BEING IMPARTED BUT ON COMMERCIAL LINES. THE DEF INITION OF CHARITABLE PURPOSE IS GIVEN IN SEC.2(15) OF THE ACT . THE SAME REFERS TO RELIEF TO POOR, MEDICAL RELIEF, EDUCATION AND T HE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE PROVISO TO SEC.2(15) OF THE ACT INTRODUCED BY THE FINANCE ACT, 2008 W.E. F. 1.4.2008 REGARDING EXCLUDING ORGANIZATIONS WHERE THERE IS PR OFIT MOTIVE FROM THE DEFINITION OF CHARITABLE PURPOSE APPLIES ONLY T O THE CATEGORY OF TRUSTS WHICH HAS AS ITS OBJECT, THE OBJECT OF ADVA NCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. IT DOES N OT APPLY TO THE OTHER CATEGORIES OF CHARITABLE PURPOSE VIZ., RELIEF TO P OOR, EDUCATION AND MEDICAL RELIEF. AS RIGHTLY POINTED OUT BY THE LE ARNED COUNSEL FOR THE ASSESSEE, ELEEMOSYNARY ELEMENT IS NOT ESSENTIAL ELE MENT OF CHARITY. IT IS ALSO NOT A NECESSARY ELEMENT IN A CHARITABLE PURPOSE THAT IT SHOULD PROVIDE SOMETHING FOR NOTHING OR FOR LESS TH AN IT COSTS OR FOR LESS THAN THE ORDINARY PRICE. THE SURPLUS GENERATE D, IF IT IS HELD FOR CHARITABLE PURPOSE AND APPLIED FOR CHARITABLE PURPO SE OF THE ASSESSE, AND THEN THE ASSESSEE HAS TO BE CONSIDERED AS EXIST ING FOR A CHARITABLE PURPOSE. THERE ARE ENOUGH SAFEGUARDS PROVIDED IN SEC.12 AND 13 OF THE ACT TO ENSURE THAT PERSONAL BE NEFITS OF THE ITA NO.86(B)/2012 13 PERSONS IN CONTROL OF THE TRUSTS ARE NOT TREATED AS HAVING APPLIED FOR CHARITABLE PURPOSE AND FOR BEING BROUGHT TO TAX LIK E PROVISIONS OF SEC.13(1) (C ) OF THE ACT WHICH RESTRICTS UNREASONA BLE AND EXCESSIVE PAYMENTS TO CERTAIN CATEGORY OF PERSONS CONNECTED W ITH A TRUST OR OTHER INSTITUTION. IN SUCH CIRCUMSTANCES, WE ARE O F THE VIEW, THAT THE ORDER U/S 12AA(3) OF THE ACT, CANNOT BE SUSTAINED. 20. FOR THE REASONS GIVEN ABOVE, WE QUASH THE IMP UGNED ORDER U/S 12AA(3) OF THE ACT AND ALLOW THE APPEAL. 21. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 14 TH SEPT., 2012. SD/- SD/- (JASON P BOAZ) (N.V.VASUD EVAN) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE: D A T E D : 14-09-2012 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-IV, BANGALORE. 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE (1+1) BY ORDER SR. PRIVATE SECRETARY ITAT, BANGALORE ITA NO.86(B)/2012 14