M/s Aashutosh Charitable Trust of Eductional & Medical Sciences, Panchkula V. Commssioner of Income Tax (Exemptions), Chandigarh

ITA 864/CHANDI/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9740 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 02-01-2017
• Assessment Year: misc
• Appeal Filed On: 19-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Keywords: Charitable institution; Question of law; Set aside
• Section: 80G; 12A; 12AA; 43; 48; 13; 153; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 864/CHD/2016 ASSESSMENT YEAR : 2016-17 M/S ASHUTOSH CHARITABLE TRUST OF VS THE CIT (E XEMPTIONS), EDUCATIONAL & MEDICAL SCIENCES, CHANDIGARH. 407/1 OFFICER COLONY, BITNA ROAD, PINJORE (PANCHKULA) HARYANA. PAN: AAETA7868C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJAY JAIN RESPONDENT BY : SHRI RAVI SARANGAL, CIT-DR DATE OF HEARING : 02.01.2017 DATE OF PRONOUNCEMENT : 12.01.2017 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(EXEMPTIONS) CHANDIGARH DATED 31.05.2016 REJECTING THE APPLICATION UNDER SE CTION 12AA OF THE INCOME TAX ACT ON THE FOLLOWING GROUNDS : 1. THAT THE LEARNED CIT(E) HAS WRONGLY PASSED ORDER U/ S 12AA OF THE INCOME TAX ACT, 1961 REFUSING THE GRANT OF REGI STRATION 12AA 2 TO APPELLANT TRUST WHO WAS FORMED MAINLY FOR PURPOS E OF EDUCATIONAL & MEDICAL RELIEF. 2. THE LEARNED CIT(E) HAS ALSO ERRED BY REFUSING REGISTRATION U/S 12AA ON IRRELEVANT GROUNDS & WITHOUT ANY MATERIAL O N RECORD IN RESPECT OF GENUINENESS OF ITS ACTIVITIES OF APPELLANT TRUST . THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD AND DISPOSED OFF. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE FILED APPLICATION FOR GRANT OF REGISTRATION UNDER S ECTION 12AA OF THE INCOME TAX ACT. THE ASSESSEE FURNISHED DETAILS CALLED FOR ON THE MATTER. THE CIT (EXEMPTI ON) NOTED THAT THE TRUST DEED EVIDENCES A DECLARATION F ROM THE CHAIRMAN REGARDING PAYMENT OF RS. 11 LACS FOR T HE PURPOSE OF THE TRUST PROPERTY EVIDENT FROM THE DEED . THE SAME, HOWEVER, HAS NOT BEEN REFLECTED IN THE BANK ACCOUNTS. THE AIMS AND OBJECTIVES OF THE TRUST HAV E BEEN NARRATED IN 21 POINTS BUT MAIN AIM APPARENTLY IS TO START EDUCATIONAL INSTITUTION WHERE COURSE IN ENGINEERING , TECHNICAL, MEDICAL, MANAGEMENT ETC. WILL BE TAUGHT. IN ADDITION, THERE IS A PROPOSAL TO RUN A HOSPITAL ALS O. IN ORDER TO CORROBORATE THE WORK BEING DONE BY THE TRU ST VIS--VIS THE STATED OBJECTIVES, SOME PHOTOGRAPHS H AVE BEEN APPENDED WHEREIN MEDICAL AID IS SHOWN BEING PROVIDED TO PEOPLE. IT IS MENTIONED THE PHOTOGRAPH S PERTAIN TO JUNE, JULY AND OCTOBER,2015. ON INQUIRY , ASSESSEE SUBMITTED THAT VOLUNTARY MEDICAL SERVICES HAVE BEEN PROVIDED TO REDEEM ITS CHARITABLE OBJECTIVES A ND THAT TRUST IS IN THE PROCESS OF OPENING OF A SCHOOL AND 3 HOSPITAL FOR DOWNTRODDEN CLASS. HOWEVER, THE PREDOMINANT PURPOSE OF THE TRUST AT PRESENT SEEMS PURCHASE OF LARGE TRACTS OF LAND OSTENSIBLY WITH TH E AIM TO CONSTRUCT SCHOOL AND HOSPITAL PREMISES. 3. THE LD. CIT ALSO NOTED IN THE IMPUGNED ORDER THA T SUBMISSIONS OF THE ASSESSEE HAVE BEEN EXAMINED AND IT REVEALED THAT ASSESSEE FURNISHED BALANCE SHEET ON 18.10.2015 AND OF 31.03.2016. NO RETURN OF INCOME HAVE BEEN FILED FOR THE PERIOD ENDING 31.03.2016 AS THE SAME WAS NOT DUE. NO PAN NUMBER PROVIDED. IT WAS NOTED THAT BALANCE SHEET FOR THE PART PERIOD WAS PREPARED WITHOUT ANY REASON BECAUSE THERE WAS NO NEED AS PER THE GIVEN PRINCIPLES AS WELL AS REQUIREMENTS OF THE VAR IOUS LAWS TO DRAW A BALANCE SHEET FOR 18.10.2015. IT WA S ALSO NOTED THAT APPARENT EXPLANATION FOR FURNISHING A PA RT BALANCE SHEET APPEARS THAT THE ASSESSEE TRUST WAS O N A SOLE MISSION TO PURCHASE VARIOUS PIECES OF LAND FOR THE PROPOSED EDUCATIONAL INSTITUTION AND AFTER REGISTRA TION OF THE TRUST, AN OD LIMIT FROM PNB BADDI OF RS. 9.56 C RORES WAS TAKEN BY PLEDGING THE FDRS OF ANOTHER TRUST NAM ELY M/S VISHAV MANAV ROOHANI KENDRA WHICH HAS BEEN CLAIMED TO BE REGISTERED UNDER SECTION 12A OF INCOM E TAX ACT THROUGH NO PROOF OF REGISTRATION HAS BEEN FILED . LOAN IS, THEREFORE, NOT FREE FROM ENCUMBRANCES. THE OD L IMIT WAS SANCTIONED FOR PURCHASE OF LAND, COPIES OF THE REGISTERED DEED HAVE BEEN FILED WHICH REVEALED THAT PAYMENTS HAVE BEEN MADE FROM OD LIMIT OF PNB, BADDI 4 AND AMOUNTS HAVE BEEN PAID THROUGH DD. HOWEVER, IN CASE OF LAND PURCHASED FOR RS. 1.40 CRORES ON 28.08.2015, AN AMOUNT OF RS. 37,85,000/- WAS PAID I N FEBRUARY,2015 PREDATES THE OPENING OF THE TRUST AND AS SUCH, APPARENTLY THE AMOUNT HAVE BEEN PAID BEFORE S TART OF THE TRUST AND TO THAT EXTENT, IS NOT PART OF THE PROPERTY OF THE TRUST. IT WAS ALSO TRANSPIRED THAT ASSESSEE HAS TAKEN ANOTHER OD LIMIT OF RS. 10 CRORES FROM STATE BANK OF INDIA SECTOR 17, CHANDIGARH WHICH WAS SANCTIONED ON 09.06.2015. THIS OD LIMIT IS SEPARATE FROM OD LIMI T OF PNB, BADDI. WHEN ENQUIRED, THE SUBMISSION MADE BY THE ASSESSEE WAS THAT THE ANOTHER OD LIMIT WHICH HAVE B EEN GOT SANCTIONED BY PLEDGING FDR FROM M/S VISHAV MANA V ROOHANI KENDRA. THIS OD LIMIT WAS SANCTIONED BUT W AS NOT UTILIZED FOR PURCHASE OF LAND AS THE LIMIT FROM PNB BADDI WAS SANCTIONED ON 16.06.2015. THE OD LIMIT FR OM STATE BANK OF INDIA CHANDIGARH HAS CASH DEPOSITS AN D EXCESS OD AMOUNT OF RS. 60,281/- HAVE BEEN WITHDRAW N AND THERE IS A CREDIT BALANCE OF RS. 3,90,241/-. T HE OD LIMIT HAS NOT BEEN CLOSED. APPARENTLY, THE ASSESSE E HAD TAKEN OD LIMIT FOR PURCHASE OF LANDS BUT AFTER SANC TION OF THE OD LIMIT FROM PNB BADDI, THIS AMOUNT HAS BEE N MORE OR LESS KEPT AS UNUTILIZED. 4. THE BALANCE SHEET ENDING 31.03.2016 WAS REPRODUCED IN THE IMPUGNED ORDER. THE LD. CIT ALSO NOTED THAT THE CORPUS FUND SHOWN BY THE ASSESSEE ON 18.10.2015 WAS RS. 3.11 CRORES WHICH HAVE BEEN 5 INCREASED TO RS. 6.66 CROES AS ON 31.03.2016. THE O D LIMIT FROM PNB BADDI HAD OUTSTANDING BALANCE OF RS. 3,77,95,902/- AS ON 18.10.2015 WHICH HAVE BEEN NULLIFIED AND IS NOT REFLECTED IN THE BALANCE SHEET . THE EXPLANATION FROM THE ASSESSEE IN THIS REGARD WAS TH AT ONCE THE LANDS WERE PURCHASED FROM FOLLOWING THE BA LANCE AVAILABLE WITH PNB BADDI AND THE CORPUS DONATION RECEIVED IN THE INTERMITTENT PERIOD WAS UTILIZED FO R PAYMENT TO PNB BADDI AND ULTIMATELY, OD LIMIT WAS NULLIFIED. THE CORPUS FUND HAS BEEN SHOWN TO HAVE BEEN RECEIVED FROM VARIOUS PERSONS WHOSE NAMES WERE PRO VIDED THROUGH THE INITIAL REPLY. THERE WAS NO ADDR ESS AND PAN NUMBER PROVIDED. INDIVIDUALS IN THEIR CONFIRMATION HAVE EXPLAINED TO HAVE CONTRIBUTED FOR CORPUS AND PAN NUMBERS OF SOME OF THEM WERE ALSO FI LED. THE LD.CIT, HOWEVER, NOTED THAT LARGE NUMBER OF CONFIRMATIONS WERE MISSING. THERE IS NO SPECIFIC DIRECTION THAT SAME AMOUNT SHOULD BE TREATED AS COR PUS DONATION. IN SOME CASES, ALTHOUGH THE CORPUS DONAT IONS HAVE BEEN PAID THROUGH CHEQUE, YET IN ABSENCE OF PA N NUMBER, MOST ARE UNAVOIDABLE. THE CONFIRMATION IN RESPECT OF WHOM PAN NUMBERS HAVE BEEN PROVIDED, ADD UP TO A MINISCULE COMPARED TO THE TOTAL QUANTUM OF THE CLAIMED CORPUS DONATIONS IN THE BALANCE SHEET. 4(I) BESIDES ALL OF THE ABOVE, EVEN ASSUMING THAT DONATION HAD COME FOR CORPUS, THE EXPENDITURE MADE BELIES LOGIC AS TO HOW A TRUST CLAIMING TO BE OF A PUBLIC 6 CHARITABLE CHARACTER CAN UTILIZE THE ENTIRE AMOUNT COLLECTED AS CORPUS DONATION ON ACTIVITIES LIKE PUR CHASE OF LAND WHICH IN ITSELF IS NOT A CHARITABLE ACTIVIT Y. THE CORPUS FUND IS NOT ALLOWED TO BE UTILIZED FOR ATTAI NMENT OF THE PURPOSE/OBJECTS OF A TRUST. INSTEAD IT IS T O BE RETAINED AS A SOURCE FROM WHICH TRUST CAN EARN INCO ME WHICH IN-TURN CAN BE UTILIZED AS WELL AS ACCUMULATE D. IN THE CASE OF THE ASSESSEE, CORPUS FUND HAS BEEN TAKE N AS THE EXPLANATION FOR ALL EXPENDITURE INCURRED BY THE TRUST. THE FUNDS SO RECEIVED HAVE BEEN DEPOSITED AT THE SW EET WILL OF THE ASSESSEE EITHER IN OD LIMIT OF PNB BADD I OR IN STATE BANK OF INDIA CHANDIGARH. THE ASSESSEE SUBMIT TED DETAILS OF DONATIONS RECEIVED AND DEPOSITED IN DIFF ERENT OD LIMIT ACCOUNTS APART FROM CASH RECEIPTS OF THE DONATIONS. THE DONATIONS HAVE BEEN RECEIVED EVEN P RIOR TO FILING OF THE REGISTRATION APPLICATION. THE COR PUS DONATIONS ARE IDENTIFIABLE AS PER PROVISIONS OF SEC TION 11(1)(D) OF THE INCOME TAX ACT WHICH CAN BE TERMED AS CORPUS DONATIONS ONLY AFTER RECOGNITION AND REGISTR ATION OF THE TRUST BY PRESCRIBED AUTHORITY. IN THE ABSEN CE OF REGISTRATION CERTIFICATE, THESE AMOUNTS MAY SIMPLY BE TREATED AS UNSECURED LOANS. 5. THE LD.CIT, CONSIDERING THE ABOVE ASPECTS, NOTED THAT ASSESSEE HAS TAKEN THE GARB OF DONATIONS FOR R E- PAYMENT OF THE OD WHICH IN TURN WAS TAKEN BY PLEDGI NG SECURITY OF FDR OF ANOTHER TRUST WHICH IS CLAIMED T O BE REGISTERED UNDER SECTION 12AA OF THE ACT, THE ISSUE OF 7 PLEDGING OF FDRS THAT DO NOT BELONG TO THE ASSESSEE ITSELF BEING QUESTIONABLE. THE LD.CIT ALSO NOTED THAT IT IS AMPLY CLEAR THAT ASSESSEE TRUST PURCHASED THE LAND AND THE PROCESS IS STARTED EVEN PRIOR TO THE REGISTRATI ON OF THE TRUST. FURTHER, SOURCE OF THE INVESTMENT HAVE NOT BEEN ESTABLISHED. THE ACTIVITIES OF THE ASSESSEE TRUST ARE APPARENTLY SEEMINGLY NOT INTENDED TO BENEFIT THE PU BLIC AT LARGE AND TO THAT EXTENT, THE STATED AIMS AND OBJECTIVES OF THE TRUST REMAINED TO BE OSTENSIBLE A ND NOT CONVINCING AT ALL. THE REGISTRATION APPLICATION WA S, ACCORDINGLY, REJECTED. THE ASSESSEE IS IN APPEAL. 6. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TRUST D EED CLEARLY SHOW THAT THE SETTLER HAS GIVEN A SUM OF RS . 11 LACS FOR THE TRUST PROPERTY WHICH IS DEPOSITED IN T HE BANK ACCOUNT, COPY OF THE BANK ACCOUNT IS FILED AT PAGE 26 OF THE PAPER BOOK. THEREFORE, FINDING OF THE CIT IS F ACTUALLY INCORRECT THAT THE AMOUNT OF RS. 11 LACS HAVE NOT B EEN REFLECTED IN THE BANK ACCOUNT OF THE ASSESSEE. HE HAS FURTHER SUBMITTED THAT THE CIT HAS ADMITTED IN THE IMPUGNED ORDER THAT AIMS AND OBJECTIVES OF THE ASSE SSEE ARE CHARITABLE IN NATURE BECAUSE ASSESSEE'S MAIN OB JECTS ARE TO RUN AND MANAGE EDUCATIONAL INSTITUTION IN VA RIOUS FIELDS AND TO RUN HOSPITAL AND OTHER EDUCATIONAL ACTIVITIES. COPY OF THE TRUST DEED IS FILED AT PAG E 7 OF THE PAPER BOOK. THE LD. COUNSEL FOR THE ASSESSEE F URTHER 8 SUBMITTED THAT PURCHASE OF LAND IS THE FIRST STEP T O ATTAIN THE OBJECTIVES OF THE TRUST. THE LAND ACQUIRED BY THE ASSESSEE WAS NOT SOLD OR USED FOR ANY OTHER PURPOSE S OTHER THAN THE AIMS AND OBJECTS MENTIONED IN THE TR UST DEED. FURTHER, CONSTRUCTION OF BUILDING OF THE SCH OOL AND HOSPITAL WOULD TAKE SOME TIME, THEREFORE, TRUST HAS BEEN CREATED ON 27.05.2015 AND ASSESSEE APPLIED FOR REGISTRATION OF THE TRUST UNDER SECTION 12AA OF THE ACT. AT THE STAGE OF REGISTRATION, THE CIT SHALL HAVE TO EXAMINE THE AIMS AND OBJECTS OF THE ASSESSEE TRUST AND THERE IS NO REQUIREMENT THAT ASSESSEE TRUST SHOULD HAVE STARTED ALL ITS ENVISAGED ACTIVITIES AT THE INITIAL STAGE ITSELF. THE BALANCE SHEET HAS BEEN PREPARED TO SHO W THE STATEMENT OF AFFAIRS OF THE TRUST TO CIT AT THE TIM E OF APPLICATION FOR REGISTRATION, COPY OF WHICH IS FILE D AT PAGE 20 OF THE PAPER BOOK. 6(I) HE HAS FURTHER SUBMITTED THAT WHEN THE LAND WA S PURCHASED OUT OF OD LIMIT FROM BANK, THERE IS NO PROHIBITION IN SECTION 12AA OF THE ACT TO PURCHASE LAND OUT OF OVER DRAFT LIMIT. M/S VISHAV MANAV ROOHANI KENDRA HAS BEEN ALLOWED REGISTRATION UNDER SECTION 12AA OF THE ACT BY THE CIT, PANCHKULA VIDE ORDER DATED 17.09.2007 AS PER DIRECTION OF THE ITAT. COPIES OF BOTH THE ORDERS ARE FILED IN THE PAPER BOOK. HE HAS FUR THER SUBMITTED THAT FOR PURCHASE OF LAND, ADVANCE WAS GI VEN BY SHRI BALBIR SINGH AND SHRI JASVIR SINGH TO THE O WNERS, HOWEVER, THEY COULD NOT ARRANGE THE BALANCE MONEY A ND 9 REQUESTED TRUST TO PURCHASE THE LAND FROM THE OWNER S AS THERE WAS A STANDARD CLAUSE IN THE AGREEMENT TO SE LL THAT BUYERS SHALL HAVE THE RIGHT TO GET THE DEED REGISTERED IN HIS OWN NAME OR ANY OTHER PERSON. IT HAS NOTHING TO DO WITH THE GRANT OR REFUSAL OF REGISTRA TION. IT IS NOT THE CASE OF CIT THAT TRUST HAS PAID THE MONE Y AND REGISTRATION HAS BEEN DONE IN THE NAME OF SOME OTHE R PERSON. COPY OF THE SALE DEED IS FILED AT PAGE 29 OF THE PAPER BOOK. HE HAS SUBMITTED THAT DONOR HAS GIVEN DONATION FOR SPECIFIC PURPOSE I.E. TO PURCHASE THE LAND FOR AIMS AND OBJECTS OF THE ASSESSEE TRUST AND THER EFORE, IT IS PART OF THE CORPUS AND MOREOVER, IT IS NOT VO LUNTARY CONTRIBUTION WITHOUT ANY PURPOSE. DETAILS OF THE S AME ARE FILED FROM PAGES 47 TO 66 OF THE PAPER BOOK. T HE NATURE OF CORPUS FUND DOES NOT CHANGE IRRESPECTIVE OF THE FACT WHETHER APPLICATION UNDER SECTION 12AA HAS BEE N FILED OR NOT. THE NATURE OF CORPUS FUND IS JUST LI KE A CAPITAL WHICH IS USED FOR FIXED ASSETS AND NOT CURR ENT ASSETS. THE VOLUNTARY DONATION IS USED TO MAKE DAY -TO- DAY EXPENSES OR TO RUN THE ACTIVITIES OF THE TRUST IN ORDINARY COURSE. 7. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON DEC ISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS B.K.K. MEMORIAL TRUST 256 CTR 424 IN WHICH IT 10 WAS HELD AS UNDER : THE TRUST WAS CREATED ON 23.6.2010 AND APPLICATION UNDER SECTION 12A(1) (AA) OF THE ACT WAS MOVED ON 19.7.2010 AND T HE SAME WAS REJECTED ON 26.11.2010. THE APPLICATION FOR REGISTR ATION IS REQUIRED TO BE MADE WITHIN ONE YEAR OF THE CREATION OF THE TRUS T AND THERE IS NO REQUIREMENT THAT THE TRUST OR THE INSTITUTION SHOUL D HAVE STARTED ALL ITS ENVISAGED ACTIVITIES IN THE FIRST YEAR ITSELF. UNDE R SECTION 12AA OF THE ACT SATISFACTION REGARDING THE GENUINENESS OF THE ACTIVITIES OF THE TRUST IS TO BE SEEN AND THE STAGE FOR APPLICATION O F INCOME IS YET TO ARRIVE I.E. WHEN SUCH TRUST OR INSTITUTION FILES IT S RETURN. THUS THE CONTENTION THAT TRUST WAS NOT SET UP FOR CHARITABLE PURPOSES AND IT WAS UTILIZING ITS INCOME NOT FOR THE SAID PURPOSE C ANNOT BE EXAMINED AT THIS STAGE AS ONLY OBJECTS OF THE TRUST HAD TO BE CONSIDERED BY THE COMMISSIONER. THE TRUST WAS IN NASCENT STAGE AND W AS YET TO WORK TOWARDS ITS OBJECTS. NO SUBSTANTIAL QUESTION OF LAW ARISES FOR DETERMINATION BEFORE HIGH COURT AND CONSEQUENTLY, T HE APPEAL WAS DISMISSED. ITA NO.710 OF 2010 -COMMISSIONER OF INCO ME TAXII, CHANDIGARH VS. M/S SURYA EDUCATIONAL & CHARITABLE D ECIDED ON 5.10.2011; ITA NO.881 OF 2010 THE COMMISSIONER OF I NCOMETAX, BATHINDA V S M/S BABA DEEP SINGH EDUCATIONAL SOCIETY, SCF 23, BHARAT NAGAR, BATHINDA DECIDED ON 13.10.2011, FOLLO WED 7(I) DECISION OF HON'BLE PUNJAB & HARYANA HIGH COUR T IN THE CASE OF CIT VS SURYA EDUCATIONAL & CHARITABLE T RUST 355 ITR 280 IN WHICH IT WAS HELD AS UNDER : AS PER S. 12AA, AN APPLICATION FOR REGISTRATION OF THE TRUST AND INSTITUTION IS REQUIRED TO BE MADE WITHIN ONE YEAR FROM THE DATE OF CREATION OF THE TRUST OR THE ESTABLISHMENT OF SUCH INSTITUTION. THE PROCEDURE FOR REGISTRATION OF THE TRUST OR INST ITUTION IS PRESCRIBED UNDER S. 12AA. IN TERMS OF CL. (A) OF S. 12AA, THE CIT IS TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE 11 TRUST ON SUCH INQUIRIES AS HE MAY DEEM NECESSARY. S UB-SS. (1A) AND (2) OF S. 12AA, ARE PROCEDURAL IN NATURE, WHEREAS SUB-S. (3) OF S. 12AA, EMPOWERS THE CIT TO CANCEL THE REGISTRATION OF THE TRUST OR INSTITUTION, IF HE IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION. THEREFORE, THE OBJECT OF S. 12AA, IS T O EXAMINE THE GENUINENESS OF THE OBJECTS OF THE TRUST BUT NOT THE INCOME OF THE TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES. THE S TAGE FOR APPLICATION OF INCOME IS YET TO ARRIVE I.E. WHEN SU CH TRUST OR INSTITUTION FILES ITS RETURN.CIT VS. DEVI EDUCATIO NAL INSTITUTION & ORS. (1984) 43 CTR (MAD) 48 : (1985) 153 ITR 571 AND ADITANAR EDUCATIONAL INSTITUTION ETC. VS. ADDL. CIT (1997) 139 CTR (SC) 7 : (1997) 224 ITR 310 (SC)-DISTINGUISHED. 7(II) DECISION OF ITAT CHANDIGARH BENCH IN THE CASE OF YODHA SAMARAK SAMITY VS CIT 138 ITD 512 IN WHICH IT WAS HELD AS UNDER : ASSESSEE SOCIETY PERPETUATING MEMORIES OF WAR HEROE S AND ENGAGED IN SETTING UP EDUCATIONAL INSTITUTIONS , ARRANGING SEMINARS, HOLDING MEETINGS/CONFERENCES AND TO ORGANIZE LECTURE EXHIBI TION ETC. , AND FURTHER TO INCULCATE MORAL, SPIRITUAL, PHYSICAL AND PATRIOTIC SPIRIT IS ENTITLED TO REGISTRATION UNDER S. 12AA. MERE FACT THAT ADDRESSES OF THE DONORS FROM WHOM D ONATION HAS BEEN CLAIMED TO BE RECEIVED WERE MISSING CANNOT FORM BASIS OF REJECTION OF REGISTRATION UNDER S. 12AA. 7(III) DECISION OF ITAT CHANDIGARH BENCH IN THE CAS E OF SHRI GURUDAS EDUCATIONAL TRUST VS CIT 177 TTJ 25 IN WHICH IT WAS HELD AS UNDER : 12 GENUINENESS OF THE ACTIVITIES OF THE TRUST HAS TO BE SEEN KEEPI NG IN MIND THE OBJECTS OF THE TRUST. THE LD. CIT HAS TO SATISFY HIMSELF ABOUT THE FACT THAT THE ACTIVITIES ARE GENUINE AND IN CONSONANCE WITH THE OBJECTS OF THE TRUST. THE ENQUIRY REGARDING GEN UINENESS OF THE ACTIVITIES CANNOT BE STRETCHED BEYOND THIS. 7(IV) ON THE OTHER HAND, LD. DR RELIED UPON IMPUGNE D ORDERS AND SUBMITTED THAT ASSESSEE IS NOT ENTITLED FOR REGISTRATION. 8. WE HAVE CONSIDERED RIVAL SUBMISSIONS. THE ASSES SEE HAS FILED COPY OF THE TRUST DEED WHICH CLEARLY REVE ALED THAT THE AIMS AND OBJECTIVES OF THE ASSESSEE TRUST ARE TO RUN AND MANAGE EDUCATIONAL INSTITUTION AND TO RUN HOSPITALS AND DISPENSARIES ETC. THEREFORE, THE MAI N AIMS AND OBJECTIVES OF THE ASSESSEE TRUST ARE CHARITABLE IN NATURE. EVEN THIS FACT IS NOT DENIED BY THE CIT (EXEMPTION) IN THE IMPUGNED ORDER. THE CIT NOTED T HAT THE AMOUNT OF RS. 11 LACS HAVE NOT BEEN REFLECTED I N THE BANK ACCOUNT. HOWEVER, THE BANK ACCOUNT OF THE ASSESSEE CLEARLY SHOW THAT THE AMOUNT MENTIONED IN THE TRUST DEED HAS BEEN REFLECTED IN THE BANK ACCOUNT O F THE ASSESSEE. THE PURCHASE OF LAND IS THE INITIAL STAGE FOR FORMATION OF THE TRUST SO THAT THE ASSESSEE COULD A CHIEVE ITS OBJECTIVES. THEREFORE, THERE IS NOTHING WRONG IF ASSESSEE STARTED PURCHASING LAND FOR THE PURPOSE OF ESTABLISHING EDUCATIONAL INSTITUTION AS WELL AS HOS PITAL ETC. FOR THE PURPOSE OF THE ASSESSEE TRUST. THE AS SESSEE HAS ALSO PRODUCED PHOTOGRAPHS BEFORE CIT(EXEMPTION) TO 13 SHOW THAT THE ASSESSEE HAS STARTED VOLUNTARY SERVIC ES TOWARDS THE AIMS AND OBJECTIVES OF THE ASSESSEE TRU ST WHICH HAVE NOT BEEN DISPUTED. COPIES OF THE SAME A RE ALSO FILED IN THE PAPER BOOK. AT THE STAGE OF GRAN T OF REGISTRATION UNDER SECTION 12AA OF THE ACT, CIT IS REQUIRED TO EXAMINE THE OBJECTS OF THE ASSESSEE TRU ST AND GENUINENESS OF ITS ACTIVITIES. AT THE TIME OF REGI STRATION UNDER SECTION 12AA OF THE ACT, WHICH IS NECESSARY F OR CLAIMING EXEMPTION UNDER SECTION 11 AND12, THE CIT (EXEMPTION) IS NOT REQUIRED TO LOOK INTO THE ACTIVI TIES, WHERE SUCH ACTIVITIES HAVE NOT OR ARE IN THE PROCES S OF ITS INITIATION. WHERE ASSESSEE TRUST IS SET UP TO ACHI EVE ITS OBJECTIVES OF ESTABLISHING EDUCATIONAL/MEDICAL INSTITUTIONS, IS IN THE PROCESS OF ESTABLISHING SUC H INSTITUTION AND RECEIVES DONATIONS, REGISTRATION UN DER SECTION 12AA CANNOT BE REFUSED ON THE GROUND THAT T RUST HAS NOT YET COMMENCED CHARITABLE ACTIVITIES. AT TH IS STAGE ONLY, GENUINENESS OF THE OBJECTS HAS TO BE TE STED AND NOT THE ACTIVITIES WHICH HAVE NOT COMMENCED. 8(I) WE ARE FORTIFIED IN OUR VIEW BY JUDGEMENT OF ALLAHABAD HIGH COURT IN THE CASE OF HARDAYAL CHARIT ABLE & EDUCATIONAL TRUST VS CIT 355 ITR 534, IN WHICH IT WAS HELD AS UNDER : AT THE TIME OF REGISTRATION UNDER SECTION 12AA OF THE INCOME-TAX ACT, 1961, WHICH IS NECESSARY FOR CLAIMING EXEMPTION UND ER SECTIONS 11 AND 12, THE COMMISSIONER IS NOT REQUIRED TO LOOK INTO T HE ACTIVITIES, WHERE SUCH ACTIVITIES HAVE NOT OR ARE IN THE PROCESS OF ITS IN ITIATION. WHERE A TRUST, SET UP TO ACHIEVE ITS OBJECTS OF ESTABLISHING EDUCATION AL INSTITUTIONS, IS IN THE PROCESS ESTABLISHING SUCH INSTITUTIONS, AND RECEIVE S DONATIONS, THE REGISTRATION UNDER SECTION 12AA CANNOT BE REFUSED, ON THE GROUND THAT THE 14 TRUST HAS NOT YET COMMENCED THE CHARITABLE OR RELIG IOUS ACTIVITY. ANY ENQUIRY OF THE NATURE WOULD AMOUNT TO PUTTING THE C ART BEFORE THE HORSE. AT THIS STAGE, ONLY THE GENUINENESS OF THE OBJECTS HAS TO BE TESTED AND NOT THE ACTIVITIES, WHICH HAVE NOT COMMENCED. THE E NQUIRY OF THE COMMISSIONER AT SUCH PRELIMINARY STAGE SHOULD BE RE STRICTED TO THE GENUINENESS OF THE OBJECTS AND NOT THE ACTIVITIES U NLESS SUCH ACTIVITIES HAVE COMMENCED. THE TRUST OR SOCIETY CANNOT CLAIM E XEMPTION, UNLESS IT IS REGISTERED UNDER SECTION 12AA AND THUS AT THAT S UCH INITIAL STAGE THE TEST OF THE GENUINENESS OF THE ACTIVITY CANNOT BE A GROUND ON WHICH THE REGISTRATION MAY BE REFUSED. HELD , ALLOWING THE APPEAL, (I) THAT IT WAS NOT DENIED THA T FOR THE SUBSEQUENT YEAR THE ASSESSEE HAD BEEN GRANTED EXEMP TION UNDER SECTION 12AA AND HAD ALSO BEEN APPROVED UNDER SECTI ON 80G, SUBJECT TO CERTAIN CONDITIONS. IF THE COMMISSIONER WAS SATISFIED WITH THE GENUINENESS OF THE OBJECTS OF THE TRUST FOR THE SUB SEQUENT ASSESSMENT YEAR, THE REFUSAL OF THE REGISTRATION FOR THE PRECE DING ASSESSMENT YEAR 2011-12 WAS NOT JUSTIFIED. (II) THAT THE QUESTION OF EXEMPTION FROM APP LICATION OF INCOME RECEIVED BY WAY OF DONATION WAS A SEPARATE ISSUE AN D WHICH MAY BE REQUIRED TO BE CONSIDERED, WHEN THE RETURN WAS FILE D BY THE TRUST AND WAS EXAMINED BY THE INCOME-TAX OFFICER. THE QUE STION AS TO WHETHER THE DONATIONS BY THE SOCIETIES WAS THE EXPE NDITURE OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES WILL BE EXAMINED AT THE TIME OF EXAMINING THE RETURN. (III) THAT THE REGISTRATION UNDER SECTION 12 AA AND APPROVAL UNDER SECTION 80G WOULD NOT BY ITSELF ENTITLE THE T RUST TO EXEMPTION OF THE INCOME OF ITS DONORS OR OF THE TRUST FOR THE ASSESSMENT YEAR 2011-12. FOR CLAIMING SUCH EXEMPTION THE RETURNS OF THE DONOR AND THE TRUST WILL BE EXAMINED, FOR ORDERS TO BE MADE I N ACCORDANCE WITH LAW. 8(II) THE OTHER DECISIONS RELIED UPON BY LD. COUN SEL FOR THE ASSESSEE AS REPRODUCED ABOVE, CLEARLY SUPPORT T HE CLAIM OF THE ASSESSEE THAT ASSESSEE IS ENTITLED FOR REGISTRATION UNDER SECTION 12AA OF THE ACT. IN THE CASE OF THE ASSESSEE, THE ASSESSEE IS STILL IN THE PROCE SS OF ACQUIRING LAND AND YET TO START CONSTRUCTION OF BUI LDING FOR EDUCATIONAL AND MEDICAL INSTITUTION THEREFORE, AT THAT INITIAL STAGE, THE TEST OF GENUINENESS OF THE ACTIV ITIES CANNOT BE A GROUND FOR REJECTION OF THE REGISTRATIO N APPLICATION UNDER SECTION 12AA OF THE ACT. MERELY BECAUSE THERE WAS SOME DEFECTS IN THE CONFIRMATION OF DONOR, BY ITSELF IS NO GROUND FOR REJECTION OF THE 15 REGISTRATION APPLICATION. THE GENUINENESS OF THE AC TIVITIES OF THE TRUST HAS TO BE SEEN KEEPING IN MIND THE OBJ ECTS OF THE TRUST. THE CIT (EXEMPTION) HAS TO SATISFY HIMS ELF ABOUT THE FACT THAT THE ACTIVITIES ARE GENUINE AND IN CONSONANCE WITH THE OBJECTS OF THE TRUST. THE OTHE R POINTS NOTED BY CIT (EXEMPTION) IN THE IMPUGNED ORD ER HAVE BEEN SATISFACTORILY EXPLAINED BY LD. COUNSEL F OR THE ASSESSEE. SINCE THE ASSESSEE WAS IN PROCESS OF ACQ UIRING LAND FOR ACHIEVING THE AIMS AND OBJECTS OF THE ASSE SSEE TRUST, THEREFORE, THERE IS NOTHING WRONG IN ACQUIRI NG LAND BY THE ASSESSEE. PREPARATION OF THE BALANCE SHEET FOR PART PERIOD IS NO GROUND TO REJECT APPLICATION FOR REGISTRATION UNDER SECTION 12AA OF THE ACT BECAUSE ASSESSEE FIELD APPLICATION FOR REGISTRATION ON 23.1 1.2015 AND AS SUCH, IT IS DIFFICULT TO PREPARE THE BALANCE SHEET OF THE ASSESSEE ENDING 31.03.2016. THE ASSESSEE AL SO EXPLAINED THAT M/S VISHAV MANAV ROOHANI KENDRA HAVE BEEN ALLOWED REGISTRATION UNDER SECTION 12AA OF THE ACT WHO HAVE HELPED THE ASSESSEE IN ITS FORMATION. SOM E ADVANCES HAVE BEEN GIVEN BY DIFFERENT PERSONS WHICH HAVE BEEN USED FOR PURCHASE OF LAND IN FAVOUR OF TH E ASSESSEE. THEREFORE, IT IS NOT A CASE THAT ADVANCE WAS GIVEN BY THE ASSESSEE TRUST AND THE LAND HAVE BEEN PURCHASED IN THE NAME OF THIRD PERSON. MOREOVER, T HESE ARE NOT RELEVANT CRITERIA TO BE CONSIDERED AT THE T IME OF GRANT OF REGISTRATION BECAUSE AIMS, OBJECTIVES AND ACTIVITIES OF THE ASSESSEE IN REFERENCE TO OBJECTS SHALL 16 HAVE TO BE CONSIDERED. APPLICATION OF INCOME FOR CHARITABLE PURPOSES CAN BE EXAMINED AT THE STAGE OF ASSESSMENT WHEN TRUST WOULD FILE THE RETURN OF INCO ME. 9. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTAN CES OF THE CASE IN THE LIGHT OF THE DECISIONS ABOVE AND PARTICULARLY THE FACT THAT THERE IS NO DENYING THE FACT THAT ASSESSEE'S MAIN AIMS AND OBJECTS ARE CHARITABL E IN NATURE I.E. RUNNING EDUCATIONAL AND MEDICAL INSTITU TIONS, WE ARE OF THE VIEW ASSESSEE WOULD BE ENTITLED FOR REGISTRATION UNDER SECTION 12AA OF THE ACT. 10. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE IMPUGNED ORDERS AND DIRECT THE LD. CIT (EXEMPTION) CHANDIGARH TO GRANT REGISTRATION TO ASSESSEE UNDER SECTION 12AA OF THE ACT AS IS CLAIMED IN THE REGIST RATION APPLICATION, WITHIN ONE MONTH FROM THE DATE OF THE ORDER. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ( ANNAPURNA GUPTA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 12 TH JANUARY,2017. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD