Prabodhan Shikshan Prasarak Sanshtha, Ratnagiri V. Dy. CIT, Ratnagiri Circle, Ratnagiri

ITA 892/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72196 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-09-2013
• Assessment Year: misc
• Appeal Filed On: 07-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M S VERMA
• Keywords: Charitable institution; Opportunity of being heard; Diversion of income; Onus to prove; Cancellation of registration
• Section: 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO. 892/PN/2012 PRABODHAN SHIKSHAN PRASARAK SANSTHA A/P AMBAV, DEVRUKH, TAL. SANGAMESHWAR, DIST. RATNAGIRI APPELLANT PAN AAATP 5904 E VS. DY. CIT RATNAGIRI CIRCLE, RATNAGIRI RESPONDENT APPELLANT BY :SHRI M.K. KULKARNI RESPONDENT BY : MS. M.S. VERMA DATE OF HEARING : 13-8-2013 DATE OF PRONOUNCEMENT : 30-09-2013 ORDER PER SHAILENDRA KUMAR YADAV, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT II, KOLHAPUR DATED 30-3-2012 PASSED U/S 12AA(3 ) OF THE ACT ON THE FOLLOWING GROUNDS:- 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT-II KOLHAPUR WAS JUSTIFIED IN CANCELLING/WITHDRAWING THE REGISTRATION GRANTED TO THE ASSESSEE U/S 12A OF THE ACT ON 11-2-1998 RESORTING TO PROVISIONS OF SEC. 12AA(3) INSERTED IN THE ACT W.E. F. 1-10-2004 BEING PROSPECTIVE IN NATURE APPLY ONLY TO REGISTRAT ION GRANTED PRIOR TO 1-10-2004? 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW AND IN VIEW OF GROUND NO. 1 ABOVE THE REGIST RATION CANCELLED/WITHDRAWN BY THE LD. CIT-II KOLHAPUR WHEN LD. CIT II KOLHAPUR HAD JURISDICTION VESTED IN HER TO CANCEL R EGISTRATION IN THE ABSENCE OF ANY PROVISIONS FOR CANCELLATION T HE ORDER OF CANCELLATION PASSED DT. 31-3-2012 IS AB INITIO VOID , ILLEGAL AND WITHOUT JURISDICTION? 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE ORDER OF CANCELLATION OF REGISTRATION GR ANTED U/S 2A TANTAMOUNT TO REVIEW OF THE ORDER BY LD. CIT-II KOL HAPUR WHICH IS IMPERMISSIBLE IN LAW? 4. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE ORDER CANCELLING REGISTRATION WHICH WAS GRANTED U/S 12A ON 11-2-1998 VIDE ORDER DT. 31-3-2012 WHEN THE IDENTICAL ISSUES ARE PENDING IN APPEAL BEFORE THE CIT(A) KOLH APUR FOR ADJUDICATION WILL AMOUNT TO INTERFERENCE IN THE JUD ICIAL POWERS VESTED IN LD. CIT(A) KOLHAPUR SINCE IN SUCH CIRCUMS TANCES HE MAY FOLLOW THE DECISION OF LD. CIT II KOLHAPUR BEIN G LOWER AUTHORITY IN HIERARCHY WHICH WILL PREJUDICE THE APP ELLANT ASSESSEE IN A SERIOUS MANNER CAUSING INJUSTICE TO I T? 2. AT THE OUTSET OF HEARING, THE LEARNED AUTHORIZED REPRESENTATIVE DID NOT PRESS GROUND NO. 4 AND HENCE THE SAME IS DI SMISSED AS NOT PRESSED. 3. THE ASSESSEE IS ENGAGED IN EDUCATIONAL ACTIVITIE S AND IS RUNNING INSTITUTIONS FROM HIGH SCHOOL LEVEL TO JUNI OR COLLEGE LEVEL. THE ASSESSEE IS ALSO RUNNING INSTITUTIONS OFFERING ENGINEERING AND TECHNOLOGICAL, PHARMACY, AND MANAGEMENT COURSES. C ENTERS FOR EDUCATIONAL EXCELLENCE, HUMAN RESOURCES DEVELOPMENT AND PRE- MILITARY TRAINING WAS ALSO RUN BY THE ASSESSEE. TH E ASSESSEE WAS GRANTED REGISTRATION U/S 12A OF THE ACT BY THE CIT KOLHAPUR VIDE CERTIFICATE NO. KOP/HQ.III/217/P-110/78/168/97-98 O N 11-2- 1998, AS A CHARITABLE TRUST. ON VERIFICATION OF REC ORDS, IT WAS NOTICED THAT THE ASSESSEE WAS IMPARTING KNOWLEDGE A T COST, WITH ELEMENT OF PROFIT INHERENT THEREIN. THE ACTIVITIES SO CARRIED OUT WERE FOUND TO BE COMMERCIAL ACTIVITIES AND NOT OF CHARIT Y. IT WAS ALSO NOTICED THAT THE ASSESSEE HAD ADVANCED FUNDS TO THE MEMBERS AND OTHER CONCERNS WHEREIN THE MEMBERS OF THE ASSESSEE OR THEIR FAMILY MEMBERS WERE INTERESTED, IN CONTRAVENTION TO SEC. 1 3 OF THE ACT. IT WAS FURTHER NOTICED THAT THE ASSESSEE HAD DEPOSITED HUGE SUMS IN PAT SANSTHAS IN CONTRAVENTION OF THE PROVISIONS OF SEC. 11(5) OF THE ACT. MOREOVER, IT WAS NOTICED THAT THE ASSESSEE HA D FAILED TO APPLY THE FUNDS SET APART FOR THE OBJECTS OF THE TRUST IN SUBSEQUENT YEAR IN CONTRAVENTION TO RULE 17 OF THE IT RULES 1962. IT WAS NOTICED THAT WITH THE AMENDMENT TO THE CONSTITUTION OF THE ASSES SEE TRUST DATED 11-9-2001, ABSOLUTE CONTROL OVER MANAGEMENT AND CON DUCTING THE ACTIVITIES OF THE ASSESSEE WAS CONGREGATED WITH THE CHAIRMAN, I.E. SHRI RAVINDRA MANE AND THE MANE FAMILY FOR ALL TIME S TO COME, WITHOUT ANY CHECKS AND BALANCES. THIS HAS EFFECTIVE LY BARRED THE PUBLIC AT LARGE OF HAVING ANY ACCESS TO THE PROPERT IES/FUNDS OF THE ASSESSEE AND SUBSEQUENT UTILISATION THEREOF. IT WA S ALSO NOTICED THAT THE ASSESSEE HAD INCURRED EXPENDITURE OF HUGE AMOUNT FOR PERSONAL BENEFITS OF INTERESTED PERSONS, IN CONTRAV ENTION TO THE PROVISIONS OF SEC. 13 OF THE ACT. THUS, IT WAS NOTI CED THAT THERE WAS APPARENT VIOLATION OF THE PROVISIONS OF SEC. 11(5) , 12A, 12AA AND 13 OF THE ACT. 4. IN VIEW OF THE ABOVE, AS PER PROVISIONS OF SEC. 12AA(I_)(B)(II) OF THE ACT, A DETAILED NOTICE WAS ISSUED ON 19-12-2011 WHEREBY THE ASSESSEE WAS POINTED OUT THE DISCREPANCIES NOTICED, AND WAS ASKED TO EXPLAIN THE SAME. 5. IN RESPONSE TO NOTICE, THE STAND OF THE ASSESSE E HAS BEEN THAT (A) THE ADVANCE FOR PURCHASES OF SHARE OF MARLESHWA R FAL PRAKRIYA KENDRA BY STAFF MEMBERS, WERE WELFARE MEAS URES FOR THE STAFF, WHICH WAS RECOVERED FROM THEIR SALARIES AND THEREFORE, THE PROVISIONS OF SEC. 13 ARE NOT APPLIC ABLE; (B) WITH REFERENCE TO THE ADVANCE WITH TRUSTEE FOR PURCHASE OF LAND, IT WAS CONTENDED THAT THE SAME WAS BREACH OF TRUST AND MISAPPROPRIATION OF TRUST FUND BY THE TREASURER WITHOUT THE KNOWLEDGE OF THE EXECUTIVE COMMITTEE WHICH WAS LATER ON RECOVERED IN INSTALMENTS. (C) AS REGARDS TO THE ADVANCE TO TRUSTEES FOR PURCH ASE OF MOTOR CAR, THE ASSESSEE HAS CONTENDED THAT THE TRUS TEES WERE ALLOWED TO PURCHASE VEHICLES ON BEHALF OF THE TRUST , HOWEVER, ON FINDING IT NO FEASIBLE, THE ADVANCE AMOUNT WAS R ECOVERED WITH INTEREST; (D) AS REGARDS TO THE DEPOSITS WITH KOSUMB GROUP VI VIDH KAR SAH. SOCIETY, THE ASSESSEE HAS SOUGHT TO EXPLAIN TH AT THE SAME WAS LATER ON REPAID WITH INTEREST; (E) REGARDING DEPOSITS WITH MADHYAMIK ADHYAPAK PAT PEDHI, THE ASSESSEE HAS FORWARDED SIMILAR CONTENTION THAT THE DEPOSITS WERE LATER ON REPAID ALONG WITH INTEREST A ND THAT NO PERSON OF THE SOCIETY HAS ANY SUBSTANTIAL INTEREST IN THE PAT PEDHI; (F) AS REGARDS TO THE UNUTILIZED ACCUMULATION OF 15 % THE ASSESSEE HAS CONTENDED THAT THERE IS NO COMPULSION ON IT TO BE INVESTED IN CHARITABLE OBJECTS; (G) THE ASSESSEE HAS STATED THAT PAYMENT TO THE CHA IRMANS CONSTRUCTION COMPANY, FOR PURCHASE OF ONGOING CONST RUCTION, WAS MADE AS THE BUILDING WAS URGENTLY REQUIRED; (H) AS REGARDS TO THE CONSTITUTIONAL AMENDMENTS OF TRUST, THE ASSESSEE HAS STATED THAT THIS IS FOR CONTINUITY OF MANAGEMENT OF THE INSTITUTION FOR SOME TIME, AND THAT THERE WA S NO PERSONAL ENJOYMENT OF THE PROPERTY OR FUNDS OF THE TRUST. IN THIS REGARDS, THE ASSESSEE HAS STATED THAT WHO CONT ROLS OR WHO IS IN THE MANAGEMENT IS NOT RELEVANT AND THAT IT IS IMMATERIAL WHO IS AT THE HELM OF AFFAIRS. IT WAS ALSO CLAIMED THAT THE MEMBERS OF A PARTICULAR FAMILY ARE IN CHARGE OF THE MANAGEMENT FOR A LONG TIME OR EVEN IN PERPETUITY IN NO BAR FOR CLAIMING REGISTRATION. (I) AS REGARDS TO THE EXPENDITURE ON ADVERTISEMENT IN NEWSPAPER, THE ASSESSEE HAS CONTENDED THAT IT IS ON LY A VERY SMALL MATTER AND HAS TO BE IGNORED WHEN CONSIDERED FROM THE POINT OF VIEW OF THE INSTITUTION WHICH GENERATES AL MOST 2.5 CRORES GROSS REVENUE. (J) AS REGARDS TO THE EXPENDITURE INCURRED ON THE M ARRIAGE OF PRINCIPALS DAUGHTER, THE ASSESSEE HAS PUT FORTH HI S CONTENTION THAT CONSIDERING THE SERVICES RENDERED BY HIM IN TH E CAPACITY OF PRINCIPAL, THIS WAS CONSIDERED AS PROPER AND JUS T PAYMENT TOWARDS THE PART PENSIONARY BENEFITS TO THE EMPLOYE E AT THE TIME OF DAUGHTERS MARRIAGE. (K) AS REGARDS TO THE OBSERVATION THAT THE ACTIVITI ES CARRIED OUT WERE FOUND TO BE COMMERCIAL ACTIVITIES AND NOT CHARITY, THE ASSESSEE HAS STATED THAT THE TRUST IS GENUINE AND THAT ACTIVITIES WERE ALSO CARRIED IN A MANNER WHICH IS B ENEFICIAL TO THE SOCIETY AND THEY ARE ALL FOR EDUCATION. IN THI S BACKGROUND, THE ASSESSEE REQUESTED THAT THE PROCEEDINGS INITIAT ED U/S 12A(3) MAY BE DROPPED; (L) THE ASSESSEE HAS RELIED UPON THE FOLLOWING DECI SIONS: (1) RASTOGI FOUNDATION VS ACIT (1993) 47 TTJ DELHI 307; (2) SMT. MANUKSHI DEVI BIHANI JAN HITKARI TRUST VS. CIT (277 ITR 140; (3) CIT VS. SOUTH POINT MONTESSORI SCHOOL (294 ITR 149) (4) CIT VS. PRAMOD JAIN TRUST (81 ITR 604 (5) THANTHI TRUST VS. ITO (91 ITR 261) IN THIS LEGAL BACKGROUND, THE ASSESSEE REQUESTED TO DROP THE PROPOSED ACTION. 6. THE CIT HAVING CONSIDERED THE SUBMISSIONS MADE O N BEHALF OF THE ASSESSEE OBSERVED THAT THE ASSESSEE CAME INTO E XISTENCE VIDE TRUST DEED DT. 25-4-1995, CONSISTING OF FIVE TRUSTE ES, WITH SHRI RAVINDRA MURLIDHAR MANE, AS CHAIRMAN. SUBSEQUENTLY , THE TRUST DEED WAS AMENDED ON 1-5-2001, ADMITTING THREE MORE TRUSTEES, THEREBY BRINGING UP THE TOTAL NUMBER OF TRUSTEES TO EIGHT. THE CHAIRMANSHIP OF THE ASSESSEE WAS RETAINED BY SHRI R AVINDRA M. MANE. CIT FURTHER HELD AS UNDER: 8.1 IN VIEW OF THE ABOVE; I AM OF THE CONSIDERED VIEW THAT THE LATEST AMENDMENTS TO THE TRUST DEED GOES AGAINST TH E VERY SPIRIT OF THE TERM 'CHARITABLE TRUST', AS IS ENVISA GED FOR THE PURPOSE OF THE INCOME TAX ACT. 9. IT IS ALSO SEEN THAT THE ASSESSEE HAS PURCHASED AN ON- GOING CONSTRUCTION FROM. MARLESHWAR CONSTRUCTION PV T. LTD., A COMPANY WHERE SHRI RAVINDRA MANE, CHAIRMAN OF PRESE NT TRUST, IS MANAGING DIRECTOR, AND HIS WIFE SOU. NEHA R. MANE IS DIRECTOR. AS ADMITTED BY THE ASSESSEE THE TOTAL AM OUNT OF CONSTRUCTION WAS RS.7835104/-. IN THIS REGARDS, THE ASSESSEE HAS MERELY STATED THAT '.THIS IS A NORMAL INVESTMEN T FOR THE PURPOSE OF COLLEGE', AND ALSO THAT '...... AT THAT TIME THE CHAIRMAN'S COMPANY WAS CONSTRUCTING A BUILDING WHIC H THE TRUST WAS DECIDED TO PURCHASE .......WHICH WAS GETT ING READY TO REDUCE TIME FOR CONSTRUCTION.....WHICH WAS URGENTLY REQUIRED' . 9.1 IT IS PERTINENT TO NOTE THAT THE ASSESSEE HAS E NTERED INTO TRANSACTION, OF A CONSIDERABLE INVESTMENT TO THE TU NE OF RS.78 LAKHS, WHEREIN THE CHAIRMAN OF THE TRUST, AND THE M ANAGING DIRECTOR OF THE COMPANY, ARE ONE AND THE SAME PERSO N. IT IS ALSO TO BE NOTED THAT THE ASSESSEE HAS BEEN CLAIMIN G THAT IT IS A 'CHARITABLE TRUST', WORKING FOR THE BENEFIT OF TH E PUBLIC AT LARGE. UNDER SUCH A CIRCUMSTANCES, IT IS APPROVED PROCEDURE THAT NECESSARY SEALED TENDERS SHOULD BE CALLED FROM THE PUBLIC, AND THEN THE WORK OF CONSTRUCTION/PURCHASE OF ONGOING CONSTRUCTION SHOULD BE ALLOTTED TO THE DESE RVING PARTY. IT IS NOT THE CASE OF THE ASSESSEE THAT SUCH A PROC EDURE WAS FOLLOWED BEFORE ALLOTTING THE WORK TO THE CHAIRMAN' S COMPANY. IT IS CLEAR THAT THE PURCHASE OF ONGOING CONSTRUCTI ON, AND WORK OF FURTHER CONSTRUCTION WAS ARBITRARILY ALLOTTED TO MARLESHWAR CONST. CO., AT THE WHIM OF SHRI RAVINDRA MANE, CHAI RMAN OF THE ASSESSEE TRUST. THE ASSESSEE'S CONTENTION IN TH IS REGARDS IS OF A GENERAL NATURE, AND THEREFORE NOT ACCEPTABLE. THIS IS NOTEWORTHY, WHEN WE CONSIDER THE VARIOUS INVESTMENTS/DEPOSITS/ADVANCES GIVEN TO THE PAT-SANS THAS, ETC., WHERE EITHER THE CHAIRMAN, OR HIS RELATIVE, H AVE SUBSTANTIAL INTEREST. THE INURING USE OR APPLICATIO N OF THE INCOME OR PROPERTY MAY BE FOR THE DIRECT OR INDIREC T BENEFIT OF THE PERSONS REFERRED TO IN SUBSECTION 3 OF SEC. 13. A TRUST WOULD FALL IN A MISCHIEF OF CLAIMING, IF ITS INCOME OR PROPERTY IS APPLIED OR USED FOR THE BENEFIT OF ANY ONE OR MORE OF SUCH PERSONS, OR CONCERNS. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS RATTAN TRUST 1991 (227 ITR 356) HAS HELD THAT ANY DIVERSION OF INCOME OTHER THAN THOSE AUTHORIZED BY THE TRUST DEED WOULD LEAD TO ATTRACTION OF SECTION 13(L)(C) O F THE ACT. IN THE PRESENT CASE, THERE IS NOT ONLY A CLEAR INFRING EMENT OF THE PROVISIONS OF SEC. 13(L)(C) OF THE ACT, BUT MORE PR OMINENTLY A GLARING EXAMPLE OF EXERCISING ABSOLUTE CONTROL AND COMMAND, WHICH IS AT THE DISPOSAL OF THE CHAIRMAN, WITH ALMO ST NEGLIGIBLE PARTICIPATION OF THE PUBLIC AT LARGE, IN THE DAY TO DAY AFFAIRS OF THE TRUST, OR QUESTIONING THE UTILIZATIO N OF THE PROPERTY OF THE TRUST. 9.2 IN VIEW OF THE ABOVE, IT IS EVIDENT THAT THE AS SESSEE HAS MADE THE SAID DEPOSITS, AND PURCHASED BUILDING UNDE R CONSTRUCTION, IN CONTRAVENTION TO SEC.13(1)(C) OF T HE INCOME TAX ACT, 1961. 10. IT IS SEEN THAT THERE ARE OTHER INSTANCES OF I NFRINGEMENT OF SEC. 13(L)(C) OF THE ACT, VIZ. ADVANCES GIVEN TO TH E TRUSTEES FOR PURCHASE OF MOTOR CAR, ADVANCES LYING WITH THE TREA SURER, WHO IS A SPECIFIED PERSON IN EXPLANATION TO SEC. 13(3), FOR ON PURCHASE OF LAND AND LYING UNUTILIZED FOR THE PURPO SE, EXPENDITURE INCURRED ON PRINCIPAL'S DAUGHTER'S MARR IAGE, ETC., 10.1 IN ALL THE ABOVE CASES (EXCEPT IN RESPECT OF EXPENDITURE ON PRINCIPAL'S DAUGHTER'S MARRIAGE), THE ASSESSEE HAS FORWARDED SIMILAR CONTENTION THAT THE SAID INVESTMENTS DID NO T RESULT IN LOSS TO THE ASSESSEE, AND THAT THE SAME WERE RETURN ED TO THE ASSESSEE IN DUE COURSE OF TIME. 10.2 THE VERACITY OF THE ABOVE CONTENTION HAS ALREA DY BEEN DISCUSSED IN PRECEDING PARAS. THEREFORE, THE STAND OF THE ASSESSEE IS REJECTED, FOR THE SAME REASONS MENTIONE D THEREIN. 11. IT IS ALSO SEEN THAT, THOUGH THE TRUST DEED PR OVIDES FOR A VERY LUCRATIVE OBJECTIVES AND PURPOSES, THE ASSESSE E HAS BEEN CHARGING THE STUDENTS FEES AS PER THEIR SCHEDULES/P ROSPECTUS, ETC. IN THIS RESPECT THE AVAILABLE RECORDS HAVE BEE N VERIFIED. THE DETAILS OF GROSS RECEIPTS, RECEIPTS FROM VARIOU S FEES, AND THE SURPLUS IS AS UNDER : AY GROSS RECEIPTS NET % OF INCOME RECEIPTS FROM SURPLUS ATTRIBUTABLE TO VARIOUS (PROFIT) THE FEES ETC, FEES, CHARGED DIRECTLY HOSTEL, FROM STUDENTS MESS, ETC 2011 - 12 92630372 88364609 3130641 95.39 2010 - 11 63159129 60870006 96.37 2009 - 10 55397106 47766682 1908419 86.22 2007 - 08 39577182 36754850 9621843 92.86 2005 - 06 22540649 20965840 93.01 IN ADDITION TO THE ABOVE, THE ASSESSEE HAS CHARGED DONATION UNDER THE HEAD 'DEVELOPMENT FUND' FROM THE STUDENTS . FROM THE DETAILS AVAILABLE ON RECORDS, IT IS SEEN THAT SUCH 'DEVELOPMENT FUND' RUNS IN CRORES OF RUPEES, EVERY YEAR. 11.1 IN THIS RESPECT, IT IS SEEN THAT THE ASSESSEE HAS MERELY STATED THAT, '......THE TRUST IS GENUINE AND THAT A CTIVITIES ARE ALSO CARRIED IN A MANNER WHICH IS BENEFICIAL TO THE SOCIETY AND THEY ARE ALL FOR EDUCATION . 11.2 FROM THE DETAILS ELABORATED HEREINABOVE, IT I S SEEN THAT ALMOST 95 % OF THE INCOME OF THE ASSESSEE, WHICH IN CIDENTALLY IS RUNNING IN CRORES, HAS BEEN CHARGED FROM THE STU DENTS, THAT TOO WHO ARE CLAIMED TO BE MOSTLY FROM 'A NOTIFIED BACKWARD AREA-KOKAN'. IT IS ALSO A POINT TO BE NOTED THAT THEY HAVE NOT/ BEEN SPARED EVEN OF THE CHARGES UNDER THE GUISE OF 'DONATIONS TOWARDS DEVELOPMENT FUNDS'. 11.3 IT IS ALSO SEEN FROM THE ABOVE THAT, THE STUDE NTS ARE ENROLLED WITH FULL FEES/CHARGES, AND OTHER EXPENSES WHICH THEY HAVE TO INCUR, LIKE HOSTEL RENT, MESS, ETC. EVEN TH E TRANSPORTATION OF STUDENTS IN SCHOOL BUS, IS NOT DO NE ON CHARITABLE BASIS, BUT FEES ARE CHARGED IN THIS RESP ECT ALSO. IT IS ALSO TO BE NOTED THAT THE ASSESSEE IS CHARGING ADDI TIONAL FEES UNDER THE GUISE OF 'DONATION TO DEVELOPMENT FUND'. THUS, IN REALITY, NO CHARITY OF WHATSOEVER NATURE IS CARRIED OUT, AS IS BEING BROUGHT OUT BY THE ASSESSEE. IT IS PERTINENT TO NOTE THAT, THE ASSESSEE IS TAKING FEES IN RESPECT OF MANAGEMEN T QUOTA, WHICH IS MUCH MORE THAN THE FEES FOR THE STUDENTS O F GOVERNMENT QUOTA. AS A MATTER OF FACTS, AS IS SEEN FROM THE ABOVE CHART, ALMOST 90% TO 95% OF THE ASSESSEE'S GR OSS RECEIPTS ARE ONLY FROM THE FEES SO CHARGED. IT IS A LSO PERTINENT TO NOTE THAT THE NET RESULT OF THE ASSESSEE'S SO-CA LLED 'CHARITABLE ACTIVITIES' HAS RESULTED IN PROFIT (SUR PLUS), RUNNING IN LAKHS OF RUPEES. 11.4 THE QUESTION IS WHETHER THE EDUCATION PROVIDED BY THE INSTITUTION BY CHARGING OF FEES, WHICH IS UNAFFORDABLE TO THE COMMON CATEGORY OF PARENTS/LOWER CLASS OF THE SOCIETY CAN BE REGARDED AS 'CHARITABLE' ? AT THE MOST OF TH E EDUCATION SO PROVIDED CAN BE SAID TO BE ARRANGEMENT FOR A STU DENT BELONGING TO HIGHER CLASS OF SOCIETY, AND FOR THE S TUDENTS WHOSE PARENTS ARE ABOVE THE POVERTY LINE. THERE IS NO ARRANGEMENT FOR A PLACE FOR THE STUDENTS BELOW THE POVERTY LINE IN THE INSTITUTION. NOT ONLY THE EDUCATION IS AT EX ORBITANT COST, BUT ALL THE SERVICES RENDERED IN FURTHERANCE OF EDU CATION LIKE CONDUCTING CLASSES, SUPPLY OF BOOKS, LIBRARY, SCHOO L BUS, HOSTEL, MESSING, ETC., ARE AT A DUE COST FROM THE S TUDENTS. MOREOVER, MOST OF THE COURSES RUN BY THE ASSESSEE A RE SPECIALIZED COURSES, FOR B.E., IN VARIOUS BRANCHES. THUS, I FIND THAT THERE IS NO DISTINCTION BETWEEN THE ASSESSEE, AND ANY OTHER PRIVATE COMMERCIAL EDUCATION INSTITUTION, WHI CH IS RUN WITH PROFIT MAKING INTENTIONS. IN FACT, I FIND THAT THERE IS NO WORK OF CHARITY DONE BY THE ASSESSEE, ON THE CONTRA RY, THE TRUST IMPARTS KNOWLEDGE AT COST, WITH PROFIT ELEMEN T INHERENT THEREIN. 11.5 THOUGH THERE IS NO BAR IN HAVING PROFIT ELEME NT, BUT ITS APPLICATION IN CHARITABLE ACTIVITIES IS THE DECIDIN G FACTOR AS TO WHETHER THE FUNDS OR PROFIT ARE BEING APPLIED FOR C HARITABLE PURPOSE. IN THIS CONNECTION, AS CAN BE SEEN FROM TH E DISCUSSION TAKEN PLACE IN PARAS 7 TO 10.2 (SUPRA), THAT THE SUBSTANTIAL PART OF THE INCOME OF THE ASSESSEE TRUS T HAS BEEN UTILIZED FOR THE PERSONAL BENEFITS, AND ALSO FOR TH E PURPOSE OTHER THAN THE BENEFIT OF THE PUBLIC, NOT BEING OF 'CHARITABLE NATURE' 11.6 I HAVE ALSO CONSIDERED THE ASSESSEE'S SUBMIS SION IN LIGHT OF THE STATE GOVERNMENT'S PERMISSION, ALLOWING T HE ASSESSEE TO COLLECT/CHARGE FEES AT PRESCRIBED RATES. IT IS PERTINENT TO NOTE THAT THE STATE GOVT HAS A CONSTITUTIONAL LIABI LITY TO PROVIDE EDUCATION TO ALL AND SUNDRY. FOR THIS PURPO SE, THE STATE GOVT. HAS BEEN RUNNING SCHOOLS OF ITS OWN FOR A LONG PERIOD. HOWEVER, WITH INCREASE IN THE NUMBER OF STU DENTS, AND ON FINDING THAT IT WAS FALLING SHORT TO DISCHARGE I TS LIABILITY, THE STATE GOVT. HAS DELEGATED THIS TASK TO NGOS, WHO AR E ENGAGED IN IMPARTING EDUCATION. EVEN IN SUCH CASES, WHERE I T IS CONSIDERED NECESSARY THAT THE EDUCATION HAS TO BE P ROVIDED AS A CHARITY, AND THAT IT WAS SHORT OF DISCHARGING ITS CONSTITUTIONAL DUTIES, THE STATE GOVT. HAS NOT UNSH ACKLED ITSELF COMPLETELY, BUT HAS PROVIDED NECESSARY FINANCIAL AI D IN FORM OF GRANTS TO SUCH NGOS. THUS, BY PROXY, THE STATE GOVT . HAS SHOULDERED THE FINANCIAL RESPONSIBILITY OF PROVIDIN G EDUCATION, TO THE NEEDY, BY PROVIDING GRANTS TO THE DESERVING NGOS ENGAGED IN THE EDUCATIONAL FIELD. THIS IMPLIEDLY ME ANS MAT, IN CASE THE STATE GOVT. IS NOT PROVIDING EDUCATIONAL G RANTS TO ANY NGO, ENGAGED IN THE FIELD OF IMPARTING EDUCATION, T HEN THE STATE GOVT. FINDS THAT THE SO-CALLED 'CHARITABLE E DUCATIONAL' WORK OF SUCH NGO IS NOT AN ABSOLUTE NECESSITY TO DISCHARGE ITS CONSTITUTIONAL LIABILITY. THUS, IN MY VIEW, GRANTING PERMISSION TO SUCH NGO TO ENGAGE IN EDUCAT IONAL ACTIVITY, IS MERELY AKIN TO GRANTING PERMISSION TO ANY OTHER BUSINESS HOUSE TO CONDUCT ITS BUSINESS. EVEN IN SUC H CASES, THE GOVT. HAS ENSURED THAT THE STUDENTS ARE NOT MAD E TO SUFFER UNDULY AT THE HANDS OF SUCH NGOS, BY ENSURING AN UP PER CEILING TO CHARGING OF FEES. 11.7 IT IS PERTINENT TO NOTE IN THE CASE THAT, THE ASSESSEE IS NOT IN RECEIPT OF ANY EDUCATIONAL GRANTS, FROM THE STAT E GOVT. AS ALREADY BROUGHT OUT ABOVE, THIS IMPLIEDLY MEANS THA T THE STATE GOVT. FINDS THAT THE SO-CALLED 'CHARITABLE WORK' OF THE ASSESSEE IS NOT AN ABSOLUTE NECESSITY TO DISCHARGE ITS CONST ITUTIONAL LIABILITY. FURTHER, BY PERMITTING THE ASSESSEE TO C HARGE FEES AT A PRE-DETERMINED RATES, THE GOVT HAS MERELY MADE AV AILABLE A MEANS TO MEET THE ASSESSEE'S EXPENDITURE, AT THE SA ME TIME HAS ENSURED THAT THE STUDENTS ARE NOT UNDULY SUFFER ED BY PROVIDING A CEILING FOR COLLECTION OF FEES. THEREFO RE, THE ASSESSEE'S STAND THAT IT IS CHARGING FEES AS PERMI TTED BY THE STATE GOVT., DOES NOT NECESSARILY MEANS THAT THE AS SESSEE IS ENGAGED IN CHARITABLE ACTIVITY WITHIN THE PREVIEW O F SEC. 2(15) OF THE-IT ACT, 1961. MOREOVER, AS ALREADY STATED EA RLIER, THE ASSESSEE HAS BEEN PROVIDING NOTHING FREE OF COST, A ND THERE IS A COST-TAG TO EACH AND EVERY ITEM, I.E. CONDUCTING CLASSES, SUPPLY OF BOOKS, LIBRARY, SCHOOL BUS, HOSTEL, MESSI NG, ETC., WHICH ARE BY NO MEANS LESS THAN THAT THE UPPER LIMI T PRESCRIBED BY THE STATE GOVT. THIS STRENGTHENS THE STAND OF THE DEPARTMENT THAT THE INSTITUTE IS RUN PURELY ON COMM ERCIAL LINES. 11.8 IN VIEW OF THE ABOVE, I HOLD THAT THE ASSESSEE IS NOT ENGAGED IN CHARITABLE ACTIVITY WITHIN THE PURVIEW O F SEC. 2(15), BUT IS ON THE CONTRARY, IMPARTING KNOWLEDGE AT COST , WITH PROFIT MAKING INTENTION INHERENT THEREIN. MORE GLARING IS THAT THE FUNDS ARE BEING UTILIZED FOR THE BENEFIT OF THE TRU STEES, OTHER THAN FOR THE OBJECT OF CHARITABLE PURPOSES. 12. I HAVE ALSO CAREFULLY CONSIDERED VARIOUS CITATI ONS QUOTED BY THE ASSESSEE. HOWEVER, DUE TO THE DIFFERENCE IN THE FACTS OF THOSE CASE AND THE FACTS PREVAILING IN THE INSTANT CASE, THE SAME ARE DIFFERENTIATED ON FACTS, AND ARE NOT OF AN Y HELP TO THE ASSESSEE. 13. IN VIEW OF THE ELABORATE DISCUSSION IN THE PRE CEDING PARAGRAPHS, I FIND THE ASSESSEE TRUST IS ENGAGED IN THE BUSINESS OF IMPARTING KNOWLEDGE WITH COST AND PROFI T, INHERENT THEREIN. I ALSO FIND THAT THE FUNDS HAVE BEEN APPLI ED FOR THE PERSONAL BENEFITS OF THE TRUSTEES AND RELATIVES, I. E. OTHER THAN FOR THE OBJECT OF THE TRUST. THEREFORE, THE ACTIVIT IES CARRIED OUT ARE COMMERCIAL ACTIVITIES, AND NOT FOR CHARITY, WIT HIN THE MEANING OF PROVISIONS OF SEC. 2(15) OF THE IT ACT, 1961. THERE IS AN INFRINGEMENT OF THE PROVISIONS OF SEC. 11(5) & 1 3(L)(C) OF THE INCOME TAX ACT, 1961. 14. TO CONTINUE TO BE REGISTERED U/S 12A OF THE AC T, AND TO AVAIL BENEFIT OF SECTION 11 AND 12 OF THE ACT, THE TRUST HAS TO COMPLY WITH THE PROVISIONS OF RULE 17, 17B, 17C OF THE IT RULES,' 1962, AND ALSO PROVISIONS OF SEC. 12A, 12AA , AND 13 OF THE IT ACT, 1961. SECTION 13 IS OVER AND ABOVE THE CONDITIONS AND PROVISIONS PROVIDED FOR EXEMPTION U/S 11 & 12 O F THE ACT. THE HON. MADRAS HIGH COURT IN THE CASE OF MA NAMAZI E ENDOWMENT VS CIT (1988) (174 ITR 58) HAS HELD THAT SECTION 13 IS ONLY AN EXCEPTION TO SECTION 11 OF THE ACT. S ECTION 13 BEGINS WITH THE WORDS 'NOTHING CONTAINED IN SECTION 11 [OR SEC. 12] SHALL OPERATE SO AS TO EXCLUDE FROM THE TOTAL I NCOME OF THE PREVIOUS YEAR.....'. IT IS CLEAR FROM THE LANGUAGE OF SEC. 13 THAT THE INCOME OF A CHARITABLE OR RELIGIOUS ORGANIZATIO N WILL BE FORTIFIED IF ANY OF THE PROVISIONS OF SECTION 13 AR E VIOLATED, EVEN IF OTHER CONDITIONS OF SECTION 11 AND 12 OF THE ACT ARE COMPLIED WITH. 15. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE CONSIDERED VIEW THAT THE REGISTRATION G RANTED U/S 12A OF THE IT ACT, 1961, VIDE NO. KOP/HQ.III/217/P- L 10/78/168/97-98 ON 11-02-1998, NEEDS TO BE DRAWN, F OR THE REASONS AS DISCUSSED ABOVE, AS THE ASSESSEE HAS FAI LED TO ESTABLISH ITS CLAIM WITH SUFFICIENT DOCUMENTARY EVI DENCE AS CHARITABLE SOCIETY AND CHARITABLE ACTIVITIES THEREI N, WITHIN THE MEANING OF SECTION 2(15) OF THE ACT, AND ALSO FOR T HE REASON OF INFRINGEMENT OF SEC. 11(5) AND 13(L)(C) OF THE ACT. THE REGISTRATION GRANTED U/S 12 AA UNDER CERTIFICATE NO.KOP/HQ.III/217/P-110/78/168/97-98 ON 11-02-1998, IS HEREBY CANCELLED. 7. BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE CIT KOLHAPUR WAS NOT JUSTIFIED IN CANCELLI NG/WITHDRAWING REGISTRATION GRANTED TO THE ASSESSEE U/S 12A OF THE ACT ON 11-2- 1998 RESORTING TO THE PROVISIONS OF SEC. 12AA(3) IN SERTED IN THE ACT W.E.F. 1-10-2004 BEING PROSPECTIVE IN NATURE APPLY ONLY TO REGISTRATIONS GRANTED PRIOR TO 1-10-2004. THE ORD ER OF CANCELLATION OF REGISTRATION IS VOID ABINITIO, ILLEGAL AND WITHO UT JURISDICTION. THE ORDER OF CANCELLATION OF REGISTRATION GRANTED U/S 1 2A TANTAMOUNTS TO REVIEW THE ORDER OF CIT KOLHAPUR WHICH IS NOT PE RMISSIBLE IN LAW. ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE ORD ER OF THE CIT WHEREBY REGISTRATION OF THE ASSESSEE-TRUST WAS CANC ELLED AS DETAILED IN PRECEDING PARAGRAPHS OF THIS ORDER. 8. AFTER GOING THROUGH THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT UNDIS PUTEDLY THE ASSESSEE WAS GRANTED REGISTRATION IN THE YEAR 1998. THE CIT KOLHAPUR ISSUED SHOW-CAUSE NOTICE UNDER S. 12AA(3) TO CANCEL THE REGISTRATION OF THE APPELLANT-TRUST R ETROSPECTIVELY FROM THE DATE THE TRUST WAS GRANTED REGISTRATION. AS PE R PROVISIONS OF S. 2(15) OF THE ACT THE 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL, MEDICAL RELIEF AND THE ADVANCEM ENT OF ANY OTHER OBJECT OF 'GENERAL PUBLIC UTILITY.' THE PROVI SO TO SEC. 2(15) OF THE ACT READS AS UNDER: 'PROVIDED THAT ADVANCEMENT OF ANY OTHER OBJECT OF G ENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, , IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TR ADE COMMERCE OR BUSINESS FOR A CESS OR FEE OR NAY OTHER CONSIDER ATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, O R RETENTION, OF THE INCOME FROM SUCH ACTIVITY'. THE PROVISO WAS INSERTED BY FINANCE (NO. 2) ACT, 20 08, W.E.F. 01-04- 2009. NOW THE QUESTION IS WHETHER THE PROVISO INSE RTED WITH EFFECT FROM 1-4-2009 IS APPLICABLE TO THE ACTIVITY OF THE TRUST BEFORE US. S. 11(1) OF THE ACT LAYS DOWN THAT SUBJECT TO THE PROV ISIONS OF SS. 60 TO 63, THE INCOME DERIVED FROM PROPERTY HELD UNDER TRU ST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSE, TO THE EXTENT TO W HICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA; AND WHERE SUC H INCOME IS ACCUMULATED OR SET APART FOR APPLICATION FOR SUCH P URPOSE IN INDIA, TO THE EXTENT TO WHICH THE INCOME SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF 15% (25% UPTO 31-03-2003) OF THE I NCOME FROM SUCH PROPERTY. THE SUB-SECTION (2) CL. (B) OF S. 11 PROVIDES THAT HERE EIGHTY-FIVE PERCENT OF THE INCOME REFERRED TO IN CL . (A) OR CL. (B) OF SUB-SECTION (1) READ WITH EXPLANATION TO THAT SUB-S ECTION IS NOT APPLIED, OR IS NOT DEEMED TO HAVE BEEN APPLIED, TO CHARITABLE OR RELIGIOUS PURPOSES IN INDIA DURING THE PREVIOUS YEA R BUT IS ACCUMULATED OR SET APART, EITHER IN WHOLE OR IN PAR T, FOR APPLICATION TO SUCH PURPOSES IN INDIA, SUCH INCOME SO ACCUMULAT ED OR SET APART SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PR EVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME, PROVIDED THAT ... (B) THE MONEY SO ACCUMULATED OR SET APART IS INVESTED OR DEPOSITED I N THE FORMS OR MODES SPECIFIED IN SUB-SECTION (5). 8.1 SECTION 11(5) LISTS THE MODES OF INVESTING OR D EPOSITING THE MONEY REFERRED TO IN CL. (B) OF SUB-SECTION (2) WHI CH INCLUDES, IN A NUTSHELL, (A) SAVINGS CERTIFICATES; (B) POST OFFICE SAVINGS A/C; (C) SCHEDULED BANK OR A CO-OPERATIVE SOCIETY ENGAG ED IN THE CARRYING ON OF THE BUSINESS OF BANKING; (D) UNIT TRUST OF INDIA; (E) ANY SECURITY OF MONEY CREATED AND ISSUED BY THE CENTRAL GOVERNMENT OR A SATE GOVERNMENT; (F) INVESTMENT IN COMPANY OR CORPORATION DIVIDENDS AND WHEREIN THE PRINCIPAL AND INTEREST ARE FULLY AN D UNCONDITIONALLY GUARANTEED BY THE CENTRAL GOVT. OR BY A STATE GOVT; (G) DEPOSITS IN ANY PUBLIC SECTOR COMPANY (H) DEPOSITS IN BONDS ISSUED BY ANY FINANCIAL CORPO RATION ENGAGED IN PROVIDING LONG TERM FINANCE FOR IND USTRIAL DEVELOPMENT IN INDIA WHICH IS ELIGIBLE FOR DED UCTION UNDER CL. (VIII) OF THE SUB-SECTION (1) OF SECTION 3 6, AND OTHER MODES SPECIFICALLY MENTIONED IN THAT SUB-SECTI ON (5) OF SECTION 11 OF THE ACT. 8.2 THE CONCERNED CIT INVOKED PROVISIONS OF S. 12A A(3) FOR CANCELLATION OF THE REGISTRATION GRANTED TO THE TRU ST U/S 12A FROM 11-02-1998. S. 12AA(3) WAS INSERTED IN THE ACT BY F INANCE (NO. 2) ACT, 2004, EFFECTIVE FROM 01-10-2004, PROVIDING SU BSEQUENTLY THAT IF THE COMMISSIONER IS SATISFIED THAT THE ACTIV ITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INST ITUTION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANC ELING THE REGISTRATION OF SUCH TRUST OR INSTITUTION. 8.3 THE CONCERNED CIT-II-KOLHAPUR HELD THAT THE DEP OSITS MADE WITH MADHYAMIK ADHYAPAK SAHAKARI PAT PEDHI, RAVINDR A NAGARI PAT-SANSTHA, JIJAI MANILA BIGGER SHETI CO-OP SOCIET Y, WERE IN CONTRAVENTION OF S. 11(5) AND S.13(L)(C) OF THE INC OME-TAX ACT, 1961 AND ALSO IN CONTRAVENTION OF BOMBAY PUBLIC TRUST AC T, 1950. IN THIS REGARD, THE STAND OF THE ASSESSEE HAS BEEN THA T 1) THE ITAT PUNE BENCH, PUNE IN THE CASE OF MAHARAS HTRA AROGYA MANDAL V. ITO, (2008) 117 TTJ (PUNE) 631 HAS HELD AS UNDER; INVESTMENT IN CREDIT CO-OP SOCIETY (PAT SANSTHA) B Y ASSESSEE-TRUST IS ELIGIBLE INVESTMENT UNDER S. LL(5 )(III), HENCE THERE WAS NO VIOLATION OF S. 13(L)(D) SO AS T O DENY RELIEF UNDER S. 11 OF THE ACT. IN THE ABOVE SAID CA SE, THE TRIBUNAL RELIED UPON DECISION IN THE CASE OF SBI ST AFF CREDIT CO-OP SOCIETY V. ITO (1998) 234 ITR 104 (MAD ), AND TATA TEA LTD. V. CIT (2003) 78 TTJ (KOL) 646. 2) IN THE CASE OF GURDAYAL BERLIA CHARITABLE TRUST V. ITO, (1990) 34 ITD (BOM) 489, THE ITAT HELD AS UNDER:- ACCORDING TO US, THE LINE OF ARGUMENT/REASONING ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE IS FUL LY FORTIFIED BY THE AFORESAID CIRCULAR NO. 387 ISSUED BY THE CBDT. THERE IS NOTHING IN S. 11(5) WHICH CAN BE INTERPRETED TO MEAN THAT IF A PORTION OF THE ACCUMU LATED INCOME OF THE TRUST IS NOT INVESTED IN SPECIFIED SE CURITIES, THE EXEMPTION UNDER S. 11 OF THE ACT WHICH HAS ALRE ADY BEEN GRANTED TO THE TRUST IN EARLIER YEAR WOULD BE WITHDRAWN.' 8.4 IT WAS FOUNDED BY CONCERNED CIT THAT THE SOCIET Y HAS PURCHASED A PLOT OF LAND AT SADAVLI FOR WHICH A SUM OF . 10,55,000/- WAS WITHDRAWN BY THE TREASURER WHEREAS THE ACTUAL COST OF THIS LAND IS ONLY RS. 2,31,000/-. THE BALA NCE AMOUNT OF RS. 8,24,000/- LYING WITH THE TREASURER IS BEING SHOWN AS ADVANCE TO MEMBER PENDING RECOVERY OF THE SAME. WHILE SCRUTINI ZING THE ACCOUNTS FOR F.Y. 2006-07 RELEVANT TO A.Y. 2007-08, IT WAS OBSERVED THAT THE SOCIETY HAS ADVANCED AMOUNT OF RS. 34,52,4 92/- TO TRUST/COMPANIES IN WHICH MEMBERS ARE DIRECTORS FOR CONSTRUCTION OF NEW COLLEGE BUILDING AT RATNAGIRI IN CONTRAVENTI ON OF PROVISIONS OF SECTION 13. THE SOCIETY HAS DEPOSITED A SUM OF R S. 55,00,000/- WITH THE MADHYAMIK ADHYAPAK PAT PEDHI AND RS. 1,03, 820/- TO RAVINDRA NAGARI PAR SANSTHA, LANJA IN CONTRAVENTION OF THE PROVISIONS OF SECTION 11(5) AND CONTRARY TO THE PRO VISIONS OF ACT. IT IS ALSO OBSERVED THAT THE AMENDMENTS MADE IN THE CO NSTITUTIONS ON 11-09-2001 RESULTED INTO ALL POWERS ACQUIRED BY THE CHAIRMAN AND HIS FAMILY MEMBERS. AS THE CONTROL OVER THE SOCIETY WAS IN THE HANDS OF FAMILY OF MANE AND MERELY RUNNING THE SOCI ETY AS A PRIVATE FAMILY SOCIETY. IN THIS BACKGROUND, THE ST AND OF THE ASSESSEE HAS BEEN THAT THE ASSESSEE-SOCIETY HAS REC EIVED BACK ALL THE AMOUNTS SO REFERRED TO IN THE SHOW-CAUSE NOTICE WITH INTEREST. THE ARRANGEMENT WAS ABSOLUTELY A TEMPORARY PHENOMEN A AND IT COULD NOT BE SAID THAT TRUST FUND WAS MISAPPROPRIAT ED BY ANY OF THE TRUSTEES. THE SOCIETY CANNOT BE PUNISHED BY CANCELI NG ITS REGISTRATION GRANTED U/S 12AA OF THE ACT FOR ANY MI S-DEEDS OF THE TRUSTEE. THE SAID TRUSTEE SHOULD BE PUNISHED FOR HI S OWN CONDUCT. ACCORDINGLY, SHRI ASHOK SAPRA, THE TRUSTEE WAS SAC KED FROM THE TRUSTEESHIP BY ACCEPTING THE RESIGNATION TENDERED B Y HIM. THE ADVANCE PAID TO HIM FOR PURCHASE OF LAND WAS FULLY RECOVERED. IN THIS BACKGROUND, THE STAND OF THE ASSESSEE HAS BEEN THAT THE EXEMPTION UNDER S. 11 COULD NOT BE DENIED TO THE AS SESSEE IF THERE WERE NO DOCUMENTARY EVIDENCES TO ATTRIBUTE THAT THE TRANSACTION TOOK PLACE ONLY TO BENEFIT THE MANAGING TRUSTEE OR HIS RELATIVES. 8.5 IT IS APPLICATION OR USE OF INCOME OR PROPERTY ALONE THAT ATTRACTS THE PROVISIONS OF SECTION 13(L)(C)(II) AND WHERE NET INCOME HAS NOT BEEN USED FOR ANY PURPOSE, LET ALONE BENEF IT OF MEMBERS, THIS SECTION CANNOT BE APPLIED. IN THE CASE OF DY. DIRECTOR OF INCOME-TAX (EXEMPTION) VS. DHARAM PARTISTHANAM (200 3) 173 TAXMAN 52 (DEL-TRIB) THE ITAT HELD THAT IN CASE IT TRANSPIRES THAT THE DEBT IN THE ASSESSEE'S BANK ACCOUNT IS A REFUND OF IDENTICAL AMOUNT PAID BY THE VICE PRESIDENT ON ITS BEHALF FOR PURCHASE OF MACHINERY THEN APPARENTLY PROVISIONS OF S. 13(L)(C) (II) WOULD NOT BE ATTRACTED. IN THIS CASE THE ADVANCE GRANTED TO ONE OF THE TRUSTEES FOR PURCHASE OF LAND AT SADVILI OF RS. 10,55,000/- ON B EHALF OF THE APPELLANT TRUST HAS BEEN RECOVERED FROM THE SAID TR USTEE AND HE IS SACKED. THE PROVISIONS OF S. 13(L)(C) THEREFORE, WI LL NOT BE ATTRACTED. IN THIS CASE THE ADVANCE GRANTED TO ONE OF THE TRUS TEES FOR PURCHASE OF LAND AT SADVILI OF RS. 10,55,000/- ON BEHALF OF THE APPELLANT TRUST HAS BEEN RECOVERED FROM THE SAID TRUSTEE THE PROVIS IONS OF SEC. 13(1)(C) THEREFORE, WILL NOT BE ATTRACTED. IN THE CASE OF CIT V. BALDEOJI MAHARAJ (1996) 84 TAXMAN 448 (ALL) THE HON BLE HIGH COURT, WHEREIN THE TRIBUNAL HELD THAT THERE WAS NO EVIDENCE TO SHOW THAT THE LOAN WAS NOT ADEQUATELY SECURED AND I NTEREST CHARGED WAS ALSO ADEQUATE IN THE FACTS AND CIRCUMST ANCES OF THE CASE, THE TRIBUNAL CONCLUDED THAT THERE WAS NO VIOL ATION OF THE PROVISIONS OF LAW I.E. S. 13 OF THE ACT AND THE TRU ST WAS ENTITLED TO EXEMPTION UNDER S. 11 OF THE ACT. IT WAS THEREFORE, CONCLUDED THAT THERE WAS NO VIOLATION OF THE PROVISIONS OF S. 13 O F THE ACT. ON THESE FINDINGS THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE PROVISIONS OF S. 13 OF THE ACT ARE NOT APPLICABLE IN THIS CASE AND T HE ASSESSEE-TRUST IS ENTITLED TO EXEMPTION UNDER SS. 11 AND 12. 8.6 THERE IS NOTHING IN SECTION 11(5) WHICH COULD B E INTERPRETED TO MEAN THAT IF A PORTION OF THE ACCUMULATED INCOME OF THE TRUST IS NOT INVESTED IN SPECIFIED SECURITIES, THE EXEMPTION UND ER SECTION 11 OF THE ACT WHICH HAS ALREADY BEEN GRANTED TO THE TRUST IN EARLIER YEARS WOULD BE WITHDRAWN. IN THIS VIEW OF THE MATTER, THE TRUST COULD NOT BE DENIED EXEMPTION UNDER SECTION 11 AND ONLY ITS I NCOME FROM DIVIDEND ON 12,000 SHARES SHOULD BE BROUGHT TO TAX AT PRESCRIBED RATE BECAUSE SUCH INCOME IS NOT FROM SPECIFIED SECU RITIES. THE ITAT AHMEDABAD BENCH IN THE CASE OF DIRECTOR OF INCOME-T AX V. SHRI N. H. KAPADIA EDUCATION TRUST (2008) 148 TTJ (AMD) 37 WHEREIN THE ISSUE OF PURCHASE OF LAND WAS RAISED AND IT WAS HEL D THAT THE PURCHASE OF THE LAND WAS INTENDED BY THE TRUSTEES F OR THEIR OWN BENEFITS/GAINS, ETC. DOES NOT HOLD WATER AS NO DOCU MENTARY EVIDENCE WAS BROUGHT ON RECORD TOWARDS THE ASSESSEE 'S CLAIM. 8.7 WITH REGARD TO THE PAYMENT MADE BY THE TRUSTEE S TO THE VENDOR, IT WAS EXPLAINED THAT THE FUNDS PROVIDED BY THE TRUST HAS BEEN PAID THROUGH ITS TRUSTEES FOR THE REASONS RECO RDED ABOVE. THE BANAKHAT CLEARLY INDICATED THAT TRANSACTION WAS MAD E FOR AND ON BEHALF O THE ASSESSEE-TRUST ONLY AND NOT FOR THE PE RSONAL BENEFIT OF ANY OF THE TRUSTEES. THE PAYMENT MADE TOWARDS PURCH ASE OF LAND WAS SHOWN BY THE ASSESSEE IN ITS BOOKS OF HIS RELAT IVES FOR THAT MATTER HAVE CLAIMED THAT THE SAID PURCHASE WAS MADE ON BEHALF OF THEM OR FOR THEIR OWN BENEFITS, ON PERUSAL OF THIS, IT WAS FOUND THAT NO DOCUMENTARY EVIDENCES TO SUBSTANTIATE THAT SAID TRANSACTION TOOK PLACE ONLY TO BENEFIT THE MANAGING TRUSTEE OR HIS RELATIVES EXCEPT THAT THE FUNDS OF THE TRUST WERE ROUTED THRO UGH THE TRUSTEES TO THE VENDOR WHICH MERELY EXHIBITED THE EXPEDIENCY WHICH PREVAILED AT THAT RELEVANT TIME. MOREOVER, THE UTIL IZATIONS OF THE TRUST FUND WAS NOT FOR PURCHASE OF AGRICULTURAL LAN D AS INVESTMENT, BUT WAS A STEPPING STONE TO SET UP AN EDUCATIONAL I NSTITUTION IN SAID LAND. 8.8 VIDE PARA 8 OF THE CANCELLATION ORDER OF THE CI T-II, KOLHAPUR IT WAS ONE OF THE REASONS FOR INVOKING S. 12AA(3) THAT THE ORIGINAL TRUST-DEED HAS BEEN AMENDED ON 11-09-2001 AND AS PE R AMENDED DEED ACCORDING TO CIT, BENEFITS ARE INTENDED TO BE ENJOYED BY THE CHAIRMAN, HIS RELATIVES AND HIS SUCCESSORS IN FUTUR E. THUS BY CONCENTRATING ALL THE POWERS OF RUNNING THE TRUST I N THE HANDS OF THE CHAIRMAN AND HIS FAMILY MEMBERS, ARRANGEMENTS H AVE BEEN DONE FOR ENJOYMENT OF BENEFITS BY MANES (FAMILY OF MANE) NOT ONLY FOR THE PRESENT BUT FOR THE FUTURE AS WELL. ACCORD ING TO CIT SUCH AMENDMENT GOES AGAINST THE VERY SPIRIT OF THE TERM 'CHARITABLE TRUST'. IN THIS REGARD, WE FIND THAT THE CO-ORDINAT E BENCH OF ITAT JODHPUR BENCH IN MANSUKHI BIHANI JAN HITKARI TRUST V. CIT (2005) 277 ITR (AT) 140 (JODHPUR) HELD: THE MERE FACT THAT THE TRUSTEE ARE CLOSELY RELATED TO EACH OTHER AND BELONG TO ONE FAMILY WITH VACANCY ALSO BO UND TO BE FILLED UP ONLY BY MEMBERS OF THE FAMILY CANNOT BE T REATED AS BENEFIT TO SUCH MEMBERS. WHETHER THE TRUST IS A PUBLIC TRUST OR NOT DEPENDS UPON ITS OBJECTS. IN CASE THE SETTLER HIMSELF DECIDES TO BE THE SOLE TRUSTEE OR NOMINATES TRUSTEES FROM HIS FAMILY OR THOSE IN HIS PERSONAL CONFIDENCE. THIS DOES NOT VITIATE EITHER THE VALIDI TY OF SUCH TRUST OR ITS PUBLIC CHARACTER. IT IS NATURAL THAT SETTLER WO ULD LIKE TO ENSURE THAT THE OBJECTS OF THE TRUST CREATED BY HIM ARE BE ST CARRIED OUT BY PERSONS IN WHOM HE HAS THE REQUIRED CONFIDENCE. IT WAS IN THIS VIEW, THAT THE REFUSAL OF REGISTRATION WAS FOUND BY THE TRIBUNAL TO BE UNJUSTIFIED. THE BURDEN IS ON THE REVENUE TO ESTABL ISH AN ALLEGATION BESIDES PROVING THAT SUCH A PERSON DERIVED SOME BEN EFIT. IN SIMILAR CIRCUMSTANCES, THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. KAMLA TOWN TRUST (2005) 279 ITR 89 (ALL) HELD T HAT THE BURDEN TO PROVE THAT SECTION 13 IS VIOLATED WHICH WAS ON T HE REVENUE, WAS NOT DISCHARGED. 8.9 IN THE CASE OF DCU V. COSMOPOLITAN EDUCATION S OCIETY (2000) 244 ITR 494 (RAJ) IT WAS POINTED OUT THAT, IF THERE WAS ANY MISAPPLICATION OF FUNDS, ACTION WOULD LIE AGAINST P ERSON RESPONSIBLE, BUT THE INSTITUTION CANNOT BE DENIED E XEMPTION, WHICH DEPENDS UPON THE OBJECTS OF THE TRUST. THIS VIEW WA S UPHELD BY THE HIGH COURT AND SLP FILED BY THE DEPTT. AGAINST JUDG MENT WAS ALSO DISMISSED. (2000) 241 ITR (ST) 132. AN ADVANCE FOR PURCHASE OF PROPERTY BY ITSELF NEED NOT BE TREATED AS VIOLATION OF S. 11(5) BUT SUCH ADVANCE SHOULD BE BONAFIDE AS HELD IN THE CASE OF CIT VS. SHREE P. SUBRAMANIAM RELIGIOUS TRUST (2010) 326 ITR 393 (KER). SO THE CIT WAS NOT JUSTIFIED IN CANCELLING THE REGISTR ATION. S. 12AA(3) WAS INSERTED BY THE FINANCE ACT (NO. 2) ACT, 2004, EFFECTIVE FROM 01- 10-2004. IT IS SETTLED LEGAL POSITION THAT THE JUDI CIAL /QUASI-JUDICIAL AUTHORITY CANNOT REVIEW ITS OWN ORDER. THE CANCELLA TION/WITHDRAWAL OF REGISTRATION GRANTED UNDER S. 12A PRIOR TO 1-10- 2004 INVOKING S. 12AA(3) TANTAMOUNTS TO REVIEW OF THE ORDER. THE POW ER GRANTED UNDER S. 12AA(3) IS NOT RETROSPECTIVE. WE FIND THA T THE HON'BLE ALLAHABAD HIGH COURT IN CIT V. MANAV VIKAS AVAM SEW A SANSTHA (2011) 336 ITR 250 (ALL) HELD AS UNDER:- IT IS WELL SETTLED, PROPOSITION OF LAW THAT THE JU DICIAL/QUASI- JUDICIAL AUTHORITY CANNOT REVIEW ITS OWN ORDER, UNL ESS THE POWER OF REVIEW IS EXPRESSLY CONFERRED ON IT BY THE STATUTE UNDER WHICH IT DERIVES ITS JURISDICTION AS HELD IN THE CASE OF DR. SMT. KUNTESH GUPTA V. MANAGEMENT OF HINDU KANYA MAHAVIDYALAYA AIR 1987 SC 2186) AND THE FULL BENCH DECISION OF THIS COURT IN THE CASE OF SMT. ANARKALI V. DEPUTY DIRECTOR OF CONSOLIDATION REPORTED IN 1997 (15). SO THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX-II, LUCKNO W DATED MARCH 13, 2009 IS WITHOUT JURISDICTION AND VOID AB INITIO AND THE APPEAL IN LT.A. NO. 304/LKO/2009 FILED BY THE A SSESSEE BEFORE THE ITAT LUCKNOW BENCH, LUCKNOW WAS CORRECTL Y AND RIGHTLY ALLOWED BY THE SAID AUTHORITY BY ORDER DATE D JULY 10, 2009. THE HON'BLE HIGH COURT OF ALLAHABAD IN OXFORD ACADEMY FOR CAREER DEVELOPMENT V. CF. CIT (2009) 315 ITR 38 2 (ALL) HELD THAT SINCE S. 12AA(3) WAS INCORPORATED IN THE ACT, W.E.F. 1 ST OCT. 2004, AND NOT APPLICABLE RETROSPECTIVELY, REGI STRATION GRANTED TO ASSESSEE ON 1 ST APRIL, 1999 COULD NOT ,THEREFORE, BE CANCELLED BY THE CIT BY INVOKING POWERS U/S 12AA(3) OF THE ACT. EVEN ASSUMING THAT CIT HAS POWER TO RESCIND TH E ORDER OF REGISTRATION ON THE GROUND THAT REGISTRATION HAS BE EN OBTAINED BY PRACTICING FRAUD OR FORGERY THERE WAS NOTHING IN THE SHOW- CAUSE NOTICE OR IN THE IMPUGNED ORDER DT. 9 TH MARCH 2004 ALLEGING THAT THE PETITIONER HAD OBTAINED THE REGIS TRATION BY PRACTICING FRAUD OR FORGERY. 8.10 EVEN THE ITAT RANCHI BENCH IN THE CASE OF IN STITUTE OF SCIENCE & MANAGEMENT V. CIT (CENTRAL) PATNA (2012) 25 TAXMANN.COM 186 (RANCHI) HAS HELD THAT THE COMMISSI ONER BEFORE PASSING AN ORDER UNDER S. 12AA(3) TO SATISFY, HIMSE LF THAT ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH OBJECTS OF TRUST OR INSTITUT ION AND BEFORE PROCEEDING TO CANCEL REGISTRATION OF SUCH TRUST OR INSTITUTION A REASONABLE OPPORTUNITY OF BEING HEARD HAS TO BE GIV EN'. THE CO- ORDINATE BENCH OF ITAT AHEMDABAD BENCH IN DIRECTOR OF INCOME-TAX V. N. H. KAPAIDA EDUCATION TRUST (2008) 148 TTJ (AH D) 37 HELD THAT REGISTRATION UNDER S. 12A HAVING BEEN GRANTED TO ASSESSEE W.E.F. 21 ST MARCH, 1990, AMENDED PROVISIONS OF S. 12 AA (3) CO ULD NOT BE APPLIED AGAINST ASSESSEE RETROSPECTIVELY PRIOR TO A MENDMENT W.E.F. 1 ST JUNE, 2010. PRIOR TO THAT REGISTRATIONS WERE GRAN TED UNDER CL. (B) OF SUBSECTION (1) OF S. 12AA. SEC. 12 AA (3) HA S BEEN AMENDED BY FINANCE ACT, 2010 W.E.F. 1 ST JUNE, 2010 AND FOLLOWING HAVE BEEN ADDED IN THIS PROVISION 'OR HAS OBTAINED REGISTRATI ON AT ANY TIME UNDER SECTION 12A AS IT STOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO 2) ACT, 1996 (33 OF 1996)'. THE AMENDED PROVISI ON IN S. 12AA (3) CANNOT BE APPLIED AGAINST THE ASSESSEE RETROSPE CTIVELY PARTICULARLY PRIOR TO AMENDMENT DT 1 ST JUNE, 2010. THE DIRECTOR OF IT (EXEMPTION) WAS NOT JUSTIFIED IN RESORTING TO CA NCEL THE REGISTRATION GRANTED TO THE ASSESSEE TRUST EARLIER BY CIT, VIDE HIS ORDER DT. 21 ST MARCH, 1990 W.E.F. 21 ST MARCH, 1990. THEREFORE, IMPUGNED ORDER WAS SET ASIDE AND QUASHED. THE ABOV E LEGAL PROPOSITION LAID DOWN THAT THE PROVISIONS OF SEC. 1 2AA(3) ARE NOT RETROSPECTIVE AND THEREFORE, RESULTANTLY THE REGIST RATION GRANTED PRIOR TO INSERTION OF S. 12AA(3) OF THE ACT COULD N OT BE CANCELLED OR WITHDRAWN WHICH WOULD AMOUNT TO REVIEW. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SINHAGAD TECHNICAL EDUCAT ION SOCIETY V. CIT (CENTRAL) 2012) 343 ITR 23 (BOM) HAS HELD THAT 'EVERY STATUTORY PROVISION WHICH OPERATES IN RESPECT OF A TRUST, WHI CH HAS ALREADY BEEN REGISTERED IN THE PAST IS NOT NECESSARILY RETR OSPECTIVE. A PROVISION IS RETROSPECTIVE WHEN IT TAKES AWAY A RIG HT WHICH HAS VESTED OR ACCRUED IN THE PAST. THE EFFECT OF THE PR OVISION IS TO EMPOWER THE COMMISSIONER TO CANCEL THE REGISTRATION OF THE TRUST WHERE HE IS SATISFIED THAT THE ACTIVITIES OF THE TR UST ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION. THIS COULD NOT BY ANY STRETCH OF IMAGINATION BE REGARDED AS RETROSPECTIVE ALTERNATION OF THE LAW. I N THE CASE BEFORE US, AS PER THE AMENDMENT BY THE FINANCE ACT, 2010, THE COMMISSIONER HAS CLAIMED TO BE EMPOWERED TO INITIAT E STEPS FOR THE CANCELLATION OF THE REGISTRATION OF A TRUST OR INST ITUTION WHERE THE ACTIVITIES OF THE TRUST OR INSTITUTION ARE NOT GENU INE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS THEREOF EVEN IN RELATION TO A TRUST WHICH WAS REGISTERED UNDER S. 12A AS IT THE N STOOD.' SO BASIC REQUIREMENT FOR INVOKING S. 12AA(3) IS THAT T HE ACTIVITIES OF THE TRUST ARE NOT GENUINE AND ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. THE CIT H AS RECORDED HER FINDINGS IN THE ORDER U/S 12AA(3) THAT THE TRUST IS IMPARTING KNOWLEDGE AT COST AND THEREFORE, NOT A CHARITABLE T RUST WITHIN THE PURVIEW OF S. 2(15) OF THE ACT, SECONDLY, THE APPEL LANT TRUST HAS CONTRAVENED THE PROVISIONS OF SS. 11(5) AND 13(1) ( C) OF THE ACT. THIRDLY, THE TRUST IS TREATED BY THE CHAIRMAN AND FAMILY MEMBERS/RELATIVES AS THEIR PRIVATE PROPERTY AND ENJ OYED BY THEM FOR THEIR BENEFITS ONLY. THERE IS NOTHING ON RECORD TO SUGGEST THAT THE TRUST IS NOT 'GENUINE'. IN FACT, THE TRUST IS CARRYING ON EDUCATIONAL ACTIVITIES THEY ARE CHARITABLE IN NATUR E. THE ACTIVITIES ARE CARRIED OUT AS PER ITS OBJECTS. THERE IS NO IN FRINGEMENT OF ANY OF THE PROVISIONS CONTAINED IN SS.11(5) AND 13 O F THE ACT. THE PROVISIONS OF S.12AA(3) FOR CANCELLATION/WITHDRAWA L OF REGISTRATION GRANTED TO IT W.E.F. 11-2-1998 U/S 12A OF THE ACT A RE NOT RETROSPECTIVE AND THEREFORE, THE IMPUGNED ORDER OF THE CIT PASSED U/S 12AA(3) IS NOTHING BUT A REVIEW OF ITS EARLIER ORDER WHICH IS IMPERMISSIBLE IN LAW. WE HOLD SO. 9. AS A RESULT, THE APPEAL OF ASSESSEE IS ALLOWED A S INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 30 TH SEPTEMBER 2013. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 30 TH SEPTEMBER 2013 ANKAM/GCVSR COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT-II, KOLHAPUR 4) THE DR, A BENCH, I.T.A.T., PUNE. 5) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE