TaxTMI 
TaxTMI 
2014 (4) TMI 928
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....ssional institutions of higher learning. Some of the main objects of the assessee society are as under: i) To promote the advancement of education and other interconnected fields in all its aspects globally and do all things necessary for the same. ii) To establish, conduct, control and manage schools, academics, colleges, old age homes for destitute, retired teaching faculty and/or any deserving persons/s, Vedic Patashalas, Institutions for spread of social awareness and for promoting social causes in form including home for the physically challenged and identified vulnerable sections of the society, and institutions for promotion of education, scientific research and/or other relevant educational activities and development in all aspects including sports and games. 3. A search action u/s 132 of the Act was carried out on 11.5.2010 on the cases of managing counsel members of the assessee. Simultaneously, there was a survey u/s 133 in the premises of the assessee trust at Matunga, SIESC, Campus, Nerul, M/s Redfine Properties Pvt. Ltd. and Encube Ethicals Pvt. Ltd. From the evidence gathered and statements recorded during the search/survey it was f....
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....anted u/s 12A should not be withdrawn/cancelled. The assessee submitted reply to the show-cause notice vide letter dated 13.3.2013 and contended that the assessee is one of the pioneer in the city of Bombay in imparting education to public by running several educational institutions for several decades. It was contended that the capitation fee collected is utilised only for the advancement of the purpose of the assessee trust and therefore, when the activity of the assessee's are to achieve the object of the trust then the registration cannot be withdrawn u/s 12AA(3). It was further contended that the amount of Rs. 2.28 crores found in the locker of Mr. N. Venkatanathan was never brought to notice of managing Counsel Member nor trustee or office bearer of any educational institution of the assessee trust. Mr. N. Venkatanathan is a retired person and without the knowledge of the Managing Counsel siphoned money in his personal capacity though he offered the said amount of Rs. 2.28 crores in his return of income. The assessee trust has nothing to do with the Act of Shri N. Venkatanathan. The Commissioner did not accept the contention of the assessee and held that the collection of cap....
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....ction of the condition that the activities of trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution. The Ld. A.R has contended that the activities of promotion and imparting education are very much genuine activity of the assessee and therefore, the incidents of accepting the capitation fee does not change the genuine activity of promotion and imparting education into non-genuine activity. He has referred the decision of Hon'ble Madras High Court in case of CIT Vs Sarvodaya Ilakkiya Pannai 343 ITR 300 and submitted that the Hon'ble High Court has observed that in order to apply the provisions of Section 12AA(3), there must be specific finding that the activities of the trust or institution are not genuine or not being carried out in accordance with the object of trust or institution as case may be. The reason for cancellation of registration that the activities of trust was not charitable cannot be brought under the provisions of Section 12AA(3) of the Act. The Ld. A.R has referred the objects of the assessee trust and submitted that the objects of the assessee are not in dispute being charitable in nature there....
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....hus, the Ld. A.R has submitted that in all these decisions the cancellation of registration on the ground of accepting capitation fee was found not sustainable in law. The Ld. A.R then submitted that the CIT(A) accepted the genuineness of the activity of imparting education in para 21 of the impugned order and therefore, the incident of accepting capitation fee cannot be the ground for cancellation of registration. He has then pointed out that the Commissioner has relied upon the decision of Hon'ble Supreme Court in case of Miss Mohini Jain Vs State of Karnataka and Ors. 2 SSC 666. In the said case the question before the Hon'ble Supreme Court was the validity of circular issued by the Karnataka Government allowing the capitation fee to be received by the educational institutions in the State therefore the said decision is not relevant for the purpose of cancellation of registration u/s 12AA(3) of the Act. The decision in case of Vodhithala Education Society Vs ADIT 20 SOT 353 (Hyd) relied upon by the CIT(A) is on the issue of exemption u/s 11 of the Act in respect of capitation fee. Therefore, the decisions relied upon by the CIT while passing the impugned order are not applicable....
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....see being cash donation/capitation fee from the parents of the admitted students. It is also undisputed fact that the assessee has accounted for the entire amount of donation/capitation fee. The part of the capitation fee against which the receipts were issued by the assessee was accounted for under the same head and the remaining part where the admission seekers did not ask for receipt was converted into donation from third parties. This fact has been accepted by the A.O in the assessment passed subsequent to the search and cancellation of registration u/s 12A. The A.O has recorded these facts in para 3.2 and 3.3 as under: "3.2 Out of the cash donations collected (Sr. No. 1), the assessee has claimed unaccounted cash expenditure (Sr. No. 2), Conversion/recycle into cheques (Sr. No. 3) and the balance of around Rs. 1.18 crores was hoarded temporarily in Lockers for future conversion/application (Sr. No. 5). However, it is seen at Sr. No. 4 that a part of the unaccounted cash collection was deposited in their bank accounts wherein the payers have insisted on receipts and hence have been accounted for by default. During the course of post search enquires, assessee has....
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....to show that the assessee is carrying on any activity which is not related to the promotion of education or imparting of education. Therefore, the source of income being the capitation fee is purely a subject of assessment and exemption u/s 11 and cannot be a ground for cancellation as stipulated u/s 12AA(3) when the actual carrying out of the activity of imparting education is not disputed. An identical issue has been considered by the Hon'ble High Court as well as this Tribunal in a series of decisions. In the case of CIT Vs Sarvodaya Ilakkiya Pannai (supra) the registration granted u/s 12A was cancelled by the Commissioner on the ground that the assessee society was engaged in the purchase and sale of books. The Hon'ble High Court has observed in para 6 and 9 as under: "6. In order to apply the above provision, there must be a specific finding by the Commissioner that the activities of the trust or institution are not genuine or not being carried out in accordance with the objects of the trust or institution, as the case may be. The question is, whether the order of the Commissioner of Income Tax could fall under the powers conferred on him under section 12AA(3) ....
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.... in nature. In our conscientious view there is no disagreement about the above-mentioned four legal proposition as eruditely laid down by the respected Amritsar Bench. Undisputedly we have also to decide this appeal more or less within these parameters. But the basic question is that before stepping towards the cancellation of registration the heavy burden is on the learned Cit to conclusively demonstrate that all had gone haywire i.e., objects are meant for personal benefits; that engaged in immoral activities or that there is no element of public benefit. In the present appeal none of the above criteria for rejection of registration was in existence, however mainly confined to the finding that by charging donation the trust has infringed the rules of Prohibition of Capitation Fee Act. 11.10............................................................ 11.11 ........................................................... 11.12 ............................................................. 11.13 ............................................................ 11.14 Facts of this appeal are peculiar, as already dis....
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.... hold a view that the above activities carried on by the Assessee-Trust are not genuine. There is no such case at all. The objects of the Assessee-Trust are to engage in the activities in the field of education, medical care and rural development. The activities now carried on by the Assessee-Trust are in consonance with the objects and enshrined in its Memorandum of Association. The Commissioner has no case that the activities of Assessee-Trust are not reflected in the objects clause of the Assessee-Trust. 47. Therefore, as a clear proposition of facts, it is very evident from the record that the conditions necessary to be satisfied for the purpose of cancelling the registration as provided u/s 12AA(3) have not been satisfied in the present case. The law does not speak of any other situation in which the Commissioner of Income Tax has the power to cancel the registration of a Charitable Institution in order to cancel the registration, it should be seen that either the activities carried on by the assessee are not genuine or the activities of the Assessee-Trust are not in consonance with the declared objects. The assessee is not hit by any of the above riders. There....