TaxTMI 
TaxTMI 
2013 (9) TMI 1120
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....sdiction vested in her to cancel registration in the absence of any provisions for cancellation the 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 case and in law the order of cancellation of registration granted u/s 2A tantamount to review of the order by ld. CIT-II Kolhapur which is impermissible in law? 4. Whether in the facts and circumstances of the case 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) Kolhapur for adjudication will amount to interference in the judicial powers vested in ld. CIT(A) Kolhapur since in such circumstances he may follow the decision of ld. CIT II Kolhapur being lower authority in hierarchy which will prejudice the appellant assessee in a serious manner causing injustice to it? 2. At the outset of hearing, the learned authorized representative did not press ground no. 4 and hence the same is dismissed as not pressed. 3. The assessee is engaged in educational activities and is running institutions from High....
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....rom their salaries and therefore, the provisions of sec. 13 are not applicable; (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 purchase of motor car, the assessee has contended that the trustees were allowed to purchase vehicles on behalf of the trust, however, on finding it no feasible, the advance amount was recovered with interest; (d) As regards to the deposits with Kosumb Group vividh kar sah. Society, the assessee has sought to explain that 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 and 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 state....
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....uently, 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 Ravindra 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 the very spirit of the term "Charitable Trust", as is envisaged for the purpose of the Income tax Act. 9. It is also seen that the assessee has purchased an ongoing construction from. Marleshwar Construction Pvt. Ltd., a company where Shri Ravindra Mane, Chairman of present trust, is Managing Director, and his wife Sou. Neha R. Mane is director. As admitted by the assessee the total amount of construction was Rs. 7835104/-. In this regards, the assessee has merely stated that ".this is a normal investment for the purpose of college", and also that "......at that time the chairman's company was constructing a building which the trust was decided to purchase .......which was getting ready to reduce time for construction.....which was urgently required". 9.1 It is pertinent to note that the assessee has e....
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.... viz. Advances given to the trustees for purchase of Motor Car, Advances lying with the treasurer, who is a specified person in explanation to sec. 13(3), for on purchase of land and lying unutilized for the purpose, Expenditure incurred on principal's daughter's marriage, 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 not result in loss to the assessee, and that the same were returned to the assessee in due course of time. 10.2 The veracity of the above contention has already been discussed in preceding paras. Therefore, the stand of the assessee is rejected, for the same reasons mentioned therein. 11. It is also seen that, though the trust deed provides for a very lucrative objectives and purposes, the assessee has been charging the students fees as per their schedules/prospectus, etc. In this respect the available records have been verified. The details of gross receipts, receipts from various fees, and the surplus is as under : AY Gross Receipts Receipts From Various fees, Hostel, mess, etc N....
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....ry of parents/lower class of the Society can be regarded as "Charitable" ? At the most of the education so provided can be said to be arrangement for a student belonging to higher class of Society, and for the students 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 exorbitant cost, but all the services rendered in furtherance of education like conducting classes, supply of books, library, School bus, hostel, messing, etc., are at a due cost from the students. Moreover, most of the courses run by the assessee are 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, which is run with profit making intentions. In fact, I find that there is no work of charity done by the assessee, on the contrary, the trust imparts knowledge at cost, with profit element inherent therein. 11.5 Though there is no bar in having profit element, but its application in charitable activities is the deciding factor as to whether the funds or profit are being applied ....
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....permitting the assessee to charge fees at a pre-determined rates, the Govt has merely made available a means to meet the assessee's expenditure, at the same time has ensured that the students are not unduly suffered by providing a ceiling for collection of fees. Therefore, the assessee's stand that it is charging fees as permitted by the state Govt., does not necessarily means that the assessee is engaged in charitable activity within the preview of sec. 2(15) of the-IT Act, 1961. Moreover, as already stated earlier, the assessee has been providing nothing free of cost, and there is a cost-tag to each and every item, i.e. conducting classes, supply of books, library, School bus, hostel, messing, etc., which are by no means less than that the upper limit prescribed by the State Govt. This strengthens the stand of the Department that the Institute is run purely on commercial lines. 11.8 In view of the above, I hold that the assessee is not engaged in charitable activity within the purview of 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 ....
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....d 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 cancelling/withdrawing registration granted to the assessee u/s 12A of the Act on 11-2- 1998 resorting to the provisions of sec. 12AA(3) inserted in the Act w.e.f. 1-10-2004 being prospective in nature apply only to registrations granted prior to 1-10-2004. The order of cancellation of registration is void abinitio, illegal and without jurisdiction. The order of cancellation of registration granted u/s 12A tantamounts to review the order of CIT Kolhapur which is not permissible in law. On the other hand, the learned DR supported the order of the CIT whereby registration of the assessee-trust was cancelled 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 undisputedly 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 appe....
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.... (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 and 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 Corporation engaged in providing long term finance for Industrial development in India which is eligible for deduction under cl. (viii) of the sub-section (1) of section 36, and other modes specifically mentioned in that Sub-section (5) of Section 11 of the Act. 8.2 The concerned CIT invoked provisions of S. 12AA(3) for cancellation of the registration granted to the trust u/s 12A from 11-02-1998. S. 12AA(3) was inserted in the Act by Finance (No. 2) Act, 2004, effective from 01-10-2004, providing subsequently that if the Commissioner is satisfied that the activities of such Trust or Institution are not genuine or are not being carried out in accordance with the objects of the Trust or Institution, as the case may be, he shall pass an order in writing canceling the reg....
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....s also observed that the amendments made in the Constitutions 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 Society as a Private Family Society. In this background, the stand of the assessee has been that the assessee-Society has received back all the amounts so referred to in the show-cause notice with interest. The arrangement was absolutely a temporary phenomena and it could not be said that trust fund was misappropriated by any of the trustees. The Society cannot be punished by canceling its registration granted u/s 12AA of the Act for any mis-deeds of the trustee. The said trustee should be punished for his own conduct. Accordingly, Shri Ashok Sapra, the trustee was sacked from the trusteeship by accepting the resignation tendered by 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 assessee if there were no documentary evidences to attribute that the transaction took place only to benefit the managing trustee or hi....
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....nch in the case of Director of Income-tax v. Shri N. H. Kapadia Education Trust (2008) 148 TTJ (AMD) 37 wherein the issue of purchase of land was raised and it was held that the purchase of the land was intended by the trustees for their own benefits/gains, etc. does not hold water as no documentary evidence was brought on record towards the assessee's claim. 8.7 With regard to the payment made by the trustees to the vendor, it was explained that the funds provided by the trust has been paid through its trustees for the reasons recorded above. The Banakhat clearly indicated that transaction was made for and on behalf o the assessee-trust only and not for the personal benefit of any of the trustees. The payment made towards purchase of land was shown by the assessee in its books of his relatives 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 through the trustees to the vendor which merely exhibited the expedi....
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....h depends upon the objects of the Trust. This view was upheld by the High Court and SLP filed by the Deptt. against Judgment 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 registration. 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 judicial /quasi-judicial authority cannot review its own order. The cancellation/withdrawal of registration granted under S. 12A prior to 1-10-2004 invoking S. 12AA(3) tantamounts to Review of the order. The power granted under S. 12AA(3) is not retrospective. We find that the Hon'ble Allahabad High Court in CIT v. Manav Vikas Avam Sewa Sanstha (2011) 336 ITR 250 (All) held as under:- "It is well settled, proposition of law that the judicial/quasijudicial authority cannot review its own order, unless the power of review is expressly conferred on it by the statute under which it derives its jurisdicti....
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....fore its amendment by the Finance (No 2) Act, 1996 (33 of 1996)". The amended provision in S. 12AA (3) cannot be applied against the assessee retrospectively particularly prior to amendment dt 1st June, 2010. The Director of IT (Exemption) was not justified in resorting to cancel the registration granted to the assessee trust earlier by CIT, vide his order dt. 21st March, 1990 w.e.f. 21st March, 1990. Therefore, impugned order was set aside and quashed. The above legal proposition laid down that the provisions of Sec. 12AA(3) are not retrospective and therefore, resultantly the registration granted prior to insertion of S. 12AA(3) of the Act could not be cancelled or withdrawn which would amount to review. The Hon'ble Bombay High Court in the case of Sinhagad Technical Education Society v. CIT (Central) 2012) 343 ITR 23 (Bom) has held that "Every statutory provision which operates in respect of a trust, which has already been registered in the past is not necessarily retrospective. A provision is retrospective when it takes away a right which has vested or accrued in the past. The effect of the provision is to empower the commissioner to cancel the registration of the trust whe....