AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2012 (2) TMI 599
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.... the Trust are not charitable within the provisions of Section 2(15) of the Income Tax Act, 1961 and also that the Trust does not satisfy the conditions laid out u/s 80G(5) of the Income Tax Act, 1961 are contrary to facts and law and therefore, the rejection of application for renewal of exemption u/s 80 G of the Income Tax Act, 1961 of the Trust is arbitrary and unlawful and therefore, is liable to be quashed and the renewal of exemption be granted to the Trust u/s 80G of the Income Tax Act, 1961." 2. At the outset, the learned counsel for the assessee states at the bar that ground No.1 is not pressed. Rejected as not pressed. 3. Apropos ground No.2, the facts are that the assessee filed an application dated 5.11.09 in form No.10 G, seeking renewal of exemption u/s 80G of the Income Tax Act. The DIT(Exemptions) issued a show cause notice to the assessee. The said show cause notice, as reproduced at pages 2 and 3 of the impugned order, reads as follows:- "To The Principal Officer, Career Launcher Education Foundation, R-90, Greater Kailash-1, New Delhi-110048. Sir, Subject:- Renewal for exemption u/s 80G of the I....
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....lely to engage in commercial/business activities with the moot object to earn profit; that the assessee's activities were against the aims and objects for which public charitable trust are created; that the two Directors of CLEIS came under the category of the "specified persons" within the meaning of section 13(3) of the Act; that the Trade Mark Licensing Agreement entered into by the assessee with Career Launcher (India)Ltd. was a revocable agreement; that the signatories of both the parties to this Agreement were "specified persons"; that the Agreement for fresh Infrastructure entered into by the assessee with CLEIS showed that the licensor had given licence to the licencee to run and manage a business school in the name of Indus World Business School at Noida; that as per the clauses of this Agreement, the Chairman and Vice Chairman of the Governing Body of the assessee Trust were the nominees of the licensor and the main activities were to be dealt with by the Governing Body and the Bank Collection Accounts were to be operated by the said Chairman or the Vice Chairman of the Governing Body, who were none other than the nominees of the licensor; that this proved that the entire....
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....tten submissions, that the assessee is a Trust incorporated vide trust deed dated 20.04.2006 for pursuing the main object of establishing, running and managing schools/colleges to provide education of all types. The assessee is also running a business school in the name of "Indus World School of Business" at Greater Noida; that the assessee is registered under section 12A vide order dated 23.05.2006. The assessee was also granted approval under section 80G of the Act for the period from 23.11.2005 to 31.12.2007 vide order dated 23.05.2006; that the assessee filed an application in Form No.10G on 05.11.2009, before the DIT (Exemptions) seeking renewal of approval under section 80G(vi) of the Act; that in the impugned order dated 07.05.2010 passed by the DIT(E) under section 80G(vi) of the Act, the DIT(E) rejected the application filed by the assessee.. The DIT(E) has primarily held that the activities of the assessee are not charitable in nature and therefore, the assessee is not entitled to grant of approval under section 80G(vi) of the Act; that the aforesaid action of the DIT(E) is, patently erroneous, since Section 11 of the Act exempts income of a `person' derived from property....
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....ct; that the ld. DIT(E) has correctly held the case of the assessee to be falling squarely within the ratio of the decision of the Hon'ble Supreme Court in "Sole Trustees, Loka Shikshana Trust v. CIT"(supra); that further-more, undisputedly, at best, accepting for the sake of argument only; that the activities of the assessee fall within the expression "General Public Utility", the proviso to section 2(15) of the Act is directly attracted, since the receipts of the assessee by way of fee charged, are of more than Rs. 10 lakhs and the exemption u/s 11 of the Act is not available to such receipts; that the ld. DIT(E) has also rightly held the ratio in "M/s. Queen Educational Society, Nainital" (supra), to be directly applicable, since huge systematic profits were being generated by the assessee repeatedly year after year; that the assessee had also contravened the provisions of section 13 of the Act; that as such, the order passed by the ld. DIT(E), being a well versed, reasoned elaborate order, calls for no interference at our hands; that the grievance sought to be raised by the assessee, per contra, is not sustainable in face of the specific findings of fact recorded by the ld. DIT....
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.... 4b.1 To acquire and take over all or any part of movable or immovable properties of any similar Trust, society or institution or any one else whosoever may be for the purpose of the Trust and to maintain such assets. 4b.2 To raise funds, trough grants, aids, donations, subscriptions, sponsorship, presents, rent, gifts and loans or any assistance in other form etc. for the fulfillment of aims & objects of the Trust. 4b.3 To receive financial and non financial assistance from any Government and Non Government organizations, International agencies/organization, Banks and other legal entities or individuals, as permitted by rules of the Government of India. 4b.4 To manage, sell, transfer, pledge, dispose of or deal with movable and immovable properties of the Trust keeping in view of the aims and objects of the Trust. 4b.5 To invest funds and help investment of any funds in the modes of investments from time to time which is in terms of Income tax Act 1961 or any other law for the time being in force and subsequent amendments thereof from time to time. 4b.6 To assist and cooperate the Trust/Associations/Organizations etc. whose aim....
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....uced hereinabove. Article 4 is nothing other than the Aims and Objects of the assessee Trust, as reproduced hereinabove. So, the Trust Fund can be applied only for the advances specified in Article 4. Application of the Trust Fund for any other purpose stands specifically forbidden by Article 13 of the Trust Deed. 12. Then, Article 18 (at APB 62) of the Trust Deed prescribes the application of the funds of the Trust, declaring that no part of the Trust profit or its income or any accretion thereto shall be applied for any purpose outside India or for any purpose which is not a charitable purpose in law. As such, the income/funds or any part thereof have been forbidden from being distributed as profit amongst the members of the Trust. Article 18 further provides that in the event of dissolution of the Trust, all its funds along with its assets and liabilities shall be transferred to any other Trust with similar object approved u/s 12A of the I.T. Act. 13. It was on the basis of the above, that registration u/s 12A of the Act was granted to the assessee vide order dated 23.5.2006. Also, vide order dated 23.5.06, approval u/s 80 G of the Act was accorded to the assessee Trust....
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....red into an Agreement dated 1.2.08 (copy at APB 13 to 29) with Career Launcher Education Infrastructure And Services Ltd. ("CLEIS" for short). It was as per the said Agreement that the assessee was granted a nonexclusive licence for the use of the name "Indus World Business School" and educational soft skills for running and managing the Business School, by CLEIS. Another agreement, a Collaboration Agreement dated 1.11.07 (copy at APB 39 to 48) was entered into by the assessee Trust with Career Launcher India Limited or "CLIL". The assessee paid Infrastructure Fee to CLIL in lieu of services rendered by CLIL. These services were the services enumerated in Annexure A (copy at APB 47 to 48 to the said Collaboration Agreement) to the said Agreement. These services are as follows:- Annexure A Service to be offered by CL for carrying on Activities("Services") 1) Business Development Services: Database Services: Database of more than 40 K prospective students for Post Graduate Program, who have prepared with CL for their undergraduate entrance tests. Database of more than 5K prospective students for its BBA examination, who have pr....
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....opy at APB 30 to 38) was entered into between the assessee and CLIL. Under this Agreement, a licence fee was paid by the assessee Trust to CLIL. This payment was for grant of a non-exclusive licence to the assessee to use the Trade Mark "Career Launcher". Under the Agreement, fixed licence fee and continuing licence fee, based on net revenue, were to be paid to CLIL. The ld. DIT(E) has failed to appreciate these facts and has gone wrong in observing that the assessee's intention was solely to engage in commercial and business activities so as to earn profit and that the assessee's activities were against the Aims and Objects for which public charitable trusts are created. The ld. DIT(E) further erred in observing that it was evident from the Agreement for Infrastructure between the assessee and CLEIS that the entire affairs of the assessee Trust had been so arranged between the licensor and the licencee, as to deviate the funds of the assessee Trust and to get the income of the assessee exempted under the Income Tax provisions, whereas the main beneficiaries of the income were the two main trustees, i.e., Nikhil Mahajan and Gautam Puri, who were "specified persons" within the meani....
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....e to be carried out while making assessment, cannot be done, and that the matter can be reviewed only if the registration granted to the assessee is withdrawn. 21. In "ITO v. Mrs. Dwarika Prasad Trust", 30 ITD 84 (Del)(TM), it has been held, inter alia, that grant of registration u/s 12A cannot be by-passed as merely an idle formality; and that once a certificate u/s 12A of the Act stands issued, it is not open to the AO to enquire into the character of the Institution and to deny exemption u/s 11 of the Act. 22. In "Stock Exchange, Ahmedabad v. ACIT", 74 ITD 1(Ahd), it has been held, inter alia, that once an Institution has been registered u/s 12A, it is for the AO to find out whether the income of the Institution has been applied for the objects of the Institution and the statutory conditions laid down in sections 11 to 13 are fulfilled by the assessee; and that the AO had no jurisdiction to reject the claim of exemption u/s 11 of the Act by looking into the objects of the Association and holding them to be non-charitable in nature. 23. The following are the other decisions to the same effect:- 1. "DCIT v. Rajneesh Foundation", 280 ITR 553(Bom); 2. &laq....
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....nts entered into by the assessee that CLEIS and CLIL were incidental to the attainment of the assessee's main object of imparting education. Therefore, it cannot at all be said that any of the activities come within "General Public Utility". 27. The objection of the ld. DIT(E) regarding charging of fee by the school cannot be made the basis of holding that the activity was a commercial one. In this regard, reliance has rightly been placed by the assessee on the following case laws:- 1. "CIT vs. Krishi Utpadan Mandi Samiti, Purvao", 186 Taxman 460 (All.); 2. "ICAI Accounting Research Foundation v. DGIT(E) & Ors.", 321 ITR 73 (Del.); 3. "Gaur Brahmin Vidya Pracharini Sabha vs. CIT", ITA No. 1905/Del/2009: 34 SOT 371 (Del.) affirmed by the Punjab and Haryana High Court in 15 Taxmann 250. 4. "CIT v. Pulikkal Medical Foundation (P.) Ltd.", [1994] 210 ITR 299 Ker.); 5. "Indo American Society vs. ADIT", 96 ITD 61 (Mum.); 6. "ITO vs Kaushalya Medical Foundation", (2009) 31 SOT 119 (Mum.); 7. "CIT vs. Surji Devi Kunji Lal Jaipuria Charitable Trust (No.1)", 186 ITR 728 (All.); 8. "Hiralal Bhagwati vs. CIT", 246 ITR 18....
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....s 10(23 C) of the Act had wrongly been allowed. Herein, however, there is no issue of exemption u/s 10 (23 C) of the Act. Rather, it is u/s 80G of the Act that the exemption was granted to the assessee and the assessee seeks continuation of such exemption. 31. "Queen Educational Society" (supra), then, has been dissented by the Hon'ble Punjab & Haryana High Court in "Pinegrove International Charitable Trust v. Union of India", 327 ITR 73(P&H) and by the Hon'ble Bombay High Court in "Vanita Vishram Trust v. CIT", 327 ITR 121(Bom), wherein "Pinegrove International Charitable Trust" (supra) was followed. 32. The objection of the ld. DIT(E) regarding the alleged violation of the provisions of section 13(3) of the Act by the assessee also holds no water. The ld. DIT(E) has failed to consider that what is material in this regard is that if the payment made was commensurate with the nature of the services rendered by "specified person", the charitable nature of the Trust cannot be doubted, which proposition also finds support from "ADIT v. Manav Bharti Child and Child Psychology", 20 SOT 517(Del), wherein it has been held, in the context of Sections 11/12 of the Act, inter alia, tha....