TaxTMI 
TaxTMI 
2017 (11) TMI 1128
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....e financial year 2007-08 (without audit report in form No.10B and annexures I, II, III). The accounts of the financial years 2005-06 and 2007-08 with annexures I, II, III to audit report in Form No. 10B were produced, later, at the time of hearing. 3. The learned Commissioner of Income-tax called for a report from the concerned Assessing Officer asking him to report as to whether the assessee-applicant had fulfilled the conditions required for the grant of registration. The report of the Assessing Officer through the Additional Commissioner of Income-tax did not clearly recommend the case for registration and left the matter to be decided on merit by the learned Commissioner of Income-tax. 4. From the various details furnished by the assessee, the learned Commissioner of Income-tax noted that the assessee has not filed the return of income for the different years which is obligatory before seeking registration under section 12AA of the Income-tax Act. Further accounts are not audited although the total income of the applicant-society is more than the prescribed limit before giving effect to the provisions of sections 11 and 12 of the Act. 5. The learned Commissioner of Income-ta....
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....exorbitant fees from the students. According to him such type of fees can be afforded by rich people. Therefore, the society is running the schools for the benefit of only a select few and therefore it cannot be considered as charitable in nature. According to him charging high fees does more harm to the social setup than it does good. Therefore, there is a clear profit motive on the part of the trust and it is definitely not for charity. 9. He observed that although the trust was established on 26 June, 1998 with a petty capital however, the corpus capital of the society has grown to Rs. 76,59,235 up to March 31, 2008 as per the balance-sheet enclosed with the copy of the accounts of the society for the financial years 2005-06 to 2007-08. According to him the capital of the society increased by Rs. 69,09,235 merely in three years from April 1, 2005 to March 31, 2008 mainly due to diversion of general funds towards corpus without there being any donation towards corpus with specific directions of the donor. The confirmations produced by the assessee from the donors cannot be said to be the direction from the donors as per section 11(1)(d) of the Income-tax Act. The assessee also c....
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....oney for the aims and objects vide object No. 4(viii) of the memorandum indicates that the real intention of the society in running the educational institutions is otherwise than charitable'. While if establishing and running school and colleges is the object of the society, it has to be satisfies that the society has established the school or colleges where education is being imparted as per Rules and factum of establishing and running the school or college is a genuine activity. 5. That the learned Commissioner of Income-tax in his order at page 4 observed that 'the society is running senior secondary school as well as a B. Ed/D. Ed college to spread education. It charges high fee for imparting education and thus provides "aid" to those who can pay for the services obtained and thus cannot be called charitable'. Once it was established that the educational institution was set up by the assessee trust for imparting education which by itself was a charitable activity, it was not required for the assessee trust to provide for any concession in fee or other charges and the absence of such provision, in our opinion, would not make its activity of imparting education as n....
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.... the hon'ble Supreme Court in the case of Queen's Educational Society v. CIT [2015] 372 ITR 699 (SC) submitted that the hon'ble Supreme Court in the said decision has held that where a surplus was made by the educational institution which was ploughed back for educational purposes, said institution was to be held to be existed solely for educational purpose and not for purpose of profit. 14. So far as the allegation of the learned Commissioner of Income-tax that the society is running like a private limited concern is concerned, the learned counsel for the assessee referring to the decision of the Ahmedabad Bench of the Tribunal in the case of Jupiter Medical Research Centre Trust v. DIT (Exemption) [2010] 128 TTJ (Ahd) 118 (UO) submitted that the Tribunal in the said decision has held that merely because all the trustees are family members, it does not mean that the trust is not a public trust. It has further been held that merely because the assessee-trust has not carried out any activities, that would not mean that trust has totally stopped activities for ever. It was accordingly held that withdrawal of registration granted to assessee-trust under section 12AA on th....
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....he Commissioner of Income-tax. He submitted that the assessee is a family controlled trust. Referring to the decision of the Amritsar Bench of the Tribunal in the case of G. D. Kavita Singla Charitable Trust v. CIT vide I. T. A. No. 594/Amritsar/2013 order dated February 3, 2014 he submitted that the Tribunal in the said decision has held that registration under section 12AA cannot be granted to a trust that is controlled by a single family. He submitted that the assessee did not file Income-tax return for financial years 2005-06, 2006-07 and 2007-08 as well as for earlier years despite the fact that its income was above taxable limit without giving effect to the provisions of sections 11 and 12. He submitted that the assessee did not get its books of account audited for the financial years 2005-06 to 2007-08 as well as for the earlier years despite the fact that its gross receipts exceeded the prescribed limits. He submitted that the confirmations filed for the corpus donation cannot be said to be directions from donors as envisaged under section 11(1)(d). The receipt does not make a mention of the mode of payment nor does it stipulate if it is donation for a specific purpose or a....
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....e Uttaranchal High Court held that assessee would not be entitled to exemption under section 10(23C)(iiiad). 22. Referring to the judgment of the hon'ble Kerala High Court in the case of Self Employers Service Society v. CIT [2001] 247 ITR 18 (Ker) ; [2000] 164 CTR (Ker) 449 he submitted that the hon'ble High Court in the said decision held that since the petitioner-society had not done any charitable work during relevant period and its activities were only for purpose of generating income for its members, rejection of application could hardly be termed as illegal or arbitrary. 23. The learned counsel for the assessee in his rejoinder submitted that various decisions relied on by the learned Commissioner of Income-tax Departmental representative are reversed by the higher courts and therefore, those decisions have no relevance at all. The decision of the hon'ble Uttaranchal High Court in the case of Queens' Educational Society has been reversed by the hon'ble Supreme Court as reported in 372 ITR 699. As regards the allegation of the learned Commissioner of Income-tax that Form 10B was not enclosed, the learned counsel for the assessee referring to the Form No.....
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....ation under section 12AA of the Income-tax Act. 25. So far as the first objection of the learned Commissioner of Income-tax that the assessee-trust has not got its account audited and that it has not filed its return of income for the preceding years is concerned, we find no action has been taken by the Revenue despite knowing the fact, if any, that the assessee-trust had surplus income before allowing the exemption under sections 11 and 12 of the Income-tax Act. We find the hon'ble Punjab and Haryana High Court in the case of Shri Sai Darbar Charitable Trust (Dharamshala) (supra) has held that non-filing of returns by a trust in earlier years cannot be a ground for denying registration and the activities of the assessee-trust cannot be said to be non genuine. The relevant observation of the hon'ble Punjab and Haryana High Court from paragraph 4 onwards read as under (page 570) : "The matter has been examined by the Tribunal after perusing the relevant statutory provisions. It has been categorically recorded by the Tribunal that the Commissioner of Income-tax (Exemption) has to satisfy the two conditions while granting registration under section 12AA of the Act. Firstly,....
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....ised to demise the immovable property or properties of the trust either from year to year or for any fixed term or for any term of years or on monthly basis at such rent and subject to such conditions as they deem fit and proper and also accept surrender of lease and may manage the property as they think proper. From the perusal of this clause, we observe that the trustees have been given powers to give property of the trust on lease or on rent We do not find anything wrong in this clause so as to deny the assessee the registration under section 12AA of the Act. As regards the apprehension of the Commissioner of Income-tax (Exemptions) that his clause may attract the provisions of section 13(1)(c) of the Act, we are of the view that the conditions as provided in section 13 or elsewhere are to be seen by the Assessing Officer at the time of assessment proceedings on yearly basis and not by the Commissioner of Income-tax (Appeals) while granting registration under section 12AA of the Act. . . . Section 13 comes Into play at the time of granting exemption under section 11 of the Act and not at the time of granting registra tion under section 12AA of the Act The only two requirements....
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....the hon'ble Supreme Court in the case of Deoki Nandan v. Murlidhar, AIR 1957 SC 133 (copy placed on record). As a matter of fact the trust genuine and because of this, the learned Director of Income-tax (Exemption) granted the exemption under section 12AA. There is no finding or allegation in the impugned order that activities carried out by the trust are not in accordance with the objects of the trust or institution. Merely because the assessee has not carried out any activities, that does not mean that the trust has totally stopped the activity forever. In these circumstances, in our considered opinion, the learned Director of Income-tax (Exemption) has not made out a case justifying cancel lation of the registration granted under section 12AA. We, therefore, set aside the impugned order of the Director of Income-tax (Exemp tion). However, we may clarify that the learned Director of Income- tax (Exemption) is at liberty to pass any order under sub-section (3) of section 12AA if any of the conditions under that section is fulfilled in future. Subject to this clarification, we allow the appeal of the asses see." 27. Similarly we find the Delhi Bench of the Tribunal in the case....
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....are not charitable in nature. Learned Commissioner of Income-tax is also not speaking of non-genuineness of the trust or its activity. The only objection raised by learned Commissioner of Income-tax is that succession to the trust properties and, thus, such perpetual succession has given a colour of private trust to the applicant, second objection of learned Commissioner of Income-tax is that the trustees would exercise full control over the working of the trust for all the time to come. Let us take an example of an ordinary institution created by some individual to carry out the charitable activity. A person who is contributing to the charitable cause may keep in his mind that the control of charitable activity may be with him or his family members, but that fact alone cannot disentitle the institution from registration unless any material is brought on record to suggest that either the objects of the charitable trust are not charitable in nature or there is a clause in the trust deed according to which certain benefits can be given either to the settler or to the trustees or to the persons related to them. Here also it is not the case of the learned Commissioner of Income-tax tha....
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....acts in the discharge of objects of the trust. The trustees are prohibited from deriving any direct of indirect pecuniary advantage out of trust properties, income or application thereof for themselves and their relatives and associates. The spending of trust properties on any object which is not enumerated in the objects of trust is also prohibited and the trustees' act against the interest of trust is also prohibited. Thus, according to the prohibition clause trustees cannot derive any direct or indirect pecuniary advantage either out of prop erty of the trust or from income or application thereof not only for themselves, but for their relatives and associates. In any case if later on it is found by the Department that the trustees or their relatives or their associates are deriving any direct or indirect pecuniary advan tage out of trust property or its income and if any such property or income is applied for that purpose, then it will be contravention of the trust deed. Therefore in our opinion, the simple fact that there is perpetual succession in the appointment of trustee, cannot disentitle the assessee institution from getting registration. Moreover, the trust deed has ....