TaxTMI 
TaxTMI 
2021 (11) TMI 881
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....ancellation and recorded a perverse finding? 2. Whether on the facts and in circumstances of the case, the Tribunal in holding that amendment of the trust deed without the consent of the department would not be sufficient ground to exercise the power u/s 12AA(3) of the Act without taking into consideration that the earlier registration under Section 12A of the Act was granted on the basis of the un-amended Trust Deed? 3. Whether the Tribunal was correct in holding that proceedings under Section 12AA(3) of the Act is not open to the revenue to review its earlier registration granted under Section 12A of the Act, by not appreciating that the granting authority has inherent power to cancel the registration? 4. Whether the Tribunal was correct in holding that the DIT exemption has not recorded any finding in order under Section 12AA(3) of the Act with regard to the genuineness of the activities of the Trust or that the activities were not in accordance with the objects of the Trust but has noticed some shortcomings in functioning and the shortcomings by themselves cannot be put on par with lack of genuineness or activities not being carried out in accordance ....
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....ssessee filed a reply to the said show-cause notice denying the allegations made against it. The DIT (E), rejecting the reply, confirmed the proposal made in the show-cause notice and thereby cancelled the registration granted to the assessee invoking Section12AA of the Act. 5. Aggrieved by the said order, the assessee preferred an appeal before the Tribunal. The Tribunal having considered the matter, held that the reasons assigned by the DIT (E) in the order under Section 12AA (3) of the Act cannot be considered as valid reasons to cancel the registration. Accordingly, the Tribunal allowed the appeal of the assessee setting aside the order passed u/s 12AA (3) of the Act-cancellation of registration. 6. Being aggrieved, the Revenue has preferred this appeal. 7. Learned counsel for the Revenue argued that the breach of Sections 13 (1) (c) and 13 (3) (cc) of the Act and the Explanation thereon being established by the conduct of the assessee viz., in paying the commission to the persons for getting students admitted to the courses, raising loans in cash and repaying the same in cash sans reflecting in the account books, making changes in the objects thereby carrying out amen....
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....ed under Section 12A of the Act, however, the same renders academic in the present case. 11. As regards substantial question of law No.(4), it was submitted that the assessee is running several institutions like Krupanidhi Residential PU College, Krupanidhi Pre-University College, Krupanidhi College of Nursing, Krupanidhi College of Physiotherapy, Krupanidhi Degree College, Krupanidhi School of Management, Krupanidhi College of Pharmacy and Asia Pacific World School. The assessee is not running any engineering or medical colleges but imparting basic education. 12. It was submitted that the Proviso to Section 2 (15) of the Act which pertains to carrying on activities in the nature of trade, commerce or business is not applicable to the assessee as it is engaged in charitable activities of imparting education. The same is clarified by the Circular No.11/2008 dated 19.12.2008 issued by the Board. 13. As regards substantial question of law No.(5), learned counsel argued that there is no bar in the provisions of the Act, 1984 in incurring expenditure to propagate the services rendered by the educational institutions to the students. No proceedings have been initiated by the con....
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....behalf; and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he- (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant: Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard." Section 12AA (3) of the Act reads thus: "(3) Where a trust or an institution has been granted registration under clause (b) of subsection (1) or has obtained registration at any time under section 12A. as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently the Principal Commissioner or 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 cancelling the registration of such trust or institution: Provided tha....
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....and accordingly, dismissed the appeal filed by the Revenue. 23. In the case of Allahabad Agricultural Institute (supra), the income tax officer has held that a comparison has shown that the original objects have been totally altered without giving intimation about the change of the alteration in its Objects to the Department, and the said alteration which would remove the very foundation, after registration going contrary to the Objects of the trust or institution, would enable the Commissioner to exercise the power of cancellation, i.e. the wholesale change in the objects without giving its immediate information to the Commissioner. 24. But in the present case, the Tribunal has made a threadbare examination of the amendment with the original Objects of the Act and has given a finding that it is in furtherance of the Objects and not contrary to the Objects. Hence, this judgment would not come to the aid of the Revenue. 25. In the case of Bhatnagar Educational Trust (supra), in a survey conducted, it was prima facie found that the Trust was not carrying on its activities in accordance with the Objects of the trust, the answers given in the questionnaire by the manage....
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....t of income of the trust which has forfeited exemption and not the entire income. The Hon'ble Delhi High Court in the case of DIT (Exemption) vs. Agrim Charan Foundation reported in (2002) 253 ITR 593 (Delhi) has held that the legislature has clearly contemplated that in a case, where the whole or part of the relevant income is not exempted under Section 11 by virtue of violation of Section 13(1)(d) of the Act, tax shall be levied on the relevant income or a part of the relevant income at the maximum marginal rate. The Co-ordinate bench of this Court concurring with these judgments has held that for violating Section 11(5) of the Act, the entire income of the assessee - trust cannot be assessed for the tax. The same analogy would be applicable even to Section 13(1)(c) of the Act also. Thus, the entire income of the respondent - trust cannot be assessed for tax even for violation of Section 13(1)(c) of the Act. 28. In Commissioner of Income-tax, (Exemptions), Bangalore, vs. CMR Jnanadhara Trust reported in (2015) 55 taxmann.com 516 (Karnataka), considering the payment of the amounts to the trustees, out of the trust amount, when the trust was availing the services of the t....