TaxTMI 
TaxTMI 
2022 (3) TMI 722
X X X X Extracts X X X X
X X X X Extracts X X X X
....ption, Pune; erred in law and on facts in not granting registration u/s 12A of the ITA, 1961 to appellant trust. 2. Appellant contends that, appellant made detailed submissions upon all the issues raised, whereas, the learned CIT, Exemption, Pune; declined the registration u/s 12A of the ITA, 1961 on altogether erroneous and incorrect analogies without affording any further opportunity to appellant, to make a SAY in the matter and as such, vitiated principle of natural justice. 3. The learned CIT, Exemption, Pune erred in law and on facts in making following erroneous and fallacious observations: - Appellant is engaged in business activity along with education activity. - Substantial component of fees inc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion u/s12AA of the Act. 4.1.1 The ld.Commissioner of Income Tax (Exemption) mainly rejected the application u/s 12AA on the following grounds: -(A) appellant has shown other income of Rs. 7,08,500/-for FY 2018-19 . The said income was generated from Rent from conference hall, Rent received from stalls placed in the school premises during festivals like Diwali, Christmas etc. The ld.Commissioner of Income Tax (Exemption) conclude that these are business activities. These activities are not incidental to the educational activities. _ (B) Appellant have received donations in cash and appellant failed to provide details of the donors to prove identity of the donors. The para graph 4 of the Order of The ld.Commissioner of In....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... almost three fold in just 3 years from the start of the educational activity and the surplus by many folds. The applicant is generating a substantial surplus @ 12% to 15% from the activity. The fees structure include various components other than tuition fees. The fees structure of Rs. 58,000/- for primary section in a place like Aurangabad is also found to be much higher." The ld.Commissioner of Income Tax (Exemption) in para 5.2 to 6 held as under: "5.2 Incidentally, a survey action was carried out in this case on 10- 07-2019. During the course of said survey action, the applicant voluntarily agreed to pay tax on the amount surplus generated from the activity at Rs. 20,18,300/- and Rs. 24,78,700/- for the F.Y. 2018-19 and 201....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rld School, Aurangabad". The school was started in 2017. The AR explained that the premises was utilized during festivals and rent was collected from the stalls. The entire income earned from this activity has been utilized for the educational activity. The AR also submitted that the Commissioner of Income Tax is not empowered to examine the activity at the time of registration of the trust. AR relied on the decision in the case of Shree Balaji Educational Trust 88 taxmann.com 358 (Delhi Trib), Pr.CIT v/s Shri Nathji Giverdhan Nathji Charitable Trust 423 ITR 69(Calcutta) dt.28/02/2020, CIT v/s Vijay Vargiya vani Charitable Trust 369 ITR 360 (Rajasthan) dated 18/08/2014.The AR further submitted that the objects of the trust are charitable an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uctant to make donations to the trust unless it was registered. In those circumstances, it is a little unrealistic to think of two situations. First, on creation of the trust the trustees apply for registration under section 12AA. In that case, they would have to demonstrate the genuineness of the objects of the trust, only, before the Commissioner. Secondly, the other situation where the trustees carry on activities for sometime and then apply for registration. In that case, the genuineness of the objects as well as the genuineness of its activities have to be proved to the Commissioner. In the second situation, practically speaking, any activity of the trust carried out without registration and without any tax benefit would likely to be i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... above chart one can understand that there is hardly any income from other sources, i.e. rent from stalls. Main income of the appellant is school fee and main expenditure is also towards the running of the schools. The Surplus is maximum 15 % as mentioned by the Commissioner of Income Tax (Exemption) in the order. 7.2 The Hon'ble Supreme Court in the case of Islamic Academy of Education Vs. State of Karnataka (Writ Petition (civil) No.350 of 1993, dated 14.08.2003 has observed, "While this Court has not laid down any fixed guidelines as regard fee structure, in my opinion, reasonable surplus should ordinarily vary from 6% to 15%, as such surplus would be utilized for expansion of the system and development of. Education", Also the Hon'bl....