Shri N.H. Kapadia Education Trust, Ahmedabad v. The DIT(Exemp.), Ahmedabad

ITA 1420/AHD/2011 | misc
Pronouncement Date: 03-02-2012 | Result: Allowed

Appeal Details

RSA Number 142020514 RSA 2011
Assessee PAN AAATM1417G
Bench Ahmedabad
Appeal Number ITA 1420/AHD/2011
Duration Of Justice 8 month(s) 15 day(s)
Appellant Shri N.H. Kapadia Education Trust, Ahmedabad
Respondent The DIT(Exemp.), Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 03-02-2012
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 03-02-2012
Date Of Final Hearing 05-01-2012
Next Hearing Date 05-01-2012
Assessment Year misc
Appeal Filed On 19-05-2011
Judgment Text
-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI BHAVNESH SAINI JUDICIAL MEMBER & SHRI A MOHAN ALANKAMONY - AM ITA NO.1321/AHD/2011 (ASSESSMENT YEAR:- 2008-09) THE DIRECTOR OF INCOME- TAX (EXEMPTION) AHMEDABAD V/S SHRI N H KAPADIA EDUCATION TRUST OPP. TIRTHNAGAR VIBHAG-I MEMNAGAR AHMEDABAD PAN: [APPELLANT] [RESPONDENT] ITA NO.1420/AHD/2011 SHRI N H KAPADIA EDUCATION TRUST OPP. TIRTHNAGAR VIBHAG-I MEMNAGAR AHMEDABAD V/S THE DIRECTOR OF INCOME- TAX (EXEMPTION) AHMEDABAD PAN: AAATM 1417 G [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI S N DIVATIA AR REVENUE BY:- SHRI S K GUPTA CIT DR DATE OF HEARING:- 01-01-2012 DATE OF PRONOUNCEMENT:- 03-02-2012 O R D E R 2 PER A MOHAN ALANKAMONY (AM) :- 1. THESE TWO APPEALS (I) ONE BY THE REVENUE AND (II) ANOTHER BY THE ASSESSEE TRUST - ARE DIRECTED AGAINST THE IMPUGNED ORDERS OF (I) THE LD. CIT (A)-XXI AHMEDABAD IN APPEAL NO.CIT(A)- XXI/859/DDIT(EXEMP)/10-11 DATED 24.2.2011 FOR THE ASSESSMENT YEAR 2008-09 AND (II) THE LD. DIT (EXEMPTION)S ORDER U/S 12AA(3) OF THE ACT DATED 17.3.2011 IN THE CASE OF N.H.KAPADIA EDUCATION TRUST AHMEDABAD RESPECTIVELY. I . I.T.A.NO.1321/A/2011 (BY THE DEPARTMENT): 2. THE REVENUE HAS RAISED TWIN ISSUES IN ITS GROUN DS OF APPEAL NAMELY: (I) THE LD. CIT (A) HAS ERRED IN DELETING THE ADDIT ION OF RS.1 90 19 319/-; & (II) THE CIT (A) ALSO ERRED IN DIRECTING TO GRANT E XEMPTION U/S 11 OF THE ACT. II . I.T.A.NO.1420/A/2011 (BY THE ASSESSEE TRUST): 2.1. THOUGH THE ASSESSEE TRUST HAS RAISED FIVE GROUNDS IN AN ILLUSTRATIVE AND NARRATIVE MANNER THE SUBSTANCE OF ITS GRIEVANCE IS CONFINED TO A SOLITARY GROUND NAMELY THE ORDER P ASSED U/S 12AA(3) OF THE ACT ON 17.3.2011 BY THE DIT (EXEMP) CANCELIN G THE REGISTRATION GRANTED TO THE ASSESSEE TRUST W.E.F. 21.3.1990 WAS WHOLLY ILLEGAL. 3 3. AS THE ISSUES RAISED BY THE RIVAL PARTIES BEING INTER-LINKED PERTAINING TO THE SAME ASSESSEE-TRUST FOR THE SAKE OF CONVENIENCE AND CLARITY BOTH THE APPEALS WERE HEARD CONSIDERE D TOGETHER AND DISPOSED OFF IN THIS COMMON ORDER. 4. WE SHALL NOW PROCEED TO DEAL WITH THE REVENUES APPEAL. I . I.T.A.NO.1321/A/2011 (BY THE DEPARTMENT): (I) BRIEFLY STATED THE ASSESSEE TRUST [THE ASSE SSEE HENCEFORTH] ENGAGED IN THE FIELD OF EDUCATION HAD FURNISHED IT S RETURN OF INCOME ON 10.9.2008 DECLARING A LOSS OF RS.75 18 264/-. D URING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASS ESSEE HAD COLLECTED THE FOLLOWING AMOUNTS FROM THE STUDENTS A T THE TIME OF ADMISSION DURING THE YEAR CONSIDERATION: (1) BUILDING FUND RS.41 73 990 (2) EDUCATION RESEARCH FUND 41 73 990 (3) EDUCATION INFRASTRUCTURE FUND 50 88 019 (4) LIBRARY FUND 13 91 330 (5) SPORTS FUND 13 91 330 (6) STAFF WELFARE FUND 13 91 330 (7) STUDENTS WELFARE FUND 13 91 3 30 TOTAL 1 90 01 319 (II) ACCORDING TO THE AO AS THE ABOVE AMOUNT WAS NOT CREDITED IN THE INCOME AND EXPENDITURE ACCOUNT BUT DIRECTL Y CREDITED TO THE BALANCE SHEET THE ASSESSEE WAS REQUIRED TO EXPLAIN THE CLAIM OF EXEMPTION WITH DOCUMENTARY EVIDENCE IN SUPPORT OF I TS CLAIM. 4 (III) AFTER DUE CONSIDERATION OF THE ASSE SSEES EXPLANATION AS RECORDED IN HIS IMPUGNED ORDER THE AO HAD OBSERVED THUS: 3.THE EXPLANATION OF THE ASSESSEE IS CAREFULLY CON SIDERED. THE ASSESSEE HAS CONTENDED THAT THE BOARD OF TRUSTEES H AS POWER TO APPROPRIATE THE CURRENT INCOME TOWARDS THE CORPUS O F THE TRUST AND SUCH APPROPRIATION WOULD NOT CONSTITUTE TO THE CURRENT INCOME LIABLE TO TAX. THIS STATEMENT OF THE ASSESS EE CLEARLY SHOWS A FAILURE ON THE PART OF THE ASSESSEE TRUST T O DISCLOSE ITS TRUE AND CORRECT INCOME AND FURTHER THE ASSESSEE HA S CLAIMED THAT EVEN DURING THE COURSE OF ASSESSMENT PROCEEDIN GS THE AMOUNT RECEIVED FROM THE STUDENTS CAN BE CONVERTED TO CORPUS WHICH IN FACT IS NOT PERMISSIBLE AS PER LAW. IT IS SEEN THAT THE TRUST HAS BEEN COLLECTING FUNDS UNDER VARIOUS HEADS FROM THEIR STUDENTS. THE FEES CONTRIBUTED BY THE STUDENTS AND THEIR PARENTS WERE FOR SERVICES TO BE GIVEN BY THE SCHOOL. THE C ONTRIBUTION BY THE STUDENTS AND PARENTS ARE QUID PRO QUO (FOR SERV ICE RENDERED MUTUALLY). THESE ARE NOT FUND CONTRIBUTIONS BUT PA YMENTS FOR ADMISSION AND SERVICES TO BE RENDERED BY THE SCHOOL . THESE RECEIPTS CANNOT BE TREATED AS DONATION MUCH LESS AS CORPUS DONATION BUT IT SHOULD HAVE BEEN REFLECTED IN THE INCOME AND THE EXPENDITURE ACCOUNT. IN FACT IN THE STATEMENT OF I NCOME FILED ALONG WITH THE RETURN OF THE INCOME THE AMOUNT OF C ORPUS DONATION IS SHOWN AS NIL. IT IS BECAUSE THE ENTIR E DONATION OF RS.1 90 01 319/- HAS NOT BEEN SHOWN IN THE INCOME A ND EXPENDITURE A/C BUT DIRECTLY CREDITED TO THE BALAN CE SHEET AND NO SEPARATE CLAIM OF DEDUCTION U/S 11(1)(D) IN RESPECT OF CORPUS DONATION HAS BEEN CLAIMED IN THE RETURN OF INCOME. 4. IN VIEW OF THE ABOVE FACTS THE ASSESSEES CLAIM OF DEDUCTION OF RS.1 90 01 319/- ON THE GROUND THAT TH ESE RECEIPTS RECEIVED FROM STUDENTS AT THE TIME OF ADMISSION ARE APPROPRIATED TOWARDS THE CORPUS CANNOT BE ACCEPTED AND THE SAME IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. (ADDITION: RS. 1 90 01 319/-) (IV) AGGRIEVED THE ASSESSEE TOOK UP THE MATTER WITH THE CIT (A) FOR RELIEF. THE CONTENTIONS OF THE ASSESSEE IN ITS WRITTEN SUBMISSION DATED 23.2.2011 ARE EXTRACTED AS UNDER: 5 5.4.(CITS ORDER)........... .. 2.1. AS REGARDS THE GROUND OF APPEAL RELATING TO TH E ADDITION OF RS.1 90 01 319/- IN RESPECT OF CORPUS DONATIONS TH E APPELLANT BEGS TO SUBMIT THAT THE PERUSAL OF CLAUSE 17 OF T HE TRUST DEED DATED 16.11.1987 (FILED AT PAGE 58 80 OF PAPER BO OK) SHOWS THAT SUB-CLAUSE (5) EMPOWERS THE TRUSTEES TO ACCEPT ANY MONEY OR PROPERTY THE CORPUS OF THE TRUST. THE RUNNING TRAN SLATION OF THE SAID CLAUSE IS AS UNDER: THE TRUSTEES ARE EMPOWERED TO ACCEPT ANY MONEY OR ANY KIND OF PROPERTY THAT MAY BE GIVEN BY ANY PERSON OR INSTITUTION OR ANY CHARITABLE TRUST FOR THE PURPOSE S OF OBJECTS OF THIS TRUST AND SUCH MONEY OR PROPERTY SHALL BE T REATED AS PROPERTY OF THIS TRUST. IN VIEW OF THE AFORESAID POWERS VESTED IN THE TRUST EES THE CONTRIBUTIONS TOWARDS DIFFERENT CORPUS FUNDS RECEIV ED BY THE APPELLANT TRUST FROM THE PARENTS/STUDENTS WAS NOT C URRENT INCOME BUT DONATION EXEMPT U/S 12. 2.2. IN ANY VIEW OF THE MATTER THE AO HAS FAILED TO APPRECIATE THAT THE APPELLANT TRUST HAS NOT MADE ANY APPROPRIA TIONS FROM THE CORPUS DONATIONS AFTER HAVING RECEIVED THE SAME . IT APPEARS THAT AO HAS MIXED UP THE FACTS OF EDUCATIONAL RESEA RCH FUND WITH THE OTHER FUNDS SUCH AS BUILDING FUND LIBRARY FUND STAFF WELFARE FUND STUDENT WELFARE FUND ETC. THE DISTINC TIONS BETWEEN THE SAME ARE THAT THE FORMER IS MAINLY APPROPRIATIO N AT 50% OUT OF TUITION FEES WHEREAS THE LATER IS SPECIFICALLY D ONATED BY THE PARENTS/STUDENTS BUT THE BIFURCATION OF THE AGGREGA TE AMOUNT IS MADE AS PER THE DECISION OF BOARD OF TRUSTEES SUCH AS 30% TOWARDS BUILDING FUND AND EDUCATIONAL RESEARCH FUND ETC. AS POINTED OUT IN REPLY DT. 15.11.2010 (SEE PAGE 19 OF PAPER BOOK). THE COPY OF LEDGER ACCOUNT OF THE RESPECTIVE FUNDS FILED BEFORE AO CLEARLY PROVES THIS CONTENTION OF THE APPELLANT. THEREFORE THE CONCLUSION REACHED BY AO THAT SUCH APPROPRIATI ON WOULD CONSTITUTE CURRENT INCOME LIABLE TO TAX IS NOT JUST IFIED. 6 (V) AFTER DUE CONSIDERATION OF THE ASSESSEES SUB MISSIONS THE CIT (A) HAD OBSERVED THAT: 5.5. I HAVE CONSIDERED THE SUBMISSIONS MADE AND CO NTENTIONS RAISED BY THE COUNSEL FOR THE APPELLANT AND I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER. THE SHORT POINT TO B E DECIDED IN THIS GROUND OF APPEAL RELATES TO THE NATURE OF CONT RIBUTIONS TOTALING TO RS.1 90 01 319/- MADE BY PARENTS/STUDEN TS AT THE TIME OF ADMISSION IN THE EDUCATIONAL INSTITUTION. THE C ONTENTION OF THE AO IS THAT THE SAID CONTRIBUTIONS WERE IN CONSI DERATION OF THE SERVICES TO BE RENDERED BY THE SCHOOL TO THE STUDEN T IS NOT ACCEPTABLE BECAUSE THE EVIDENCE PRODUCED BY THE APP ELLANT TRUST SHOWS THAT THE AMOUNT IS NOT FIXED OR IDENTIC AL IN ALL CASES AND IN AS MANY AS 381 NUMBER OF STUDENTS THE ADMIS SION WAS GIVEN WITHOUT RECEIVING SUCH CONTRIBUTION. IT IS A LSO NOTICED THAT THE STUDENTS HAVE PAID SEPARATELY TOWARDS TUITION F EES EVERY YEAR AND HAD THE CONTRIBUTION BEEN TOWARDS EDUCATIO N TO BE IMPARTED BY THE SCHOOL IT WOULD NOT HAVE CHARGED S EPARATELY THE AFORESAID QUARTERLY/MONTHLY TUITION FEES TERM FEES COMPUTER FEES ETC. YET ANOTHER IMPORTANT ASPECT IS THAT T HE CONTRIBUTION BY WAY OF CORPUS DONATION RANGES BETWEEN RS.10 000/ - TO 15 000/- IRRESPECTIVE OF MEDIUM OF INSTRUCTION AND STANDARD. IN CASE THE SAID CONTRIBUTIONS WERE TO BE QUID PRO QU O THE SAME SHOULD HAVE BEEN DIFFERENT DEPENDING UPON THE MEDIU M OF INSTRUCTION AND STANDARD. IT IS ALSO NOTICED THAT THE VOLUNTARY CONTRIBUTION WERE NON-REFUNDABLE AND ONE TIME PAYME NT. THE CONTRIBUTIONS HAVE BEEN TOWARDS DIFFERENT PURPOSES SUCH AS LIBRARY BUILDING SPORTS DEVELOPMENT ETC. WHEREAS THE TUITION FEES WERE TOWARDS THE EDUCATION IMPARTED TO THE STU DENTS AND THE FEES BY WAY OF STATIONARY WORKSHOP COMPUTER W ERE TOWARDS USE OF SUCH ITEMS. THE AO HAS ALSO NOT APPRECIATED THAT THE CONTRIBUTIONS MADE BY THE PARENTS/STUDENTS MAY NOT USE THE INFRASTRUCTURE INTENDED TO BE SO CREATED AND THE AC TUAL BENEFICIARY OF SUCH CONTRIBUTION MAY BE STUDENTS OF THE SUBSEQUENT YEARS. THEREFORE THE CONTRIBUTIONS BUI LDING OR LIBRARY FUND MAY BE MADE BY THE STUDENTS FOR THIS Y EAR BUT THE ACTUAL USERS WOULD BE THE STUDENTS OF THE YEARS AFT ER COMPLETION OF SUCH BUILDING. THUS THE ELEMENT OF QUID PRO Q UO CLAIMED BY THE AO IS NOT ESTABLISHED. THE CONTENTION OF AO TH AT THE SAID CONTRIBUTIONS SHOULD HAVE BEEN REFLECTED IN THE INC OME AND EXPENDITURE ACCOUNT IS ALSO NOT ACCEPTABLE FOR TWO FOLD REASONS 7 FIRSTLY EVEN IF THE SAME MAY BE REFLECTED IN INCOM E AND EXPENDITURE ACCOUNT THE SAME MAY BE TAKEN TO DIFFE RENT FUNDS ACCOUNT AND SECONDLY THE PASSING OF ANY ENTRY OR M ANNER OF ACCOUNTING IS NOT THE CONCLUSIVE OF THE NATURE OF R ECEIPT OR ITS TAXABILITY AS HELD IN THE CASE OF KEDARNATH JUTE MF G. LTD V. CIT (82 ITR 363) (SC). THE COPY OF LEDGER ACCOUNT OF D IFFERENT CORPUS FUNDS PRODUCED BY THE APPELLANT TRUST SHOWS THAT AM OUNT HAS BEEN CREDITED TO EACH FUND ACCOUNT OF EACH RECEIPT FROM THE PARENTS/STUDENTS. IT APPEARS THAT THE AO HAS CONFU SED THE EDUCATIONAL INFRASTRUCTURAL FUND WITH THE AFORESAID DIFFERENT CORPUS FUNDS. THERE IS A DISTINCTION BETWEEN THE T WO IN AS MUCH AS THE CREDIT TO DIFFERENT CORPUS FUNDS IS DIRECTLY ON THE BASIS OF THE AMOUNT RECEIVED FROM THE PARENT/STUDENT WHEREAS IN CASE OF EDUCATIONAL INFRASTRUCTURAL FUND ACCOUNT THE CREDI T IS BY WAY OF APPROPRIATION AT EVERY MONTH FROM TUITION FEES. TH IS DISTINCTION IS CLEARLY EVIDENT FROM THE RECEIPTS ISSUED BY THE TRUST AND COPY OF LEDGER ACCOUNT PRODUCED. THE CONTENTION OF AO R ELATING TO THE APPROPRIATION OF THE SAID CONTRIBUTION TO DIFFE RENT FUNDS AS PER THE RESOLUTION MADE BY THE BOARD OF TRUSTEES DE SERVES TO BE REJECTED BECAUSE THE RESOLUTION PASSED BY THE BOARD OF TRUSTEES MERELY PROVIDES FOR THE QUANTUM REQUIRED FOR DIFFER ENT PURPOSES AND THEY ARE THE BEST JUDGE TO DECIDE IT CONSIDERIN G THE REQUIREMENTS OR FUTURE NEEDS OF THE SCHOOL. THE PARENTS/STUDENTS HAVE MADE CONTRIBUTION WITH A CLEA R UNDERSTANDING AS IT IS NOTICED FROM THE NARRATION G IVEN IN THE RECEIPT ISSUED TO THEM. THE RELEVANT PORTION FROM THE SAMPLE OF SUCH RECEIPT PRODUCED BY THE APPELLANT TRUST AT PAG E 81 OF THE PAPER BOOK CONTAINS THE FOLLOWING: RECEIVED WITH THANKS CONTRIBUTION TOWARDS TRUST CO RPUS FUND OF RS.. *NON REFUNDABLE *RECEIPT VALID ONLY AFTER REAL IZATION OF CHEQUE I AFFIRM THE DONATION TO CORPUS FUND. SIGNATURE OF DONOR THUS THE COPY OF RECEIPTS ISSUED BY THE SCHOOL ITS ELF PROVES THAT THE CONTRIBUTIONS WERE RECEIVED TOWARDS DIFFERENT C ORPUS FUNDS. 5.6. THERE IS YET ANOTHER ASPECT OF THE MATTER WHI CH IS EVIDENT FROM THE RIGHTS AND DUTIES OF THE BOARD OF TRUSTEES ENUMERATED IN CLAUSE 17 OF THE TRUST DEED DATED 16.11.1987 WHI CH WAS FILED 8 AT PAGE 58 TO 80 OF THE PAPER BOOK. THE FREE ENGLI SH TRANSLATION OF SUB-CLAUSE 5 OF CLAUSE 17 OF THE TRUST DEED IS R EPRODUCED AS UNDER: IN CASE ANY PERSON OR INSTITUTION OR ANY CHARITAB LE TRUST HANDS OVER ANY MONEY OR ANY KIND OF PROPERTY TO THE TRUST OR THE TRUSTEES FOR THE PURPOSES OF THIS TRUST THE TR USTEES ARE EMPOWERED TO ACCEPT SUCH SUM AND SUCH AMOUNT OR PROPERTY SHALL BE TREATED AS PROPERTY OF THIS TRUST . 5.7. THUS IN VIEW OF THE AFORESAID CLAUSE EMPOWE RING THE BOARD OF TRUSTEES TO ACCEPT ANY MONEY FOR THE OBJEC TS OF THE TRUST THE VOLUNTARY CONTRIBUTION GIVEN BY THE PARE NTS/STUDENTS WERE THE PROPERTY OF THE APPELLANT TRUST AND REQUIR ED TO BE UTILIZED FOR THE OBJECTS OF THE TRUST. THE APPROPR IATION OF DONATION AS CANVASSED BY AO WAS NOT THE APPROPRIATI ON TOWARDS DIFFERENT FUNDS BUT THE QUANTUM OF SUCH DONATIONS W HICH MAY CHANGE BY THE TRUSTEES FROM YEAR TO YEAR DEPENDING UPON VARIOUS FACTORS. 5.8. CONSIDERING ALL THESE FACTS OF THE CASE I AM OF THE VIEW THAT AO WAS NOT JUSTIFIED IN HOLDING CONTRIBUTIONS TOWAR DS DIFFERENT CORPUS FUNDS TOTALING TO RS.1 90 01 319/- AS CURREN T INCOME LIABLE TO TAX. I HOLD THAT THE SAID CONTRIBUTIONS WERE IN NATURE OF CORPUS FUNDS AND AS SUCH EXEMPT U/S 12 OF THE ACT. THE AD DITION OF RS.1 90 01 319/- MADE BY AO IS HEREBY DELETED. (VI) AGITATED WITH THE TREATMENT METED OUT AT THE FINDINGS OF THE CIT (A) THE REVENUE HAS COME UP WITH THE PRESENT A PPEAL. IT WAS THE CASE OF THE REVENUE THAT THE ASSESSEE HAD COLLE CTED RS.1 90 01 319/- FROM STUDENTS AT THE TIME OF ADMIS SION. THIS AMOUNT WAS NOT CREDITED TO THE INCOME AND EXPENDITURE BUT DIRECTLY CREDITED TO THE BALANCE SHEET. DURING THE COURSE O F SCRUTINY THE ASSESSEE HAD CLAIMED THIS AS A CORPUS DONATION. TH E ASSESSEE COULD NOT FURNISH ANY EVIDENCE IN SUPPORT OF THE CL AIM THAT THE FEES 9 AND FUNDS COLLECTED FROM THE STUDENTS WAS A CORPUS DONATION. THE FEES CONTRIBUTED FROM STUDENTS AND THEIR PARENTS WE RE FOR SERVICES TO BE RENDERED BY THE SCHOOL. THE CONTRIBUTION BY THE STUDENTS AND PARENTS ARE QUID PRO QUO (FOR SERVICE RENDERED MUTU ALLY). IT WAS FURTHER CONTENDED THAT THESE WERE NOT DONATIONS B UT PAYMENTS FOR ADMISSION AND SERVICES TO BE RENDERED BY THE SCHOOL ; THAT IN THE STATEMENT OF INCOME FILED ALONG WITH THE RETURN OF INCOME; THE AMOUNT OF CORPUS DONATION WAS SHOWN AS NIL. IT WAS FURTHE R ARGUED THAT IT WAS BECAUSE THE ENTIRE DONATION OF RS.1.90 CRORES H AS NOT BEEN SHOWN IN THE INCOME & EXPENDITURE ACCOUNT BUT DIR ECTLY CREDITED TO THE BALANCE SHEET AND NO SEPARATE CLAIM OF DEDUCTIO N U/S 11(1)(D) OF THE ACT IN RESPECT OF CORPUS DONATION HAS BEEN CLAI MED IN THE RETURN. (VII) WE HAVE DULY CONSIDERED THE SUBMISSIONS OF THE EITHER PARTY THOROUGHLY PERUSED THE RELEVANT CASE RECORDS AND ALSO THE VOLUMINOUS PAPER BOOK CONTAINING INTER ALIA COPIE S OF (I) AUDITED ANNUAL ACCOUNT WITH TAX AUDIT REPORT; (II) TRUST DE ED; (III) SAMPLE RECEIPTS TOWARDS CORPUS FUND AND TUITION FEES; (IV) BANAKATH WITH MRS. SONASL J JAKASANIA ETC. FURNISHED BY THE LD. AR DU RING THE COURSE OF HEARING. 10 (A) THE CORE CONTENTION OF THE REVENUE AS RIGHTL Y HIGHLIGHTED BY THE CIT (A) WAS THAT THE CONTRIBUTIONS AGGREGAT ING TO RS.1.90 CRORES MADE BY THE PARENTS/STUDENTS AT THE TIME OF ADMISSION IN THE INSTITUTION WERE IN CONSIDERATION OF THE SERVICES T O BE RENDERED BY THE SCHOOL TO THE STUDENTS. IN CONTRAST THE DOCUMENTA RY EVIDENCES ADDUCED BY THE ASSESSEE GO TO PROVE THAT THE AMOUNT S WERE IN FACT NEITHER FIXED NOR IDENTICAL IN ALL THE CASES AND TO ILLUSTRATE THE CLASSICAL EXAMPLE THAT ALMOST 381 STUDENTS HAVE BEEN ADMITTED TO THE INSTITUTION WITHOUT RECEIVING A PENNY FOR SUCH A CO NTRIBUTION. THE ASSESSEE HAD IN FACT FURNISHED A LIST RUNNING INT O STAGGERING 29 PAGES SHOWING THE NAMES OF THE STUDENTS IN STANDARD -WISE AND ALSO THE CONTRIBUTIONS TOWARDS CORPUS FUND [ PAGES 111 138 OF PB FURNISHED BY THE LD. AR]. COPIES OF LEDGER ACCOUN TS OF DIFFERENT CORPUS FUNDS PRODUCED BY THE ASSESSEE FOR VERIFICAT ION EXHIBIT THAT THE AMOUNTS RECEIVED HAVE BEEN CREDITED TO EACH FUN D ACCOUNT OF EACH RECEIPT FROM THE PARENTS/STUDENTS. APART FRO M SUCH CONTRIBUTIONS TOWARDS CORPUS FUNDS IT WAS NOTICE D THAT THE STUDENTS HAVE ALSO PAID TOWARDS TUITION FEES EVERY YEAR. HA D THE CONTRIBUTION COLLECTED BEEN TOWARDS EDUCATION TO BE IMPARTED BY THE SCHOOL AS ALLEGED BY THE REVENUE THE INSTITUTION WOULD NOT H AVE RESORTED TO CHARGE SEPARATELY THE MONTHLY/QUARTERLY TUITION TE RM AND COMPUTER 11 FEES? ANOTHER SALIENT FEATURE NOTICED FROM THE EVI DENCES PRODUCED WAS THAT THE CONTRIBUTION BY WAY OF CORPUS DONATIO N RANGES RS.10000 15000 WITH NO CONSEQUENCE OF THE MEDIUM OF INSTRUCTION AND THE STANDARD IN WHICH THE WARD (STUDENT) WAS TO BE ADMITTED. ASSUMING BUT NOT ADMITTING IF THE CONTRIBUTIONS WE RE TO BE QUID PRO QUO AS CANVASSED BY THE REVENUE THE SAME SHOULD HA VE BEEN QUITE DIFFERENT DEPENDING UPON THE MEDIUM OF INSTRUCTION- WISE AND STANDARD-WISE. ANOTHER SIGNIFICANT FEATURE OBSERVE D WAS THAT THE ONE TIME PAYMENT OF VOLUNTARY CONTRIBUTION WAS - NON-R EFUNDABLE - TOWARDS DIFFERENT PURPOSES VIZ. LIBRARY BUILDING S SPORTS CURRICULUM ACTIVITIES ETC.; WHEREAS THE TUITION FEES SO COLLEC TED WILL BE SPENT FOR ACADEMIC FIELD SUCH AS EDUCATION TO BE IMPARTED TO THE STUDENTS BY WAY OF STATIONARY WORKSHOP COMPUTER EDUCATION ETC . AS RIGHTLY TAKEN REFUGE BY THE CIT (A) IN THE RULING OF THE HO NBLE APEX COURT IN THE CASE OF KEDARNATH JUTE MFG. LTD V. CIT (82 ITR 363 SC) TO OUTWIT THE AOS CONTENTION THAT THE SO CALLED CONTRIBUTION SHOULD HAVE BEEN REFLECTED IN THE I & E ACCOUNT. THE AO HAD RATHER FAILED TO DISTINGUISH THE RECEIPT OF CORPUS FUNDS FROM TUITION FEES NAME LY TO CREDIT THE DIFFERENT CORPUS FUND IS DIRECTLY ON THE BASIS OF T HE AMOUNT RECEIVED FROM THE PARENTS/STUDENTS; WHEREAS UNDER EDUCATION AL INFRASTRUCTURE FUND ACCOUNT THE CREDIT IS BY WAY OF APPROPRIATION AT EVERY MONTH 12 FROM TUITION FEES. AT A GLIMPSE OF THE SAMPLE COPY OF RECEIPT PRODUCED BY THE ASSESSEE AS PART OF EVIDENCE ( P 81 & 82 OF PAPER BOOK) IT WAS NOTICED THAT: PAGE 81 : RECEIPT TOWARDS TRUSTS C ORPUS FUND RECEIVED WITH THANKS CONTRIBUTION TOWARDS TRUSTS C ORPUS FUND OF RS. *I AFFIRM THE DONATION TO CORPUS FUND SIGN OF DONOR PAGE 82 : RECEIPT NO.. FORM NO. STD :. NAME:.. FEES RECEIVED AS UNDER : QUARTERLY/MONTHLY TUITION FEE (QUARTER/PER MONTH). TERM FEE (ONE TERM) STATIONARY & WORKSHOP FEE COMPUTER FEE TOTAL THE ABOVE ILLUSTRATION MAKES IMPLICITLY CLEAR THAT THERE IS DISTINCTION BETWEEN THE TUITION FEES AND CORPUS FUNDS. (B) FURTHER THE BOARD OF TRUSTEES WERE EMPOWERE D (SOURCE: SUB-CLAUSE 5 OF CLAUSE 17 FREE ENGLISH TRANSLATIO N RECORDED SUPRA) TO ACCEPT ANY MONEY FOR THE OBJECTS OF THE TRUST AN D THUS THE VOLUNTARY CONTRIBUTIONS GIVEN BY THE PARENTS/STUDEN TS WERE THE 13 EXCLUSIVE PROPERTY OF THE TRUST WHICH REQUIRED TO B E UTILIZED FOR THE OBJECTS OF THE TRUST ONLY. (C) TAKING INTO ACCOUNT ALL THE FACTS AS DISCUSSE D IN THE FORE- GOING PARAGRAPHS WE ARE OF THE CONSIDERED VIEW THA T THE STAND OF THE AO WAS RATHER MISCONCEIVED IN HOLDING THAT THE CONT RIBUTION TOWARDS DIFFERENT CORPUS FUNDS AGGREGATING TO RS.1.9 CRORES AS CURRENT INCOME OF THE ASSESSEE LIABLE TO BE TAXED WHEREAS THE CIT (A) WAS JUSTIFIED IN HER FINDING THAT THE SAID CONTRIBUTIONS WERE IN THE NATURE OF CORPUS FUNDS AND AS SUCH EXEMPT U/S 12 OF THE ACT. THEREF ORE THE ORDER OF THE LD. CIT(A) IS CONFIRMED WITH RESPECT TO THIS IS SUE. (2) THE OTHER GRIEVANCE OF THE REVENUE BEING THAT THE CIT (A) HAD ERRED IN DIRECTING THE AO TO GRANT EXEMPTION U/ S 11 OF THE ACT. THE CASE OF THE REVENUE WAS THAT THE ULTIM ATE BENEFICIARY FROM THE STUDENT FEES AND CONTRIBUTIONS WERE THE FA MILY OF THE MANAGING TRUSTEE AND THE ASSESSEE WAS COLLECTING HU GE FEES AND CONTRIBUTIONS FROM POOR AND NEEDY STUDENTS BUT IT WAS ENRICHING ITSELF AND ITS TRUSTEES. THIS CONCLUSION OF THE A O WAS APPARENTLY BASED ON THE TRANSACTION RELATING TO THE BANAKATH F OR PURPOSE OF AGRICULTURAL LANDS AND HUGE SALARY FREE USE OF MOT OR CARS PROVIDED TO THE MANAGING TRUSTEE ETC. 14 AFTER GIVING DUE WEIGHT-AGE TO THE LENGTHY SUBMI SSION OF THE ASSESSEE AS RECORDED IN HER IMPUGNED ORDER UNDER CH ALLENGE AND ALSO REASONING OF THE AO IN DENYING EXEMPTION U/S 1 1 OF THE ACT BY INVOKING S.13(1)(C)(II) OF THE ACT IN RESPECT OF TH E THREE ITEMS THE CIT(A) HAS OBSERVED THUS: (A) FUNDS OF RS.4.5 CRORES UTILIZED THRO UGH MANAGING TRUSTEES FOR PURCHASE OF AGRICULTURAL LANDS: 6.3. (ON PAGE 18)I FIND CONSIDERABLE FORCE IN THE CONTENTION OF THE APPELLANT THAT THE DECISION OF TH E TRUSTEES TO START AN EDUCATIONAL INSTITUTION AT FAST DEVELOP ING AREA OF S.G. HIGHWAY WHEREIN EVEN VARIOUS OTHER EDUCATIONAL INSTITUTIONS ARE LOCATED IT WAS A PROGRESSIVE AND FOR CITED DECISION OF THE TRUSTEES. SUCH A DECISION HAS TO B E TAKEN BY THE BOARD OF TRUSTEES AFTER TAKING INTO CONSIDERATI ON OF VARIOUS FACTORS AND SUCH A COMMERCIAL DECISION CANN OT BE QUESTIONED BY THE REVENUE AUTHORITIES UNLESS IT SMA CKS OF ANY PERSONAL GAIN TO THE TRUSTEES. HOWEVER IN THE PRESENT CASE THE FUNDS PROVIDED BY THE TRUST HAS BEEN PAID TO THE VENDOR OF COURSE THROUGH THE TRUSTEES AND THEIR R ELATIVES BUT EVEN THAT WAS MADE IN VIEW OF THE RESTRICTIONS ON TRANSFER OF AGRICULTURAL LANDS. IT IS NOT THE CASE OF AO THAT THE PURCHASE OF SAID LAND WAS INTENDED BY THE TRUST EES FOR THEIR OWN BENEFIT OR GAIN ON THE CONTRARY THE EVIDE NCE PRODUCED BY THE APPELLANT CLEARLY ESTABLISH THAT IT WAS A PRUDENT DECISION TAKEN BY THE TRUSTEES IN THE INTER EST OF TRUST AND ACTED IN A MANNER AS ANY ASSESSEE OF SOUND COMMONSENSE WOULD HAVE ACTED. THE BANAKHAT CLEARL Y SHOWS THAT THE PURCHASE WAS MADE FOR AND ON BEHALF OF THE APPELLANT TRUST AND NOT FOR THE PERSONAL BENEFIT OF THE TRUSTEES. AS REGARDS THE CONTENTION OF AO AS TO T HE COMPLETION OF THE TRANSACTION IT WAS CONTENDED BY THE APPELLANT THAT THE DELAY WAS CAUSED FOR THE REASONS BEYOND ITS CONTROL IN AS MUCH AS THE GOVERNMENT POLICIES FINALIZATION OF TP SCHEME SANCTION FROM VARIOUS AU THORITIES ETC. TAKE CONSIDERABLE TIME NOT ONLY FOR CONVERSIO N OF LAND 15 BUT ALSO FOR COMMENCEMENT OF CONSTRUCTION ETC. IT IS ALSO NOTICED THAT THE PAYMENT MADE TOWARDS PURCHASE OF L AND HAS BEEN SHOWN BY THE APPELLANT TRUST IN ITS BOOKS UNDER THE HEAD ADVANCE TOWARDS LAND AS PER ANNEXURE-I TO TH E AUDITED ANNUAL ACCOUNTS AND THE MANAGING TRUSTEE HA S NOT CLAIMED THE SAID PAYMENT TOWARDS PURCHASE OF LAND I N HIS PERSONAL BOOKS. THE ACCOUNTING MADE IN THE BOOKS O F MANAGING TRUSTEE SHRI M.N. KAPADIA AS REGARDS TH E AFORESAID FUNDS SUPPLIED BY THE APPELLANT TRUST TO HIM FOR THE PURPOSE OF PAYMENT TO THE VENDOR CLEARLY PROVES THA T THE SAID FUNDS WERE SIMPLY ROUTED THROUGH HIM AND NO PE RSONAL GAIN OR TITLE WAS SET UP BY THE TRUSTEE IN THIS TRA NSACTION. IT IS WELL SETTLED POSITION IN LAW THAT THE PROPERTY O F THE TRUST CAN BE HELD EITHER IN THE NAME OF TRUST OR ANY ONE OR MORE TRUSTEES. EVEN THE MANAGING TRUSTEE AND THE RELATI VES HAVE NOT CLAIMED THAT THE SAID PURCHASE WAS MADE BY THEM FOR THEIR OWN BENEFIT. IT APPEARS THAT THE AO HAS MADE THIS CONCLUSION SIMPLY BECAUSE THE FUNDS OF THE TRUST WE RE PAID TO THE VENDOR THROUGH THE TRUSTEES BUT THERE WAS NO OTHER MATERIAL EXCEPT ROUTING OF FUNDS TO HOLD TO THIS EF FECT. FURTHER THE UTILIZATION OF TRUST FUND IS NOT FOR P URCHASE OF AGRICULTURAL LAND BUT IT IS THE FIRST STEP TOWARDS THE EDUCATIONAL INSTITUTIONS TO BE COMMENCED IN THE SAI D LOCALITY. THE TRUSTEES HAVE NOT RETAINED ANY PART OF THE SAID FUNDS OF RS.4.5 CRORES PAID TO THE VENDOR. UNDER T HESE FACTS AND CIRCUMSTANCES OF THE CASE IT CANNOT BE SAID TH E FUNDS OF THE APPELLANT TRUST HAVE BEEN UTILIZED FOR THE P ERSONAL BENEFITS OF THE TRUSTEES OF THE TRUST IN SO FAR AS IT RELATES TO THE PAYMENT TOWARDS PURCHASE OF AGRICULTURAL LAND I S CONCERNED. (B) PAYMENT OF RS.1.5 CRORES PAID TO BUILDING C ONTRACTORS: 9. (PAGE 20)IT IS NOT DISPUTED BY EITHER PART Y THAT THE PAYMENT MADE TO SHRI V.K. PATEL AND SHRI NANALA L V PATEL WAS ADVANCED TOWARDS THE CONSTRUCTION WORK TO BE CA RRIED OUT AT THE PROPOSED SITE. EVEN BOTH THESE CONTRA CTORS IN THE CONFIRMATION LETTERS DATED 20.11.2010 FILED WIT H THE AO HAVE CONFIRMED TO HAVE RECEIVED THE SAID ADVANCE FO R CONSTRUCTION WORK TO BE DONE AT THE PROPOSED SITE. THUS WHEN THE APPELLANT TRUST HAS RESOLVED TO SET UP AN EDUCATIONAL INSTITUTION ON S G HIGHWAY AND IN ORDER TO 16 IMPLEMENT THE SAID DECISION THE EXECUTION OF BANAK ATH FOR PURCHASE OF LAND ENTRUSTING THE CONSTRUCTION CONTR ACT AND PAYMENT OF ADVANCE TO THE CONTRACTORS ETC. ARE NO THING BUT STEPS TAKEN IN THIS DIRECTION SO THAT THE SAME CANN OT BE TREATED AS IMPROPER UTILIZATION OF TRUST FUNDS. T HE AFORESAID DECISIONS WERE FOUND TO BE AS A MAN OF PRUDENCE WOU LD HAVE TAKEN IN SUCH CIRCUMSTANCES. BOTH THESE CONTR ACTORS ARE NOT RELATED TO THE TRUSTEES OF THE APPELLANT TR UST. IT IS ALSO NOT THE CASE THAT THE TRUST HAS LOST MONEY BY GIVING SUCH ADVANCE TO THEM. UNDER THE CIRCUMSTANCES I F IND THAT THE ADVANCE GIVEN BY THE APPELLANT TRUST TO BOTH TH ESE CONTRACTORS CANNOT BE SAID TO BE IMPROPER UTILIZATI ON OF TRUST FUNDS. (C) EXCESSIVE SALARY AND MOTOR CARS PROVIDED TO TH E MANAGING TRUSTEES: 12. (PAGE 24)..I FIND CONSIDERABLE FORCE IN TH E CONTENTION OF THE APPELLANT THAT THE COMPARISON OF SALARY AND OTHER BENEFITS BY WAY MOTOR CAR PROVIDED TO THE TRUSTEES WITH THE PRINCIPAL AND OTHER STAFF OF THE SCHOOL IS TOTALLY MISPLACED. IT IS STATED BY THE APPELLANT THAT SHRI M.N.KAPADIA IS BORN-EDUCATIONALIST OF THIRD GENERA TION AND THEREFORE HE HAS INHERITED EDUCATION AND SCHOOL MANAGEMENT IN HIS BLOOD. HE HAS INTRODUCED VARIOUS ADVANCED AND MODERN TECHNIQUES IN THE SCHOOLS RUN B Y THE TRUST AND THE RESULTS OF HIS EFFORTS FORESIGHTEDNE SS VISION AND COMPETENCE ARE SEEN IN THE NUMBER OF STUDENTS W HO HAVE SECURED RANKS YEAR-AFTER-YEAR NOT IN STATE BOA RD EXAMINATION BUT OTHER COMPETITIVE EXAMS WHICH IS EV IDENCE FROM THE STATISTICS GIVEN IN THE ANNUAL REPORTS. H E IS NOT ONLY MANAGING APPROXIMATELY MORE THAN 14 000 STUDEN TS BUT CARRYING OUT OTHER ADMINISTRATIVE WORK GOVERNMENT CO- ORDINATION WITH GOVERNMENT AUTHORITIES. ON THE OTH ER HAND THE SALARY PAID TO PRINCIPAL AND OTHER STAFF OF THE SCHOOL IS BASED ON EXPERIENCE NUMBER OF WORKING HOURS ETC. AND EVEN THE SAME DIFFERS FROM RANK TO RANK SUCH AS PR INCIPAL OF PRE-PRIMARY PRIMARY AND HIGHER EDUCATION AS WELL A S MEDIUM OF INSTRUCTIONS. THE CHART SHOWING THE AFOR ESAID DETAILS FURNISHED BY THE APPELLANT CLEARLY SHOWS TH E 17 AFORESAID DISTINCTION. MOREOVER THE USE OF MOTOR CARS PROVIDED TO THE TRUSTEES FOR THE PURPOSE OF TRUST C ANNOT BE SAID TO BE ANY EXCESSIVE AMENITIES PROVIDED TO THEM . NOW- A-DAYS SUCH AMENITIES ARE BEING PROVIDED TO MOST O F THE HIGH-RANKING OFFICERS OF ANY ORGANIZATION. IT IS C ONTENDED BY THE APPELLANT THAT THE TRUSTEES HAVE TO VISIT DIFFE RENT PLACES SUCH AS GOVERNMENT OFFICES AT GANDHINAGAR BANKS S CHOOLS ETC. WHICH ARE LOCATED AT A VERY FAR DISTANT PLACE S AND IN CASE SUCH AMENITY WAS NOT PROVIDED TO THEM THEY W OULD HAVE CLAIMED CONVEYANCE EXPENSES FOR SUCH PURPOSES APART FROM IT WOULD HAVE RESULTED INTO AS LOSS OF TIME E NERGY AND MONEY. THE CONTENTIONS OF THE AO THAT THE ULTIMAT E BENEFICIARY FROM THE STUDENTS FEES AND CONTRIBUTION IS THE FAMILY OF MANAGING TRUSTEE IS ALSO NOT SUPPORTED BY ANY EVIDENCE OR MATERIAL ON RECORD. ON THE CONTRARY T HE ACTIVITIES CARRIED OUT BY THE APPELLANT TRUST IN TH IS YEAR BY WAY OF GIVING DONATION TO VARIOUS EDUCATIONAL INSTI TUTIONS AND DISCHARGING THE SOCIAL OBLIGATIONS BY ADMITTING MANY STUDENTS WITHOUT CONTRIBUTION AND PROVIDING FREE ED UCATION TEXT BOOKS SCHOOL UNIFORMS ETC. CLEARLY PROVES TH AT THE APPELLANT TRUST IS CARRYING ON ACTIVITIES OF PUBLIC CHARITABLE CAUSE. THE PERUSAL OF ANNUAL ACCOUNT FOR THIS ALSO SHOW THAT A LARGE SUM OF RS.5 80 05 990/- WAS SPENT FOR THE PURPOSE OF EDUCATION AS AGAINST WHICH IT HAD RECEIV ED THE TUITION FEES OF RS.2 23 44 694/- AND TERM FEES OF RS.76 02 525/- AND STATIONARY WORK-SHEET FEES OF RS.36 10 300 AND COMPUTER FEES OF RS.36 23 725/-. THE SCHEDULE B-1 SHOWING EXPENSES FOR THE OBJECT OF THE TRUST TOTALING TO RS.5 80 05 990 CLEARLY SHOWS THAT THE F UNDS HAVE NOT BEEN UTILIZED FOR THE BENEFIT OF FAMILY OF MANA GING TRUSTEE AS ALLEGED BY AO. EVEN THE BALANCE SHEET AS ON 31.3.2008 SHOWS THAT SHRI M.N. KAPADIA HAS ADVANCED MONEY TO THE APPELLANT TRUST IN AS MUCH AS THERE IS AN OUTSTANDING CREDIT BALANCE OF RS.66 66 512/- EVEN O THER FAMILY MEMBERS HAVE ADVANCED MONEY TO THE APPELLANT TRUST. THERE IS ALSO FORCE IN THE CONTENTION OF TH E APPELLANT THAT THE SCHOOLS RUN BY THE TRUST ARE UNDER SUPERVI SION AND CONTROL OF THE EDUCATION BOARD AND OTHER GOVERNMENT AUTHORITIES WHO HAVE NOT FOUND THAT THE FUNDS HAVE BEEN UTILIZED FOR THE PERSONAL BENEFIT OF THE FAMILY OF THE TRUSTEES. UNDER THE CIRCUMSTANCES THE FINDINGS GIVEN BY AO A BOUT THE UTILIZATION OF TRUST FUND FOR THE BENEFIT OF FA MILY OF THE 18 TRUSTEES IS UNFOUNDED AND LIABLE TO BE REJECTED. T HE APPELLANT IS THEREFORE ENTITLED TO EXEMPTION U/S 11 AND 12 OF THE ACT. THE AO IS THEREFORE DIRECTED TO ALLOW T HE AFORESAID EXEMPTION WHILE COMPUTING THE TOTAL INCOME OF THE A PPELLANT TRUST. DURING THE COURSE OF HEARING THE ARGUME NT OF THE REVENUE WAS THAT THE ASSESSEE TRUST HAD TRANSFERRED RS.4.5 CRORES TO SMT. SONALBEN JAKSANIA. THIS AMOUNT WAS NOT DIRECTLY TR ANSFERRED TO SMT. JAKSANIAS ACCOUNT BUT HAS BEEN TRANSFERRED BY TH E TRUST TO THE SAVING BANK ACCOUNT OF SHRI MUKTAK KAPADIA AND HIS SONS AND THEY IN TURN HAVE PAID THE SAME TO SMT. JAKSANIA. IN THE BANAKHAT I.E. AGREEMENT TO SALE WITH SMT.JAKSANIA DATED 31.3.2008 FOR THE PROPOSED PURCHASE OF LAND THE AMOUNT MENTIONED THER EIN WAS RS.3 50 00 000 AND NOT RS.4.5 CRORES. NO SALE DEED HAD BEEN EXECUTED TILL THE DATE OF ASSESSMENT PROCEEDINGS. IT WAS FURTHER SUBMITTED THAT IN FORM NO.10-B WHICH OUGHT TO BE FI LED ALONG WITH THE RETURN OF INCOME THE ASSESSEE TRUST HAD TO DISCLOS E WHETHER THE FUND OF THE TRUST IS/WAS LENT AT ANY POINT OF TIME TO T HE TRUSTEES AND PERSONS REFERRED TO S.13(3) OF THE ACT I.E. THE RE LATIVES OF THE TRUSTEES. THE ASSESSEE HAD NOT DISCLOSED THIS FACT IN FORM 10 -B FILED WITH THE RETURN OF INCOME. IT WAS CONTENDED THAT THE ASSESS EE HAD CONCEALED THE ACTUAL MODE OF TRANSACTION AND TRANSFER OF SUCH PAYMENTS THROUGH TRUSTEES. IT WAS CONTENDED BY THE REVENUE THAT THE ASSESSEE HAD 19 THEREFORE VIOLATED THE PROVISIONS OF S.13(1)(C)(II ) OF THE ACT AND HENCE THE ASSESSEE WAS NOT ELIGIBLE FOR DEDUCTION U/S 11 AND THE PROVISIONS OF S. 12 SHALL NOT OPERATIVE. THE REVEN UE HAS RELIED ON THE DECISION OF HONBLE UTTARKHAND HIGH COURT IN TH E CASE OF NATIONAL INSTITUTE OF AERONAUTICAL ENGINEERING EDUCATION SOC IETY V. CIT (315 ITR 428) TO SUPPORT ITS VIEW. ON THE OTHER HAND THE LD. AR SUBMITTED HIS SIDE OF THE VERSION WHICH WAS MORE OR LESS WHAT WAS CONTENDED B EFORE THE FIRST APPELLATE AUTHORITY. IN FURTHERANCE IT WAS CONTEN DED THAT KEEPING THE ABNORMAL GROWTH AND VAST DEVELOPMENT ACTIVITIES OF THE CITY IN VIEW THE BOARD OF TRUSTEE TOOK A DECISION TO ACQUIRE AGR ICULTURAL LANDS FOR THE PURPOSE OF CONSTRUCTION OF BUILDING AND OTHER I NFRASTRUCTURAL FACILITIES. ACCORDINGLY IT HAD ENTERED INTO A BANA KHAT FOR PURCHASE OF AGRICULTURAL LANDS AND GETTING THEM INTO NON-AGRICU LTURAL PURPOSES AND THUS NONE OF THE TRUSTEES HAD DERIVED ANY BENEFIT B Y APPLICATION OF THE SAID FUNDS. IT HAS ALSO BEEN CLEARLY STATED IN THE BANAKHAT THAT IT WAS EXECUTED BY THE ASSESSEE THROUGH ITS TRUSTEES SMT R UPALI M KAPADIA AND SHRI MUTLAK N KAPADIA; THAT EVEN IN ITS BOOKS O F ACCOUNT IT HAS BEEN SHOWN UNDER THE HEAD ADVANCE TOWARDS LAND. IT WAS THEREFORE SUBMITTED THAT THE SAID PURCHASE WAS NOT MADE BY THE 20 TRUSTEES FOR THEIR OWN PURPOSES OR DIVERTED THE FUN DS FOR THEIR BENEFITS AS ALLEGED BY THE REVENUE. REFUTING THE REVENUES CONTENTION THAT NEIT HER THE TRANSACTION SHOULD HAVE BEEN ENTERED INTO THROUGH ITS TRUSTEES NOR THE FUNDS BE UTILIZED FOR PURCHASE OF AGRICULTURAL LANDS IT WAS COUNTERED BY THE ASSESSEE THAT THE AGRICULTURAL LAND COULD BE PURCHA SED ONLY BY AN AGRICULTURIST AS PROVIDED IN S.36G OF THE BOMBAY LA ND REVENUE CODE AND SMT. RUPALI N KAPADIA BEING AN AGRICULTURIST THE BANAKHAT WAS ENTERED INTO IN HER NAME ONLY; THAT THE ASSESSEE HA D NOT MADE ANY INVESTMENT FOR ACQUIRING LAND AS ALLEGED BY THE REV ENUE BUT IN FACT IT WAS A FUND SAVING DEVISE AND THAT THE TRUSTEES H AVE NEVER AT ANY POINT OF TIME CLAIMED THAT THE SAID TRANSACTION WAS CARRIED OUT FOR THEIR BENEFITS. WITH REGARD TO THE ALLEGED DIFF ERENCE IN PURCHASE CONSIDERATION OF RS.3.5 CRORES AND RS.4.5 CRORES I T WAS EXPLAINED THAT ON PERUSAL OF BANAKHAT IT IS CLEAR THAT THE A SSESSEE HAD TO BEAR VARIOUS EXPENSES COSTS AND FEES SUCH AS PERMISSION FOR CONVERSION OF AGRICULTURAL LANDS INTO NON-AGRICULTURAL AND FOR CONVERSION THE ASSESSEE WERE TO BORNE SUCH EXPENSE AND OTHER ALLIE D EXPENSES SUCH AS REGISTRATION FEE STAMP DUTY LEGAL FEES ET C. SINCE THE VENDOR WHO WAS IN THE BUSINESS AND WELL VERSED IN THE PROC EDURE AND 21 FORMALITIES TO BE OBSERVED FOR SUCH CONVERSION OF A GRICULTURAL LAND TO NON-AGRICULTURAL ETC. A SUM OF RS.1 CRORE WAS PAID TO MEET SUCH EXPENSES ON BEHALF OF THE ASSESSEE. IN CONCLUSION IT WAS SUBMITTED THAT THE ASSESSEE TRUST WAS IN RECEIPT OF LOANS AGG REGATING TO RS.90.88 LAKHS FROM ITS TRUSTEES WHICH WOULD VINDIC ATE THE NON- INTENTION OF THE TRUSTEES TO UTILIZE THE TRUSTS PR OPERTY FOR THEIR BENEFITS. WE HAVE CONCLUSIVELY CONSIDER ED THE SUBMISSIONS OF THE ASSESSEE AS WELL AS THE REVENUE AND ALSO PERUSE D THE VARIOUS DOCUMENTARY EVIDENCES ADDUCED BY THE ASSESSEE DURIN G THE COURSE OF HEARING. AS POINTED OUT BY THE CIT (A) THE FUND PROVIDED BY THE ASSESSEE TRUST HAS BEEN PAID TO THE VENDOR THROUGH ITS TRUSTEES AND THEIR RELATIVES PRECISELY TO OUTSMART THE RESTRIC TIONS ON TRANSFER OF AGRICULTURAL LANDS TO A NON-AGRICULTURIST - THE ASS ESSEE TRUST.. SINCE THE AGRICULTURAL LANDS COULD BE PURCHASED ONLY BY A N AGRICULTURIST AS SUCH RESTRICTION WAS PREVAILED AT THAT RELEVANT TIM E ONE OF THE TRUSTEES MRS. RUPALI N KAPADIA BEING AN AGRICULT URIST WAS MADE AS A CONDUIT TO GET OVER THE RESTRICTION. THE AOS ALLEGATION THAT THE PURC HASE OF THE SAID LAND WAS INTENDED BY THE TRUSTEES FOR THEIR OWN BENEFITS/GAI N ETC. DOESNT HOLD 22 WATER AS NO DOCUMENTARY EVIDENCE WAS BROUGHT ON REC ORD TO THWART THE ASSESSEES CLAIM. WITH REGARD TO THE PAYMENT MADE BY THE TRUSTEES TO THE VENDOR IT WAS EXPLAINED THAT THE FUNDS PROVIDE D BY THE TRUST HAS BEEN PAID THROUGH ITS TRUSTEES FOR THE REASONS RECO RDED SUPRA AND THAT THE BANAKHAT CLEARLY INDICATES THAT THE TRANSA CTION WAS MADE FOR AND ON BEHALF OF THE ASSESSEE TRUST ONLY AND NOT FO R THE PERSONAL BENEFIT OF ANY OF THE TRUSTEES. AS HIGHLIGHTED BY THE CIT (A) IN THE IMPUGNED ORDER THE PAYMENT MADE TOWARDS PURCHASE O F LAND WAS SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT UNDER THE HEAD ADVANCE TOWARDS LAND (ANNEXURE L TO THE AUDITED A NNUAL A/C) AND THE MANAGING TRUSTEE HAD NOT CLAIMED ANYWHERE IN HI S BOOKS OF ACCOUNT THAT THE SAID PAYMENTS TOWARDS PURCHASE OF LAND. TO TOWERING ALL NEITHER THE MANAGING TRUSTEE NOR ANY OF HIS RELATIVES FOR THAT MATTER HAVE CLAIMED THAT THE SAID PURCHASE WAS MADE ON BEHALF OF THEM OR FOR THEIR OWN BENEFITS. WE HAVE ALSO PER USED THE CONFIRMATION OF ACCOUNTS FURNISHED BY SONALBEN J JA KASANIA PLACED AT P 89 OF PAPER BOOK. THERE WERE ALSO NO DOCUMEN TARY EVIDENCES TO ATTRIBUTE THAT THE SAID TRANSACTION TOOK PLACE O NLY TO BENEFIT THE MANAGING TRUSTEE OR HIS RELATIVES EXCEPT THAT THE F UNDS OF THE TRUST WERE ROUTED THROUGH THE TRUSTEES TO THE VENDOR WHIC H MERELY EXHIBITS 23 THE EXPEDIENCY WHICH PREVAILED AT THAT RELEVANT TIM E. MOREOVER THE UTILIZATION OF THE TRUST FUND WAS NOT FOR PURCHASE OF AGRICULTURAL LAND AS INVESTMENT BUT WAS A STEPPING STONE TO SET UP AN E DUCATIONAL INSTITUTION IN THAT LAND. WE THEREFORE DO NOT FI ND ANY INFIRMITY IN THE CONCLUSION OF THE CIT (A) ON THIS POINT. WITH REGARD TO THE OBSERVATION OF THE A O THAT THE FUNDS OF THE TRUST CANNOT BE SAID TO BE PROPERLY UTILIZED FOR OBJECTS OF THE TRUST AS NO SALE-DEED HAD BEEN EXECUTED OR ANY CONS TRUCTION WORK WAS CARRIED OUT WE FIND THAT BOTH THE CONTRACTORS - WHOM THE MONEY WAS ADVANCED TOWARDS THE CONSTRUCTION WORK TO BE CA RRIED ON AT THE PROPOSED SITE IN THEIR LETTERS DT. 20.11.2010 CONF IRMED BEFORE THE AO THAT THEY WERE IN RECEIPT OF ADVANCES FOR THE PROPO SED CONSTRUCTION WORK. THIS GOES TO PROVE THE GENUINENESS AND DEDIC ATION OF THE ASSESSEE TRUST TO SET UP AN EDUCATIONAL INSTITUTION FOR WHICH IT HAD EXECUTED A BANAKHAT FOR PURCHASE OF LAND; AND FOR A CCOMPLISHING THE CONSTRUCTION OF THE BUILDING BY ADVANCING MONIES TO THE CONTRACTORS CANNOT BE CASTIGATED AS IMPROPER UTILIZATION OF TRU ST FUNDS. IN THESE CIRCUMSTANCES WE DO NOT FIND ANY INFIRMITY IN THE FINDING OF CIT (A) THAT THE ADVANCE GIVEN BY THE APPELLANT TRUST TO BOTH TH ESE CONTRACTORS CANNOT BE SAID TO BE IMPROPER UTILIZATI ON OF TRUST FUNDS. 24 MOVING ON TO THE OTHER ALLEGATION OF THE REVENUE THAT THE EXCESSIVE SALARIES PAID TO SHRI M.N. KAPADIA AND SMT. RUPALI KAPADIA WE WOULD LIKE TO REITERATE THAT DUE TO UNS TINTED EFFORTS AND FARSIGHTEDNESS SHRI KAPADIA HAS BEEN MANAGING A CH UNK OF STUDENT COMMUNITY ALSO CARRYING ON OTHER ADMINISTRATIVE WO RK BESIDES CO- ORDINATE WITH VARIOUS GOVERNMENT AGENCIES. HIS EXP ERIENCE ADMINISTRATIVE SKILL AND MANAGING A FLAGSHIP OF INS TITUTION CANNOT BE EQUATED WITH THAT OF THE PRINCIPAL OF A SCHOOL/COLL EGE AND OTHER STAFF OF THE INSTITUTION WHOSE ACTIVITIES WERE CONFINED TO T HEIR RANKS EXPERIENCE AND LIMITED ROLE TO THEIR ASSIGNMENTS. THEREFORE THE SALARIES OF SHRI M.N. KAPADIA AND MRS. RUPALI KAPAD IA CANNOT BE EQUATED WITH THAT OF OTHER PERSONS WORKING IN THE I NSTITUTION AT THE BEHEST OF THE ASSESSEE TRUST. WITH REGARD TO THE USE OF MOTOR CARS PROVIDED TO THE TRUSTEES CANNOT ALSO BE CONSIDERED TO BE EXCESSIVE AMENITIES PROVIDED TO THEM. AS THEY WERE EXPECTED TO COMMUTE ON DAY-TO-DAY BASIS TO VARIOUS GOVERNMENT AGENCIES AND OTHER ALL IED PLACES WHICH WERE SCATTERED ALL OVER THE VAST CITY OF AHMEDABAD THE ASSESSEE TRUST WAS EXPECTED TO EXTEND SUCH MINIMUM FACILITIE S TO ITS TRUSTEES. THIS CANNOT BE BRANDED AT ANY STRETCH OF IMAGINATIO N THAT THE TRUSTEES HAVE BEEN PROVIDED WITH EXCESSIVE AMENITIES. THE A OS OTHER 25 ALLEGATION THAT THE ULTIMATE BENEFICIARY FROM THE S TUDENT FEES AND CONTRIBUTION BEING THE FAMILY OF MANAGING TRUSTEES WAS ALSO WITHOUT ANY BASIS OR SUPPORTED BY ANY VALID DOCUMENTARY EVI DENCE. ON THE OTHER HAND THE ASSESSEE TRUST HAS BEEN MAGNANIMOUS IN ITS ENDEAVOUR IN CONTRIBUTING LIBERALLY BY WAY OF DONAT IONS TO VARIOUS EDUCATIONAL INSTITUTIONS BESIDES DISCHARGING ITS S OCIAL OBLIGATIONS BY ADMITTING MANY NEEDY STUDENTS WITHOUT COLLECTING AN Y CONTRIBUTIONS PROVIDING FREE EDUCATION SUPPLYING OF TEXT BOOKS UNIFORMS ETC; THE SERVICES RENDERED BY THE ASSESSEE TRUST HAS BEEN A CKNOWLEDGED BY: (I) VISAMOKIDS (PAGES 98 104 OF P.B); (II) GUJARAT RESEARCH ORGANIZATION UNITY (PAGES 107 & 108 OF P.B) PLANNING (GROUP) (III) MANAV SADHNA GANDHI ASHRAM (PAGE 109 OF P.B) (IV) PROCH.ORG (PAGE 110 OF P.B.) IN VIEW OF THE FACTS AND CIRC UMSTANCES AS DELIBERATED UPON IN THE FOREGOING PARAGRAPHS AND ALSO THE REASO NS RECORDED EXHAUSTIVELY AND ELABORATELY IN THE IMPUGNED BY THE CIT (A) WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE TRUST WAS ENTITLED TO EXEMPTION U/S 11 AND 12 OF THE ACT. THE DEPARTMENT APPEAL IS DISMISSED. WE SHALL NOW TAKE UP THE ASSESSEES APPE AL FOR ADJUDICATION. 26 II . I.T.A.NO.1420/A/2011 (BY THE ASSESSEE TRUST): 5. THE ISSUE IN BRIEF WAS THAT THE ASSESSEE W AS GRANTED REGISTRATION NO. HQ I/32(N.4)89-90 U/S 12A(A) OF T HE ACT BY THE CIT G-I AHMEDABAD WAY BACK ON 21.3.1990 . HOWEVER T HE LD. DIT (E) HAD SLAPPED A SHOW-CAUSE NOTICE ON 10.2.2011 U/S 12 AA(3) OF THE ACT ON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE REG ISTRATION GRANTED EARLIER SHOULD NOT BE CANCELLED FOR THE FOLLOWING R EASONS: DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR AY 2008- 09 IT IS NOTICED BY THE ASSESSING OFFICER FROM THE RECORDS THAT AN AMOUNT OF RS.4 50 00 000/- WAS TRANSFERRED TO SAVINGS ACCOUNT OF SHRI MUKTAK KAPADIA AND HIS SONS AND THEY IN TURN HAD PAID RS.3 50 00 000/-TO SMT.SONBE N JAKSANIA TOWARDS AGREEMENT TO SALE OF LAND WITH HER . NO SALE DEED HAS BEEN EXECUTED SO FAR. THE SAID TRANS ACTION WITH SRI MUKTAK KAPADIA AND HIS SONS WAS TO BE REFL ECTED IN FORM NO;10-B U/S 13(3) OF THE I.T. ACT 1961 HAVE NOT BEEN MENTIONED ANYWHERE IN FORM NO.L10B FILED WITH THE R ETURN OF INCOME. THUS THE TRUST HAS CONCEALED ACTUAL MODE O F TRANSACTION AND TRANSFERRED THE FUND THROUGH TRUSTE E BY VIOLATING PROVISIONS OF SECTION 13(1)(C)(II) OF THE I.T. ACT 1961 AS A RESULT OF WHICH IT IS NOT ELIGIBLE FOR D EDUCTION 11 OF THE I.T. ACT 1961. FURTHER IT IS ALSO SEEN FROM THE RECORDS BY THE AS SESSING OFFICER THAT LAND PROPOSED TO BE ACQUIRED BY THE TR UST IS AN AGRICULTURAL LAND WHICH HAS NOT BEEN CONVERTED INTO NON- AGRICULTURAL LAND. OBJECTS OF THE TRUST ARE EDUCAT IONAL IN NATURE AND NOT AGRICULTURAL ONES. THE TRUST CANNOT DIVERT AND UTILIZE FUND FOR PURPOSE OF AGRICULTURE. 2. TRUST HAS COLLECTED RS.1 90 01 319/- FROM STU DENTS AT THE TIME OF ADMISSION. THIS AMOUNT WAS DIRECTLY CREDIT ED TO BALANCE AND CLAMED AS CORPUS DONATIONS INSTEAD OF REFLECTING IN INCOME AND EXPENDITURE ACCOUNT. THE TRUST HAS FAILED TO ESTABLISH AFORESAID AMOUNT AS CORPUS 27 DONATIONS AND ALSO NO SEPARATE CLAIM OF DEDUCTION U /S 11(1)(D) OF THE I.T. ACT 1961 IN RESPECT OF CORPUS DONATION HAS BEEN MADE IN THE RETURN OF INCOME. 3. THUS THE TRUST HAS VIOLATED PROVISIONS OF SECT ION 11(1)(D) AND 13(1)(C)(II) OF THE I.T. ACT 1961 AND IS NOT E LIGIBLE FOR REGISTRATION U/S 12A(I) OF THE I.T. ACT 1961. IT CLEARLY ATTRACTS THE AMENDED DEFINITION OF CHARITABLE PURPOSE IN S ECTION 2(15) OF THE I.T. ACT 1961 BY INSERTION OF A PROVI SO W.E.F. 1.4.2009 AS THE AFORESAID ACTIVITIES SHOW THEIR COM MERCIAL NATURE.. 5.1. AFTER CONSIDERING THE LENGTHY AND EXHAUSTIVE SUBMISSION OF THE ASSESSEE AS RECORDED IN HIS IMPUGNED ORDER U NDER CHALLENGE THE DIT(E) HAS CANCELLED THE REGISTRATION EARLIER G RANTED W.E.F. 21.3.1990 FOR THE FOLLOWING REASONS: (III) ..(I) AT THE OUTSET IT IS SEEN THAT THE LD. CO UNSEL HAS BEEN REITERATING TIME AND AGAIN IN HIS SUBMISSIONS THAT THE ASSESSMENT ORDER PASSED U/S 143(3) FOR AY 2008-09 O N 27.12.10 HAS NOT DISPUTED THIS FACT I.E. THE ACTIVITIES CAR RIED ON BY THE ASSESSEE TRUST ARE NOT GENUINE FURTHERMORE THERE IS NO INDICATION IN THE SHOW-CAUSE NOTICE DATED 10.2.11 ( SUPRA) THAT THE ACTIVITIES CARRIED ON BY THE ASSESSEE TRUST ARE NOT GENUINE ON THE CONTRARY IT IS SEEN THAT THE AFFAIRS OF THE ASSESSEE TRUST WOULD CLEARLY INDICATE THAT THE UNDERSIGNED HAS TAK EN JUDICIAL NOTICE OF A NOTORIOUS FACT WHICH HAS BEEN GIVEN JUD ICIAL BENEDICTION BY THE HONBLE SUPREME COURT IN ATTAR S INGH GURMUKH SINGH V. ITO (1991) 191 ITR 667 (SC) AND TH E HONBLE CALCUTTA HIGH COURT IN THE CASE OF MEHMUDABAD PROPE RTIES PVT. LTD V. CIT (1972) 85 ITR 500 (CAL). IN THIS CASE THE MAIN NOTORIOUS FACTS ARE THAT THE TRUST HAS BEEN INDULGI NG IN TAKING DONATIONS FROM THE STUDENTS INDULGING IN TRANSACTI ONS OF COMMERCIAL NATURE WITHIN THE FAMILY GROUP ITSELF C LEARLY VIOLATING THE PROVISIONS OF SECTION 11(1)(D) AND 13(1) OF TH E I.T. ACT 1961. THESE NOTORIOUS FACTS WOULD FURTHER STARE IN THE FA CE OF THE SO- CALLED GENUINENESS OF THIS TRUST. THE FOREGOING PA RAS WOULD 28 AMPLY DEMONSTRATE THAT THE ACTIVITIES OF THIS TRUST ARE NOT ONLY NON-GENUINE IN NATURE BUT ALSO SOME OF ITS ACTIVITI ES WOULD FALL OUTSIDE THE OBJECTS OF THE TRUST. (II) IT WOULD BE WORTHWHILE TO REFER TO THE OBJECT CLAUSES OF THE TRUST DEED DT. 29.8.1988 ON PAGES 4 AND 5 GIVEN IN CLAUSES 1 TO 6 (IN GUJARATI). THE ENGLISH TRANSLATION OF AFORESAI D 6 OBJECTS ARE REPRODUCED BELOW: (1) TO RUN INSTITUTION FOR PHYSICAL MENTAL MORAL SPIRITUAL AND INDUSTRIAL EDUCATION; (2) TO HELP STUDENTS BY WAY OF PROVIDING BOOKS FEE S SCHOLARSHIP FOR STUDY IN SCHOOL AND COLLEGES; (3) TO DO ACTIVITIES TO ESTABLISH SCHOOL COLLEGES HOTELS DHARMSHALA DISPENSARIES HOSPITALS PHYSICAL TRAIN ING SCHOOL AND LIBRARY AND MAINTENANCE THEREOF; (4) TO PROVIDE INTEREST-FREE LOAN SCHOLARSHIP TO T HE STUDENTS WHO WANT TO GO ABROAD FOR EDUCATION; (5) TO CARRYOUT RESEARCH FOR UP-LIFTMENT OF SOCIETY ON SCIENCE INDUSTRIES AND EDUCATION; (6) TO PUBLISH BOOKS FOR UNLIFTMENT OF SOCIETY ON M ORALITY SPIRITUALITY AND EDUCATION. FROM THE AFORESAID OBJECT CLAUSES IT IS NOWHERE ST ATED THAT IT WOULD INDULGE ITSELF IN TRANSACTION OF COMMERCIAL N ATURE I.E. BY TRANSFERRING AMOUNT OF RS.4 50 00 000/-FROM BANK AC COUNT TO SHRI MUKTAK KAPADIA AND HIS SONS AND THEY IN TURN HAD PAID RS.3 50 00 000/- TO SMT.SONALBEN JAKSANIA TOWARDS A GREEMENT TO SELL OF LAND WITH HER. IT IS SEEN THAT NO SALE DEE D HAS SO FAR BEEN EXECUTED FOR THE REASONS BEST KNOWN TO THE TRUST. THE SAID TRANSACTION WITH SHRI MUKTAK KAPADIA WAS TO BE REFL ECTED IN FORM NO.10B FILED WITH THE RETURN OF INCOME. THIS SHOWS THAT THE TRUST HAS CONCEALED ACTUAL MODE OF TRANSACTIONS AND VIOLATED THE PROVISIONS OF SECTION 13(1)(C)(II) OF THE I.T. ACT 1961 WHICH WOULD NOT MAKE IT ELIGIBLE FOR DEDUCTION U/S 11 OF THE I.T. ACT 1961. IN THI REGARD THERE IS NO MERIT IN THE ARGU MENT OF THE LD. COUNSEL THAT THE PAYMENTS MADE TO SMT. SONSALBEN JA KASAINA TOWARDS THE PURCHASE OF AGRICULTURAL LAND ARE ALSO IN ACCORDANCE WITH THE OBJECTS OF THE TRUST BECAUSE THE ASSESSEE- TRUST HAD RESOLVEDMTO EXPAND AND DIVERSITY ITS EDUCATIONAL AC TIVITIES TO S.G.ROAD AHMEDABAD. IN FACT SHRI N.H.KAPADIA EDU CATION TRUST HAS BEEN ENGAGING ITSELF IN TRANSACTIONS OF C OMMERCIAL 29 NATURE. IT HAS ALSO FAILED TO GIVE INTIMATION ABOU T THE CHANGE/ALTERATION IN ITS OBJECTS TO THE OFFICE OF T HE UNDERSIGNED IN ACCORDANCE WITH RULE 17B AND FORM NO:10A. IT IS SEEN THAT FORM NO.L0A WHICH IS TO BE USED IN APPLYING FOR REG ISTRATION U/S 12AA OF THE I.T. ACT 1961 ITSELF CONTAIN AN UNDERT AKING IN THE FOLLOWING WORDS: PLACING RELIANCE ON THE DECISION OF HONB LE HIGH COURT OF ALLAHADBAD IN THE CASE OF ALLAHADBAD AGRICULTURAL INSTITUTE V. UOI (2007) 291 ITR 116 (ALL) THE DIT (E) JUSTIFIED THE CANCELLATION OF REGISTRATION OF THE ASSESSEE TRUST. FURTHER THE DIT (A) HAD OBSERVED THUS: (ON PAGE 11) (III) THE AFORESAID PURCHASE OF LAND TRANSACTION OF THE TRUST CLEARLY INDICATES THAT IN ADDITION TO EDU CATION THE TRUST IS ALSO HAVING ACTIVITIES OF COMMERCIAL NATURE. HO WEVER THE LEGISLATURE IN ITS WISDOM IN ORDER TO REMEDY THIS M ISCHIEF INSERTED PROVISO TO SECTION 2(15) OF THE ACT 1961 IN THE NATURE OF AMENDMENT BY THE FINANCE ACT 2008 W.E.F. 1.4.2009 I.E. AY 2009- 10. THE PROVISIONS OF SECTION 2(15) OF THE ACT AF TER THE AFORESAID AMENDMENT W.E.F. 1.4.09 IS REPRODUCED HERE BELOW: .. THE LD. COUNSEL HAS VEHEMENTLY ARGUED THAT THE ACTI VITIES CARRIED ON BY THE ASSESSEE-TRUST CANNOT BE SAID TO COMMERCIAL IN NATURE WHEN THE AUDITED ANNUAL ACCOUNTS FOR THIS Y EAR ARE SCANNED THROUGH. THERE IS A HUGE DEFICIT OF RS.75 18 264/- AND IT HAS ALSO INCURRED EXPENSES TOTALING TO RS.5 80 05 9 90/- FOR THE PURPOSE OF EDUCATION. HAD THE ACTIVITIES OF THE T RUST BEEN COMMERCIAL THERE WOULD HAVE BEEN HUGE SURPLUS AND THE TRUSTEES WOULD HAVE BEEN THE SOLE BENEFICIARY? IN THIS REGARD THERE IS NO MERIT IN THE AFORESAID CONTENTION OF TH E LD. COUNSEL 30 AS IT CANNOT BRING OUT THE CASE OF THIS TRUST OUT O F THE MISCHIEF OF AFORESAID PROVISO TO SECTION 2(15) OF THE I.T. ACT 1961. THE LEGISLATURE IN ITS WISDOM HAS INTRODUCED SECTIO N 12AA OF THE I.T. ACT 1961 BY THE FINANCE ACT NO.2 1996 W.E.F 1. 4.1997 I.E. AY 1997-98 ONWARDS WHICH REQUIRES THE COMMISSIONER TO BE SATISFIED WITH THE OBJECTS OF THE TRUST AND THE GEN UINENESS OF ITS ACTIVITIES. AS A LOGICAL COROLLARY OF THE PROVISIO NS OF SECTION 12AA OF THE ACT THE COMMISSIONER HAS TO EXAMINE TH E OBJECTS OF THE TRUST BY THEIR REFERENCE TO THE DEFINITION O F CHARITABLE PURPOSE ALONG WITH THE NEW INSERTED PROVISO TO CHA RITABLE PURPOSE IN SECTION 2(15) OF THE ACT W.E.F. 1.4.2009 . IN FACT THERE IS A MUTUAL SYMBIOTIC RELATIONSHIP BETWEEN THE TWO PR OVISIONS NAMELY SECTION 2(15) AND SECTION 12AA OF THE I.T. ACT 1961. THE DEFINITION OF CHARITABLE PURPOSE IN SECTION 2(15) OF THE ACT IS THE ENGINE WHICH DRIVES THE MACHINERY OF THE PROVISION S OF SECTION 12AA OF THE ACT. (IV) THE LD. COUNSEL HAS RELIED UPON THE FOLLOWING JUDICIAL DECISIONS TO SUPPORT HIS CASE FOR RECONSIDERATION O F REGISTRATION GRANTED TO THE TRUST U/S 12A(A) OF THE I.T. ACT 19 61: I HAVE GIVEN MY THOUGHTFUL REFLECTIONS TO THE JUDIC IAL DECISIONS CITED BY THE COUNSEL IN RESPONSE TO THE AFORESAID S HOW-CAUSE NOTICE AND I AM CONSTRAINED TO POINT OUT THAT THE Q UESTIONS IN ISSUE ARE DISTINGUISHABLE FROM THE FACTS OF THE CIT ED JUDICIAL DECISIONS. THE LD. COUNSEL HAS SIMPLY CULLED THE RATIO OF THE DECISIONS FROM DIFFERENT JUDICIAL PRONOUNCEMENTS. IN THE FITNESS OF THINGS I AM TEMPTED TO ANALYZE THE CONCEPT OF R ATIO DECIDENDI IN A JUDICIAL DECISION. IT WOULD BE WORTHWHILE TO REFER TO ONE OF THE LOCUS CLASSIUS ON THE SUBJECT LEARNING THE LAW (ELEVENTH EDITION STEVENS AND SONS LONDON 1982) BY PROF. G LANVILLE WILLIAM AT PAGE 67 THAT PART OF A CASE THAT IS SAI D TO POSSESS AUTHORITY IS THE RATIO DECIDENDI THAT IS TO SAY T HE RULE OF LAW UPON WHICH THE DECISION IS FOUNDED. THE RATIO DE CIDENDI OF A CASE CAN BE DEFINED AS THE MATERIAL FACTS OF THE CA SE PLUS DECISION. THIS VIEW HAS BEEN APPROVED BY THE CONST ITUTION BENCH OF THE HON. SUPREME COURT IN KRISHNAKUMAR V. UNION OF 31 INDIA (1990) 4 SCC 207 (SC) AND ALSO IN CIT V. SUN ENGINEERING CO. PVT. LTD (1992) 198 ITR 272 (SC) (PER J.S.ANAND J). (V) VIEWED FROM ANOTHER ANGLE ALSO THE REGISTRATIO N GRANTED TO THIS TRUST VIDE ORDER DATED 21.3.1990 DID NOT CONFE R ANY RIGHT OR ENTITLEMENT REGARDING OPERATIONS OF SECTION 11 12 A ND 13 OF THE I.T. ACT 1961 OR ANY OTHER PROVISIONS OF I.T. ACT 1961 WHICH ARE TO BE DECIDED BY THE AO ON MERITS. IT IS FURTHER SEEN FROM THE AFORESAID FACTS AND THE JUDICIAL DECISION OF THE AL LAHABAD HIGH COURT (SUPRA) THAT REGISTRATION GRANTED U/S 12AA OF THIS TRUST CAN BE CANCELLED EVEN WITH REGARD TO THE LEGAL POSITION OF PRE- AMENDED PERIOD TO SECTION 2(15) OF THE I.T. ACT 19 61 WHICH WOULD TAKE EFFECT FROM AY 1990-01 ONWARDS. THIS PO SITION IS FURTHER BUTTRESSED BY THE DECISION OF HON. SUPREME COURT IN THE CASE OF HEMALATHA GARGYA V. COMMISSIONER OF INCOME- TAX AND ANOTHER (2003) 259 ITR 1 (SC) WHEREIN THEIR LORDSHI PS HAD HELD THAT THE QUESTION OR RULE OF CONSISTENCY DOES NOT P RECLUDE THE DEPARTMENT FROM INITIATING APPROPRIATE ACTION UNDER THE DOCTRINE OF JUST CAUSE. ACCORDINGLY IT WOULD FALL WITHIN T HE AMBIT AND SCOPE OF DOCTRINE OF JUST CAUSE TO CANCEL THE REGIS TRATION ALLOWED U/S 12AA OF THE I.T. ACT 1961 FROM AY 1990 -01 ONWARDS. (VI) LASTLY THE LD. COUNSEL HAS VEHEMENTLY ARGUED THAT THE ASSESSEE TRUST HAD PREFERRED APPEAL AGAINST THE ORD ER OF DDIT (E) AHMEDABAD PASSED IN THIS CASE U/S 143(3) FOR A Y 2008-09. HE HAD ALSO ATTACHED A COPY OF THE SAID APPELLATE O RDER AND HAS ALSO STRESSED ON THE DOCTRINE OF MERGER OF THE AOS ORDER WITH THE ORDER OF THE CIT (A)-XXI AHMEDABAD. HE HAS PL ACED RELIANCE UPON THE JUDICIAL PRONOUNCEMENTS OF HONBLE SUPREME COURT IN THE CASE OF CIT V. KANPUR COAL SYNDICATE REPORTED I N 53 ITR 225 (SC) AND THE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT V. SAKSERIA COTTON MILLS LTD REPORTED IN 124 ITR 570 (BOM). THERE IS NO MERIT IN THE AFORESAID SUBMISSIONS OF T HE LD. COUNSEL BY INVOKING THE DOCTRINE OF MERGER OF THE A OS ORDER WITH THE ORDER OF THE CIT (A) FOR THE PURPOSE OF NO T WITHDRAWING THE REGISTRATION BY THE UNDERSIGNED IN THIS ISSUE. IT GOES WITHOUT SAYING THAT THE NATURE OF PROCEEDINGS BEFORE THE UN DERSIGNED U/S 12AA(3) OF THE I.T. ACT 1961 AND THE APPELLATE PRO CEEDINGS BEFORE THE CIT(A)-XXI AHMEDABAD U/S 246 OR CHAPTER XX OF THE I.T. ACT 1961 ARE TOTALLY DISTINCT SEPARATE AND I NDEPENDENT IN NATURE. THE JURISDICTION OF BOTH THESE AUTHORITIE S DOES NOT 32 OVERLAP WITH EACH OTHER. THE AFORESAID TWO JUDICIA L PRONOUNCEMENTS RELIED UPON BY THE LD. COUNSEL ARE T OTALLY DISTINGUISHABLE AND INDEPENDENT FROM THE FACTS OF T HIS CASE IN QUESTION. FURTHERMORE THE JURISDICTION OF CIT (A) U/S 246 OF THE I.T. ACT 1961 DOES NOT EXTEND TO ANY OF THE PROCEE DINGS U/S 12AA OF THE I.T. ACT 1961. REGISTRATION UNDER THE PROVISIONS OF SECTION 12AA OF I.T. ACT 1961 ITS CANCELLATION TH EREOF IS CONFERRED ONLY ON THE COMMISSIONER/DIRECTOR OF INCO ME-TAX (EXEMPTION). THE DOCTRINE OF MERGER IS NOT A DOCTR INE OF RIGID AND UNIVERSAL APPLICATION. THIS HAS BEEN POINTED O UT BY THE HON. SUPREME COURT IN THE CASE OF STATE OF MADRAS V. MAD URAI MILLS CO. LTD. (1967) N19 STC 144 (SC) AND HINDUSTAN AERO NAUTICS LTD V. CIT (2000) 243 ITR 808 (SC). FROM THE AFORESAID FACTS AND CIRCUMSTANCES IT IS P ALPABLY MANIFEST THAT THE ACTIVITIES OF THIS TRUST ARE NOT GENUINE IN NATURE AND ALSO NOT BEING CONDUCTED WITH ITS OBJECTS THER EOF. FURTHERMORE A FORTIORI WITH THE AMENDMENT U/S 2(1 5) OF THE I.T. ACT 1961 BY THE FINANCE ACT 2008 W.E.F. AY 2009-1 0 SHRI N.H. KAPADIA EDUCATION TRUST HAS LOST THE STATUS OF CHAR ITABLE ORGANIZATION. ITS ACTIVITIES PROPRIO VIGORE ARE BEING CARRIED ON COMMERCIAL LINES. SHRI N.H. KAPADIA EDUCATION TRUS T THOUGH WAS GRANTED REGISTRATION IN PRINCIPLE BY CIT GUJAR AT-I AHMEDABAD VIDE ORDER DATED 21.3.1990 DID NOT CARRY OUT ANY ACTIVITY WHICH HAS CHARITABLE OBJECT AND ALSO BY IN VOKING DOCTRINE OF JUST CAUSE IN THE LIGHT OF THE OBSERVAT IONS OF HON. SUPREME COURT IN 259 ITR 1 (SC) (SUPRA) I STRONGLY CONCLUDE THAT THE ACTIVITIES OF SHRI N.H.KAPADIA EDUCATION TRUST ARE NOT GENUINE CHARITIES AND ARE BEING CARRIED OUT NOT IN CONSONANCE WITH ITS OBJECTS BEREFT OF ANY ELEMENT OF CHARITY. ACCORDINGLY THE REGISTRATION GRANTED EARLIER BY THE THEN CIT G UJARAT-I AHMEDABAD VIDE ORDER DATED 21.3.1990 IS CANCELLED W .E.F. 21.3.1990 I.E. AY 1990-91 ONWARDS. 6. AGGRIEVED THE ASSESSEE HAS COME UP WIT H THE PRESENT APPEAL BEFORE THIS BENCH. IT WAS SUBMITTED DURING THE COURSE OF HEARING THAT IT IS NOW WELL-SETTLED POSITION IN LAW THAT THE SUB-SECTION (3) INSERTED IN S.12AA OF THE ACT W.E.F. 1.11.2004 EMPOWERS THE CIT 33 TO CANCEL REGISTRATION IF HE FINDS THAT THE ACTIVI TIES ARE NOT GENUINE OR NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TRUST; THAT IT IS EVIDENT THAT IN TERMS OF S.12AA(3) OF THE ACT T HE CIT HAS POWER TO CANCEL REGISTRATION GRANTED U/S 12(A) OR 12AA(1)(B) OF THE ACT ON BEING SATISFIED OF EITHER OF THE TWO CONDITIONS NA MELY THAT THE ACTIVITIES OF THE TRUST OR THE INSTITUTION ARE NOT GENUINE OR THAT THE ACTIVITIES ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION AS THE CASE MAY BE. RELIES ON THE CASE LAWS: (I) AJIT EDUCATION TRUST V. CIT - 134 TTJ 483 (AHD) ; (II) BABA GANDHA SINGH EDUCATION TRUST V. CIT 138 TTJ 1 (CHD); 6.1. IT WAS FURTHER ARGUED THAT THE DIT (E) HAVING NOT DOUBTED THE GENUINENESS OF THE ACTIVITIES OF THE TR UST AND THE ACTIVITIES NOT FOUND BEYOND ITS OBJECTS THE CANCELLATION OF REGISTRATION WAS UNWARRANTED [REFER: ST. DON BOSCO EDUCATION SOCIEIT Y V. CIT 90 ITD 477 (LUCK)]. IT WAS FURTHER SUBMITTED THAT O N PERUSAL OF THE REASONING GIVEN BY THE DIT (E) IN HIS IMPUGNED ORDE R THAT THE ACTIVITIES OF THE ASSESSEE TRUST BY WAY OF TAKING D ONATIONS FROM STUDENTS INDULGING IN TRANSACTIONS OF COMMERCIAL N ATURE WITHIN THE FAMILY GROUP WERE TREATED AS VIOLATION OF S.13(1)(C ) OF THE ACT. THE 34 REASONING GIVEN BY THE DIT (E) IN PARA III OF THE I MPUGNED ORDER HAS BEEN DEALT WITH BY THE ASSESSEE AS UNDER: 3.3.1 (SUBMISSION) IT IS OBSERVED BY DIT (E) IN PA RA (I) OF THE ORDER THAT THE MAIN NOTORIOUS FACTS ARE THAT THE T RUST HAS BEEN INDULGING IN TAKING DONATIONS FROM THE STUDENTS IN DULGING IN TRANSACTIONS OF COMMERCIAL NATURE WITHIN THE FAMILY GROUP ITSELF CLEARLY VIOLATING THE PROVISIONS OF SEC.11( 1)(D) AND 13(1)(C) 3.3.2. THE APPELLANT SUBMITS THAT AS STATED ABOVE THE DIT (E) HAS CANCELLED/WITHDRAWN REGISTRATION OF THE TRUST B ASICALLY FOR ALLEGED VIOLATION OF SECT.11(1)(D) AND 13(1) WHICH IN VIEW OF THE SETTLED LEGAL POSITION ASS STATED ABOVE IS BEY OND THE PURVIEW OF HIS POWERS U/S. 12AA(3). IN OTHER WORDS THE ALLEGED VIOLATION OF THE SAID PROVISIONS AS PER DIT (E) COULD NOT BE A GROUND FOR CANCELLATION OF REGISTRATION OF THE TRUST U/S 12AA(3) THOUGH IT COULD BE ENQUIRED INTO BY AO WHI LE EXAMINING THE CLAIM OF EXEMPTION U/S 11/12 OF THE A CT. THEREFORE ON THIS PRELIMINARY GROUND ITSELF THE I MPUGNED ORDER IS LIABLE TO BE QUASHED AND SET ASIDE. 3.3.3. WITHOUT PREJUDICE TO THE ABOVE AND IN THE A LTERNATIVE THE APPELLANT SUBMITS THAT THE REASONING GIVEN BY D IT (E) IS NOT JUSTIFIED BOTH ON FACTS AND IN LAW AS UNDER: (A) AS REGARDS TAKING DONATIONS FROM THE STUDENTS THE APPELLANT HAS DEALT WITH THIS ISSUE AT LENGTH IN TH E QUANTUM PROCEEDINGS SO THAT THE SAME IS NOT REPEATED HERE F OR THE SAKE OF BREVITY BUT THE SAME MAY BE REFERRED TO FOR THE PURPOSE OF THIS APPEAL ALSO (REFER TO P 116 TO 136 OF PB). RELIANCE IS PLACED ON THE DECISION OF MAHARASTRA AC ADEMY OF ENGG. & EDUC. RESEARCH (MAEER) V. CIT 133 TTJ 70 6 (PUNE) WHEREIN IN REGISTRATION WAS CANCELLED MAINLY ON THE GROUND THAT THE INSTITUTION HAD COLLECTED DONATIONS THUS ADOPTED SOME WRONG MEANS OF COLLECTION OF FEES THE CIT COULD NOT ENTER INTO THE AREA OF INVESTIGATION OF S OURCE AND APPLICATION OF INCOME AND SO LONG AS IT WAS NOT THE CASE THAT THE TRUST WAS NOT IMPARTING OF EDUCATION DOUBT ED OR CHALLENGED BY CIT. (B) AS REGARDS THE ALLEGEDLY INDULGING INTO THE TRA NSACTIONS OF COMMERCIAL NATURE WITHIN THE FAMILY GROUP THE DIT (E) HAS 35 DISCUSSED IN PARA (II) OF THE ORDER ALSO AND HENCE BOTH ARE DEALT WITH TOGETHER AS UNDER: THE APPELLANT HAD EXPLAINED IN ITS REPLY DT. 17.3.2 011 THAT THE PAYMENTS MADE TOWARDS THE AGRICULTURAL LAND WAS FOR THE PURPOSE OF PURSUING THE OBJECT OF EDUCATION BY ESTABLISHING SCHOOL ON S.G. HIGHWAY AND NEITHER ANY TRUSTEE NOR ANY OF THE FAMILY MEMBER HAD DERIVED AN Y BENEFIT OR GAIN WHATSOEVER THERE FROM. THIS IS EVI DENT FROM THE FOLLOWING MATERIAL PRODUCED BEFORE THEM: (I) BANAKHAT WAS EXECUTED IN THE CAPACITY AS A TRUSTEE AND EXPRESSLY STATED AS REPRESENTING THE APPELLANT TRUST (PAGE 60); (II) PAYMENTS SHOWN IN THE BOOKS OF APPELLANT UNDER THE HEAD ADVANCE TOWARDS THE LAND AS PER ANNEXURE I TO THE AUDITED BALANCE SHEET AS ON 31.3.2008 (PAGE 20); (III) THE TRUSTEES HAD ALSO NOT TREATED THE SAID FU NDS AS LOAN OR ADVANCE FROM THE TRUST BUT ON THE CONTRARY GIVEN FUNDS TO THE TRUST TO CARRY OUT THE ACTIVITIE S OF THE TRUST (P 19); (IV) THE BOARD OF TRUSTEES HAD PASSED RESOLUTIONS I N THIS REGARD; (V) THE FUNDS WERE ROUTED THROUGH THE TRUSTEES ACCOUNT IN VIEW OF THE LAND BEING AGRICULTURAL AND ONE OF THE TRUSTEES WAS AN AGRICULTURIST. THE TRUSTEES HAD NOT RETAINED ANY PART OF THE SAID FUND . IN VIEW OF THE ABOVE FACTS IT CANNOT BE SAID THAT THE AFORE SAID ACTIVITY WAS NON-GENUINE OR OUTSIDE THE OBJECTS OF THE TRUST. IN VIEW OF THE ABOVE THE DIT (E) HAVING NOT DOUBTED THE GENUINENESS OF THE ACTIVITIES OF THE APPELLANT TRUST AND THE ACTIVITIES NOT FOUND BEYOND ITS OBJECTS THE CANCELLATION OF REGISTRATION IS UNWARRANTE D. 3.4.1. IT IS CONTENDED BY DIT (E) IN PARA (II ) OF THE IMPUGNED ORDER THAT THE TRANSACTION OF COMMERCIAL NATURE BY TRANSFERRING THE AMOUNT OF RS.4.50 CRORES TO THE ACCOUNT OF TRUSTEES ETC. WAS OUTSIDE THE 36 OBJECTS OF THE TRUST AND IT HAD FAILED TO INTIMATE CHANGE/ALTERATION OF ITS OBJECTSL 3.4.2. THE APPELLANT BEGS TO SUBMIT THAT THE TR ANSACTION OF TRANSFERRING SUCH AMOUNT WAS NOT COMMERCIAL IN NATU RE BECAUSE: (I) IT WAS NEITHER TREATED AS LOAN OR ADVANCE NOR A NY INTEREST WAS PAID BY THE TRUSTEES AND OTHERS ON THE SAID AMO UNT. IT WAS MERELY A CASE OF FUNDS ROUTED THROUGH THEM S O AS TO ACHIEVE THE OBJECT OF THE TRUST I.E. ACQUIRING LAND FOR SCHOOL BUILDING WITH A LOWER COST; (II) THE SAID FUNDS WERE NOT RETAINED BY THE TRUSTE ES AND OTHER BUT PAID FOR PURCHASE OF LAND ETC. THUS NO GAIN OR BENEFIT WAS DERIVED BY THEM UNDER SUCH ARRANGEMENT. 3.4.3. IT IS ALSO CONTENDED BY DIT (E) THAT THERE WAS FAILURE TO REPORT THIS TRANSACTION IN FORM NO.10B. THE APPELL ANT SUBMITS THAT THERE WAS NO SUCH FAILURE BECAUSE PART II OF ANNEXURE IN THIS FORM REQUIRES REPORTING OF APPLICATION OR USE OF INCOME OR PROPERTY FOR THE BENEFIT OF TRUSTEE ETC. BUT IN TH E PRESENT CASE SINCE INCOME OR PROPERTY WAS NEITHER USED NOR APPLI ED FOR THE BENEFIT OF TRUSTEE ETC. THERE WAS NO QUESTION OF R EPORTING THE SAME. 3.4.4. IT IS CONTENDED BY THE DIT (E) IN VIEW OF UNDERTAKING IN FORM 10A THE APPELLANT SHOULD HAVE COMMUNICATED TH E ALTERATION IN THE TERM OF THE TRUST. HOWEVER DIT (E) HAS FAILED TO APPRECIATE THAT THERE WAS NO ALTERATION IN THE OBJE CT CLAUSE OF THE TRUST DEED WHEN THERE IS EXPANSION OF THE EDUCATION AL ACTIVITY OF RUNNING SCHOOL AT A NEW PLACE. THE DIT (E) HAS FAI LED TO APPRECIATE THAT THERE IS DISTINCTION BETWEEN THE OB JECTS OF THE TRUST AND THE POWERS OF THE TRUSTEES TO IMPLEMENT T HE SAID OBJECTS. THE STEPS TAKEN TO ACQUIRE THE LAND FOR CO NSTRUCTING THE SCHOOL AT S.G HIGHWAY WAS THE EXERCISE OF POWERS TO CARRY OUT THE OBJECT OF EDUCATION. IT WAS HELD IN THE CASE O F CIT V. KSHATRIYA GIRLS SCHOOLS MANAGING BOARD [245 ITR 170 (MAD)] THAT WHEN THE OBJECT OF TRUST WAS TO UTILIZE INCOME FOR IMPARTING EDUCATION THROUGH SCHOOL AND TRUSTEES WERE GIVEN PO WERS TO CONSTRUCT BUILDINGS AND TO LEASE THEM OUT THESE PO WERS COULD NOT BE REGARDED AS OBJECTS OF THE TRUST. SIMILARL Y IN THE CASE OF SUNBEAM ENGLISH SCHOOL SOC. V. CIT (129 ITD 299)(A LL) IT WAS 37 HELD THAT WHEN THE ASSESSEE WAS ENGAGED IN THE ACT IVITIES OF PROVIDING THE EDUCATION SINCE ITS INCEPTION THE PA YMENTS FOR CONSTRUCTION OF BUILDING WHICH WAS NOT UTILIZED FOR THE PURPOSE OTHER THAN THE EDUCATION PURPOSES THE PAYMENTS CAN NOT BE THE GROUND TO CANCEL THE REGISTRATION GRANTED U/S 12A(A ). IN VIEW OF THE ABOVE IT IS SUBMITTED THAT NEITHER THERE WAS A COMMERCIAL TRANSACTION OF TRANSFERRING MONEY TO THE TRUSTEE AND OTHERS NOR THE ACTIVITY OF ACQUIRING LAND FOR THE P URPOSE OF EXPANSION OF EDUCATION ACTIVITY WAS AN ALTERATION I N HE OBJECT CLAUSE OF THE TRUST. 3.5.1. IT IS OBSERVED BY DIT (E) IN PARA (III) OF THE ORDER THAT THE PROVISO TO SECTION 2(15) INSERTED W.E.F. 1.4.2009 T REAT THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE COMMERCE OR BUSINESS WAS NOT WITH THE OBJECT OF GENERAL PUBLIC UTILITY. 3.5.2. THE APPELLANT SUBMITS THAT THE RELIANCE PLA CED ON THIS AMENDED DEFINITION OF CHARITABLE PURPOSE IS WHOLL Y UNJUSTIFIED BECAUSE - (I) THE SAID PROVISO AS EVEN STATED BY DIT(E) IS AP PLICABLE FROM AY 2009-10 AND ONWARDS. (II) MOREOVER IT IS APPLICABLE ONLY IN CASE WHERE THE OBJECT OF THE TRUST IS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND NOT IN THE CASES OF LIKE RELIEF OF THE POOR EDUCATION MEDICAL RELIEF ETC. THE APPE LLANT TRUST IS ADMITTEDLY ESTABLISHED WITH THE OBJECT OF IMPARTING EDUCATION AND UNDISPUTEDLY CARRYING ON TH E ACTIVITIES AS AN EDUCATIONAL INSTITUTION SO THAT TH E AMENDMENT WILL NOT APPLY; (III) IN ANY VIEW OF THE MATTER THE AUDITED ANNUAL ACCOUNTS FOR AY 2008-09 CLEARLY ESTABLISH THAT THE ACTIVITIE S OF THE TRUST WERE NOT COMMERCIAL IN NATURE. THERE WAS A H UGE DEFICIT OF RS.75 18 264/- IN THIS YEAR AS PER INCOM E AND EXPENDITURE ACCOUNT AND IT HAD ALSO INCURRED EXPENS ES TOTALING TO RS.5 80 05 990/- TOWARDS THE OBJECT OF THE EDUCATION AS PER THE AUDITED ANNUAL ACCOUNT (PAGE 2 3). THE APPELLANT SUBMITS THAT IT IS AN INSULT TO THE EDUCATIONAL INSTITUTION WHICH HAS RECEIVED VARIOUS AWARDS FOR EXCELLENCE AND THE PROMINENT PERSONALITI ES FROM THE FILED OF EDUCATION AND OTHERWISE HAVE GRAC ED 38 ITS DIFFERENT OCCASIONS SUCH AS SILVER JUBILEE FUNC TION BY THE THEN HIS EXCELLENCY HON. PRESIDENT OF INDIA D R. S.RADHAKRISHNAN. (IV) IT HAS BEEN HELD IN THE CASE OF M.P.MADHYAM V. JT. CIT (89 TTJ 770) (IND) THAT WHERE THE PREDOMINANT OBJEC T IS TO CARRY OUT THE CHARITABLE PURPOSE AND NOT TO EARN PROFIT IT WOULD NOT LOSE ITS CHARITABLE CHARACTER MERELY B ECAUSE SOME PROFIT ARISES FROM THE ACTIVITY CIT HAVING F AILED TO SPECIFY AS TO HOW PROFIT-MAKING WAS PREDOMINANT ACTIVITY OF ASSESSEE INSTEAD OF CARRYING OUT CHARIT ABLE PURPOSE WAS NOT JUSTIFIED IN CANCELING REGISTRATIO N UNDER S.12A. SIMILARLY IT WAS HELD IN THE CASE OF JYOTI PRABHA SOC. (87 ITD 126) (DEL) THAT HAVING UTILIZED THE WHOLE INCOME FOR EDUCATIONAL PURPOSES AS PER ITS OBJECTS WITHOUT HAVING ANY PROFIT MOTIVE IS ENTITL ED TO HOLD REGISTRATION. 3.6.1. LASTLY THE DIT (E) HAS CANCELLED REGISTRAT ION W.E.F. 21.3.1990 WHICH IS WHOLLY ILLEGAL UNLAWFUL AND UNJ UST. IT IS SURPRISING THAT DIT (E) BY RELYING UPON THE ASSESS MENT FOR AY 2008-09 MADE BY AO CANCELLED THE REGISTRATION FROM THE DATE OF GRANT THOUGH THERE WAS NO EVIDENCE ON RECORD TO SH OW THAT THE ACTIVITIES CARRIED OUT IN THE PAST WERE NON-GENUINE OR IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. THE DIT (E) HAS NOT BROUGHT ON RECORD EVEN A SINGLE INSTANCE RELATING T O THE PAST YEARS SO AS TO CANCEL REGISTRATION FROM THAT DATE. IT IS SURPRISING THAT THE APPELLANT TRUST CARRYING ON EDUCATION ACTI VITIES FOR PAST MANY YEARS AND FOR THREE GENERATIONS HAS BEEN TREAT ED AS NON- GENUINE BY DIT (E) FROM ITS INCEPTION. THIS ACTION ON PART OF DIT (E) CLEARLY DEMONSTRATES NON-APPLICATION OF MIND AN D BIAS. 6.2. ON THE OTHER HAND THE LD. D R HAD V EHEMENTLY ARGUED THAT AS THE ACTIVITIES OF THE ASSESSEE WERE NOT ONL Y NON-GENUINE IN NATURE BUT ALSO OUTSIDE THE OBJECTS OF THE TRUST AN D FOR THE DETAILED REASONS RECORDED IN HIS FINDINGS THE DIT (E) CANCE LLED THE REGISTRATION EARLIER GRANTED TO THE ASSESSEE TRUST. IT WAS THE REFORE PLEADED THAT THE STAND OF THE DIT(E) REQUIRES TO BE SUSTAINED. 39 7. WE HAVE CAREFULLY CONSIDERED THE SUB MISSIONS OF THE LD. AR AS WELL AS THE REVENUE. WE HAVE ALSO PERUSED TH E RELEVANT RECORDS CASE LAWS RELIED ON BY RIVAL PARTIES AND ALSO THE VOLUMINOUS PAPER BOOK FURNISHED BY THE LD. A R DURING THE COUR SE OF HEARING. 7.1. THE ORIGIN OF THE ISSUE BEING THAT THE ASSESSMENT IN THE CASE OF THE ASSESSEE TRUST WAS CONCLUDED BY THE AO FOR THE AY 2008- 09 IN REJECTING THE EXEMPTION ALLOWED U/S 11 AND 12 OF THE ACT FOR THE REASONS DETAILED BY THE AO IN HIS IMPUGNED ORDER. O N BEING APPROACHED THE CIT(A) WITH AN APPEAL THE ASSESSEE TRUSTS PLEA FOR RESTORATION OF THE EXEMPTION UNDER THE SAID SECTION S OF THE ACT WAS ULTIMATELY ACCEDED TO BY THE CIT (A)S ORDER DT.24. 1.2011. IN THE MEANWHILE THE DIT (E) SLAPPED A SHOW-CAUSE NOTICE DT.10.2.2011 ON THE ASSESSEE TRUST TO SHOW-CAUSE AS TO WHY ITS REGI STRATION GRANTED EARLIER SHOULD NOT BE CANCELLED AND SO ON AND SO FO RTH. AS ALREADY NARRATED SUPRA THE DIT (E) FOR THE DETAILED REASO NS RECORDED IN HIS IMPUGNED ORDER UNDER CHALLENGE CANCELLED THE REGIS TRATION EARLIER GRANTED TO THE ASSESSEE W.E.F. 21.3.1990. 7.2. THE CRUXES OF THE ISSUES WHICH PROMPTED THE DIT (E) TO RESORT TO CANCEL THE REGISTRATION CAN AT BEST BE NARROWED DOWN TO THE FOLLOWING REASONS: 40 (1) THE ACTIVITIES OF THE TRUST WERE NOT ONLY NON-G ENUINE IN NATURE BUT ALSO SOME OF THE ACTIVITIES WERE OUTSIDE THE OB JECTS OF THE TRUST; (2) THE TRANSACTION OF COMMERCIAL NATURE BY WAY OF TRANSFERRING RS.4.50 CRORES TO SHRI MUKTAK KAPADIA AND HIS SONS WHO IN TURN PAID TO SMT. SONALBEN JAKASANIA TOWARDS AGREEM ENT TO SELL OF THE AGRICULTURAL LAND; (3) THE TRUST WAS HAVING THE ACTIVITIES OF COMMERCI AL NATURE WHICH WAS HIT BY THE PROVISO TO S.2(15) INSERTED BY FINANCE ACT 2008 W.E.F. 1.4.2009 AY 2009-10; AND LASTLY (4) S. 12AA INSERTED BY FINANCE ACT (NO.2) OF 1996 W.E.F. 1.4.1997 EMPOWERS THE COMMISSIONER TO EXAMINE THE OBJECTS OF THE TRUST W. R. TO THE DEFINITION OF CH ARITABLE PURPOSE ALONG WITH NEWLY INSERTED PROVISO TO S. 2 (15). THE ISSUES ARE DEALT WITH CHRONOLOGICALLY IN THE FOLLOWING MANNER: (1). THE ACTIVITIES OF THE TRUST WERE NOT GENUINE I N NATURE : IT IS A WELL KNOWN FACT THAT THE ASSESSEE TRUST IS ONE OF THE PIONEERS IN THE CITY IN IMPARTING EDUCATION TO THE NEEDY (PUBLIC) BY RUNNING A CHUNK OF EDUCATIONAL INSTITUTIONS FOR DECADES. IT WAS THE ALLEGATION OF THE DIT (E) THAT THE ACTIVITIES O F THE ASSESSEE BY WAY OF TAKING DONATIONS FROM THE STUDENTS INDULGING IN TRANSACTION OF COMMERCIAL NATURE WITHIN THE FAMILY GROUP WHICH AC CORDING TO THE DIT (E) WERE THE VIOLATION OF S.13(1)(C) OF THE ACT. INCIDENTALLY A SIMILAR ISSUE IN THE ASSESSEES OWN CASE HAS ALREADY BEEN EXHAUSTIVELY DELIBERATED UPON BY T HIS BENCH IN THE REVENUES APPEAL (SUPRA) WHEREIN IT HAS BEEN OBSERV ED THAT THE 41 ACTIVITIES OF THE ASSESSEE TRUST WERE WITHIN THE PA RAMETERS OF THE OBJECTS OF THE TRUST AND THUS WE ARE OF THE FIRM VIEW THAT THE ALLEGATION OF THE DIT (E) WAS WITHOUT ANY BASIS WHI CH DESERVES TO THE REJECTED. THE FINDINGS HANDED DOWN IN THE REVENUE S APPEAL REFERRED ABOVE HOLDS GOOD FOR THIS ISSUE ALSO. THEREFORE TH E ACTIVITIES OF THE TRUST ARE GENUINE. (2) TRANSACTION OF COMMERCIAL NATURE BY WAY OF TRA NSFERRING OF RS.4.5 CRORES TO SHRI MUTAK KAPADIA ETC. : INCIDENTALLY THIS ISSUE ALSO DREW O UR ATTENTION WHILE DEALING WITH THE REVENUES APPEAL (SUPRA). FOR APPRECIATIO N OF FACTS OF COURSE AT THE COST OF REPETITION WE OBSERVE THAT IN RESPECT OF THE PAYMENT MADE BY THE TRUSTEES TO THE VENDOR IT WAS EXPLAINED THAT THE FUNDS PROVIDED BY THE TRUST HAS BEEN PAID THROUGH I TS TRUSTEES FOR THE REASONS RECORDED SUPRA AND THAT THE BANAKHAT CLEARL Y INDICATES THAT THE TRANSACTION WAS MADE FOR AND ON BEHALF OF THE A SSESSEE TRUST ONLY AND NOT FOR THE PERSONAL BENEFIT OF ANY OF THE TRUS TEES. THE PAYMENT MADE TOWARDS PURCHASE OF LAND WAS SHOWN BY THE ASSE SSEE IN ITS BOOKS OF ACCOUNT UNDER THE HEAD ADVANCE TOWARDS LA ND (ANNEXURE L TO THE AUDITED ANNUAL A/C) AND THE MANAGING TRUSTEE HAD NOT CLAIMED ANYWHERE IN HIS BOOKS OF ACCOUNT THAT THE SAID PAYM ENTS WERE TOWARDS PURCHASE OF LAND. TO TOWERING ALL NEITHER THE MANAGING TRUSTEE NOR ANY OF HIS RELATIVES FOR THAT MATTER HA VE CLAIMED THAT THE 42 SAID PURCHASE WAS MADE ON BEHALF OF THEM OR FOR THE IR OWN BENEFITS. WE HAVE ALSO PERUSED THE CONFIRMATION OF ACCOUNTS F URNISHED BY SMT. SONALBEN J JAKASANIA PLACE [P 66 OF PAPER BOOK ]. THERE WERE ALSO NO DOCUMENTARY EVIDENCES TO ATTRIBUTE THAT THE 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 EXHIBITS THE EXPEDIENCY PREVAIL ED AT THAT RELEVANT TIME. MOREOVER THE UTILIZATION OF THE TR UST FUND WAS NOT FOR THE PURCHASE OF AGRICULTURAL LAND AS AN INVESTMENT BUT IT WAS A GATE- WAY TO SET UP AN EDUCATIONAL INSTITUTION IN THAT LA ND. IN THIS CONNECTION WE WOULD LIKE TO RECALL THE RULING OF T HE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. KSHATRIYA GIRLS S CHOOLS MANAGING BOARD 245 ITR 170 (MAD) WHEREIN IT HAS BEEN OBSERVE D: THE OBJECTS OF THE ASSESSEE-TRUST MAKE IT CLEAR TH AT THE ASSESSEE-TRUST WAS ESTABLISHED TO UNDERTAKE TO RUN AND IMPROVE THE KSHATRIYA SCHOOLS AND TO UPGRADE THE SCHOOLS BE LONGING TO THE BOARD THE TRUSTEES HAVE BEEN GIVEN POWER TO CO NSTRUCT BUILDINGS AND TO LEASE OUT THE PROPERTIES. THOUGH T HE POWERS GIVEN TO THE TRUSTEES ARE FOUND IN THE OBJECT CLAUS ES A FAIR READING OF THE OBJECTS CLAUSE WOULD SHOW THAT THEY ARE MERE POWERS CONFERRED ON THE TRUSTEES AND THEY CANNOT BE REGARDED AS OBJECTS OF THE TRUST. THE APEX COURT IN ADITANAR EDUCATIONAL INSTITUTION'S CASE [1997] 224 ITR 310 HELD THAT A DISTINCTION/DIFFERENCE SHOULD BE MADE BETWEEN THE C ORPUS OBJECTS AND POWERS OF THE TRUSTEES. WHEN THE DISTIN CTION BETWEEN THE OBJECTS AND POWERS ARE KEPT IN MIND CL AUSES (C) TO (E) ARE ONLY POWERS OF THE TRUSTEES WHICH IS MADE E XPLICIT BY CLAUSE (F). THAT APART CLAUSE 3(G) OF THE TRUST DE ED ALSO MAKES IT CLEAR THAT THE INCOME FROM THE PROPERTIES SHOULD BE UTILIZED TO 43 IMPLEMENT THE OBJECTS MENTIONED IN CLAUSES 3(A) AND 3(B). THEREFORE WE ARE OF THE VIEW THE OBJECT OF THE TR UST IS EDUCATION AND IT IS NOT TO MAKE PROFIT. AS HELD BY THE SUPREM E COURT THE ACID TEST IS WHETHER THE OBJECT IS TO MAKE PROFIT. BUT IN CONSTRUING THE OBJECTS ONE HAS TO WEED OUT THE POW ERS OF THE TRUSTEES AND WHEN THE OBJECTS OF THE ASSESSEE ARE S EEN WE ARE OF THE OPINION; THE ASSESSEE-TRUST HAS BEEN FOUNDED SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR EARNING PROFIT. WITH REGARD TO THE DIT (E)S AL LEGATION THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TRUST TO REPORT THE TRANSACTION IN FORM NO.10B WE WOULD LIKE TO DRAW THE ATTENTION OF THE REVENUE THAT THERE WAS NO SUCH FAILURE SINCE PART II OF ANNEXURE IN THE SAID FORM REQUIRES REPORTING OF APPLICATION OR USE OF INCOME OR PROPERTY FOR THE BENEFITS OF ITS TRUSTEES. HOWEVER IN THE CASE UND ER CONSIDERATION NEITHER THE INCOME NOR THE PROPERTY OF THE ASSESSEE TRUST WAS UTILIZED FOR THE BENEFITS OF THE TRUSTEES; THERE WAS NO OCCA SION FOR THE ASSESSEE TRUST TO FURNISH SUCH A TRANSACTION IN FOR M NO.10B. FURTHER THERE WAS NO CASE OF ANY ALTERATION OF OBJECT OF TH E TRUST AS THE PURCHASE OF AGRICULTURAL LAND AND ROUTING THROUGH O F THE PAYMENTS TO THE VENDOR WAS DUE TO EXPEDIENCY. THE OBJECT OF THE TRUST HAS NOT ANYWAY BEEN DERAILED AS ALLEGED BY THE DIT (E) WHIL E MAKING EXPANSION OF ITS EDUCATIONAL ACTIVITIES TO RUN ITS SCHOOLS AT A NEW PLACE. WE THEREFORE DO NOT FIND ANY INFIRMITY IN T HE TRANSACTION AS ALLEGED BY THE DIT (E). 44 (3) THE TRUST WAS HAVING ACTIVITIES OF COMMERCIAL NATURE WHICH IS HIT BY THEPROVISO TO S.2(15) OF THE ACT: BRUSHING ASIDE THE ASSESSEES GENUI NE CLAIM THAT THE INSERTED PROVISO HAS COME INTO EFFECT ONLY FROM 1.4 .2009 I.E. FROM THE AY 2009-10 AND ONWARDS WE WOULD LIKE TO RECALL THE AMENDED PROVISIONS OF S.2 (15) OF THE ACT WHICH READS AS UN DER: CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR E DUCATION MEDICAL RELIEF [PRESERVATION OF ENVIRONMENT (INCLUD ING WATERSHEDS FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF A ARTISTIC OR HIS TORIC INTEREST]AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PU RPOSE IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NAT URE OF TRADE COMMERCE OR BUSINESS OR ANY ACTIVITY OF REN DERING ANY SERVICE IN RELATION TO ANY TRADE COMMERCE OR B USINESS FOR A CESS OR FEES OR ANY OTHER CONSIDERATION IRRE SPECTIVE OF THE NATURE OF USE OF APPLICATION OR RETENTION OF T HE INCOME FROM SUCH ACTIVITY. ON A CAREFUL READING IT MAKES IT CRY STAL CLEAR THAT THE AMENDED PROVISION OF S.2(15) OF THE ACT WILL COME I NTO FORE ONLY THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY SHALL NOT BE A CHARITABLE PURPOSE IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE COMMERCE OR BUSINE SS. IN THE CASE UNDER CONSIDERATION THE ASSESSEE TRUST DID NO T IN ANYWAY INVOLVE ITSELF IN INDULGING IN CARRYING ON OF ANY A CTIVITY IN THE NATURE TO ANY TRADE COMMERCE OR BUSINESS. THEREFORE THE QUE STION OF BRINGING 45 THE ASSESSEE TRUSTS CASE UNDER THE AMBIT OF THE AM ENDED PROVISIONS OF S. 2(15) OF THE ACT DOESNT ARISE. AT THIS JUNCT URE IT WOULD BE MORE APPROPRIATE TO QUOTE THE RULING OF THE HONBLE MAD RAS HIGH COURT CITED SUPRA - OF COURSE AT THE COST OF REPETITION - WHEREIN IT HAS BEEN HELD THAT THEREFORE WE ARE OF THE VIEW THE OBJECT OF THE TRUST IS EDUCATION AND IT IS NOT TO MAKE PROFIT. AS HELD BY THE SUPREME COURT THE ACID TEST IS WHETHER THE OBJECT I S TO MAKE PROFIT. BUT IN CONSTRUING THE OBJECTS ONE HAS TO WEED OUT THE POWERS OF THE TRUSTEES AND WHEN THE OBJECTS OF THE ASSESSEE ARE SEEN WE ARE OF THE OPINION; THE ASSESSEE-TRUST HAS BEEN FOUNDED SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR EARNING PROFIT. AS ALREADY MADE IT CLEAR THAT THE ASSESSEE TRUST H AD IN FACT INDULGED IN PURCHASE OF AGRICULTURAL LAND WITH A SO LE OBJECT OF CONSTRUCTING AN EDUCATIONAL INSTITUTION TO COMMENSU RATE WITH ITS EDUCATIONAL ACTIVITY. THE AUDITED ANNUAL ACCOUNTS FOR THE AY 2008-09 HAVE CLEARLY ESTABLISHED THAT THE ACTIVITIES OF THE TRUST WERE NOT COMMERCIAL IN NATURE. AS COULD BE SEEN FROM ITS AC COUNTS THAT THERE WAS A DEFICIT OF RS.75.18 LAKHS IN THAT YEAR AS PER I & E ACCOUNT AND THAT IT HAD INCURRED EXPENSES AGGREGATING TO RS.5.8 0 CRORES TOWARDS THE OBJECT OF THE EDUCATIONAL ACTIVITIES. 46 IN VIEW OF THE ABOVE FACTS WE ARE OF THE CONSIDERE D VIEW THAT THE ASSESSEE TRUSTS REGISTRATION COULD NOT HAVE BEEN C ANCELED ON A FLIMSY GROUND. (4) S. 12AA INSERTED BY FINANCE ACT (NO.2) OF 199 6 W.E.F. 1.4.1997 EMPOWERS THE COMMISSIONER TO EXAMINE THE OB JECTS OF THE TRUST W. R. TO THE DEFINITION OF CHARITABLE PURP OSE ALONG WITH NEWLY INSERTED PROVISO TO S. 2 (15) . WE HAVE DULY CONSIDERED THE SUBMISS ION OF THE ASSESSEE TRUST THAT THE DIT(E) HAD CANCELLED THE REGISTRATIO N OF THE TRUST BASICALLY FOR ALLEGED VIOLATION OF S.11(1)(D) AND S .13(1)(C) OF THE ACT WHICH IN VIEW OF THE SETTLED LEGAL POSITION WAS B EYOND THE PURVIEW OF THE POWERS OF DIT (E) U/S. 12AA(3) OF THE ACT. IT WAS FURTHER ADVANCED THAT IN OTHER WORDS THE ALLEGED VIOLATION OF THE SAID PROVISIONS AS PER DIT (E) COULD NOT BE A GROUND FOR CANCELLATION OR REGISTRATION OF THE TRUST U/S. 12AA(3) OF THE ACT. AS RIGHTLY ARGUED BY THE ASSESSEE TRUST THE ALLEGED VIOLATION OF THE SA ID PROVISIONS COULD BE ENQUIRED INTO BY THE AO WHILE EXAMINING THE CLAI M OF EXEMPTION U/S 11 AND 12 OF THE ACT. WE SHALL NOW ANALYZE THE LEGAL VIEWS ON THIS PART ICULAR ISSUE AS UNDER: (I) M/S.VIDARBHA CRICKET ASSOCIATION NAGPUR V. CIT ITA NO.3/NAG/10 DT.30.5.2011 : 47 BRIEFLY THE ISSUE BEFORE THE HONBLE BENCH WAS T HE INVOKING OF SECTION 12AA(3) BY THE COMMISSIONER TO WITHDRAW REG ISTRATION GRANTED TO THE ASSESSEE U/S 12AA OF THE ACT. AFTER ANALYZING THE ISSUE IN DEPTH TAKING INTO ACCOUNT THE RIVAL SUBMI SSIONS AND ALSO EXTENSIVELY QUOTING THE FINDINGS OF (I) THE CHANDIG ARH BENCH OF THE TRIBUNAL IN THE CASE OF H.P.GOVERNMENT ENERGY DEVEL OPMENT AGENCY V. CIT [46 DTR (CHD)(TRIB) 126] AND (II) CHATURVEDI HAR PRASAD EDUCATIONAL SOCIETY V. CIT [46 DTR (LUCK) (TRIB)121 ] IT WAS OBSERVED BY THE BENCH THAT: 8. ON AS PERUSAL OF THE AFORESAID IT IS CLEARLY E STABLISHED THAT AS PER THE COMMISSIONER THE ACTIVITIES OF THE ASSESSEE DO NOT FALL WITHIN THE MEANING OF CHARITABLE PURPO SE AS PER PROVISO TO SECTION 2(15) INSERTED WITH EFFECT FROM 1.4.2009. QUITE CLEARLY AS WE HAVE OBSERVED EARLIER SUCH AN OBJECTION CANNOT BE THE BASIS TO INVOKE SECTION 12AA(3) SO AS TO CANCEL THE REGISTRATION ALREADY GRANTED TO THE ASSE SSEE UNDER SECTION 12A OF THE ACT. IN OUR CONSIDERED OP INION REGISTRATION ALREADY GRANTED TO THE ASSESSEE COULD NOT HAVE BEEN RE-VISITED BY THE COMMISSIONER ON THE BASIS OF THE REASONING AFORESAID SINCE HIS POWER TO CANCEL REGIS TRATION UNDER SECTION 12AA(3) WAS CONFINED TO THE EXAMINATI ON AS TO WHETHER THE ACTIVITIES OF THE ASSESSEE SOCIETY/A SSOCIATION ARE GENUINE OR THAT THE SAME ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE STATED OBJECTS. IN THE LIGHT O F THE DISCUSSION EMERGING FROM THE ORDER OF THE COMMISSIO NER IN OUR CONSIDERED OPINION ACTION TAKEN BY THE COMMISS IONER DOES NOT FALL WITHIN THE PARAMETERS OF SECTION 12AA (3) OF THE ACT AND THEREFORE THE IMPUGNED ORDER IS BAD IN LA W. 9. AT THIS STAGE WE MAY HASTEN TO ADD THAT WE ARE NOT COMMENTING ON THE MERITS OF THE ISSUE AS TO WHETHER THE ACTIVITIES OF THE ASSESSEE FALL WITHIN THE MEANING OF EXPRESSION CHARITABLE PURPOSE PER SECTION 2(15) A S 48 AMENDED WITH EFFECT FROM 1.4.2009. THE ONLY POINT DECIDED IN THE APPEAL IS TO THE EFFECT THAT IT WAS NOT WITHIN THE SCOPE AND AMBIT OF SECTION 12AA(3) FOR THE COMMISSIONER T O HAVE EXAMINED THE APPLICABILITY OF THE AMENDED SECTION 2 (15) FOR THE PURPOSES OF INVOKING HIS POWERS OF CANCELLATION PROVIDED IN SECTION 12AA(3) OF THE ACT. AT THIS S TAGE WE MAY ALSO STATE THAT THE ISSUES RAISED BY THE COMMIS SIONER IN THE IMPUGNED ORDER ARE NOT BEYOND THE POWERS OF THE REVENUE TO EXAMINE SO HOWEVER THE SAME CAN ONLY B E EXAMINED IN THE APPROPRIATE PROCEEDINGS SUCH AS ASSESSMENT PROCEEDINGS IN THE PRESENT CASE. OUR DE CISION IS RESTING ONLY ON THE FOUNDATION THAT THE IMPUGNED ORDER PASSED BY THE COMMISSIONER IS NOT PERMISSIBLE IN VI EW OF THE LIMITED POWERS AVAILABLE TO HIM UNDER SECTION 1 2AA(3) OF THE ACT (2) AHMEDABAD URBAN DEVELOPMENT AUTHORITY V. DI T (E) ITA NO. 754/AHD/2010 DT; 21.5.2010 (FOR THE AY 20 09-10): AN IDENTICAL ISSUE TO THAT OF T HE PRESENT ONE CAME UP FOR CONSIDERATION OF THE EARLIER BENCH. THE ISSUE BEFO RE THE BENCH IN BRIEF WAS THAT THE ASSESSEE WAS AN AUTONOMOUS BODY SET UP AND GOVERNED BY THE PROVISIONS OF THE GUJARAT TOWN PLAN NING AND URBAN DEVELOPMENT ACT 1976 (GTP ACT); THAT THE ASSESSEE W AS REGISTERED U/S 12AA OF THE ACT W.E.F 1.4.2002 VIDE ORDER DATED 23.10.2003 OF THE DIT (E). THE DIT (E) VIDE HIS ORDER U/S 12AA(3) OF THE ACT DATED 15.2.2010 CANCELLED THE REGISTRATION U/S 12AA W.E.F . 1.4.2002. AFTER CONSIDERATION OF THE SUBMISSIONS OF EITHER PARTY A NALYZING THE PROVISIONS OF S.12AA(3) OF THE ACT AND ALSO THE PR OVISIONS OF S.79 OF THE GTP ACT THE BENCH HAD RECORDED ITS FINDINGS TH US: 49 7. IN VIEW OF THE ABOVE WE ARE SATISFIED THAT NO NE OF THE CONDITIONS AS PRESCRIBED UNDER SECTION 12AA(3) IS S ATISFIED IN THE CASE OF THE ASSESSEE SO AS TO CANCEL THE REG ISTRATION GRANTED UNDER SECTION 12AA. WE THEREFORE QUASH T HE ORDER OF THE DIT (EXEMPTION) PASSED UNDER SECTION 12AA(3) AND RESTORE THE ORDER OF THE REGISTRATION PASSED BY THE DIT (EXEMPTION) UNDER SECTION 12AA(1) DATED 23.10.2003. (3) YET ANOTHER FINDING IN THE CASE OF AJIT EDUCATION TRUST V. CIT REPORTED IN (2010) 46 DTR (AHD)(TRIB) 482 THE EARLIER BENCH HAS OBSERVED THUS: (PARAS 11 & 14) THE OBJECTS HAVE EXPLICITLY STATE D THAT THE TRUST WAS ESTABLISHED FOR EDUCATIONAL PURPOSES. NO WHERE IN THE ORDER OF THE CIT THERE WAS AN ALLEGATION THAT T HE TRUST WAS NOT RUNNING AN EDUCATIONAL INSTITUTION. THEREFO RE ONE HAS TO EXAMINE THE CORRECTNESS OF THE CANCELLATION OF THE REGISTRATION IN TERMS OF THE LANGUAGE OF S. 12AA AS PRESCRIBED IN SUB.S. (1) AND PARTICULARLY IN CLS. ( A) AND (B) OF THE SECTION. SO FAR AS THE RUNNING OF THE EDUCATIO NAL INSTITUTION IS CONCERNED EVEN THE AO WHILE PASSING ASSESSMENT ORDERS FOR SEVERAL YEARS HAS HELD THAT THE TRUST IS ENTITLED FOR EXEMPTION UNDER S.10(23C)(IIIAD). IF THE REVENUE OFFICER HIMSELF IS QUALIFYING THIS TRUST AS AN EDUCATIONAL INSTITUTION AND THEN GRANTING THE SAID EXEMPTION THEN AS A RESULT IT WAS NOT JUSTIFIABLE ON THE PART OF THE CIT TO HOLD SUCH A CONFLICTING VIEW WHICH CA N BE SAID TO BE ALTOGETHER CONTRARY TO THE FACTS OF THE CASE. THE ALLEGATION WAS THAT THE BOOKS OF ACCOUNT WERE NOT F OUND IN A PROPER MANNER. BECAUSE OF THE ABSENCE OF THE BOOKS OF ACCOUNT IT WAS ALSO DOUBTED WHETHER THE EDUCATIONA L FEES RECEIVED FROM THE STUDENTS WAS EVER APPLIED FOR THE PURPOSE OF EDUCATION. IN THE PRESENT CASE THE TRUST BEING AN EDUCATIONAL INSTITUTION AND UNDISPUTEDLY IMPARTING EDUCATION THEREFORE IT WAS NOT JUSTIFIABLE ON THE PART OF THE CIT TO DENY THE REGISTRATION. NEVERTHELESS THE AP PLICATION OF INCOME AND THE UTILIZATION OF FUNDS IS ALWAYS SUBJE CT TO SCRUTINY BY THE AO WHILE ASSESSING THE INCOME OF TH E TRUST. IT IS THEREFORE CLARIFIED THAT MERELY BY GRANTING A 50 REGISTRATION UNDER S.12A/12AA A TRUST IPSO FACTO IS NOT ENTITLED FOR THE EXEMPTIONS PRESCRIBED UNDER SS.11 AND 12. NEITHER DE JURE NOR DE FACTO I.E. NEITHER IN PRINC IPLE NOR IN PRACTICE A TRUST CAN GET EXEMPTION UNDER S. 12AA ( IN THE PAST S.12A). IN THE LIGHT OF ABOVE DISCUSSION THE CANCELLATION OF REGISTRATION ON BOTH THE COUNTS I .E. ON MERITS AS ALSO ON THE LEGALITY OF JURISDICTION WAS NOT IN ACCORDANCE WITH LAW-MAHARASHTRA ACADEMY OF ENGINEER ING & EDUCATIONAL RESEARCH (MAEER) V. CIT (2010) 36 DTR (PUNE)(TRI) 321 RELIED ON. 7.3. IT IS PERTINENT TO NOTE THAT THE W HOLE FINDING OF THE LD. DIT(E) ARE BASED ON THE FINDINGS GIVEN IN THE ASSES SMENT ORDER FOR THE ASSESSMENT YEAR 2008-09 BUT SUBSEQUENTLY THE A SSESSMENT ORDER HAS BEEN SET ASIDE AND THE ADDITIONS MADE T HEREIN WERE DELETED BY THE LD.CIT(A) VIDE ORDER DT. 24/02/2011 WHICH IS NOW CONFIRMED BY THE TRIBUNAL IN ITA NO.1321/A/2011 HER EIN ABOVE. HOWEVER THE LD.DIT(E) HAD CANCELLED THE REGISTRATI ON VIDE ORDER DT. 17/03/2011. SINCE ON THE DAY OF PASSING THE ORDER O N 17/03/2011 NOTHING SURVIVED IN FAVOUR OF THE REVENUE BECAUSE T HE LD. CIT(A) HAD DELETED ALL THE ADDITIONS ON MERITS BY HIS ORDE R ON 24/02/2011 THERE WAS NO BASIS LEFT FOR THE LD.DIT(E) TO CANCEL THE REGISTRATION GRANTED TO THE ASSESSEE. 7.4. FURTHER SEC. 12AA HAS BEEN INSERTE D INTO THE INCOME TAX ACT W.E.F 01/04/1997. PRIOR TO THAT REGISTRATION W ERE GRANTED U/S. 51 12A(A) OF THE ACT. SECTION 12AA(3) PROVIDES FOR CAN CELATION OF REGISTRATION GRANTED UNDER CLAUSE (B) OF SUB-SECTIO N (1) OF SECTION 12AA. SECTION 12AA(3) HAS BEEN AMENDED BY FINANCE A CT 2010 W.E.F 01/06/2010 AND FOLLOWING HAVE BEEN ADDED IN THIS PR OVISION:- [ 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 19 96)]]. THE ASSESSEE HAS BEEN GRANTED REGISTRATION W.E.F 21/03/1990 AND AS SUCH THE AMENDED PROVISION IN SECTION 12AA(3) CANNOT BE APPL IED AGAINST THE ASSESSEE RETROSPECTIVELY PARTICULARLY PRIOR TO AMEN DMENT DATED 01/06/2010. HON. DELHI COURT IN THE CASE OF DIT(E) V/S MOOL CHAND KHAIRATI RAM TRUST 339 ITR 622 HELD AS UNDER:- IN SUB-SECTION (1) CLAUSE (B) AND SUB-SECTION (3) OF SECTION 12AA OF THE INCOME-TAX ACT 1961 CANCELLATION OF REGISTRATION W AS PROVIDED WHERE THE REGISTRATION WAS GRANTED UNDER CLAUSE (B) OF SUB-S ECTION (1). FURTHER CANCELATION UNDER SUB-SECTION (3) WAS ALSO PROVIDED WHERE THE R EGISTRATION WAS OBTAINED AT ANY TIME UNDER SECTION 12A (WHETHER UNDER CLAUSE (A) OR CLAUSE (AA) OF SUB-SECTION (1) OF SECTION 12A). BUT THIS POWER OF CANCELLATION OF REG ISTRATION UNDER SECTION 12A CAME TO BE INCORPORATED BY WAY OF AMENDMENT INTRODUCED B Y THE FINANCE ACT 2010 WITH EFFECT FROM JUNE 1 2010. NOW WITH EFFECT FROM JUNE 1 2010 THE POWER VESTS WITH THE COMMISSIONER TO CANCEL THE REGISTRATION GRANTED UNDER ANY OF THE CLAUSES OF SUB- SECTION(1) OF SECTION 12A. 52 THE ASSESSEE-TRUST OBTAINED REGISTRATION I N DECEMBER 1974. BASED ON THIS THE ASSESSEE GOT EXEMPTION OF INCOME-TAX IN THE ASSESSM ENTS UNDER SECTION 143(3) FOR THE ASSESSMENT YEARS 1996-97 TO 2005-06. THE DIRECT OR OF INCOME-TAX CANCELLED THE REGISTRATION UNDER SECTION 12AA(3) WITH EFFECT FROM ASSESSMENT YEAR 2002-03 BY HIS ORDER DATED JUNE 30 2009. THE TRIBUNAL SET ASI DE THE ORDER OF CANCELLATION. ON APPEAL TO THE HIGH COURT : HELD DISMISSING THE APPEAL THAT THE CANC ELLATION OF REGISTRATION WAS NOT VALID. 7.5. IN OVERALL CONSIDERATION OF ALL THE FACTS AN D CIRCUMSTANCES OF THE ISSUE AND ALSO IN CONFORMITY WITH THE JUDICI AL PRONOUNCEMENTS (SUPRA) AND FROM THE ABOVE DISCUSSIONS WE ARE OF THE CONSIDERED VIEW THAT THE DIT (E) WAS NOT JUSTIFIED IN RESORTIN G TO CANCEL THE REGISTRATION GRANTED TO THE ASSESSEE TRUST EARLIER BY THE CIT GUJARAT-I AHMEDABAD VIDE HIS ORDER DATED 21.3.1990 W.E.F. 21/ 3/1990. THEREFORE THE IMPUGNED ORDER IS SET ASIDE AND QUASH ED. THE ORDER GRANTING REGISTRATION IN FAVOUR OF THE ASSESSEE IS RESTORED THEREBY ALLOWING THE APPEAL OF THE ASSESSEE IN ITS FAVOUR. 53 8. IN THE RESULT : (I) THE REVENUES APPEAL IS DISMISSED; & (II) THE ASSESSEE TRUSTS APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT TODAY ON 03-02-2012 SD/- SD/- ( BHAVNESH SAINI ) JUDICIAL MEMBER ( A MOHAN ALANKAMONY ) ACCOUNTANT MEMBER DATE : 03-02-2012 COPY OF THE ORDER FORWARDED TO: 1. SHRI N H KAPADIA EDUCATION TRUST OPP. TIRTHNAGA R VIBHAG-I MEMNAGAR AHMEDABAD 2. THE DIRECTOR OF INCOME-TAX (EXEMPTION) AHMEDABAD 3. CIT CONCERNED 4. CIT(A) 5. DR ITAT AHMEDABAD BENCH AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD