M/s Viswabharathi Educational Society, Gudivada v. The CIT, Vijayawada, Vijayawada

ITA 675/VIZ/2013 | misc
Pronouncement Date: 29-04-2015 | Result: Allowed

Appeal Details

RSA Number 67525314 RSA 2013
Assessee PAN AABFV8288J
Bench Visakhapatnam
Appeal Number ITA 675/VIZ/2013
Duration Of Justice 1 year(s) 5 month(s) 15 day(s)
Appellant M/s Viswabharathi Educational Society, Gudivada
Respondent The CIT, Vijayawada, Vijayawada
Appeal Type Income Tax Appeal
Pronouncement Date 29-04-2015
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 29-04-2015
Date Of Final Hearing 24-02-2015
Next Hearing Date 24-02-2015
Assessment Year misc
Appeal Filed On 14-11-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH : VISAKHAPATNAM BEFORE SHRI J. SUDHAKAR REDDY ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY JUDICIAL MEMBER ITA NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA PAN AABFV8288J VS. COMMISSIONER OF INCOME TAX VIJAYAWADA (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. GVN. HARI ADV. FOR REVENUE : MR. LUCAS PETER DR DATE OF HEARING : 03.03.2015 DATE OF PRONOUNCEMENT : 29.04.2015 ORDER PER J. SUDHAKAR REDDY A.M . THESE ARE APPEALS BY THE ASSESSEE AND ARE DIR ECTED AGAINST THE ORDERS OF THE LD. COMMISSIONER OF INCOM E TAX VIJAYAWADA DATED 27.09.2013 REFUSING REGISTRATION U /S 12AA OF THE INCOME TAX ACT 1961 (THE ACT) AND RECOGNITION U/S 80G OF THE ACT. 2. FACTS IN BRIEF:- THE ASSESSEE M/S VISWABHARATHI EDUCATIONAL SOCIETY IS A REGISTERED SOCIETY BEARIN G REGISTRATION NO.126 OF 1997 DATED 28.05.1997 WITH THE DISTRICT REGISTRAR MACHILIPATNAM KRISHNA DISTRICT. 2.1. AS PER THE MEMORANDUM OF ASSOCIATION ITS AIM S AND OBJECTS ARE AS UNDER: 2 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. A. TO ESTABLISH AND MAINTAIN EDUCATIONAL AND OTHER ALLIED INSTITUTIONS TO IMPORT EDUCATION AT ALL STAGES FOR THE PROMOTION OF LITERATURE ARTS AND SCIENCES AND ALL OTHER SUBJECT S THAT MAY BE DECIDED FROM TIME TO TIME. B. TO ORGANIZE DISCOURSES LECTURES DEBATES ELOCU TION CONTESTS DANCES DRAMAS MUSIC PAINTING PROGRAMME S FOR THE CULTURAL ADVANCEMENT OF CHILDREN. C. TO PROVIDE ACCOMMODATION EQUIPMENT AND OTHER NE CESSITIES TO THE EDUCATIONAL INSTITUTIONS. D. TO PROMOTE UNIVERSAL BROTHERHOOD AMONG PUPILS IRRESPECTIVE OF THEIR RACE RELIGION CASTE COMMUN ITY AND SEX. E. TO INCULCATE AMONG THE MEMBERS AND PUPILS THE VI RTUES OF PATRIOTISM HONESTY LOVE OF SERVICE PERSEVERANCE DISCIPLINE SELF- CONFIDENCE A SENSE OF DEDICATION AND SIMPLE LIVING . F. TO ORGANIZE READING ROOMS TO HELP GATHER WORKIN G KNOWLEDGE AND CREATE INTEREST IN READING. G. TO ENCOURAGE GAMES SPORTS 'AND LITERACY ACTIVI TIES AND SO THAT COMPETITIONS AMONG THE PUPIL. H. TO DEVELOP 'VISWABHARATI EDUCATIONAL SOCIETY' RAJENDRANAGAR MAIN ROAD GUDIVADA IS NOW RUNNING B Y THE SOCIETY. 2.2. THE DETAILS OF EXECUTIVE BODY WERE AS UNDER: NAME OCCUPATION DESIGNATION RAMANAVARAPU SASANK DOCTOR PRESIDENT BOPPUDI INCOME TAX PRAC TITIONER VICE PRESIDENT SUBRAHMANYESWARA RAO POTLURI SRIMANNARAYANA SECRETARY & CORRESPONDENT KJAGAN MOHANA RAO RETIRED T EACHER VICE SECRETARY RAMANAVARAPU MANJULA HOUSE MAKER. TREASURER 3 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. STATED TO BE W/0 SRI RAMANAVARAPU SASANK & DAUGHTER OF SRI POTLURI SRIMANNARAYANA. PEDDU DHANUNJAYA AGRICULTURE MEMBER MURTHY A.P.CHANDRA SEKHAR RAO AGRICULTURE MEMBER 2.3. THE ASSESSEE FILED AN APPLICATION FOR REGISTR ATION U/S 12AA AND RECOGNITION U/S 80G OF THE ACT WITH THE LD .CIT VIJAYAWADA. ALONG WITH THE APPLICATION THE ASSESSE E FILED INCOME AND EXPENDITURE ACCOUNT FROM THE FINANCIAL YEARS 20 09-10 TO 2011-12. THEY ARE SCHEMATICALLY EXTRACTED AS UNDER: S.NO. DESCRIPTION/NATURE OF RECEIPT F INANCIAL YEAR 2009-10 2010-1 1 2011-12 A. INCOME: MEMBERSHIP SUBSCRIPTIONS 63 000 70 000 73 500 ACCRUED INTEREST 3 755 3 20 2 0 DONATIONS FROM PUBLIC 0 12 500 16 000 B. EXPENDITURE: SALARIES 36 000 42 00 0 45 000 TRAVELLING 10 250 12 800 13 568 RENTS 6 000 6 000 7 200 2.4. THE LD.CIT NOTES FROM THE PARTICULARS FURNISH ED THAT THE DISTRICT EDUCATION OFFICER MACHILIPATNAM KRISH NA DISTRICT IN RC 129/C4/97 DT. 24.9.1997 HAS ACCORDED PERMISSION TO THE SOCIETY FOR STARTING A SCHOOL WITH CLASSES I TO V D URING THE ACADEMIC YEAR 1997-98. THE SOCIETY HAS BEEN GRANTE D PROVISIONAL RECOGNITION VIDE ORDER OF DEO KRISHNA DISTRICT MACHILIPATNAM IN RC NO.DIS.NO.55/C1/98 DT. 17.4.199 8 FOR THE PERIOD OF FIVE YEARS FROM 1997 TO 2001-02 WITH CLAS SES I TO VII. THE DEO MACHILIPATNAM VIDE PROCEEDINGS IN RC NO.7- A/06 DT. 18.7.2002 GRANTED RECOGNITION TO ANOTHER SCHOOL VIS WABHARATHI 4 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. (E.M.) ELEMENTARY SCHOOL. THIS TEMPORARY RECOGNITI ON HAS BEEN RENEWED BY THE DEO KRISHNA MACHILIPATNAM VIDE ORD ER IN R.C.NO. 153A 5/2006 DT. 7.11.2006 FOR A PERIOD OF 10 YEARS FROM ACADEMIC YEAR 2007-08 TO 2016-17. THE SOCIETY HAS FLOATED ANOTHER SCHOOL VIZ. VISWABHARATHI E.M. HIGH SCHOOL EXTENDING CLASSES UP TO X CLASS AND TEMPORARY RECOGNITION HAS BEEN ACCORDED FOR CLASSES VI TO X UP TO THE YEAR 2000-01 BY THE REGIONAL JOINT DIRECTOR (RJD) OF SCHOOL EDUCATION KAKINADA IN PROCES.L.DIS.NO.6151B1/2000 DT. 15.9.2000. THIS RE COGNITION HAS BEEN RENEWED FOR 5 YEARS FROM 2001-02 TO 2005-0 6 BY THE PROCEEDINGS OF R.J.D. IN DIS.NO.7306/B1/2001 DT.6. 11.2001 FOR CLASSES VI TO X. THIS RENEWAL HAS BEEN FURTHER EXT ENDED FOR FIVE EYARS FROM 2006-07 TO 2010-11 VIDE PROCEEDINGS DT. 19.01.2006 OF RJD KAKINADA AND FURTHERMORE EXTENDED FOR A PER IOD OF 10 YEARS FROM 2011-12 TO 2020-21. 2.5. THE LD.CIT HAS OBSERVED FROM THE AVAILABLE PARTICULARS THAT SRI POTLURI SREEMANNARAYANA AND RAMANAVARAPU MANJULA FLOATED A PARTNERSHIP FIRM BY A NAME VISWABHARATHI VIDYANIKETAN TO RUN SCHOOL OF ENGLISH AND TELUGU MEDIUM AND ALSO TO MAINTAIN HOSTEL AND ANY OTHER BU SINESS AS THEY THINK FIT AND CARRIED ON IT WITH THE ENTITLEME NT OF INTEREST @ 12% P.A. ON THEIR CAPITAL REMUNERATION AS ALLOWED BY THE INCOME TAX PROVISIONS FOR THE BUSINESS PARTNERS ETC. W.E.F . 01.01.2003 THE FIRM ADMITTED THE DAUGHTER AND SON OF SMT.RAMAN AVARAPU MANJULA VIZ. RAMANAVARAPU SREE HARSHA (REPRESENTS HUF) AND RAMANAVARAPU PRANEETH AS PARTNERS. W.E.F 1.4.2011 ONWARDS PROFIT SHARE RATIO IS 35% 25% 20% AND 20% RESPE CTIVELY AND THEY CARRIED ON THE BUSINESS OF VISWABHARATHI VIDYA NIKETAN WITH THE ABOVE ENTITLEMENTS. 5 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. 2.6. THEREAFTER THE LD.CIT HAS OBSERVED AS FOLLOWS : (I) THOUGH THE SOCIETY WAS GRANTED PERMISSION TO START A SCHOOL SHRI POTLURI SREEMANNARAYANA SMT. RAMANAVARAPU MANJULA VIOLATED THE JUDGEMENT OF THE APEX COURT AS THEY RAN THE EDUCATIONAL INSTITUTION WITH THE PROFIT MOTIVE AND BY SUBTERFUGE CARRIED ON BUSI NESS BY FLOATING A PARTNERSHIP FIRM. (II) IT APPEARS THAT THEY HAVE OBTAINED PERMISSION TO RU N AN EDUCATIONAL INSTITUTION BY USING THE SOCIETY AS A F RONT BUT ACTUALLY IT WAS RUN AS A BUSINESS PARTNERSHIP FIRM AS EVIDENCED BY THE ACCOUNTS OF THE SOCIETY. (III)THE TRUSTEE ACQUIESCED IN OR THEY LENT THEIR N AME THUS GIVING AN IMPRESSION THAT THE SOCIETY IS NOT RUN IN THE MANNER AND METHOD IN WHICH A PUBLIC CHARITABLE INSTITUTION SHOULD BE RUN. (IV) ON QUERY FROM THE LD.CIT THE ASSESSEE REPLIED AS F OLLOWS: SCHOOL BUILDING SITES ARE HELD ON THE NAMES OF SRI P.SRIMANNARAYANA AND R.MANJULA. BUT BUILDING CONSTRUCTIONS ARE TAKEN PLACE BY THE VISWABHARATHI VIDYA NIKETAN. SCHOOL HOSTEL SITE BUILDING HELD ON THE NAME OF P.SRIMANNARAYANA AND HE IS NOT TAKEN ANY RE NT FROM THE SCHOOL OR SOCIETY. IN THE ABOVE MENTIONED SCHOOL PREMISES AND HOSTEL PREMISES TWO OWNERS ARE NOT TAKING ANY RENT. (V) THAT THE ACCOUNTS OF THE ASSESSEE ARE DIVIDED INTO TWO PARTS VIZ. PROFITABLE AND NON-PROFITABLE AND PROFI TABLE ACTIVITIES HAVE BEEN RETAINED WITH THE FIRM AND N ON- PROFITABLE ACTIVITIES HAVE BEEN TRANSFERRED TO THE SOCIETY TO GAIN BENEFIT UNDER THE GUISE OF CHARITABLE PURPOSE . 6 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. (VI) AFTER OBTAINING FIELD INFORMATION REPORT AT PARAS 14 AND 15 THE LD.CIT HAS OBSERVED AS FOLLOWS: 14. FROM THE ABOVE IT IS CLEAR THAT THE TRUSTEE USING THE SOCIETY AS A FRONT OBTAINED PERMISSION TO RUN THE SCHOOL IN VIOLATION OF THE APEX COURTS DECISION R AN EDUCATIONAL INSTITUTION AS A PROFITABLE VENTURE EN RICHED THEMSELVES WITHOUT ANY RATIONAL BASIS IMPRESSED TH E LOSS MAKING ACTIVITIES WITH THE SOCIETY RETAINING ALL THE PROFIT MAKING ACTIVITIES INCLUDING THE VERY CORE ADMISSION PROCESS WITH THE FIRM WITH AN AIM TO MA KE HUGE PROFIT THROUGH FIRM AND TRANSFERRED THE LIKE LY LOSS MAKING ACTIVITIES TO THE SOCIETY. THEIR PROFITEER ING ACTION DID NOT STOP THERE. IT RUNS DEEP INTO THE SO CALLED SOCIETY ALSO AS THEY HAVE IMMEDIATELY INC REASED THE FEES THERE. IT IS CLEAR CASE OF INTERMIXING AN D INTER LACING OF PROFIT EARNING MOTIVE AS WELL AS ACTION A T EACH AND EVERY STAGE. A THOROUGH ABUSE AND ILLEGALITY. 15. THE SATISFACTION OF THE CIT IN THE MATTER IS A STATUTORY OBLIGATION IN TERMS OF S.12AA(1)(B) OF TH E ACT. THEREFORE I AM OF THE OPINION THAT THIS IS NOT A F IT CASE FOR GRANTING REGISTRATION U/S 12AA OF THE ACT. HEN CE THE APPLICATION FOR REGISTRATION U/S 12AA IS HEREBY REJECTED. SINCE APPLICATION FOR REGISTRATION OF 12 AA IS REJECTED RECOGNITION U/S 80G DOES NOT ARISE. 3. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US O N THE FOLLOWING GROUNDS. 1. THE ORDER OF LD. CIT IS CONTRARY TO THE FACTS AND ALSO THE LAW APPLICABLE TO THE FACTS OF THE CASE. 2. (A) THE LD. CIT IS NOT JUSTIFIED IN REFUSING TO GRA NT REGISTRATION U/S.12AA OF THE INCOME TAX ACT 1961. 7 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. (B) THE LD. CIT OUGHT TO HAVE APPRECIATED THAT APPE LLANT SOCIETY FULFILLED ALL THE REQUISITE CONDITIONS FOR GRANT OF REGISTRATION U/S.12AA OF THE ACT. 3. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF APPEAL HEARING. 4. THE LD.COUNSEL FOR THE ASSESSEE MR.GVN HARI ADV OCATE SUBMITTED THAT THE OBJECTS OF THE SOCIETY WERE TO ESTABLISH AND MAINTAIN EDUCATIONAL AND OTHER ALLIED INSTITUTIONS TO IMPART EDUCATION. IT WAS SPECIFICALLY PROVIDED IN THE MEMO RANDUM OF THE SOCIETY THAT THE INCOME OR FUNDS OF THE SOCIETY SHA LL BE SOLELY UTILIZED FOR THE FURTHERANCE OF THE OBJECTS OF THE SOCIETY AND NO PART OF IT SHALL BE DISTRIBUTED AMONG THE MEMBERS O F THE SOCIETY BY WAY OF PROFIT OR DIVIDEND OR OTHERWISE. HE FURTH ER POINTED OUT THAT IT IS STIPULATED THEREIN THAT IN THE EVENT OF DISSOLUTION OF THE SOCIETY THE FUNDS AND ASSETS REMAINING AFTER THE D ISCHARGE OF ALL ITS LIABILITIES SHALL BE TRANSFERRED TO ANOTHER SOC IETY HAVING SIMILAR OBJECTS AND REGISTERED WITH THE COMMISSIONER OF INC OME TAX UNDER S.12A AND 80G OF THE ACT. THUS THE APPELLAN T SOCIETY FULFILLED ALL THE REQUISITE CONDITIONS FOR GRANT OF REGISTRATION U/S 12A OF THE ACT. FURTHER HE SUBMITTED THAT FROM TH E STAND POINT OF THE PROMOTERS THOUGH THEY HAVE INVESTED HUGE AM OUNTS IN THE INITIAL YEARS TOILED HARD TO EARN GOODWILL AND REP UTATION FOR THE INSTITUTION AND THEREAFTER SIMPLY HANDED OVER THE A CTIVITY TO THE SOCIETY WITHOUT CHARGING ANY PREMIUM. HE POINTED OU T THAT ON 1 ST APRIL 2012 THE ASSETS OF THE PARTNERSHIP FIRM WHI CH RAN SCHOOL STOOD TRANSFERRED TO THE SOCIETY AT BOOK VALUE AND THE SOCIETY STARTED RUNNING THE SCHOOL FROM THAT DATE. HENCE HE SUBMITTED THAT THE ACT OF TRANSFERRING THE ASSETS TO THE SOCI ETY BY THE PARTNERSHIP FIRM WAS A CHARITABLE ACTIVITY BY ITSE LF AS OTHERWISE ENTIRE PROFITS WOULD HAVE BEEN EARNED BY THE PARTNE RSHIP FIRM. 8 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. 4.1. ON THE OBJECTIONS OF THE LD.CIT HE SUBMITTED AS FOLLOWS. A) THE LEARNED COMMISSIONER OF INCOME TAX HAS TO CONSIDER THE POSITION AS ON THE DATE OF GRANT OF REGISTRATION IN AS MUCH AS THE BENEFIT OF REGISTRAT ION IS NOT EXTENDABLE TO THE PREVIOUS YEARS PRIOR TO THE PREVIOUS YEAR DURING WHICH THE APPLICATION IS MADE. AS ON THE DATE OF APPLYING FOR THE REGISTRATION TH E ACTIVITY OF SCHOOL WAS BEING RUN BY THE APPELLANT SOCIETY ONLY. B) IF SOME ERROR WAS COMMITTED EARLIER IT CANNOT BE EXPECTED THAT THE ERROR SHALL BE PERPETUATED YEAR A FTER YEAR MORE SO AT THE COST OF THE EXISTENCE OF THE INSTITUTION ITSELF. C) THE OBSERVATION THAT NON-PROFITABLE ACTIVITY WAS ENTRUSTED TO THE APPELLANT SOCIETY TO GAIN BENEFIT UNDER THE GUISE OF CHARITABLE PURPOSE IS ALSO NOT EMANATING FROM THE ACTUAL FACTS PREVAILING. THE SOCIETY MADE A SURPLUS OF RS.6 26 557 FOR THE A.Y.2013-14 AND HAD THE FIRM RETAINED THE ACTIVITY THEY WOULD HAVE BEEN BENEFITTED TO THIS EXTENT. D) INCREASE IN THE SCHOOL FEE IS TO MEET THE INCREASIN G COST OF INFLATION AND MERELY BECAUSE THE ACTIVITY WAS TAKEN UP BY THE APPELLANT SOCIETY. IN FACT FOR THE PARENTS OF THE STUDENTS IT REALLY DOES NOT MATTER W HO IS RUNNING THE SCHOOL. THEY WOULD NOT PAY HIGHER AMOUNT OF FEE JUST BECAUSE THE ACTIVITY IS TRANSFER RED FROM A FIRM TO SOCIETY. 4.2. HE RELIED ON THE DECISION OF THE VISAKHAPATNAM BENC H OF THE TRIBUNAL IN THE CASE OF SIDDHARTHA EDUCATIONAL SOCIETY IN ITA NO. 99/VIZ/2008 ORDER DT. 9 TH MAY 2011 AND SUBMITTED THAT THE ISSUE IS COVERED IN AS MUCH AS WHAT IS TO BE LOOKED INTO FOR GRANT OF REGISTRATION U/S 12A IS THE OBJECTS OF THE SOCIE TY AND WHETHER THE SOCIETY HAS APPLIED THE INCOME IN ACCORDANCE WI TH ITS OBJECTS. HE FURTHER SUBMITTED THAT THE AMOUNT OF FEE COLLECT ED FROM THE 9 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. STUDENTS CANNOT BE A FACTOR TO DECIDE WHETHER THE S OCIETY IS EXISTING FOR CHARITABLE PURPOSES OR NOT. 5. THE LD.D.R. MR.LUCAS PETER ON THE OTHER HAND OPP OSED THE CONTENTIONS OF THE ASSESSEE AND SUBMITTED THAT FROM THE YEAR 2003 TO THE YEAR 2012 THE SCHOOL WAS ACTUALLY RUN BY THE PARTNERSHIP FIRM FOUNDED BY SOME MEMBERS OF THE SOC IETY. HE SUBMITTED THAT NOTHING CHANGED AND IT IS ONLY THAT THE ACTIVITY HAS BEEN TRANSFERRED TO A SOCIETY AND THE PROMOTERS CONTINUE TO RUN THE INSTITUTION WITH A PROFIT MOTIVE. HE REFER RED EXTENSIVELY TO THE ORDER OF THE LD.CIT U/S 12A OF THE ACT AND A RGUED THAT: (A) THOUGH THE PERMISSION TO START THE SCHOOLS WA S GRANTED TO THE SOCIETY THE SAME WERE RUN BY FLOATING A PARTNE RSHIP FIRM. (B) THE MEMBERS OF THE SOCIETY ALLOWED THE ABOVE S ITUATION TO CONTINUE. (C) PROFITABLE ACTIVITIES HAVE BEEN RETAINED WITH THE FIRM AND NON- PROFITABLE ACTIVITIES HAVE BEEN TRANSFERRED TO THE SOCIETY TO GAIN BENEFIT UNDER THE GUISE OF 'CHARITABLE PURPOSE'. (D) SOCIETY INCREASED THE FEE IN FINANCIAL YEAR 20 12-13. 6. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERAT ION OF THE FACTS AND CIRCUMSTANCES OF THE CASE ON PERUSAL OF PAPERS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAWS CITED WE HOLD AS FOLLOWS. 7. THE SOCIETY IS SEEKING FOR REGISTRATION U/S 12A OF THE ACT WITH EFFECT FROM MARCH 2013. PRIOR TO THAT THE S OCIETY HAS NOT SOUGHT FOR ANY REGISTRATION. VARIOUS COURTS HAVE L AID DOWN THE TESTS TO BE APPLIED BY THE CIT WHILE DISPOSING OF A N APPLICATION FOR REGISTRATION U/S 12A OF THE ACT. IT HAS BEEN L AID DOWN THAT THE CIT HAS TO EXAMINE WHETHER THE OBJECTS OF THE S OCIETY ARE CHARITABLE IN NATURE OR NOT. THE UNDISPUTED FACT I N THIS CASE IS 10 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. THAT THE OBJECTS OF THE SOCIETY ARE CHARITABLE IN N ATURE WHEN EXAMINED AS PER THE DEFINITION GIVEN U/S 2(15) OF T HE ACT. THE ISSUE FOR OUR CONSIDERATION IS WHETHER THE ACTIVITY CONDUCTED BY THE PROMOTERS PRIOR TO THE ASSESSEE SEEKING REGIST RATION U/S 12A OF THE ACT WOULD AFFECT THE GRANT OF REGISTRATION U/S 12A. IN OUR VIEW THE LD.CIT SHOULD NOT GET INFLUENCED BY SUCH A CTIVITIES. WHAT IS TO BE SEEN IS WHETHER THE ASSESSEE SOCIETY HAS BEEN ESTABLISHED FOR CHARITABLE PURPOSES OR NOT. AS FAR AS THE VIOLATIONS IF ANY ARE CONCERNED THE AO MAY LOOK INTO THE MATTER. IN ANY CASE THE ASSESSEE IS NOT SEEKING T HAT THE BENEFIT OF REGISTRATION SHOULD BE EXTENDED TO THE PREVIOUS YEARS ALSO AND THE ALLEGED VIOLATIONS ARE NOT PRESENT FROM THE YEA R FOR WHICH THE REGISTRATION WAS SOUGHT U/S 12A. THE CONCLUSIONS D RAWN BY THE LD.CIT ARE NOT BASED ON THE ACTUAL FACTS PREVAILING AT THE POINT WHEN THE APPLICATION FOR REGISTRATION WAS MADE. FO R THE PREVIOUS YEAR DURING WHICH THE APPLICATION WAS MADE THE SOC IETY HAS MADE SURPLUS OF RS.6 26 557/- AND IT IS NOT A CASE WHERE THE SOCIETYS FUNDS HAVE BEEN DIVERTED TO THE PARTNERSH IP FIRM. ON THE OTHER HAND THE PARTNERSHIP FIRM HAS TRANSFERRED ITS ASSETS AT BOOK VALUE TO THE ASSESSEE SOCIETY AND AS ON THE DA TE OF APPLYING FOR REGISTRATION THE ACTIVITY OF THE SCHOOL IS BEI NG RUN ONLY BY THE ASSESSEE SOCIETY. THE OBSERVATIONS BY THE LD.CIT O N THE INCREASE OF SCHOOL FEE ARE MISPLACED FOR THE REASON THAT INC REASE IN SCHOOL FEE DID NOT TAKE PLACE JUST BECAUSE THE SCHOOL IS BEING RUN BY THE SOCIETY AT PRESENT. THERE IS ANOTHER CONTRADICTION IN THE LD. CITS OBSERVATION IN AS MUCH AS IF ALL THE PROFITAB LE ACTIVITIES ARE RUN BY THE PARTNERSHIP FIRM THEN THE REVENUE SHOULD NOT HAVE ANY GRIEVANCE AS THESE ACTIVITIES HAVE BECOME TAXA BLE ACTIVITIES. THE VISAKHAPATNAM BENCH OF THE TRIBUNAL IN THE CASE OF SIDHARTHA EDUCATIONAL SOCIETY IN ITA NO.349/VIZAG/2 007 AND 11 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. ITA 99/VIZAG/2008 ETC. IN ORDER DT. 9.5.2011 HAS CO NSIDERED A SIMILAR ISSUE WHEREIN IT WAS HELD AS UNDER: 16. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFU LLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND DOCUMENTS P LACED ON RECORD. UNDISPUTEDLY THE ASSESSEE SOCIETY WAS FOR MED BY TWO PROMOTERS NAMELY SHRI K. SURESH BABU AND SMT. K. VI JAYA LAKSHMI IN 1993 AND THEREAFTER SOCIETY OBTAINED A C ERTIFICATE OF REGISTRATION U/S 12AA OF THE ACT FROM THE CONCERNED COMMISSIONER OF INCOME TAX ON 20.12.2002. BEFORE F ORMING THE SOCIETY SHRI K. SURESH BABU AND SMT. K. VIJAYA LAKS HMI HAD STARTED THE BUSINESS ACTIVITY OF CONDUCTING REGULAR AS WELL AS RESIDENTIAL CLASSES BOTH FOR BOYS AND GIRLS IN THEI R INDIVIDUAL STATUS AND THEY WERE REGULARLY ASSESSED TO TAX IN RESPECT OF INCOME FROM SUCH ACTIVITY. SUBSEQUENTLY THEY FLOATED THE SOCI ETY AND GOT IT REGISTERED U/S 12A OF THE I.T. ACT. SINCE THE STUD ENTS WERE COMMON TO THE SOCIETY AS WELL AS THEIR INDIVIDUAL A CTIVITY THE FEES WERE COMMONLY COLLECTED FOR THE DAY SCHOLARS AND HO STELLERS AND THE SAME WERE PROPORTIONATELY DISTRIBUTED AMONGST T HE SOCIETY AND THE TWO INDIVIDUAL PROMOTERS DEPENDING UPON THE IR EXPENDITURE NEEDS. WITH EFFECT FROM 1.4.2005 THE I NDIVIDUAL ACTIVITIES WERE SHIFTED TO THE HANDS OF THE SOCIETY AND THE INCOME FROM RUNNING OF THE EDUCATIONAL INSTITUTIONS WERE A CCOUNTED FOR IN THE HANDS OF THE ASSESSEE SOCIETY. THE REVENUE HAS RAISED A DISPUTE THAT SINCE THE ACTIVITIES OF THE SOCIETY AS WELL AS THE PROMOTERS ARE MIXED UP AND THE PROMOTERS ARE RUNNIN G THEIR ACTIVITIES ON COMMERCIAL BASIS THE ACTIVITIES OF T HE SOCIETY SHOULD ALSO BE CONSIDERED TO BE THE COMMERCIAL ACTIVITY AN D THE EXEMPTION U/S 12AA SHOULD BE WITHDRAWN. 17. NOW THE QUESTION ARISES AS TO WHAT ARE THE REQU IREMENTS FOR TREATING THE SOCIETY TO BE A CHARITABLE SOCIETY FOR GRANTING THE REGISTRATION U/S 12AA OF THE ACT? THE WORD CHARIT ABLE PURPOSE HAS BEEN DEFINED U/S 2(15) OF THE I.T. ACT. ACCORD ING TO IT THE WORD `CHARITABLE PURPOSE INCLUDES A RELIEF OF THE POOR EDUCATION MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OB JECT OF GENERAL PUBLIC UTILITY. SINCE THE ASSESSEE SOCIETY IS ENGAGED IN IMPARTING OF EDUCATION IT CAN BE CONSIDERED TO BE E NGAGED IN A CHARITABLE ACTIVITY. WE HAVE ALSO EXAMINED THE BY- LAWS OR THE MEMORANDUM OF THE SOCIETY APPEARING AT PG.NO.1 TO 8 OF THE COMPILATION OF THE ASSESSEE WE FIND THAT THE SOCIE TY UNDER THE NAME OF `SIDDHARTHA EDUCATIONAL SOCIETY WAS CONSTI TUTED ONLY TO PROMOTE OR IMPART EDUCATION. IT HAS BEEN ALSO SPEC IFIED IN CLAUSE 5 THAT THE ASSESSEE IS FORMED WITH NO PROFIT MOTIVE AND NO COMMERCIAL ACTIVITY INVOLVED IN ITS WORKING. RELYI NG UPON THE 12 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. OBJECTS OF MEMORANDUM OF THE SOCIETY THE REGISTRAT ION U/S 12A WAS GRANTED TO THE ASSESSEES W.E.F. 31 ST NOV97 THE DATE ON WHICH THE APPLICATION FOR REGISTRATION WAS FILED VI DE LETTER DATED 20.12.2002. NOW THE QUESTION IS RAISED WITH REGARD TO THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE SOCIETY AND I TS PROMOTERS. NOTHING HAS BEEN BROUGHT OUT BY THE REVENUE BEFORE US THAT PRESENT STATE OF AFFAIRS OF THE SOCIETY AND ITS PRO MOTERS DO NOT ALLOW THE SOCIETY TO CLAIM BENEFIT OF EXEMPTION U/S 11 OF THE ACT. WHAT IS TO BE SEEN TO DISALLOW A BENEFIT OF EXEMPTI ON TO A CHARITABLE SOCIETY IS ONLY WHETHER THE SOCIETY IS ENGAGED IN COMMERCIAL ACTIVITIES OR THE SURPLUS FUNDS OF THE S OCIETY IS USED OTHER THAN THE PURPOSE FOR WHICH IT WAS CREATED. I N THE INSTANT CASE IT HAS BEEN STATED THAT TWO PROMOTERS OF THE SOCIETY HAVE BEEN IMPARTING EDUCATION ON COMMERCIAL BASIS AND LA TER ON THEY FORMED THE ASSESSEE SOCIETY AND WHATEVER THE FEES W ERE COLLECTED IT WAS BIFURCATED AMONG THE INDIVIDUAL P ROMOTERS AND THE SOCIETY. MAJOR PORTION OF THE FEES WAS ALLOCAT ED TO THE INDIVIDUAL PROMOTERS WHICH WAS ASSESSED TO TAX. WH ATEVER PROPORTION WAS ALLOCATED TO THE ASSESSEE SOCIETY IT WAS UTILIZED BY THE SOCIETY TO ACHIEVE ITS OBJECT OF IMPARTING OF E DUCATION. 18. WE HAVE ALSO EXAMINED THE ORDER OF THE TRIBUNAL IN THE CASE OF ACIT VS. GANDHI INSTITUTE OF TECHNOLOGY AND MANAGEMENT ITA NO.525/V/2009 IN WHICH THE ISSUE OF FEES COLLEC TED AND THE DONATION RECEIVED BY THE ASSESSEE SOCIETY WAS EXAMI NED AND IT WAS HELD THAT ON ACCOUNT OF HIGHER FEES COLLECTED O R DONATION RECEIVED THE REGISTRATION U/S 12A CANNOT BE CANCELL ED. THE TRIBUNAL HAS EXAMINED ALL RELEVANT ASPECTS AND HAS OBSERVED THAT SINCE NO IOTA OF EVIDENCE IS BROUGHT ON RECORD BY T HE REVENUE TO DEMONSTRATE THAT ASSESSEE WAS EVER ENGAGED IN ANY S ORT OF COMMERCIAL ACTIVITY THE BENEFIT OF EXEMPTION U/S 1 1 OF THE ACT CANNOT BE DENIED BY CANCELLING THE REGISTRATION U/S 12A OF THE ACT. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED HEREUNDER: 9. WE HAVE ALSO CAREFULLY EXAMINED THE JUDGEMENTS OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF GOVERNING BODY OF RANGARAYA MEDICAL COLLEGE VS. ITO (SUPRA) AND WE FI ND THAT THE JURISDICTIONAL HIGH COURT HAS CATEGORICALLY HEL D THAT MERELY BECAUSE CERTAIN SURPLUS ARISES FROM ITS OPERATION IT CANNOT BE HELD THAT INSTITUTION IS BEING RUN FOR THE PURPOSE OF PROFIT SO LONG AS NO PERSON OR INDIVIDUAL IS ENTITLED TO ANY PORTION OF THE SAID PROFIT AND THE SAID PROFIT IS USED FOR THE PUR POSE AND FOR THE PROMOTION OF THE OBJECT OF THE INSTITUTION. W E HAVE ALSO EXAMINED THE ORDER OF THE TRIBUNAL PUNE BENCH IN TH E CASE OF 13 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. MAHARASHTRA ACADEMY OF ENGINEERING AND EDUCATIONAL RESEARCH VS. CIT (SUPRA) IN WHICH THE IDENTICAL ISS UE WAS RAISED. IN THAT CASE THE MAIN ALLEGATION OF THE DE PARTMENT WAS THAT THE TRUST WAS TAKING THE DONATIONS AND CAP ITATION FEES FOR ADMISSIONS THOUGH PROHIBITED UNDER MAHARAS HTRA INSTITUTION (PROVISION OF CAPITATION FEES) ACT 198 7. HAVING EXAMINED THOROUGHLY VARIOUS JUDICIAL PRONOUNCEMENTS OF APEX COURT AND THE VARIOUS HIGH COURTS THE TRIBUNAL HAS HELD THAT SO LONG AS THERE WAS NO EVIDENCE OF MISUTILISATION OF FUNDS AND THE PRESCRIBED ACTIVITY OF EDUCATION WAS FOUND TO BE CARRIED ON BY THE ASSESSEE CIT HAS NO JURISDICTION TO CANCEL THE REGISTRATION U/S 12AA(3) OF THE I.T. ACT. IF T HE CIT HAD AN INFORMATION OF SOME WRONGFUL MEANS OF EARNING FEES IN THE FORM OF A DONATION OR ABOUT EXCESSIVE CHARGING OF F EES IN THE INVESTIGATION PROCESS THE CIT CAN ONLY PASS ON THE INFORMATION TO THE CONCERNED REGULATORY AUTHORITIES OF THE EDUCATIONAL INSTITUTIONS WITHIN HIS RIGHTS. THE RE LEVANT OBSERVATION OF THE TRIBUNALS ARE EXTRACTED HEREUNDE R FOR THE SAKE OF REFERENCE: IN THE RECENT PAST SUB-S.(3) WAS INSERTED IN S.12AA W.E.F 1 ST NOV. 2004 WHICH GIVES POWER OF CANCELLATION OF REGISTRATION TO THE CIT IF HE FINDS THAT THE ACTIV ITIES ARE NOT GENUINE OR NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TRUST. THESE POWERS ARE CONFERRED WITH A VI EW TO ENSURE THAT IF ONCE A REGISTRATION HAS BEEN GRANTED UNDER S. 12AA A TRUST OR INSTITUTION MAY NOT TAKE ANY SUCH LIBERTY OF MISUSE OF THE REGISTRATION OR THE PROVISIONS BY GOI NG HAYWIRE RATHER FURTHERING THE OBJECTS OF THE TRUST OR GENUI NELY NOT PURSUING THE ACTIVITIES FOR WHICH IT WAS ESTABLISHE D. THE MOST IMPORTANT FEATURE OF S. 12AA IS AS ALSO REFERRED IN THIS APPEAL FOR ADJUDICATION THAT THIS SECTION HAS ONLY LAID D OWN THE PROCEDURE OF REGISTRATION AND THIS SECTION NOWHERE SPEAKS THAT WHILE CONSIDERING THE APPLICATION OF REGISTRATION THE CIT SHALL ALSO LOOK INTO THE PROCEDURE OF EARNING OF INCOME A ND SOURCES FROM WHERE RECEIPTS ARE DERIVED. THE POWER OF ENQU IRY IN RESPECT OF SOURCES OF RECEIPTS AND THE UTILIZATION OF INCOME IS ENTRUSTED IN SEPARATE SECTIONS. THE LANGUAGE THUS USED IN THIS SECTION ONLY CONFINES TO ENQUIRE ABOUT THE ACT IVITIES OF THE TRUST AND ITS GENUINENESS WHICH MEANS IN CONSONAN CE WITH THE OBJECTS FOR WHICH CREATED AND THOSE OBJECTS AS ALSO ACTIVITIES SHOULD NOT BE A CAMOUFLAGE BUT PURE SIN CERE CHARITABLE AND FOR PUBLIC UTILITY AT LARGE. WHAT I S IMPLICIT IS THAT THE CIT HAS TO SINCERELY EXAMINE THAT THE OBJE CTS AS ALSO THE ACTIVITIES SHOULD NOT BE PRIMA FACIE AGAINST TH E BASIC 14 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. STRUCTURE FOR WHICH BENEFICIAL LAW IS MADE AND ALSO BE NOT IN CONFLICT WITH THE GENERAL PUBLIC UTILITY. NATURALL Y AN INSTITUTION IF ESTABLISHED TO CARRY OUT AN ILLEGAL ACTIVITY OR ACTIVITIES ARE CAUSING ANY TYPE OF NUISANCE NOT IN THE INTEREST OF THE PUBLIC AT LARGE SHOULD DEFINITELY LEAD TO CANCELLATION OF REGISTRATION. THE SCHEME OF THE ACT OTHERWISE DO NOT SUBSCRIBE AN D ALLOW A TRUST TO TAKE THE BENEFIT OF THE PROVISIONS OF SS. 11 AND 12 UNLESS ESTABLISH THE PRESCRIBED UTILIZATION OF THE INCOME EVEN IF AT ALL THE TRUST HOLDS THE REGISTRATION IN ITS HANDS. THEREFORE AT THE STAGE OF GRANTING REGISTRATION THE CIT IS NO T EXPECTED TO BOTHER HIMSELF ABOUT THE OTHER PROVISIONS OF THE AC T AND SUPPOSED TO CONFINE HIMSELF TO THE PROCEDURE OF REG ISTRATION AS LAID DOWN THEREIN. NOWHERE THE CIT HAS TAKEN ANY OBJECTION TO THE CHARITABLE AND EDUCATIONAL NATURE OF THE INSTITUTIO N. IN FACT THE OBJECTS OF THE INSTITUTION AS DECLARED IN THE T RUST DEED DOES REFLECT THAT ALL ARE PHILANTHROPIC OR BENEVOLE NT IN NATURE PRECISELY FOR THE PURPOSE OF IMPARTING EDUCATION. STRANGE ENOUGH THERE IS NO FINDING RECORDED BY THE CIT CONT RARY TO THIS FACT. BE THAT AS IT MAY THE REAL AND THE ONL Y SUBSTANTIAL OBJECTION FOR REFUSAL OF REGISTRATION WAS THAT THE INSTITUTION HAS COLLECTED DONATIONS THUS ADOPTED SOME WRONG MEANS O F COLLECTION OF FEES. BUT WHETHER AT THIS PRELIMINAR Y STAGE HE HAD THE RIGHT TO DRAW AN ADVERSE INFERENCE SO AS TO REFUSE REGISTRATION OR ALTERNATIVELY CONFINE HIMSELF TO TH E ENQUIRY ABOUT THE OBJECTS AND THE ACTIVITIES OF THE TRUST A S PER THE LIMITS OF THE JURISDICTION OF S. 12AA. RATHER THIS IS ALSO NOT THE CASE OF THE CIT THAT THE INSTITUTION IS DOING SOME OTHER ACTIVITY OF EARNING PROFIT OTHER THAN THE ACTIVITY OF RUNNIN G EDUCATIONAL INSTITUTIONS. THE ESTABLISHED FACTUAL POSITION IS THAT THE INSTITUTION IS NOT DOING IN ANY OTHER ACTIVITY EXCE PT RUNNING EDUCATIONAL INSTITUTIONS. IN SUCH CIRCUMSTANCES T HE ACTION OF CANCELLATION OF REGISTRATION CANNOT BE UPHELD. AS FAR AS THE OBJECTIVE OF THE APPELLANT IS CONCERNED THIS IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE WAS NOT IMPARTING EDU CATION. SINCE THE QUESTION ABOUT THE IMPARTING OF EDUCATION HAS NOT BEEN DOUBTED OR CHALLENGED BY THE REVENUE THEREFORE THE IMPUGNED ORDER PASSED BY THE RESPONDENT IS UNSUSTAI NABLE IN LAW. STRANGE ENOUGH THERE IS NOTHING ON RECORD TO PROVE SIGHTLESSLY THAT THE PURPOSE OF IMPARTING OF EDUCAT ION WAS NOT FULFILLED BY THIS INSTITUTE THUS THE REVENUE DEPART MENT HAS HOPELESSLY FAILED TO ESTABLISH THAT THERE WAS ANY I LLEGAL ACTIVITY OR INFRINGEMENT OF ANY LAW SO THAT TO DOUBT THE GEN UINENESS OF THE ACTIVITIES. IF IT WAS SO THEN IT CAN BE HEL D THAT THE 15 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. ALLEGATIONS OF THE REVENUE REMAINED UNSUPPORTED THU S DESERVES DISMISSAL. THE CITS APPROACH FOR DECIDIN G THE ELIGIBILITY OF REGISTRATION OF A TRUST SHOULD BE DI FFERENT FROM THE ANGLE BY WHICH AN ASSESSMENT OF AN INCOME IS MADE B Y THE A.O. WHAT PURPOSE DOES IT SERVE TO REVENUE BY CANC ELING A REGISTRATION IF THE ACTIVITIES ARE IN PUBLIC INTERE ST BECAUSE IN CASE OF ANY BREACH OF THE LAWS THE SAME IS SUBJECT TO TAX UNDER SS. 11 AND 12. THESE TWO PROVISIONS AND FEW OTHER PROVISIONS ARE COMPETENT ENOUGH TO TACKLE FIRMLY A DEFAULTER OF PHILANTHROPIC APPLICATION OF INCOME OR FUNDS OF THE TRUST. THE OTHER ADVERSE SIDE OF CANCELLATION IS THAT ON R EFUSAL OF REGISTRATION THE ENTIRE RECEIPTS SHALL BE SUBJECT T O ASSESSMENT WITHOUT GRANTING BENEFIT OF S.11 AND S.12 TO ASSESS INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME THOUGH THE FACTUAL POSITION COULD BE THAT MAJOR PART MIGHT HAVE BEEN D EVOTED TOWARDS ACHIEVING THE OBJECTS I.E. IMPARTING EDUCA TION AS IN THIS CASE BUT THE A.O. SHALL BE AUTOMATICALLY FORB IDDEN TO GRANT ADVANTAGE OF EXEMPTION CONSEQUENT UPON THE CANCELLATION AS IS MANDATORY IN STATUTE. THE OUTCO ME OF THE DELIBERATION MADE IN DETAIL HERE IN ABOVE IS THAT P ERCURIAN OPINION IS TO DEBAR THE CIT TO ENTER INTO THE AREA OF INVESTIGATION OF SOURCE OF INCOME AND ALSO APPLICAT ION OF INCOME SO THAT THE AMOUNT OF CORRECT EXEMPT INCOME BE NOT PREJUDGED. IF THE CIT HAD AN INFORMATION OF SOME W RONGFUL MEANS OF EARNING FEES IN THE FORM OF A DONATION OR THE INFORMATION TELLS ABOUT EXCESSIVE CHARGING OF FEES; THEN THE CIT IN HIS RIGHTS CAN PASS ON THE INFORMATION TO TH E CONCERNED OFFICE BEARERS WORKING UNDER THE MAHARASHTRA CAPITA TION FEES (PROHIBITION) ACT. THESE AUTHORITIES HAVE ENOUGH P OWER TO DEAL WITH SUCH NATURE OF DEFAULT SIDE BY SIDE THE CIT IS TO LIMIT HIS JURISDICTION WITHIN THE AMBITS OF PROVISI ONS OF THE ACT AND EXPECTED TO GIVE A FINDING ON FACTS THAT EITHER THE OBJECTS ARE NOT FOR GENERAL PUBLIC UTILITY OR NOT ACHIEVED AS PRESCRIBED UNDER LAW. HOWEVER PRESENTLY THE SITUATION IS THA T THE REVENUE HAS NOT SAID ABOUT ANY IMMORAL ACTIVITY OF THE APPELLANT OR THE COLLECTION OF FEES WAS BY WRONGFUL MEANS. PRIMA FACIE NO CASE WAS MADE OUT BY THE CIT SO AS T O EVEN VAGUELY DEMONSTRATE THAT THE ACTIVITIES OF THE APPE LLANT WERE NOT GENUINE OR ACTIVITY OF IMPARTING OF EDUCATION FOR WHICH THE TRUST WAS CREATED WERE NOT CARRIED OUT. EVEN THE CIT HAS FAILED TO ESTABLISH THAT ANY PART OF THE INCOME/REC EIPT OF THE TRUST WAS IN ANY MANNER MISUTILISED BY THE TRUSTEES FOR THEIR PERSONAL BENEFIT I.E. NOT IN FULFILLMENT OF THE OB JECT OF THE TRUST. OTHERWISE ALSO THERE ARE THREE WAYS TO LOOK AT THIS PROBLEM. ONE IS THAT THE DONATIONS ARE RAISED BUT NOT UTILIZED 16 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. FOR ACHIEVING THE OBJECTS I.E. TOWARDS IMPARTING E DUCATION; THEN SUCH AN INSTITUTION MUST BEAR THE CONSEQUENCE OF CANCELLATION OF REGISTRATION SINCE IPSO FACTO INFRI NGED S. 12AA(3) CONDITION. SECOND ASPECT IS THAT THOUGH T HE DONATIONS RECEIVED ARE MEANT TO FULFILL THE OBJECTS BUT TOGETHER WITH FEES HAVE INFRINGED ANTI CAPITATION PROHIBITIO N ACT; THAT COMES WITHIN THE CLUTCHES OF THAT ACT BUT DEFINITEL Y NOT UNDER S. 12AA(3) PROVISIONS. THE THIRD ASPECT IS THAT T HE DONATION PLUS FEES DO NOT EXCEED THE PRESCRIBED LIMIT OF ANT I CAPITATION FEE ACT I.E. FIVE TIMES THE NORMAL FEES; FURTHER T HAT NO EVIDENCE OF MISUTILISATION OTHER THAN THE PRESCRIBE D ACTIVITY THEN NO ACTION CAN BE SUGGESTED UNDER S. 12AA(3). THE ASSESSEES CASE FALLS UNDER THE THIRD CATEGORY. WI TH THE RESULT TOTALITY OF THE CIRCUMSTANCES THUS WARRANTS IN THE LIGHT OF THE FOREGOING DISCUSSION NOT TO ENDORSE THE VIEW OF T HE CIT. THE ORDER OF CANCELLATION OF REGISTRATION IS HEREBY REVOKED AGGARWAL MITRA MANDAL TRUST VS. DIRECTOR OF IT (EXE MPTION) (2007) 109 TTJ (DEL) 128 KALINGA INSTITUTE OF INDU STRIAL TECHNOLOGY VS. CIT (2008) 113 TTJ (CTK) 906 : (2008 ) 1 DTR (CTK) 273 AND HIMACHAL PRADESH ENVIRONMENT PROTECTI ON & POLLUTION CONTROL BOARD VS. CIT (2009) 125 TTJ (CHD ) 98: (2009) 28 DTR (CHD) (TRIB) 289 RELIED ON. 10. THE SIMILAR VIEWS WERE ALSO EXPRESSED BY THE TR IBUNAL IN THE CASE OF KAKINADA INSTITUTE OF TECHNOLOGY AND SCIENCE EDUCATIONAL SOCIETY VS. CIT ITA NO.92 OF VIZAG 2008 . COPY OF THE SAME IS PLACED ON RECORD AT PG.NO.69 TO 76 OF T HE ACT. WE HAVE ALSO CAREFULLY EXAMINED THE CIRCULAR NO.11 OF 2008 DATED 19.12.2008 IN WHICH THEY HAVE GIVEN THE DEFINITION OF CHARITABLE PURPOSE U/S 2(15) OF THE I.T. ACT 1961. WHILE DEFINING THE CHARITABLE PURPOSE IT HAS BEEN CLARIFI ED THAT THE NEWLY INSERTED PROVISO TO SECTION 2(15) WILL NOT AP PLY IN RESPECT OF FIRST 3 LIMBS OF SECTION 2(15) I.E. RELI EF OF THE POOR EDUCATION OR MEDICAL RELIEF. CONSEQUENTLY WHERE TH E PURPOSE OF A TRUST OR INSTITUTION IS RELIEF OF THE POOR ED UCATION OR MEDICAL RELIEF IT WILL CONSTITUTE CHARITABLE PURPOS E EVEN IF IT INCIDENTALLY INVOLVES THE CARRYING ON OF COMMERCIAL ACTIVITIES. THEREFORE SO LONG AS PERFORMANCE OF THE TRUST/OBJE CT OF THE TRUST IS TO IMPART EDUCATION IT WILL CONSTITUTE CH ARITABLE ACTIVITIES EVEN IF INCIDENTALLY IT INVOLVES CARRYIN G OF THE COMMERCIAL ACTIVITIES. 11. TURNING TO THE FACTS OF THE CASE WE FIND THAT THE ASSESSEE TRUST IS SOLELY INVOLVED IN IMPARTING OF E DUCATION. NO IOTA OF EVIDENCE WAS BROUGHT ON RECORD BY THE REVEN UE TO 17 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. DEMONSTRATE THAT ASSESSEE WAS EVER ENGAGED IN ANY S ORT OF COMMERCIAL ACTIVITIES. THE SOLE ALLEGATION IS WITH REGARD TO THE RECEIPT OF DONATIONS FROM THE PARENTS OF 8 MEMBERS AND THE RECEIPT OF DONATIONS MAY BE AGAINST A SPIRIT OF A P ARTICULAR ACT BUT IT DOES NOT DISENTITLE THE ASSESSEE EITHER FROM THE REGISTRATION U/S 12 OR THE BENEFIT OF EXEMPTION U/S 11 OF THE ACT SO LONG AS IT IS UTILIZED TO ACHIEVE THE OBJECT OF THE ASSESSEE TRUST. 19. WE HAVE ALSO EXAMINED THE CIRCULAR NO.11 OF 208 DATED 19.12.2008 IN WHICH THE BOARD HAS CLARIFIED THE DEF INITION OF `CHARITABLE PURPOSE GIVEN U/S 2(15) OF THE INCOME TAX ACT. THE BOARD HAS FURTHER CLARIFIED THE IMPLICATIONS ARISES FROM THE FIRST PROVISO TO SECTION 2(15) OF THE ACT WHICH SAYS THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY SHALL NOT BE A CHARITABLE PURPOSE IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE COMMERCE OR BUSINE SS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO AN Y TRADE COMMERCE OR BUSINESS FOR A CESS OR FEES OR ANY OTHE R CONSIDERATION IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY BY STAT ING THAT THE NEWLY INSERTED PROVISO TO SECTION 2(15) WILL NOT AP PLY IN RESPECT OF THE FIRST THREE LIMBS OF SECTION 2(15) I.E. RELIEF OF THE POOR EDUCATION OR MEDICAL RELIEF. THE RELEVANT CLARIFIC ATION GIVEN BY THE BOARD IS EXTRACTED HEREUNDER: 2. THE FOLLOWING IMPLICATIONS ARISE FROM THE AMEND MENT 2.1 THE NEWLY INSERTED PROVISO TO SECTION 2(15) WI LL NOT APPLY IN RESPECT OF THE FIRST THREE LIMBS OF SECTIO N 2(15) I.E. RELIEF OF THE POOR EDUCATION OR MEDICAL RELIEF. C ONSEQUENTLY WHERE THE PURPOSE OF A TRUST OR INSTITUTION IS RELI EF OF THE POOR EDUCATION OR MEDICAL RELIEF IT WILL CONSTITUTE `CH ARITABLE PURPOSE EVEN IF IT INCIDENTALLY INVOLVES THE CARRY ING ON OF COMMERCIAL ACTIVITIES. 2.2 `RELIEF OF THE POOR ENCOMPASSES A WIDE RANGE O F OBJECTS FOR THE WELFARE OF THE ECONOMICALLY AND SOC IALLY DISADVANTAGED OR NEEDY. IT WILL THEREFORE INCLUD E WITHIN ITS AMBIT PURPOSES SUCH AS RELIEF TO DESTITUTE ORPHANS OR THE HANDICAPPED DISADVANTAGED WOMEN OR CHILDREN SMALL AND MARGINAL FARMERS INDIGENT ARTISANS OR SENIOR CITIZ ENS IN NEED OF AID. ENTITIES WHO HAVE THESE OBJECTS WILL CONTI NUE TO BE ELIGIBLE FOR EXEMPTION EVEN IF THEY INCIDENTALLY CA RRY ON A COMMERCIAL ACTIVITY SUBJECT HOWEVER TO THE CONDI TIONS 18 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. STIPULATED UNDER SECTION 11(4A) OR THE SEVENTH PROV ISO TO SECTION 10(23C) WHICH ARE THAT: (I) THE BUSINESS SHOULD BE INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE ENTITY AND SIMILARLY ENTITI ES WHOSE OBJECT IS `EDUCATION OR `MEDICAL RELIEF WOU LD ALSO CONTINUE TO BE ELIGIBLE FOR EXEMPTION AS CHARI TABLE INSTITUTIONS EVEN IF THEY INCIDENTALLY CARRY ON A COMMERCIAL ACTIVITY SUBJECT TO THE CONDITIONS MENTI ONED ABOVE. 3. THE NEWLY INSERTED PROVISO TO SECTION 2(15) WILL APPLY ONLY TO ENTITIES WHOSE PURPOSE IS `ADVANCEMENT OF A NY OTHER OBJECT OF GENERAL PUBLIC UTILITY I.E. THE FOURTH L IMB OF THE DEFINITION OF `CHARITABLE PURPOSE CONTAINED IN SEC TION 2(15). HENCE SUCH ENTITIES WILL NOT BE ELIGIBLE FOR EXEMP TION UNDER SECTION 11 OR UNDER SECTION 10(23C) OF THE ACT IF T HEY CARRY ON COMMERCIAL ACTIVITIES. WHETHER SUCH AN ENTITY IS C ARRYING ON AN ACTIVITY IN THE NATURE OF TRADE COMMERCE OR BUS INESS IS A QUESTION OF FACT WHICH WILL BE DECIDED BASED ON THE NATURE SCOPE EXTENT AND FREQUENCY OF THE ACTIVITY. 20. WE HAVE FURTHER EXAMINED ONE MORE ORDER OF THE TRIBUNAL OF THIS BENCH IN THE CASE OF G.V. EDUCATIONAL SOCIE TY VS. CIT ITA 430/V/2001 ON THE SAME ISSUE IN WHICH THE REVENUE H AS MADE OUT A CASE FOR DENYING THE REGISTRATION ON THE GROU ND THAT AT THE END OF THE DIFFERENT FINANCIAL YEARS ASSESSEE HAS SURPLUS INCOME AND RELYING UPON THE VARIOUS JUDGEMENTS OF DIFFEREN T HIGH COURTS THE TRIBUNAL HAS HELD THAT SINCE CIT HAS NOT BROUGH T OUT ANYTHING ON RECORD IN SUPPORT OF HIS FINDING THAT ASSESSEE W AS EVER ENGAGED IN COMMERCIAL ACTIVITY THE REGISTRATION U/ S 12A CANNOT BE DENIED ON THE BASIS OF THE PRESUMPTION THAT ASSE SSEE HAD A SURPLUS FUND AT THE END OF THE FINANCIAL YEAR WITHO UT BRINGING ANYTHING ON RECORD THAT THE SURPLUS WAS UTILIZED FO R THE PURPOSE OTHER THAN THE CHARITABLE. THE RELEVANT OBSERVATIO N OF THE TRIBUNAL ARE EXTRACTED HEREUNDER: 5. THE LD. COUNSEL FOR THE ASSESSEE FURTHER INVITE D OUR ATTENTION TO THE JUDGEMENT OF THE BOMBAY HIGH COURT IN THE CASE OF VANITA VISHRAM TRUST VS. CCIT AND OTHERS 23 3 CTR 90 IN WHICH THEIR LORDSHIP HAVE HELD THAT PETITIONER T RUST WHICH ONLY CONDUCTED EDUCATIONAL INSTITUTIONS MUST BE RE GARDED AS EXISTING SOLELY FOR THE PURPOSE OF EDUCATION; FACT THAT A SURPLUS MAY INCIDENTALLY ARISE FROM THE ACTIVITIES OF THE T RUST AFTER MEETING THE EXPENDITURE INCURRED FOR CONDUCTING EDU CATIONAL 19 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. ACTIVITIES WOULD NOT DISENTITLE THE TRUST OF THE BE NEFIT OF SECTION 10(23C) OF THE ACT. THE RELEVANT OBSERVATION OF TH EIR LORDSHIP ARE EXTRACTED HEREUNDER: THE PETITIONER HAS BEEN CONDUCTING PRIMARY AND SECONDARY SCHOOLS AND COLLEGES FOR ARTS SCIENCE C OMMERCE AND TECHNICAL COURSES IN MUMBAI SINCE 1929 AND IN S URAT SINCE 1940. EXCEPT FOR CONDUCTING THESE EDUCATIONAL INST ITUTIONS THE PETITIONER HAS NOT CARRIED ON ANY OTHER ACTIVIT IES RIGHT SINCE 1929. IN THIS BACKGROUND IT WOULD BE NECESS ARY TO ADVERT TO THE OBJECTS SET OUT IN THE MEMORANDUM OF ASSOCIATION CLAUSE III(B) SPELLS OUT AS THE OBJECT AMELIORATION OF THE CONDITION OF GUJARATI HINDU WOMEN OF THE THE N BOMBAY PRESIDENCY AND OTHER PLACES AND ALLEVIATION OF THEI R SOCIAL STATUS BY EDUCATING TO THEM IN SUBJECTS TENDING TO THEIR MATERIAL MORAL AND SPIRITUAL ADVANCEMENT OPENING OUT FOR THEM PROPER AND SUITABLE FIELDS OF WORK LAWFULNESS AND INFLUENCE IN HINDU SOCIETY. FROM THIS OBJECT IT I S ABUNDANTLY CLEAR THAT THE AMELIORATION OF THE CONDITION OF GUJ ARATI SPEAKING HINDU WOMEN WAS SOUGHT TO BE IMPROVED WHE N THE TRUST WAS FOUNDED IN MARCH 1928 BY PROVIDING FOR THE EDUCATION OF THIS CLASS OF WOMEN. THE MEANS BY WHI CH THIS OBJECT IS SOUGHT TO BE ACHIEVED IS BY CONDUCTING AS HRAMS OR HOMES FOR WOMEN AND GIRLS PARTICULARLY FOR WIDOWS AND ORPHANED GIRLS EITHER AS FREE OR AS PAYING INMATES AND BY CONDUCTING SCHOOLS FOR IMPARTING RELIGIOUS SECULAR AND INDUSTRIAL EDUCATION AND TRAINING IN FINE ARTS. A NUMBER OF ANCILLARY OBJECTS HAVE BEEN ADVERTED THEREIN INCLUD ING PROVISION OF LIBRARIES AND GYMNASIUMS PUBLICATION OF BOOKS AND BY MEANS OF PECUNIARY AND OTHER HELP TO STUDENT S OF THE INSTITUTION. A HOLISTIC READING OF THE OBJECT CLAU SE WOULD ESTABLISH BEYOND DOUBT THAT THE SOLE PURPOSE FOR TH E ESTABLISHMENT OF THE PETITIONER WAS TO FURTHER THE CLAUSE OF EDUCATION AMONGST WOMEN BELONGING TO A PARTICULAR C LASS AS STATED THEREIN. THOUGH THE OBJECTS CLAUSE CONTAINE D VARIED OBJECTS INCLUDING THE MANAGEMENT AND DEVELOPMENT OF MOVABLE AND IMMOVABLE PROPERTIES THE STATEMENT OF FACT BEFORE THE COURT WHICH IS NOT DISPUTED IS THAT THE ONLY ACTIVITY WHICH HAS BEEN CARRIED OUT BY THE TRUST EVER SINCE ITS INCEPTION IS THE CONDUCT OF EDUCATIONAL INSTITUTION S. THE COURT IT MUST BE EMPHASIZED IS NOT DEALING WITH IN INSTI TUTION WHICH HAS SOUGHT APPROVAL FOR THE FIRST TIME OR WHICH HAS BEEN SET UP IN THE PROXIMATE PAST. THE TRUST HAS A HISTORY OF OVER EIGHTY YEARS DURING THE COURSE OF WHICH THE ONLY AC TIVITY IS OF CONDUCTING EDUCATIONAL INSTITUTIONS. THE FACT THAT THE TRUST 20 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. EXISTS SOLELY FOR EDUCATIONAL PURPOSES IS EVIDENCED FROM THE ASSESSMENT ORDERS FOR ASST. YRS. 2000-01 AND 2006-0 7. BOTH THESE ORDERS WHICH HAVE BEEN MADE UNDER S. 143(3) C ONTAIN A STATEMENT TO THE EFFECT THAT THE ASSESSEE IS RUNNIN G SCHOOLS WITH GUJARATI AND ENGLISH AS MEDIA OF INSTRUCTION A T THE PRIMARY AND SECONDARY STAGES AND THAT THE ASSESSEE ALSO CONDUCTS A COLLEGE FOR GIRLS WITH THE SOLE INTENT O F IMPARTING EDUCATION. THE RECORD OF THESE PROCEEDINGS ALSO CO NTAINS A JUDGEMENT OF A DIVISION BENCH OF THE COURT DATED 29 TH JUNE 2005 IN A REFERENCE UNDER S. 256(1) TO WHICH THE PE TITIONER WAS THE APPLICANT. THE ISSUE BEFORE THE COURT IN T HE REFERENCE WAS WHETHER THE ASSESSEE WAS ENTITLED TO EXEMPTION UNDER S. 10(22) ON INTEREST EARNED ON SURPLUS FUNDS OF THE S CHOOL RUN BY THE TRUST FOR ASST. YRS. 1979-80 AND 1980-81. T HE DIVISION BENCH OBSERVED THAT MERELY BECAUSE A CERTAIN SURPLU S AROSE FROM THE OPERATIONS OF THE TRUST IT COULD NOT BE H ELD THAT THE INSTITUTION WAS RUN FOR THE PURPOSE OF PROFIT SO L ONG AS NO PERSON OR INDIVIDUAL WAS ENTITLED TO ANY PORTION OF THE PROFIT AND THE PROFIT WAS UTILIZED FOR THE PURPOSE OF PROM OTING THE OBJECTS OF THE INSTITUTION. THE INCOME OF THE TRUS T WAS THEREFORE HELD TO BE EXEMPT UNDER S. 10 (22). THE DIVISION BENCH NOTED AS A PRINCIPLE OF LAW THAT IF AFTER MEE TING THE EXPENDITURE A SURPLUS RESULTS INCIDENTALLY FROM AN ACTIVITY LAWFULLY CARRIED ON BY THE EDUCATIONAL INSTITUTION THE INSTITUTION WOULD NOT CEASE TO BE ONE WHICH IS EXIS TING SOLELY FOR EDUCATIONAL PURPOSES SINCE THE EDUCATIONAL PURP OSES AND CONDUCTS AN EDUCATIONAL INSTITUTION THE FACT THAT IT HAD OTHER OBJECTS WOULD NOT DISENTITLE IT TO THE EXEMPTION SO LONG AS THE ACTIVITY CARRIED OUT BY IT IN THAT ASSESSMENT YEAR WAS THAT OF RUNNING AN EDUCATIONAL INSTITUTION AND NOT FOR PROF IT. THE COURT OBSERVED THAT THE ASSESSEE HAD EXISTED ONLY F OR EDUCATIONAL PURPOSES WHICH CONSISTED OF RUNNING EDU CATIONAL INSTITUTION AND NOT FOR EARNING PROFITS. THE OBSER VATIONS OF THE DIVISION BENCH WHICH THE APPLICATIONS FOR APPROVAL WERE REJECTED BY THE FIRST RESPONDENT. FIRSTLY THOUGH THE MEMORANDUM OF ASSOCIATION CONTAINS VARIED OBJECTS SO LONG AS THE RECORD DEMONSTRATES THAT THE ASSESSEE ONLY C ONDUCTS EDUCATIONAL INSTITUTIONS IT MUST BE REGARDED AS EX ISTING SOLELY FOR THE PURPOSE OF EDUCATION. NO OTHER ACTIVITY IS CARRIED ON. SECONDLY THE FACT THAT A SURPLUS MAY INCIDENTALLY ARISE FROM THE ACTIVITIES OF THE TRUST AFTER MEETING THE EXPE NDITURE INCURRED FOR CONDUCTING EDUCATIONAL ACTIVITIES WOUL D NOT DISENTITLE THE TRUST OF THE BENEFIT OF THE PROVISIO NS OF S. 10(23C). IN SO FAR THE ASPECT OF SURPLUS IS CONCER NED ONE MUST IN ADDITION ADVERT TO THE PROVISION WHICH HAS BEEN MADE 21 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. BY PARLIAMENT IN THE THIRD PROVISO TO S. 10(23C). BY THE THIRD PROVISO IT HAS BEEN CLARIFIED THAT IN THE CASE INT ER ALIA OF UNIVERSITIES OR OTHER EDUCATIONAL INSTITUTIONS WHIC H HAVE APPLIED ITS INCOME OR ACCUMULATED IT FOR APPLICATIO N WHOLLY AND EXCLUSIVELY TO THE OBJECTS FOR WHICH IT IS ESTABLIS HED AND IN A CASE WHERE FIFTEEN PER CENT OF INCOME IS ACCUMULATE D ON OR AFTER 1 ST APRIL 2002 THE PERIOD OF THE ACCUMULATION OF THE AMOUNT EXCEEDING FIFTEEN PER CENT SHALL IN NO CASE EXCEED FIVE YEARS. THIS PROVISION WOULD ESTABLISH THAT PA RLIAMENT DID NOT REGARD THE ACCUMULATION OF INCOME BY A UNIVERSI TY OR EDUCATIONAL INSTITUTION GOVERNED BY SUB-CL (VI) AS A DISABLING FACTOR SO LONG AS THE PURPOSE OF ACCUMULATION IS T HE APPLICATION OF THE INCOME WHOLLY AND EXCLUSIVELY TO THE OBJECTS FOR WHICH THE INSTITUTION HAS BEEN ESTABLISHED. PA RLIAMENT HAS HOWEVER PRESCRIBED THAT WHERE MORE THAN FIFTE EN PER CENT OF THE INCOME IS ACCUMULATED AFTER 1 ST APRIL 2002 THE AMOUNT EXCEEDING FIFTEEN PER CENT SHALL NOT BE ACCU MULATED FOR A PERIOD IN EXCESS OF FIVE YEARS. FOR ALL THES E REASONS THE REJECTION OF THE APPROVAL BY THE FIRST RESPONDENT W AS MANIFESTLY MISCONCEIVED. 6. IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABL E TRUST & ORS VS. UOI & ORS 230 CTR 477 THEIR LORDSHIP OF THE PUNJAB & HARYANA HIGH COURT HAVE CATEGORICALLY HELD THAT EVEN IF THERE REMAINS A SURPLUS AT THE HANDS OF THE EDUCATIONAL INSTITUTION IT WOULD BE ENTITLED TO TH E EXEMPTION U/S 10(23C)(VI) PROVIDED THE EDUCATIONAL INSTITUTI ON SOLELY EXIST FOR EDUCATIONAL PURPOSES. 7. IN THE CASE OF RAEBAREILY POLYTECHNIC ASSOCIATIO N VS. CIT 48 DTR 1 THE TRIBUNAL HAS HELD THAT AT THE TIM E OF GRANTING REGISTRATION U/S 12A CIT IS ONLY REQUIRED TO EXAMINE AS TO WHETHER THE OBJECTS OF APPLICANT ARE OF CHARI TABLE NATURE AND WHETHER THE ACTIVITIES CARRIED ON BY IT ARE FOR ACHIEVING SUCH OBJECTS AND HE IS NOT REQUIRED TO LOOK INTO TH E PRESENCE OF SURPLUS ARISING AS A RESULT OF SUCH ACTIVITIES A ND ENTITLEMENT OF EXEMPTION U/S 11 IN RESPECT OF SUCH SURPLUS; PRE SENCE OF INCOME IN A PARTICULAR YEAR CANNOT BE TREATED AS A DISQUALIFICATION FOR THE PURPOSE OF REGISTRATION U/ S 12A. 8. AGAIN IN THE CASE OF DIRECTOR OF INCOME TAX VS. GARDEN CITY EDUCATIONAL TRUST 330 ITR 480 THEIR LORDSHIP OF THE KARNATAKA HIGH COURT HAVE MADE THE SAME OBSERVATION S AND HELD THAT SO LONG AS THE TRUST HAD EDUCATION AS ONE OF ITS 22 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. OBJECT WHICH IS ONE OF THE ENUMERATED HEADS WHICH QUALIFY AND COME WITHIN THE SCOPE OF CHARITABLE PURPOSE AS ENUMERATED IN SUB SECTION 15 OF SECTION 2 IT HAD T O BE ACCEPTED THAT TRUST WAS HAVING A CHARITABLE PURPOSE AS ITS OBJECT AND COULD QUALIFY FOR CLAIMING EXEMPTION IN TERMS OF SECTION 11 AND 12 SUBJECT TO TRUST FULFILLING THE C ONDITIONS ENUMERATED THEREIN. 9. IN THE LIGHT OF RATIO LAID DOWN THROUGH AFORESAI D JUDGMENTS IF WE EXAMINE THE FACTS OF THE CASE WE FIND THAT THE CIT HAS NOT BROUGHT OUT ANYTHING ON RECORD IN S UPPORT OF HIS FINDING THAT ASSESSEE WAS EVER ENGAGED IN COMME RCIAL ACTIVITIES. HE HAS DRAWN HIS CONCLUSION SIMPLY ON THE BASIS THAT SOME SURPLUS WAS FOUND AT THE END OF THE FINAN CIAL YEAR. THERE IS NO EVIDENCE THAT SURPLUS WAS UTILIZED FOR THE PURPOSE OTHER THAN THE CHARITABLE. MOREOVER IT HAS BEEN C LARIFIED BY THE CIRCULAR OF THE BOARD AND BY VARIOUS HIGH COURT S THROUGH THEIR JUDGMENTS THAT EVEN IF ASSESSEES INCIDENTALLY INVOLVES IN THE CARRYING ON COMMERCIAL ACTIVITIES THE REGISTRA TION U/S 12A SHOULD NOT BE DENIED. IN THE INSTANT CASE THERE I S NO EVIDENCE WHICH PROVES THAT ASSESSEE WAS EVER ENGAGE D IN COMMERCIAL ACTIVITIES. THEREFORE WE FIND NO FORCE IN THE OBSERVATION OF THE CIT THAT ASSESSEE WAS ENGAGED IN COMMERCIAL ACTIVITIES. ACCORDINGLY WE SET ASIDE T HE ORDER OF THE CIT AND DIRECT HIM TO GRANT THE REGISTRATION U/ S 12AA OF THE ACT. 21. WE HAVE ALSO EXAMINED THE JUDGEMENT OF THE KARN ATAKA HIGH COURT IN THE CASE OF DIT VS. GARDEN CITY EDUCA TIONAL TRUST (2010) 191 TAXMAN 238 IN WHICH THEIR LORDSHIP HAS C ATEGORICALLY HELD THAT WHERE IMPARTING OF EDUCATION BEING THE MA IN OBJECT OF THE TRUST IT HAS TO BE ACCEPTED THAT ASSESSEE EXIS T FOR A CHARITABLE PURPOSE AND THEREFORE IT IS ENTITLED TO REGISTRATION U/S 12A. MANNER OF APPLICATION OF FUNDS AND ALLOWABILI TY OF BENEFIT OF EXEMPTION U/S 11 & 12 ARE MATTERS WHICH ARE TO BE E XAMINED BY THE A.O. AT THE TIME OF THE ASSESSMENT AND NOT BY T HE CIT. 22. IN THE CASE OF OXFORD ACADEMY FOR CAREER DEVELO PMENT VS. CIT 315 ITR 382 HONBLE ALLAHABAD HIGH COURT H AS ALSO EXAMINED THIS ASPECT AND HAS CONCLUDED THAT SECTION 12AA(3) WAS INCORPORATED IN THE ACT W.E.F. 2004 AND NOT APP LICABLE RETROSPECTIVELY. REGISTRATION GRANTED TO ASSESSEE ON 1 ST APRIL 1999 COULD NOT THEREFORE BE CANCELLED BY THE CIT BY INVOKING 23 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. POWERS U/S 12AA(3). WITH REGARD TO THE ACTIVITY OF IMPARTING EDUCATION THE HONBLE HIGH COURT HAS OBSERVED AS UN DER: IN THE INSTANT CASE THE ASSESSEE IS PREPARING ST UDENTS BY PROVIDING COACHING/GUIDELINES TO GET ADMISSIONS IN PROFESSIONAL INSTITUTIONS TO PURSUE THEIR STUDIES. THE SENSE IN WHICH THE WORD EDUCATION HAS BEEN USED IN S.2(15) OF THE ACT IS THE SYSTEMATIC INSTRUCTION SCHOOLING OR TRA INING GIVEN TO THE YOUNG IN PREPARATION FOR THE WORK OF LIFE. SIM ILARLY EXTENDING FINANCIAL ASSISTANCE/SCHOLARSHIP ETC. T O STUDENTS FOR THEIR EDUCATIONAL PURPOSE WOULD SQUARELY AND FAIRLY FALL WITHIN THE CONNOTATION OF EDUCATION AS PER THE RATIO LAI D DOWN IN THE CASE OF CIT VS. SARASWATH POOR STUDENTS FUND (1 985) 46 CTR (KAR) 107 : (1984) 150 ITR 142 (KAR). THUS TH E ASSESSEE IS ENGAGED IN EDUCATIONAL ACTIVITIES WHI CH FALLS UNDER CHARITABLE PURPOSE. RECENTLY THE HONBLE SUPREME COURT IN THE CASE OF AMERICAN HOSTEL & LODGING ASSOCIATION EDUCATIONAL I NSTITUTE VS. CBDT & ORS (2008) 216 CTR (SC) 377 : (2008) 7 D TR (SC) 183: (2008) 301 ITR 86 (SC) HAS OBSERVED AS UNDER: ON THE GRANT OF APPROVAL SS. 11 AND 13 DID NOT A PPLY. ONCE AN APPLICANT INSTITUTION CAME WITHIN THE PHRAS E `EXISTS SOLELY FOR EDUCATIONAL PURPOSE AND NOT FOR PROFIT NO OTHER CONDITION LIKE APPLICATION OF INCOME WAS REQUIRED T O BE COMPLIED WITH. THE PRESCRIBED AUTHORITY WAS ONLY R EQUIRED TO EXAMINE THE NATURE ACTIVITIES AND GENUINENESS OF T HE INSTITUTION. THE MERE EXISTENCE OF PROFIT/SURPLUS DID NOT DISQUALIFY THE INSTITUTION. BY TAKING THE LIBERAL APPROACH THE JHARKHAND HIGH COURT IN THE CASE OF CIT VS. KARIMIA TRUST (2008) 2 18 CTR (JHARKHAND) 670: (2008) 302 ITR 57 (JHARKHAND) HAS OBSERVED THAT BREACH OF THE CONDITIONS OF THE TRUST DEED EVEN IF COMMITTED BY THE ASSESSEE WOULD NOT DISENTITLE T HE ASSESSEE FROM GETTING THE BENEFIT WHICH THE ASSESSEE HAD BEE N GRANTED EARLIER BEING A CHARITABLE-CUM-RELIGIOUS TRUST. IT MAY BE MENTIONED THAT THE HONBLE SUPREME COURT IN THE CASE OF ASST. CIT VS. SURAT CITY GYMKHANA (2008 ) 216 CTR (SC) 23 : (2008) 300 ITR 214 (SC) OBSERVED THAT AFTER REGISTRATION FURTHER PROBE INTO OBJECT IS NOT PERM ISSIBLE. 24 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. IN THE LIGHT OF THE ABOVE DISCUSSION AND BY CONSID ERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE HOLD THAT THE ORDER DATED 9 TH MARCH 2004 PASSED BY THE CIT (ANNEX. NO.15 TO THE WRIT PETITION) AS PER THE THEN LAW IS WITHOUT POWER AND JURISDICTION AND THEREFORE IT IS LIABLE TO BE SET QUASHED. 23. IT IS ALSO EVIDENT FROM THE RECORD THAT IN EARL IER YEAR I.E. IN A.Y. 2003-04 THE BENEFIT OF EXEMPTION WAS ALLOWED TO THE ASSESSEE ON THE SIMILAR ACTIVITIES. A COPY OF THE ASSESSMENT ORDER IS ALSO PLACED ON RECORD AT PG.NO.34 OF THE COMPILA TION OF THE ASSESSEE. 24. WE HAVE ALSO EXAMINED THE JUDGEMENT OF THE DELH I HIGH COURT IN THE CASE OF SAFDARJUNG ENCLAVE SOCIETY VS. MUNICIPAL CORPORATION OF DELHI AIR 1992 (SC) 1456 WHICH WAS R ENDERED ON 9.2.1989 AND WE FIND THAT IN THAT CASE THE WORD `CH ARITABLE PURPOSE WAS EXAMINED WITH RESPECT TO THE RELEVANT PROVISIONS OF THE DELHI MUNICIPAL CORPORATION ACT 1957. IT HAS NO RELEVANCE TO THE PROVISIONS OF THE INCOME TAX ACT AS SUCH THE JU DGEMENT CANNOT BE APPLIED WHILE ADJUDICATING THE ISSUE UNDE R THE INCOME TAX ACT. 25. OUR ATTENTION WAS ALSO INVITED TO THE INCOME AN D EXPENDITURE ACCOUNT OF THE PROMOTERS AND THE COPY O F THE RETURN OF INCOME AND WE FIND THAT WHATEVER INCOME WAS ALLO CATED IN THE HANDS OF THE PROMOTERS THAT WAS DULY OFFERED TO TAX . THEREFORE MERE ON ACCOUNT OF ALLOCATION OF PART OF THE RECEIP TS TO THE PROMOTERS DOES NOT DISENTITLE THE ASSESSEE FROM CLA IMING A BENEFIT OF EXEMPTION BECAUSE WHATEVER FUNDS COMES I N THE HANDS OF THE ASSESSEE ON ACCOUNT OF EDUCATIONAL TUITION F EES OR DONATIONS IT WAS UTILIZED FOR THE PURPOSE FOR WHIC H THE ASSESSEE SOCIETY WAS CREATED I.E. TO PROMOTE OR IMPART EDUCA TION. MERE COLLECTION OF DONATION OR FEES FROM THE STUDENTS C ANNOT BE A GROUND FOR DENYING THE EXEMPTION U/S 11 OF THE ACT IN AS MUCH AS NOTHING HAS BEEN BROUGHT ON RECORD BY THE REVENU E THAT ASSESSEE WAS EVER ENGAGED IN ANY SORT OF NON CHARIT ABLE ACTIVITY OR ANY OF ITS FUNDS WAS UTILIZED FOR THE PURPOSE OT HER THAN THE PURPOSE FOR WHICH IT WAS CREATED. IN THE LIGHT OF THESE FACTS WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE WAS FO RMED FOR THE CHARITABLE PURPOSE AND WAS ALSO ENGAGED IN CHARITAB LE ACTIVITIES OF IMPARTING THE EDUCATION AND THE REVENUE AUTHORIT IES ARE NOT JUSTIFIED IN DENYING THE EXEMPTION TO THE ASSESSEES . WE 25 ITA.NO.674 & 675/VIZAG/2013 M/S. VISWABHARATHI EDUCATIONAL SOCIETY GUDIVADA. ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND D IRECT THE A.O. TO ALLOW THE EXEMPTION U/S 11 OF THE ACT. 6. RESPECTFULLY FOLLOWING THE ORDER OF THE COORDIN ATE BENCH OF THE TRIBUNAL IN THE CASE OF SIDDHARTHA EDU CATIONAL SOCIETY (SUPRA) WE SET ASIDE THE ORDERS OF THE LEA RNED COMMISSIONER OF INCOME TAX VIJAYAWADA WITH A DIREC TION TO GRANT REGISTRATION TO THE ASSESSEE SOCIETY UNDER SE CTION 12AA OF THE ACT AND RECOGNITION UNDER SECTION 80G OF THE AC T. ORDERED ACCORDINGLY. 7. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH APRIL 2015. SD/- SD/- (SAKTIJIT DEY) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER VISAKHAPATNAM DATED: 29 TH APRIL 2015. MANGA COPY TO 1. THE INCOME TAX OFFICER WARD 2 (1) 2 ND FLOOR RAJKAMAL COMPLEX MAIN ROAD LAKSHMIPURAM GUNTUR. 2. VEDA EDUCATIONAL DEVELOPMENT ASSOCIATION SANDHY A ENCLAVE NRT ROAD CHILAKALURIPET GUNTUR DISTRICT. 3. CIT(A) GUNTUR. 4. CIT GUNTUR. 5. D.R. ITAT VISAKHAPATNAM BENCH VISAKHAPATNAM. 6. GUARD FILE //BY ORDER // ASST. REGISTRAR ITAT VISAKHAPATNAM.