Gyan Educational and Social, Mathura v. The CIT, Agra

ITA 8/AGR/2010 | misc
Pronouncement Date: 27-08-2010 | Result: Allowed

Appeal Details

RSA Number 820314 RSA 2010
Assessee PAN AAAAG6837E
Bench Agra
Appeal Number ITA 8/AGR/2010
Duration Of Justice 7 month(s) 13 day(s)
Appellant Gyan Educational and Social, Mathura
Respondent The CIT, Agra
Appeal Type Income Tax Appeal
Pronouncement Date 27-08-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 27-08-2010
Date Of Final Hearing 23-08-2010
Next Hearing Date 23-08-2010
Assessment Year misc
Appeal Filed On 13-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI R.K. GUPTA JUDICIAL MEMBER AND SHRI P.K. BANSAL ACCOUNTANT MEMBER ITA NOS.07 & 08/AGR/2010 GYAN EDUCATIONAL & WELFARE SOCIETY VS. THE COMMIS SIONER OF INCOME-TAX-1 ANAND DHAM AGRA. BEHIND INCOME TAX OFFICE MATHURA. (PAN : AAAAG 6837 E). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.M. AGARWAL C.A. RESPONDENT BY : NONE (APPLICATION REJECTED) ORDER PER P.K. BANSAL A.M.: SINCE BOTH THE APPEALS FILED BY THE ASSESSEE RELATE TO THE COMMON ISSUE WE THEREFORE DISPOSE OF BOTH THESE APPEALS BY THIS COMMON ORDER. 2. ITA NO.08/AGR/2010 IS FILED AGAINST THE REJECTIO N OF THE REGISTRATION UNDER SECTION 12AA BY THE CIT WHILE ITA NO.07/AGR/2010 IS FILED AGAINS T THE REFUSAL OF THE APPROVAL UNDER SECTION 80G(5)(VI) OF THE INCOME-TAX ACT 1961 (THE ACT H EREINAFTER) BY THE CIT. THE ASSESSEE MOVED AN APPLICATION IN FORM NO.10A FOR THE GRANT OF REGI STRATION UNDER SECTION 12AA ON 7.6.2009. SIMULTANEOUSLY APPLICATION IN FORM NO.10G FOR GRAN T OF APPROVAL UNDER SECTION 80G(5)(VI) WAS SUBMITTED ON 3.6.2009. THE CIT VIDE ORDER SHEET DA TED 20.11.2009 ASKED THE ASSESSEE TO SUBMIT CERTAIN INFORMATION AND HAS ALSO POINTED OUT ABOUT THE INSPECTORS REPORT POINTING OUT THAT NO 2 ACTIVITY WAS BEING CARRIED OUT AT THE GIVEN ADDRESS NO OFFICE OF THE SOCIETY WAS FOUND AT THE GIVEN ADDRESS AND UNDER THESE FACTS WHY THE SOCIETY COULD NOT BE TREATED AS NON-GENUINE AND NON-EXISTING. THE ASSESSEE FURNISHED WRITTEN SUBMI SSION ON 26.11.2009 POINTING OUT THAT THE SOCIETY IS FORMED WITH AN OBJECT OF IMPARTING EDUCA TION. THE SOCIETY HAS PURCHASED LAND AND APPLIED FOR AFFILIATION WITH AGRA UNIVERSITY. THE CIT EVEN THOUGH OBSERVED THAT THE OBJECTS OF THE ASSESSEE SOCIETY AS PER MEMORANDUM OF ASSOCIAT ION ARE CHARITABLE IN NATURE BUT HE ON THE BASIS OF SEPARATE ENQUIRY CONDUCTED BY THE A.O. AND THE INSPECTOR TOOK THE VIEW THAT THE ACTIVITIES OF THE SOCIETY IS NOT GENUINE AND ACCORD INGLY REJECTED THE REGISTRATION AS WELL AS DENIED THE APPROVAL UNDER SECTION 80G(5)(VI) OF THE ACT. N ONE APPEARED ON BEHALF OF THE REVENUE. WE THEREFORE DECIDED TO DISPOSE OF THE APPEAL AFTER H EARING THE LD. AR. 3. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY THE L D. A.R. IN THE LIGHT OF THE MATERIAL PLACED BEFORE US ALONG WITH THE ORDER OF THE CIT(A) . THE ONLY ISSUE INVOLVED IN ITA NO.08/AGR/2010 IS THAT WHAT IS TO BE DONE AT THE TI ME OF SEEKING REGISTRATION BY THE CIT. THIS ISSUE HAS BEEN CONSIDERED BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RED ROSE SCHOOL 163 TAXMAN 163 (ALLD.) AND IT WOULD BE RELE VANT TO REPRODUCE THE FINDING OF THEIR LORDSHIPS FROM THE SAID DECISION :- 22. THE PROCEDURE FOR REGISTRATION HAS BEEN GIVEN IN S ECTION 12AA WHICH READS AS UNDER :- 12AA. PROCEDURE FOR REGISTRATION .(1) THE COMMISSIONER ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUT ION MADE UNDER CLAUSE ( A ) OF SECTION 12A SHALL - ( A ) CALL FOR SUCH DOCUMENTS OR INFORMATION FORM THE T RUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF 3 THE TRUST OR INSTITUTION AND MAY ALSO MAKE SUCH INQ UIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF; AND ( B ) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES HE - ( I ) SHALL PASS AN ORDER IN WRITING REGISTERING THE TR UST OR INSTITUTION; ( II ) SHALL IF HE IS NOT SO SATISFIED PASS AN ORDER I N WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTION AND A COPY OF SUCH ORDER SHAL L BE SENT TO THE APPLICANT : PROVIDED THAT NO ORDER UNDER SUB-CLAUSE ( II ) SHALL BE PASSED UNLESS THE APPLICANT HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HE ARD. ( 1A ) ALL APPLICATIONS PENDING BEFORE THE CHIEF COMMIS SIONER ON WHICH NO ORDER HAS BEEN PASSED UNDER CLAUSE ( B ) OF SUB-SECTION (1) BEFORE THE 1ST DAY OF JUNE 1999 SHALL STAND TRANSFERRED ON THAT DAY TO THE COM MISSIONER AND THE COMMISSIONER MAY PROCEED WITH SUCH APPLICATIONS UND ER THAT SUB-SECTION FROM THE STAGE AT WHICH THEY WERE ON THAT DAY. (2) EVERY ORDER GRANTING OR REFUSING REGISTRATION U NDER CLAUSE ( B ) OF SUB-SECTION (1) SHALL BE PASSED BEFORE THE EXPIRY OF SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE APPLICATION WAS RECEIVED UNDER CLAUSE ( A ) OF SECTION 12A. (3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTE D REGISTRATION UNDER CLAUSE ( B ) OF SUB-SECTION (1) AND SUBSEQUENTLY THE COMMISSIONER I S SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITU TION AS THE CASE MAY BE HE SHALL PASS AN ORDER IN WRITING CANCELLING THE REGISTRATIO N OF SUCH TRUST OR INSTITUTION : PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASS ED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD. SUB-CLAUSE 3 AFORESAID WAS INSERTED BY THE FINANC E ACT NO. 2 OF 2004 WITH EFFECT FROM 1-10-2004. 23. THE AFORESAID PROVISION CONFERS POWER ON THE COMMI SSIONER WHILE CONSIDERING THE APPLICATION FOR REGISTRATION OF A T RUST OR INSTITUTION MADE UNDER CLAUSE ( A ) OF SECTION 12A TO CALL FOR SUCH DOCUMENTS OR INFO RMATION FROM THE TRUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO S ATISFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTI ON AND ALSO TO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF AND AFTER S ATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND THE GENUINE NESS OF ITS ACTIVITIES HE SHALL PASS AN ORDER IN WRITING REGISTERING THE TRUST OR INSTIT UTION AND IF HE IS NOT SATISFIED HE WOULD REFUSE THE REGISTRATION. 4 24. SUB-SECTION (3) INSERTED WITH EFFECT FROM 1-10-200 4 GAVE POWER OF CANCELLATION OF REGISTRATION TO THE COMMISSIONER I F SUBSEQUENTLY HE FINDS AND IS SATISFIED THAT ACTIVITIES OF SUCH TRUST OR INSTITUT ION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE T RUST OR INSTITUTION. 25. POWER OF CANCELLATION OF REGISTRATION HAS BEEN CON FERRED WITH A VIEW TO ENSURE THAT IF ONCE A REGISTRATION HAS BEEN GRANTED UNDER SECTION 12AA THE TRUST OR THE INSTITUTION MAY NOT TAKE LIBERTY OF MISUSING THE PR OVISION AND CONSEQUENTLY GO HAYWIRE IN FURTHERING THE OBJECT OF THE TRUST OR IT S ACTIVITIES DO NOT REMAIN GENUINE ANY FURTHER. 26. THE MOOT QUESTION WHICH HAS BEEN PRESSED FROM BOTH THE SIDES AS PER THEIR OWN INTERESTS IS REGARDING THE SCOPE OF AUTHORITY AND THE EXTENT OF INVESTIGATION BY THE COMMISSIONER FOR THE PURPOSE OF SATISFYING A BOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION FOR THE PUR POSE OF GRANT OF REGISTRATION. 27. THE REVENUE HAS IN SUBSTANCE PLEADED THAT THE CO MMISSIONER WHILE SATISFYING HIMSELF ABOUT THE GENUINENESS OF THE ACT IVITIES OF THE TRUST OR INSTITUTION HAS GOT FULL POWER TO MAKE ANY SUCH ENQUIRIES WHIC H MAY REFLECT UPON THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTI TUTION AND FOR THAT PURPOSE THE INCOME DERIVED BY THE TRUST OR THE INSTITUTION ITS EXPENDITURE AND ALSO OTHER ACTIVITIES IN THE MATTER OF CARRYING OUT THE OBJEC TS OF THE TRUST CAN BE SUBJECTED TO SCRUTINY BEFORE GRANTING REGISTRATION. 28. IN RESPONSE THE ASSESSEE SUBMITS THAT THE COMMISS IONER HAS TO LIMIT HIS ENQUIRIES ONLY TO THE OBJECT OF THE SOCIETY TO SEE THAT THE OBJECTS ARE NOT AGAINST PUBLIC POLICY AND THEY ARE IN EFFECT THE OBJECTS FOR CHARITABLE PURPOSES AND IT CANNOT BE DISPUTED THAT EDUCATION IS ONE SUCH CHARI TABLE PURPOSE AND THAT GENUINENESS OF THE ACTIVITIES WOULD ONLY RELATE TO THE INCOME DERIVED BY THE INSTITUTION AND NOT IN WHAT MANNER THE SAME HAS BEE N SPENT. 29. ELABORATING THE AFORESAID ARGUMENT IT HAS BEEN SU BMITTED THAT SINCE THE PROVISIONS OF SECTION 12A DEBARS A TRUST OR AN INSTITUTION FROM CLAIMING ANY EXEMPTION UNDER SECTION 11 OR SEC TION 12 AND CONSEQUENTLY THE APPLICABILITY OF SECTION 13 IN THE ABSENCE OF REGI STRATION UNDER SECTION 12AA THE COMMISSIONER WAS ONLY TO SEE THAT WHETHER THE INCOM E OF THE TRUST/INSTITUTION FALLS WITHIN ANY OF THE HEADS UNDER THE AFORESAID PROVISI ONS OF SECTIONS 11 AND 12 AND IN CASE DURING THE ASSESSMENT PROCEEDINGS FOR ANY PARTICULAR ASSESSMENT YEAR THE ASSESSING OFFICER FINDS THAT EITHER THE INCOME DERI VED CANNOT BE SAID TO BE INCOME FROM EDUCATIONAL ACTIVITIES OR ITS EXPENDITURE CANN OT BE ATTRIBUTED TO ANY EDUCATIONAL PURPOSE HE WOULD BE AT LIBERTY TO ASSE SS THAT INCOME AND LEVY TAX BUT ON THE CONTRARY IN THE ABSENCE OF REGISTRATION TH E ASSESSEE WOULD BE DEPRIVED OF CLAIMING SUCH BENEFIT EVEN THOUGH IT IS OTHERWISE ENTITLED FOR THE SAME EITHER IN RESPECT OF THE ENTIRE INCOME OR A PART THEREOF. SUB MISSION FURTHER IS THAT THE 5 GROUNDS TAKEN BY THE COMMISSIONER OF INCOME-TAX IN THE INSTANT CASE DO NOT CONSTITUTE ANY VALID REASON FOR REJECTION OF REGIST RATION AND THEREFORE ALSO THE ORDER OF THE ITAT CANNOT BE INTERFERED WITH NOR AN Y SUBSTANTIAL QUESTION OF LAW ARISES IN THE APPEAL SO AS TO WARRANT ANY INTERFERE NCE. 30. ON A READING OF PROVISIONS OF SUB-CLAUSES ( A ) AND ( B ) OF SECTION 12AA IT MAKES CLEAR THAT THE COMMISSIONER HAS TO SATISFY HI MSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION AND ALSO ABOUT THE OBJECTS OF THE TRUST OR THE INSTITUTION. 31. ON BEING SATISFIED ABOUT THE GENUINENESS OF THE AC TIVITIES OF THE TRUST OR THE INSTRUCTION AND ALSO ABOUT ITS OBJECTS THE COMMISS IONER WOULD EITHER GRANT THE CERTIFICATE OR WOULD REJECT THE PRAYER. IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE I NSTITUTION HE CAN CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST OR THE INST ITUTION AS HE THINKS NECESSARY AND HE IS ALSO EMPOWERED TO MAKE SUCH ENQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF. 32. THE OBJECTS OF THE TRUST CAN BE HAD FROM THE BYE-L AWS OR THE DEED OF TRUST AS THE CASE MAY BE AND UNLESS OF COURSE THE OBJECTS OF THE TRUST APPARENTLY MAKE OUT THAT THEY WERE NOT IN CONSONANCE WITH THE PUBLIC PO LICY OR THAT THEY WERE NOT THE OBJECTS OF ANY CHARITABLE PURPOSE REGISTRATION CAN NOT BE REFUSED ACCORDINGLY ON THIS GROUND. 33. IN REGARD TO THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION WHOSE OBJECTS DO NOT RUN CONTRARY TO PUBLIC POLICY AND ARE IN FACT RELATED TO CHARITABLE PURPOSES THE COMMISSIONER IS AGAIN EMPO WERED TO MAKE ENQUIRIES AS HE THINKS FIT. IN CASE THE ACTIVITIES ARE NOT GENUI NE AND THEY ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST/SOC IETY OR THE INSTITUTION OF COURSE THE REGISTRATION CAN AGAIN BE REFUSED. BUT ON MERE PRESUMPTIONS AND ON SURMISES THAT INCOME DERIVED BY THE TRUST OR THE INSTITUTION IS BEING MISUSED OR THAT THERE IS SOME APPREHENSION THAT THE SAME WOULD NOT BE USED I N THE PROPER MANNER AND FOR THE PURPOSES RELATING TO ANY CHARITABLE PURPOSE RE JECTION CANNOT BE MADE. 34. SECTION 12AA WHICH LAYS DOWN THE PROCEDURE FOR RE GISTRATION DOES NOT SPEAK ANYWHERE THAT THE COMMISSIONER WHILE CONSIDERING T HE APPLICATION FOR REGISTRATION SHALL ALSO SEE THAT THE INCOME DERIVE D BY THE TRUST OR THE INSTITUTION IS EITHER NOT BEING SPENT FOR CHARITABLE PURPOSE OR SU CH INSTITUTION IS EARNING PROFIT. THE LANGUAGE USED IN THE SECTION ONLY REQUIRES THAT ACTIVITIES OF THE TRUST OR THE INSTITUTION MUST BE GENUINE WHICH ACCORDINGLY WOUL D MEAN THEY ARE IN CONSONANCE WITH THE OBJECTS OF THE TRUST/INSTITUTIO N AND ARE NOT MERE CAMOUFLAGE BUT ARE REAL PURE AND SINCERE NOR AGAINST THE PRO POSED OBJECTS. THE PROFIT EARNING OR MISUSE OF THE INCOME DERIVED BY CHARITABLE INSTI TUTION FROM ITS CHARITABLE ACTIVITIES MAY BE A GROUND FOR REFUSING EXEMPTION ONLY WITH RESPECT TO THAT PART 6 OF THE INCOME BUT CANNOT BE TAKEN TO BE A SYNONYM T O THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION. 35. THIS IS MORE EVIDENT IF WE SEE THE PROVISIONS OF S ECTION 11 WHICH WHILE EXEMPTING THE INCOME GIVEN IN ITS VARIOUS SUB-CLAUS ES FROM BEING INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME FOR EXAMPLE IN SUB-CLAUSE (1) SAYS INCOME DERIVED FRO M PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA; AND WHERE ANY SU CH INCOME IS ACCUMULATED OR SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA TO THE EXTENT TO WHICH THE INCOME SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF FIFTEEN PER CENT OF THE INCOME FROM SUCH PROPERTY. 36. THE AFORESAID PROVISION THUS CLARIFIES THAT ALL T HAT INCOME WHICH IS DERIVED FROM THE PROPERTY HELD UNDER THE TRUST WHOLLY FOR C HARITABLE PURPOSES OR RELIGIOUS PURPOSES SHALL STAND EXEMPTED TO THE EXTENT TO WHI CH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA BUT IF THE INCOME IS ACCUMUL ATED OR SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA THE SAME SHA LL NOT BE IN EXCESS OF FIFTEEN PER CENT OF THE INCOME FROM SUCH PROPERTY. 37. SUB-SECTION (2) OF SECTION 11 STATES ABOUT A SITUA TION WHERE EIGHTY FIVE PER CENT OF THE INCOME REFERRED TO IN CLAUSE ( A ) OR CLAUSE ( B ) OF SUB-SECTION (1) READ WITH THE EXPLANATION TO THAT SUB-SECTION IS NOT APPLIED OR IS NOT DEEM ED TO HAVE BEEN APPLIED TO CHARITABLE OR RELIGIOUS PURPOSES I N INDIA DURING THE PREVIOUS YEAR BUT IS ACCUMULATED OR SET APART EITHER IN WHOLE OR IN PART FOR APPLICATION TO SUCH PURPOSES IN INDIA AND SAYS THAT IN SUCH A SITUATIO N SUCH INCOME SO ACCUMULATED OR SET APART SHALL NOT BE INCLUDED IN THE TOTAL INC OME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME PROVIDED THE CONDI TIONS GIVEN IN SUB-CLAUSES ( A ) AND ( B ) ARE COMPLIED WITH. 38. THIS ALSO MEANS THAT EVEN THAT INCOME WHICH COULD NOT BE EXEMPTED UNDER SUB-CLAUSE ( A ) OR ( B ) OF SUB-SECTION (1) CAN STILL BE EXEMPTED IF THE CONDITIONS ATTACHED TO SUB-SECTION (2) IN ITS SUB-CLAUSES ( A ) AND ( B ) ARE COMPLIED WITH. 39. SUB-SECTION (3) AGAIN SAYS THAT IF ANY INCOME REFE RRED TO IN SUB-SECTION (2) IS APPLIED TO PURPOSES OTHER THAN CHARITABLE OR RELIGI OUS PURPOSES AS AFORESAID OR CEASES TO BE ACCUMULATED OR SET APART FOR APPLICATI ON THERETO OR CEASES TO REMAIN INVESTED OR DEPOSITED IN ANY OF THE FORMS OR MODES SPECIFIED IN SUB-SECTION (5) OR IS NOT UTILISED FOR THE PURPOSE FOR WHICH IT IS SO ACCUMULATED OR SET APART DURING THE PERIOD REFERRED TO IN CLAUSE ( A ) OF THAT SUB-SECTION OR IN THE YEAR IMMEDIATELY FOLLOWING THE EXPIRY THEREOF OR IS CREDITED OR PAI D TO ANY TRUST OR INSTITUTION REGISTERED UNDER SECTION 12AA OR TO ANY FUND OR INS TITUTION OR TRUST OR INSTITUTION REGISTERED UNDER SECTION 12AA OR TO ANY FUND OR INS TITUTION OR TRUST OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL 7 INSTITUTION REFERRED TO IN SUB-CLAUSE ( IV ) OR SUB-CLAUSE ( V ) OR SUB-CLAUSE ( VI ) OR SUB- CLAUSE ( VIA ) OF CLAUSE ( 23C ) OF SECTION 10 SHALL BE DEEMED TO BE THE INCOME O F SUCH PERSON OF THE PREVIOUS YEAR IN WHICH IT IS SO APPLIED OR CEASES TO BE ACCUMULATED OR SET APART OR CEASES TO REMAIN SO INV ESTED OR DEPOSITED OR CREDITED OR PAID OR AS THE CASE MAY BE OF THE PREVIOUS YEA R IMMEDIATELY FOLLOWING THE EXPIRY OF THE PERIOD AFORESAID. 40. SECTION 12 ALSO ONLY SAYS THAT ANY VOLUNTARY CONTR IBUTIONS RECEIVED BY A TRUST CREATED WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES OR BY AN INSTITUTION ESTABLISHED WHOLLY FOR SUCH PURPOSES SHALL FOR THE PURPOSES OF SECTION 11 BE DEEMED TO BE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLL Y FOR CHARITABLE OR RELIGIOUS PURPOSES AND THE PROVISIONS OF THAT SECTION AND SEC TION 13 SHALL APPLY ACCORDINGLY. 41. THE PROVISION THUS EMPHASIZES UPON THE INCOME OF THE TRUST CREATED WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES OR AN INSTITUT ION ESTABLISHED WHOLLY FOR SUCH PURPOSES AND SO IS THE CASE IN SUB-SECTION (2) OF T HE AFORESAID SECTION. THE PROVISIONS OF SECTION 13 EXCLUDES THE APPLICABILITY OF SECTION 11 IN CERTAIN CASES. 42. A CUMULATIVE READING OF THE AFORESAID PROVISIONS L EAVES NO MANNER OF DOUBT THAT EXEMPTION UNDER THE AFORESAID PROVISIONS CAN B E CLAIMED WITH RESPECT TO THE INCOME DERIVED BY THE TRUST OR THE INSTITUTION WHI CH IS BEING RUN FOR A CHARITABLE PURPOSE AND THEREFORE WHILE CONSIDERING THE REGIS TRATION UNDER SECTION 12AA THE SCOPE OF ENQUIRY OF THE COMMISSIONER WOULD BE LIMI TED TO THE AFORESAID EXTENT. 43. SINCE IN THE ABSENCE OF SUCH REGISTRATION THE TRU ST OR THE INSTITUTION WOULD NOT BE ENTITLED TO CLAIM ANY EXEMPTION OF THE INCOME DE RIVED THOUGH IT IS BEING RUN FOR CHARITABLE PURPOSES THE REGISTRATION HAS TO BE CONSIDERED IN THE LIGHT OF THE SPECIFIC PROVISIONS AFORESAID AND IN THE MANNER THA T IT FURTHERS THE OBJECT OF THE SCHEME OF REGISTRATION AND OF COURSE EXEMPTION OF THE ENTIRE INCOME OR THE PART OF THE INCOME AS THE CASE MAY BE OF A CHARITABLE TRUST OR INSTITUTION HAS TO BE CONSIDERED DURING ASSESSMENT PROCEEDINGS. 44. IT IS SIGNIFICANT TO MENTION THAT REGISTRATION UND ER SECTION 12AA DOES NOT NECESSARILY ENTITLE THE ASSESSEE TO GET THE INCOME EXCLUDED FROM THE INCOME OF THE PREVIOUS YEAR FOR THE PURPOSE OF DETERMINATION OF T AX LIABILITY BUT IT ONLY ENTITLES THE ASSESSEE TO CLAIM SUCH EXEMPTION WHICH OTHERWI SE COULD NOT BE CLAIMED IN THE ABSENCE OF REGISTRATION. THE ENQUIRY BY THE COM MISSIONER SHALL REMAIN RESTRICTED TO THE EXAMINA-TION AS TO WHETHER THE A SSESSEE WHO HAS MOVED THE APPLICATION FOR REGISTRATION UNDER SECTION 12A IS ACTUALLY IN THE ACTIVITIES WHICH ARE GENUINE. GENUINENESS OF THE ACTIVITIES OF THE T RUST OR THE INSTITUTION HAS TO BE SEEN KEEPING IN MIND THE OBJECTS THEREOF WHICH NE CESSARILY MEANS THAT THE COMMISSIONER SHALL SATISFY HIMSELF ABOUT THE FACT T HAT THE ACTIVITIES ARE GENUINE AND IN CONSONANCE WITH THE OBJECTS OF THE TRUST OR THE INSTITUTION. IN OTHER WORDS IF ESTABLISHING AND RUNNING A SCHOOL IS THE OBJECT OF THE SOCIETY AS GIVEN IN ITS BYE- 8 LAWS IT HAS TO BE SATISFIED THAT THE SOCIETY HAS E STABLISHED THE SCHOOL WHERE EDUCATION IS BEING IMPARTED AS PER RULES AND THE FA CTUM OF ESTABLISHMENT AND RUNNING SCHOOL IS A GENUINE ACTIVITY. THE ENQUIRY R EGARDING GENUINENESS OF THE ACTIVITIES CANNOT BE STRETCHED BEYOND THIS. 45. SUFFICIENT SAFEGUARDS HAVING BEEN GIVEN IN SECTION S 11 12 AND 13 FOR ASSESSING THE INCOME WHICH HAS NOT BEEN APPLIED TO THE PURPOSE OF THE TRUST OR THE INSTITUTION THE INTENTION OF THE LAW MAKER AND THE SCOPE AND PURPORT OF THE PROVISION IS APPARENT WHILE CONSIDERING THE QUESTIO N OF REGISTRATION. 46. THE SCHEME OF SECTION 12A AND SECTION 12AA DOES NO T ALLOW ANY PERSON/TRUST OR INSTITUTION TO TAKE BENEFIT OF THE PROVISIONS OF SECTION 11 SECTION 12 AS THE CASE MAY BE UNLESS REGISTRATION UNDER SECTION 12AA IS O BTAINED AND THAT SUB-CLAUSE (3) OF SECTION 12AA PUTS COMPLETE CONTROL OVER THE ACTI VITIES OF THE TRUST OR THE INSTITUTION AND IF IT IS FOUND AT ANY SUBSEQUENT ST AGE THAT ITS ACTIVITIES ARE NOT BEING CARRIED AS PER THE OBJECTS OR THEY DO NOT REM AIN GENUINE ACTION FOR CANCELLATION OF REGISTRATION CAN BE TAKEN. 4. SIMILARLY IN RELATION TO REGISTRATION TO BE GRA NTED UNDER SECTION 12AA WHILE DISCUSSING THE PROVISIONS OF SECTION 12A THE HONBLE ALLAHABA D HIGH COURT IN THE CASE OF FIFTH GENERATION EDUCATION SOCIETY VS. CIT 185 ITR 634 HAS HELD AS UNDER :- A READING OF SECTION 12A OF THE INCOME-TAX ACT 19 61 SHOWS THAT REGISTRATION UNDER THE SECTION IS A PRECONDITION FO R AVAILING OF THE BENEFIT UNDER SECTIONS 11 AND 12. SECTION 11 PROVIDES FOR EXEMPT ION OF INCOME WHICH IS APPLIED FOR CHARITABLE PURPOSES. SECTION 12 IS IN THE NATU RE OF AN EXPLANATION TO SECTION 11. BEFORE A PERSON CAN CLAIM THE BENEFIT OF SECTI ON 11 OR SECTION 12 AS THE CASE MAY BE HE MUST OBTAIN REGISTRATION UNDER SECTION 1 2A. THE APPLICATION FOR REGISTRATION UNDER SECTION 12A HAS TO BE MADE IN FO RM NO.10A PRESCRIBED BY RULE 17A OF THE INCOME-TAX RULES 1962 BEFORE THE EXPIR Y OF ONE YEAR FROM THE DATE OF CREATION OF THE TRUST OR THE ESTABLISHMENT OF THE I NSTITUTION WHICHEVER IS LATER. IT HAS TO BE MADE BY THE PERSON IN RECEIPT OF THE INCO ME OF THE TRUST. AT THAT STAGE THE COMMISSIONER IS NOT REQUIRED TO EXAMINE THE APP LICATION OF INCOME. ALL THAT HE MAY EXAMINE IS WHETHER THE APPLICATION IS MADE I N ACCORDANCE WITH THE REQUIREMENTS OF SECTION 12A READ WITH RULE 17A OF T HE INCOME TAX RULES 1962 AND WHETHER FORM NO.10A HAS BEEN PROPERLY FILLED UP . HE MAY ALSO SEE WHETHER THE OBJECTS OF THE TRUST ARE CHARITABLE OR NOT. MERELY BECAUSE THE OBJECTS OF A CHARITABLE TRUST AR E GENERAL THEY DO NOT CEASE TO BE CHARITABLE. IT IS ALSO NOT THE REQUIRE MENT OF SECTION 12A THAT ANY ACTIVITY SHOULD BE CARRIED ON BY THE CHARITABLE SOC IETY FOR OBTAINING REGISTRATION. 9 5. IF THE FACTS OF CASE OF THE ASSESSEE ARE SEEN FR OM THE LAW EXPLAINED IN THE AFORESAID CASES IT WILL BE REQUIRED TO SEE THAT WHETHER THE OBJECTS OF THE ASSESSEE TRUST IS CHARITABLE IN NATURE. IN OUR OPINION THERE IS NO DISPUTE ABOUT THE FACT THA T THE OBJECTS OF THE ASSESSEES TRUST ARE CHARITABLE IN NATURE RATHER THE CIT HIMSELF HAS OBS ERVED IN THE ORDER THAT THE OBJECTS OF THE ASSESSEE SOCIETY AS PER THE MEMORANDUM OF ASSOCIATI ON ARE CHARITABLE IN NATURE. THE SECOND POINT WHICH IS REQUIRED TO BE EXAMINED IS THE GENUI NENESS OF THE ACTIVITIES OF THE TRUST WHOSE OBJECTS DO NOT RUN CONTRARY TO THE PUBLIC POLICY. IN THAT EVENT THE CIT IS EMPOWERED TO MAKE ENQUIRY AS HE THINKS FIT. IN CASE THE ACTIVITIES A RE NOT GENUINE AND IF THEY ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH OBJECTS OF THE TRUST/SOCIETY OR THE INSTITUTION OF COURSE REGISTRATION CAN AGAIN BE REFUSED. BUT IN THE PRESENT CASE THE CI T ON THE BASIS OF THE INSPECTORS REPORT TOOK THE VIEW THAT THE ACTIVITIES OF SOCIETY ARE NOT GEN UINE AND THE INSPECTOR IN HIS REPORT STATED THAT ON THE GIVEN ADDRESS NO OFFICE OF THE SOCIETY WAS FOUN D NOR ANY ACTIVITIES WERE FOUND TO BE CARRIED OUT BY THE ASSESSEE SOCIETY. THIS REPORT IS DATED 27.11.2009. AFTER THAT WE NOTED THAT NO OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO CONFRONT W ITH THE REPORT OF THE INSPECTOR. IN OUR OPINION MERELY RELYING ON THE REPORT OF THE INSPECTOR WILL NOT BE SUFFICIENT EVIDENCE TO COME TO THE CONCLUSION THAT THE SOCIETY IS NOT GENUINE. RULE O F NATURAL JUSTICE DEMANDS THAT THE PERSON AT THE BACK OF WHOM EVIDENCES ARE RELIED WHICH ARE COLLECT ED AT HIS BACK MUST BE GIVEN AN OPPORTUNITY TO CONFRONT THOSE EVIDENCES. FROM THE ORDER PASSED UNDER SECTION 12AA WE NOTED THAT NO SUCH OPPORTUNITY WAS GIVEN TO THE ASSESSEE. WE ACCORDI NGLY SET ASIDE THE ORDER OF THE CIT AND RESTORE THIS ISSUE TO THE FILE OF THE CIT WITH THE DIRECTION THAT THE CIT SHALL RE-DECIDE THE ISSUE REGARDING THE REGISTRATION TO THE ASSESSEE UNDER SE CTION 12AA OF THE ACT IN ACCORDANCE WITH THE LAW PRONOUNCED BY THE JURISDICTIONAL HIGH COURT IN THE AFORESAID CASES. THE ASSESSEE IS ALSO DIRECTED TO PROVIDE THE NECESSARY INFORMATION AS MA Y BE DESIRED BY THE CIT IN THIS REGARD. 10 6. COMING TO THE SECOND APPEAL WHICH IS AGAINST THE REFUSAL OF THE APPROVAL UNDER SECTION 80G(5)(VI) OF THE ACT WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE LD. A.R. SECTION 80G(5)(VI) READ WITH RULE 11AA EMPOWERS THE CIT TO REJECT THE APPLICATION FOR APPROVAL AFTER RECORDING THE REASONS FOR SUCH REJECTION IN W RITING ONLY IF THE COMMISSIONER IS SATISFIED THAT ONE OR MORE OF THE CONDITIONS LAID DOWN IN CLAUSE ( I) TO (V) OF SECTION 80G(5) ARE NOT FULFILLED. SECTION 80G(5)(I) TO (V) LAYS DOWN AS UNDER :- (I) WHERE THE INSTITUTION OR FUND DERIVES ANY INCO ME SUCH INCOME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME UNDER THE PROVISIO NS OF SECTION 11 AND 12 OR CLAUSE (23AA) OR CLAUSE (23C) OF SECTION 10 : [ PROVIDED THAT WHERE AN INSTITUTION OR FUND DERIVES ANY INCO ME BEING PROFITS AND GAINS OF BUSINESS THE CONDITION THAT SUCH INCO ME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME UNDER THE PROVISIONS OF SECTION 11 SHALL NOT APPLY IN RELATION TO SUCH INCOME IF - (A) THE INSTITUTION OR FUND MAINTAINS SEPARATE BOOK S OF ACCOUNT IN RESPECT OF SUCH BUSINESS; (B) THE DONATIONS MADE TO THE INSTITUTION OR FUND A RE NOT USED BY IT DIRECTLY OR INDIRECTLY FOR THE PURPOSES OF SUCH BUSINESS; AND (C) THE INSTITUTION OR FUND ISSUES TO A PERSON MAKI NG THE DONATION A CERTIFICATE TO THE EFFECT THAT IT MAINTAINS SEPARATE BOOKS OF A CCOUNT IN RESPECT OF SUCH BUSINESS AND THAT THE DONATIONS RECEIVED BY IT WILL NOT BE USED DIRECTLY OR INDIRECTLY FOR THE PURPOSES OF SUCH BUSINESS;] (II) THE INSTRUMENT UNDER WHICH THE INSTITUTION OR FUND IS CONSTITUTED DOES NOT OR THE RULES GOVERNING THE INSTITUTION OR FUND DO NOT CON TAIN ANY PROVISION FOR THE TRANSFER OR APPLICATION AT ANY TIME OF THE WHOLE OR ANY PART OF THE INCOME OR ASSETS OF THE INSTITUTION OR FUND FOR ANY PURPOSE O THER THAN A CHARITABLE PURPOSE; (III) THE INSTITUTION OR FUND IS NOT EXPRESSED TO B E FOR THE BENEFIT OF ANY PARTICULAR RELIGIOUS COMMUNITY OR CASTE; (IV) THE INSTITUTION OR FUND MAINTAINS REGULAR ACCO UNTS OF ITS RECEIPTS AND EXPENDITURE; (V) THE INSTITUTION OR FUND IS EITHER CONSTITUTED A S A PUBLIC CHARITABLE TRUST OR IS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT 18 60 (21 OF 1860) OR UNDER ANY LAW CORRESPONDING TO THAT ACT IN FORCE IN ANY PART OF INDIA OR UNDER SECTION 25 OF 11 THE COMPANIES ACT 1956 (1 OF 1956) OR IS A UNIVER SITY ESTABLISHED BY LAW OR IS ANY OTHER EDUCATIONAL INSTITUTION RECOGNIZED BY THE GOVERNMENT OR BY A UNIVERSITY ESTABLISHED BY LAW OR AFFILIATED TO ANY UNIVERSITY ESTABLISHED BY LAW OR IS AN INSTITUTION FINANCED WHOLLY OR IN PAT BY T HE GOVERNMENT OR A LOCAL AUTHORITY. 7. FROM THE ORDER OF REFUSAL OF APPROVAL PASSED UND ER SECTION 80G(5) WE NOTED THAT THE APPROVAL HAS ALSO BEEN REFUSED ONLY ON THE BASIS TH AT IN THE OPINION OF THE CIT THE SOCIETY AND ITS ACTIVITIES ARE NOT GENUINE. FOR COMING TO THIS CON CLUSION THE CIT HAS MERELY RELIED ON THE REPORT OF THE INSPECTOR DATED 27.11.2009 ON WHICH HE RELIE D FOR NOT GRANTING THE REGISTRATION UNDER SECTION 12AA. WE HAVE ALREADY SET ASIDE THE ORDER OF NOT GRANTING REGISTRATION UNDER SECTION 12A AND RESTORED THE FILE TO THE CIT. WE ACCORDIN GLY ON THE SAME REASONING SET ASIDE THE ORDER THE CIT FOR REFUSING THE APPROVAL UNDER SECTION 80G AND RESTORE THIS ISSUE ALSO TO THE FILE OF THE CIT WITH THE DIRECTION THAT THE CIT SHALL RE-EXAMIN E THE ISSUE AFTER GIVING PROPER AND SUFFICIENT OPPORTUNITY TO THE ASSESSEE AND AFTER POINTING OUT SPECIFICALLY WHICH CONDITION THE ASSESSEE DID NOT FULFILL AS STIPULATED UNDER SECTION 80G(5)(I)TO (V). 8. IN THE RESULT BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 27.08.2010). SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 27 TH AUGUST 2010. PBN/* 12 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR ITAT AGRA BENCH AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL AGRA TRUE COPY