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Registration of trust — Mere generation of surplus from year to year cannot be basis to hold that it exists for the purpose of the profit as sufficient safeguards have been provided whereby accumulation of income is permissible subject to the manner prescribed therein provided such accumulation is to be applied wholly and exclusively to the objects for which it is established.
Facts: Being aggrieved of the order of Tribunal, Revenue went on appeal before High Court and raised the question of law that 1. Whether on the facts and circumstances of the case the Hon'ble ITAT was right in law in setting aside the rejection order of CIT(E) and directing him to grant registration to the assessee society notwithstanding that the assessee society has not complied with the provisions of section 12A(1)(b) of the Act consequences to which the activities of the assessee society become non-genuine? 2. Whether on the facts and in circumstances of the case and in law the Hon'ble ITAT is right in allowing 12AA registration to the assessee society in spite of the fact that the activities of the society are not genuine?
Held, that while examining that an educational institution exists solely for educational purpose or for the purpose of the profit, mere generation of surplus from year to year cannot be basis to hold that it exists for the purpose of the profit as sufficient safeguards have been provided whereby accumulation of income is permissible subject to the manner prescribed therein provided such accumulation is to be applied wholly and exclusively to the objects for which it is established. In our view, the view of the CBDT is in consonance with the express wordings provided and intended by the legislature in 10(23C)(vi) and in conformity with the law laid down by the Hon'ble Supreme Court in case of Queens Education Society where it is provided that where the surplus is ploughed back for education purposes, the educational institution exists solely for educational purposes and not for purposes of profit. The same will apply with equal force in context of registration under section 12AA as similar safeguards have been provided in terms of accumulation and utilisation of surplus so generated for the purposes of charitable purposes in terms of section 11(2) of the Act. Further, there is no dispute that the objects of the assessee society are not chartiable or the activities of the assessee society are not being carried on in accordance with the stated objectives of imparting education for which it has been established. There is no adverse finding recorded by the ld CIT(E) in this regard. In light of above discussions and in the facts and circumstances of the case, we are of the considered view that the ld CIT(E) was not correct in denying the registration to the assessee society under section 12AA.

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Section 12A and 12AA of the Income Tax Act, 1961 — Trust — Registration of trust — Mere generation of surplus from year to year cannot be basis to hold that it exists for the purpose of the profit as sufficient safeguards have been provided whereby accumulation of income is permissible subject to the manner prescribed therein provided such accumulation is to be applied wholly and exclusively to the objects for which it is established.
Facts: Being aggrieved of the order of Tribunal, Revenue went on appeal before High Court and raised the question of law that 1. Whether on the facts and circumstances of the case the Hon'ble ITAT was right in law in setting aside the rejection order of CIT(E) and directing him to grant registration to the assessee society notwithstanding that the assessee society has not complied with the provisions of section 12A(1)(b) of the Act consequences to which the activities of the assessee society become non-genuine? 2. Whether on the facts and in circumstances of the case and in law the Hon'ble ITAT is right in allowing 12AA registration to the assessee society in spite of the fact that the activities of the society are not genuine?
Held, that while examining that an educational institution exists solely for educational purpose or for the purpose of the profit, mere generation of surplus from year to year cannot be basis to hold that it exists for the purpose of the profit as sufficient safeguards have been provided whereby accumulation of income is permissible subject to the manner prescribed therein provided such accumulation is to be applied wholly and exclusively to the objects for which it is established. In our view, the view of the CBDT is in consonance with the express wordings provided and intended by the legislature in 10(23C)(vi) and in conformity with the law laid down by the Hon'ble Supreme Court in case of Queens Education Society where it is provided that where the surplus is ploughed back for education purposes, the educational institution exists solely for educational purposes and not for purposes of profit. The same will apply with equal force in context of registration under section 12AA as similar safeguards have been provided in terms of accumulation and utilisation of surplus so generated for the purposes of charitable purposes in terms of section 11(2) of the Act. Further, there is no dispute that the objects of the assessee society are not chartiable or the activities of the assessee society are not being carried on in accordance with the stated objectives of imparting education for which it has been established. There is no adverse finding recorded by the ld CIT(E) in this regard. In light of above discussions and in the facts and circumstances of the case, we are of the considered view that the ld CIT(E) was not correct in denying the registration to the assessee society under section 12AA.[2018] 48 ITCD 82 (RAJ)