Chandramohan Garg, J.M.-This appeal by the assessee has been directed against the order of the CIT, Faridabad dated 26.9.2014 passed u/s 12AA(1)(b)(ii) of the Income Tax Act, 1961 (for short the Act).
2. The sole effective ground raised by the assessee reads as under:-
“That the ld. CIT erred in rejecting the application of the assessee for registration u/s 12AA although the trust fulfils all the conditions for registration and all the objects and activities of the Trust are eligible for grant of registration u/s 12AA of the Act.”
3. Briefly stated the facts giving rise to this appeal are that the appellant trust was created on 2.8.11 and registered with Joint Registrar under the Public Trust Act in the name and style of Swami Dayanand Educational Trust. Gurgaon. The appellant filed an application for registration u/s 12AA of the Act before the CIT, Faridabad on 19.3.14 accompanied by a copy of the Trust deed and other relevant documents. In order to verify the nature of assessee appellant’s objects, the Commissioner issued some questionnaires and replies were filed by the appellant. Ld. CIT, Faridabad, however, held that the applicant trust failed to substantiate its claim that its aims and objects mentioned in the Memorandum of Association are charitable in nature and the appellant could not produce any conclusive evidence to prove the genuineness of the activities of the Trust despite sufficient opportunities accorded to the applicant. Consequently, the CIT, Faridabad rejected the application of the appellant Trust for registration u/s 12AA of the Act. Now, the empty handed appellant is before this Tribunal with the sole ground as reproduced hereinabove.
4. We have heard arguments of both the sides and carefully perused the relevant material placed on record. Learned counsel of the assessee submitted that all objects of the appellant Trust are charitable in nature as per clause (iii) of the Trust deed which also shows that the trust is created wholly for charitable purposes and not for the benefit of any particular religion or caste or to carry on any business for profit. Learned counsel of the appellant further submitted that income of the appellant trust is not for the benefit of any particular individual person or office bearer of the assessee and the application was made in Form 10A along with all relevant documents which reveals charitable purposes of the activities of the appellant trust. Learned counsel of the assessee vehemently contended that for assessment year 2012-13, the appellant trust was assessed u/s 143(3) of the Act and nil returned income was accepted as per order dated 5.11.2014 available on assessee’s paper book page 17 to 19. Learned counsel of the assessee also submitted that all statutory conditions for grant of registration u/s 12AA of the Act are fulfilled and it is a well-settled proposition that for grant of registration u/s 12AA of the Act, the only inquiry required to be made by the CIT is that the aims and objects of the applicant trust should be charitable in nature and trust should be genuine. To support this proposition, learned counsel of the assessee has relied on the following judgements/orders of Hon'ble High Court and coordinate benches of the Tribunal:-
i) Fifth Generation Education Society vs CIT 185 ITR 634 (All)
ii) Mormugao Port Trust vs CIT 109 ITD 303 (Panaji)
iii) Malli Ram Charitable Trust v CIT 260 ITR (AT) 118 (Amr)
5. It was further submitted that the main objections of the CIT are that:- i) the appellant has undertaken only one object of running the school out of 21 objects. ii) all the trustees appear to be from one family/relatives iii) The Trust could be dissolved by ¾ majority of trustees and therefore trust is not irrevocable. iv) The Trust deed provides for amending the Trust which could not be provided as per judgment of Hon'ble Supreme Court in the case of HEH Nizam’s Pilgrimage Money Trust vs CIT 243 ITR 676 (S.C.). v) The Trust has not maintained proper minutes books.
6. Learned counsel of the assessee contended that all these allegations are baseless and have no relevance with the satisfaction of the CIT which is required for the purpose of grant of registration u/s 12AA of the Act.
7. Learned counsel of the assessee submitted that there is no statutory condition that Trust should undertake all of these objects from the very beginning of the activities of the Trust. He further submitted that there is no rider that the relatives could not be trustees of a trust, however, in the present case, trustees belong to three different families which is clear from their names and addresses reproduced by the CIT himself in para no. 3.1 of the impugned order. To support this contention, learned counsel of the assessee has relied on the judgment of ITAT Ahmedabad in the case of Jupiter Medical Research Centre Trust 128 TTJ (Ahmedabad) (UO) (118) and submitted that even the trustees could be from one family and in the present case, trustees are from three different families. Learned counsel of the assessee also pointed out that in some extraordinary situation, the trust could be dissolved but clause XVI of the trust deed clearly mandates that upon dissolution of the trust, its assets shall be handed over to similar type of registered trust or to the government and shall not be distributed or paid among the trustees. Learned counsel of the assessee also pointed out that as far as the provisions of amendment in the trust deed are concerned, it is proper that trust deed could never be amended. To support this contention, ld. Counsel has relied on the judgment of Hon’ble Andhra Pradesh High Court in the case of DIT vs Ramoji Foundation 364 ITR 85 and submitted that in this case, the Hon’ble Andhra Pradesh High Court has followed the decision of Hon’ble Supreme Court in the case of CIT vs Kamla Town Trust 217 ITR 699 (S.C.).
8. Learned counsel of the assessee lastly pointed out that the applicant trust submitted all the required and relevant records of all the resolutions passed in the Board of trustees and Minutes book were duly maintained in the form of computer printout duly sanctioned by the Board of trustees and copies were filed before the CIT and originals were also produced for his kind perusal. Learned counsel of the assessee finally pointed out that the CIT rejected the application of the assessee without any basis and justified reasons, therefore, he may kindly be directed to grant registration u/s 12AA of the Act.
9. Replying to the above, ld. CIT DR placed reliance on the decision of Hon’ble Punjab & Haryana High Court in the case of CIT vs Guru Gorakh Nath Charitable Educational Society dated 5.5.2015 in I.T.A. 336/2013 and submitted that the CIT was entrusted with powers u/s 12AA of the Act to look into the activities of the Trust and to satisfy himself regarding the charitable nature of the activities. Ld. CIT DR further submitted that u/s 12AA of the Act, the provisions of section 11 & 12 shall not apply in relation to the income of any trust or institution unless various conditions are fulfilled and therefore provisions of section 12AA also give power under sub-section (3) to cancel the registration of the activities of the Trust if it is not carried out in accordance with the objects but the Commissioner has to keep in mind that it is not to act as assessing authority while deciding the application u/s 12AA of the Act and the inquiry regarding genuineness of the activities of imparting education with a charitable trust is to be kept in mind. Ld. CIT DR submitted that applicant trust did not receive any donation for charity and there was no charitable purpose in the activities conducted by the applicant trust, therefore, the CIT, Faridabad was justified in rejecting the application of the assessee.
10. Replying to the above, learned counsel of the assessee also submitted € rejoinder and submitted that charging of fees is not a bar as per judgment of Hon'ble Supreme Court in the case of Aditanar Educational Institution vs ACIT 224 ITR 310.
11. We have heard the rival submissions and carefully perused the relevant material placed on record, inter alia, impugned order of CIT(A) and judgment/orders relied by both the parties. At the very outset, we note that section 12A of the Act provides conditions for applicability of section 11 and 12 of the Act and section 12AA of the Act provides procedure for registration u/s 12AA of the Act. The provisions of section 12AA of the Act provide that the Commissioner shall call for documents, information and conduct inquiries to satisfy about the genuineness of the activities of the trust or institution and after recording satisfaction about the charitable or religious nature of the objects and genuineness of the trust or institution, CIT will pass an order granting registration u/s 12AA of the Act. It is further provided that if the CIT is not so satisfied, the provisions of section 12AA of the Act require him to pass an order rejecting such application of registration and section 12AA of the Act prescribes and provides the scope and ambit of the inquiry that the commissioner is authorised to carry out at the time of grant of registration u/s 12AA of the Act to a Trust or institution. From these provisions, it is amply clear that the scope and ambit of the inquiry revolves around the nature of objects being charitable or religious and the genuineness of the activities of the trust or institution. At this juncture, it is relevant to take respectful cognizance of the judgment of Hon’ble Karnataka High Court in the case of Sanjeevamma Hanumath Gowda Charitable Trust vs DIT(E) reported as 285 ITR 327 (Karnataka) wherein their lordships have set out the guidelines for the purpose of grant of registration u/s 12AA of the Act and has held that the registration granting authorities have to be satisfied about the genuineness of the activities of the Trust or institution and they are required to see that how the income derived from the trust property is applied to charitable purposes.
12. In the present case, on careful perusal of impugned order, we note that the CIT has considered irrelevant factors in rejecting the application of the appellant trust. The objects of the applicant trust as mentioned in Trust deed are charitable in nature and the application for registration cannot be rejected merely because applicant trust undertook only one activity out of 21 objects and activities proposed in the trust deed. So far as the allegation of the CIT that the income derived by the trust either by way of donation or by way of fees from the students is concerned, there is no allegation that the receipts from fees were applied or used by the assessee trust for the purpose other than the aims and objects of the trust. From the impugned order, we further note that it is not the allegation of the CIT that the fees charged from the institutions or donations received have been used for the purposes other than running the institution managed by the assessee trust. Admittedly and undisputedly, this fact has been noted by the CIT that the appellant trust is running a school as per its charitable objects and it is not the allegation of the CIT that the activities carried on by the assessee trust are not in consonance with its objects as per trust deed.
13. At this juncture, we respectfully note that the ratio of the decision of Hon'ble Punjab & Haryana High Court in the case of CIT vs Guru Gorakh Nath Charitable Educational Society (supra) does not provide any benefit in favour of the revenue because in that case, the applicant society failed to submit relevant material before the CIT which is not the situation in the present case. Therefore, in view of the decision of Hon’ble Karnataka High Court in the case of Sanjeevamma Hanumath Gowda Charitable Trust vs DIT(E) (supra), we are of the considered opinion that the ld. CIT was not justified in rejecting the application of the assessee for grant of registration u/s 12A of the Act as he considered irrelevant facts and material while rejecting the application of the assessee. Finally, we are of the considered view that as per objects of the applicant trust, if only one activity of running of school for charitable purposes is being undertaken and other activities are not being carried out, then this cannot be a basis of rejection of registration u/s 12A of the Act. So far as the charging of fee is concerned, if appellant trust is charging fees from the students to meet day to day expenses of the school which is in accordance with the prescribed rule of the state educational department, then it cannot be alleged that the applicant trust is earning income from fees beyond the ambit of charitable activity as per trust deed. The CIT has not demolished this contention of the applicant that the trust is charging reasonable fees from students and it also gives concession from time to time to the poor and more deserving students. At the time of grant of registration, the CIT is not required to act as the Assessing Officer, especially when the concerned Assessing Officer has passed an assessment order u/s 143(3) of the Act for assessment year 2012-13.
14. On this issue, it is relevant and necessary to take respectful cognizance of the order of Hon'ble Punjab & Haryana High Court in the case of CIT-I vs Baba Kartar Singh Dukki Educational Trust reported as 221 Taxman 493 (P&H) wherein speaking for the Jurisdictional High Court, their lordships held as follows:-
“4. We have heard counsel for the parties, perused the impugned order as well as the order passed by the Commissioner of Income -tax and the substantial questions of law but find no reason to hold that the impugned order suffers from any error or raises a substantial questions of law much less questions of law framed by the revenue. The object of Section 12AA of the Act is to examine the genuineness of the objects of the Trust and though while examining genuineness, the income as well as resources of the Trust may be taken into consideration but any suspicion as to these facts cannot be the sole criteria for rejecting an application under Section 12A of the Act. This apart, there appears to be a misconception amongst officers exercising power under Section 12AA of the Act that if a trustee is a life long member of a Trust, it automatically raises an inference that the Trust is not charitable. The fact that a trustee is a life member, may be relevant but cannot by itself lead to a finding that the Trust is not charitable.”
15. Our conclusion also finds support from above noted dicta of Hon'ble Jurisdictional High Court. Furthermore, as per dicta laid down by Hon'ble Karnataka High Court case of DIT vs Garden City Educational Trust 191 Taxman 238 (Kar), as relied by the appellant, the manner of application of funds and as to whether the assessee can claim benefit of exemption in terms of section 11and 12 are the questions which have to be examined by the Assessing Officer at the stage when it is urged and not by the CIT while considering the application for grant of registration u/s 12A of the Act.
16. On the basis of foregoing discussion, we are of the view that the CIT rejected an application for registration u/s 12AA of the Income Tax Act, 1961 without any justified reason and basis despite the fact that the objects of the applicant trust are charitable and no allegation has been brought out on record by the CIT that the assessee is conducting activities beyond its object as per trust deed or fees and donations are being used for the activities which are not charitable and beyond the ambit of the objects of the assessee applicant trust, hence, we direct the CIT that the applicant trust should be granted registration u/s 12A of the Act and accordingly we direct the ld. CIT to grant registration to the applicant trust as per relevant provisions of the Act.
17. In the result, the appeal of the assessee is allowed.