D.b. Income Tax Appeal v. Govindam Education Trust, A

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 434 / 2009 Commissioner of Income Tax, Jaipur-II, Jaipur. ----Appellant Versus Govindam Education Trust, A-1, Shakti Nagar, J.L.N. Marg, Jaipur. ----Respondent _____________________________________________________For Appellant(s) : Mr. R.B. Mathur with Mr. K.D. MathurFor Respondent(s) : Mr. Anant Kasliwal _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHURJudgment Per Hon’ble Jhaveri, J. 25/05/2017 1.By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal hasallowed the appeal preferred by the assessee. 2.This Court while admitting the appeal on 20.01.2010 hasframed the following substantial question of law: “Whether on the facts and in thecircumstances of the case, the ITAT wasjustified in directing to grant registration u/s12AA despite of the fact that the trust failedto furnish the required details and provethat it was not working on commerciallines?” 3.Mr. Mathur has contended that the view taken by the CIT(A)is just and proper in as much as the activity was charitable but not the commercial activity and therefore, the CIT(A) has rightlyrejected the registration. 4.However, while considering the case the Tribunal hasobserved as under: “We are of the view that under section12AA (the scope of enquiry) while decidingwhether to grant registration or not, the ld.CIT can call for such document orinformation, which he thinks necessary tosatisfy himself about the genuineness ofactivities and similarly if the ld. CIT issatisfied about the object of the Trust, heshall pass an order granting registration.Section 12AA confers power on the ld. CITwhile considering the application forregistration of a trust or institution. Section12AA does not speak any where that the ld.CIT, while considering the application forregistration, shall also see that the incomepurpose or such institution is earning profit.Profit earning or misuse of the incomederived by charitable institution from itscharitable activities may be a ground forrefusing exemption only with respect tothat part of the income but cannot be takento be a synonym to the genuineness of theactivities of the trust or the institution.There is no adverse remark by the ld. CITabout the diversion of the funds for thebenefit of the trustees or their relatives.There is a small surplus of Rs. 17,272/-(page 21) nor is there any adverse remarkson the receipt from tution fees, details ofwhich were furnished before the ld. CIT. Itwas mere presumption of ld. CIT that theappellant might have taken franchise ofDolphin Group to run the school.Disbelieving the submissions of theassessee in this regard that no suchagreement was entered into with this groupand know how about school procedure,curriculums and other systems weresupplied by them free of cost. Under thecircumstances, we are of the view that theld. CIT was not justified in rejecting theapplication for registration keeping in mindthat the Trust was set up only on 14.03.2007 and, therefore, accounts priorto the date was not possible and theappellant trust had furnished the copies ofincome and expenditure account andbalance sheet for the period after formationas well as books of account for that periodwith copies of bank statements, details ofsalary expenses and advance fee receivedetc. Under these circumstances, we whilesetting aside order of the ld. CIT in questiondirect the ld. CIT to grant registration onthe application filed by the assessee undersection 12A(a) of the Act on 8.2.2007 forthe applied period. The ground isaccordingly allowed.” 5.Taking into consideration the observations made by the 14.03.2007 and, therefore, accounts priorto the date was not possible and theappellant trust had furnished the copies ofincome and expenditure account andbalance sheet for the period after formationas well as books of account for that periodwith copies of bank statements, details ofsalary expenses and advance fee receivedetc. Under these circumstances, we whilesetting aside order of the ld. CIT in questiondirect the ld. CIT to grant registration onthe application filed by the assessee undersection 12A(a) of the Act on 8.2.2007 forthe applied period. The ground isaccordingly allowed.” 5.Taking into consideration the observations made by the Tribunal that the profit earning or misuse of the income derived bycharitable institution from its charitable activities may be a ground for refusing exemption only with respect to that part of the incomebut cannot be taken to be a synonym to the genuineness of theactivities of the trust or the institution is required to be accepted.Therefore, the view taken by the Tribunal is just and proper. 6.In that view of the matter, the issue is answered in favour ofthe assessee and against the department. 7.The appeal stands dismissed. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. Asheesh Kr. Yadav/101