ORDER
Dr. Dipak P. Ripote, Accountant Member.- This is an appeal filed by the assessee against the order of ld.Principal Commissioner of Income Tax(Central), Pune under section 12AA r.w.s 254 of the Income Tax Act, 1961 dated 24.02.2016. The Assessee has raised the following grounds of appeal :
“1) On the facts and circumstances of the case and in law the Ld. CIT(Central) in deciding the issue of registration of the Education society under 5. 12AA of the Act vide his order dt. 24-02-2016 erred in not following the directions of the Hon’ble Tribunal so issued while deciding the appeal of the assessee in ITA/1280/pn/2007 vide order dt. 27 September, 2011 This has caused great prejudice to the assessee. The assessee Trust is filing this appeal in Second round after 4 years when the matter was restored to the file of Ld. CIT(Central)-Pune. The registration u/s 12AA be granted to the
2) On the facts and circumstances of the case and in law the Hon’ble Tribunal restored the issue of registration of the Trust under S. 12AA of the Act to consider the application for registration under 5. 12AA filed dt. 05-02-2007 on 12-02-2007 The Ld. CIT(Central) ought to have appreciated properly the registration application and Hon’ble Supreme Court judgment in the case of Society for the promotion of Education Adventure and Conservation of Environment (2016) 284 CTR (SC) 207 wherein the Apex Court held approving the Allhabad High Court judgment reported as (2008) 5 DTR 0329 (All) that non-consideration of registration Application within the time fixed by S. 12AA(2) would result in deemed registration. The Ld. CIT was not justified in not appreciating this issue raised before him. The registration be granted to the assessee.
3) On the facts and circumstances of the case and in law the application for registration was filed on 1202-2007 dt. 05-02-2007 that is before 01-06-2007 The provisions of law as existed prior to 01-06-2007 applied to the facts of the case. The Ld. CIT(Central) failed to consider the provisions of S. 12A(1)(a) in its proper perspective. The Commissioner had then the power to condone the delay if the application was filed after one year from the date of creation of the Trust if he gets satisfied that the Trust was prevented by sufficient cause from making the application within time and if the Commissioner was satisfied the exemption would apply from the date of creation. If not so satisfied, the exemption shall become applicable from the 1 day of the Financial year in which the application was made following thisthe Ld. Commissioner ought to have held that the assessee-Trust was entitied to registration we. f. 01-04-2006 It be held accordingly.
4) On the facts and circumstances of the case and in law the Ld. CIT(Central) relied upon the order of his predecessor CIT who had refused registration Since the same was set aside by the Higher Appellate Forum it was not in existence at all. The reliance placed by Ld. CIT as such on non-existent order was a misnomer On such basis the rejection of the application of registration u/s 12AA was not on sound judicial principle. The order of the Ld. CIT (Central) be quashed and registration be granted to the appellant society
5) On the facts and circumstances of the case and in law the Ld. CIT was not justified in ignoring the case laws cited before him after providing the copies of the same. In the circumstances the cited case laws of High Court were binding on him. The order of the CIT refusing registration be quashed and registration be granted to the assessee.
6) On the facts and circumstances of the case and in law the observation of the Hon’ble Tribunal that in fact, it is also emerging from the order of the Commissioner that there is neither any assertion of a view that the above activities carried on by the assessee are not genuine nor it is the case of the Commissioner that the activities carried on by the assessee are not in consonance with the objects.” In such circumstances the order passed by Ld. CIT be quashed and the registration be grated to the assessee
7) On the facts and circumstances of the case and in law and as regards Capitation Fees the Hon’ble Tribunal recorded a finding that with regard to the receipt of capitation Fees/donation are factors to be considered at the time of assessments while examining the eligibility of the assessee-trust for the benefit of Ss. 11 and 12 and the same do not come into play in course of the examination by the commissioner for the purpose of grant of registration under S. 12AA of the Act. In view of this the order of the CIT is not sustainable in law. It be quashed.
8) On the facts and circumstances of the case and in law The Hon’ble Tribunal further held “In our considered opinion the Commissioner has examined the application of the assessee on irrelevant consideration which were beyond the scope of enquiry envisaged under Section 12AA of the Act. The order of the Ld. CIT (Central) continues with the same findings which are irrelevant and beyond the scope of enquiry. The order of the CIT be quashed allowing registration u/s 12AA of the Act.
9) On the facts and circumstances of the case and in law and on reading para No. 4.3.3 of the order it transpires that the attempt has been made by Ld. CIT to assail the order of the Hon’ble Tribunal. This is impermissible considering the judicial propriety and sound judicial principles.
10) The appellant craves to leave, add/amend or alter any of the above grounds of appeal.”
Concise Grounds of appeal:
“1. The Ld.CIT has erred in passing order u/s.12AA r.w.s 254 of the Act and rejecting application for registration u/s.12AA of the Act to the appellant.
2. The Ld.CIT has erred in not granting registration with effect from date of formation by condoning delay in making application for registration u/s.12A of the Act.
3. The Ld.CIT has erred in not appreciating that non-consideration of the application for registration u/s.12A within the time prescribed u/s.12AA(2) of the Act would result into deemed registration to the appellant.
4. The Ld.CIT has erred in deciding the issue of registration u/s.12AA of the Act without properly following the directions of the Hon’ble Tribunal.
5. The appellant craves leave to add to, amend, alter or delete all or any of the foregoing grounds of appeal.”
Submission of Id.AR :
2. The ld.Authorised Representative(ld.AR) for the Assessee filed paper book. Ld.AR submitted that only the concise grounds shall be considered.
3. At the outset of hearing, Ground No.2 and 3 were not pressed by the Assessee.
4. Ld.AR submitted that Ld.Pr.CIT, Central, Pune vide order dated 24.02.2016 passed u/s.12AA r.w.s 254 has exceeded the jurisdiction. Ld.AR submitted that while giving effect to the ITAT Order, ld.Pr.CIT had to stick to the issues mentioned by the ITAT. ITAT in its order had specifically mentioned that receipt of Capitation Fee cannot be considered at the time of registration u/s.12AA of the Act by the Commissioner. ITAT had specifically directed Commissioner to restrict enquiry as envisaged in Section 12AA of the Act. Therefore, the order of the Pr.CIT is bad in law.
4.1 Ld.AR submitted that the Ld.Pr.CIT(Central) vide order dated 16.08.2024 has granted registration u/s.12A of the Act to the Assessee for A.Y.2022-23 to A.Y.2026-27. It means, ld.Pr.CIT was satisfied that Assessee’s activities and objects are charitable in nature. Ld.AR further submitted that during the proceedings, for registration u/s.12A the Assessee had brought to the notice of the ld.Pr.CIT the earlier order dated 24.02.2016, inspite of that Ld.Pr.CIT had granted registration u/s.12A of the Act.
4.2 Ld.AR further submitted that the additions made in earlier years have been deleted by ITAT.
4.3 Ld.AR therefore submitted that the order u/s.12AA r.w.s 254 shall be quashed and Assessee shall be granted registration u/s.12A for that period.
4.4 Ld.AR submitted that Assessee is running educational institutes and assessee has been granted status of deemed university. Ld.AR invited our attention to the paper book at page no.59 to 185.
Submission of ld.DR :
5. Ld.Departmental Representative for the Revenue relied on the order of Ld.Pr.CIT. Ld.DR submitted that assessee had taken capitation fee and hence Assessee is not eligible for registration u/s.12A of the Act.
Findings & Analysis :
6. We have heard both the parties and perused the records. This is a second round of litigation. Earlier, ld.Commssioner of Income Tax, Central, Pune vide order dated 29.08.2007 passed u/s.12AA of the Act, rejected Assessee’s application for registration u/s.12A of the Act. Assessee filed appeal before this Tribunal. ITAT in D.Y. Patel Education Society v. CIT [ITAppeal No.1280(PUNE) OF 2007, dated 27-9-2011]/ITA No.1280/pUN/2007 vide order dated 27.09.2011 set-aside the order of ld.CIT(Central) to examine the issue afresh in terms of scope of enquiry envisaged u/s.12AA(1) of the Act. The relevant paragraph of the ITAT Order in the Assessee’s case in D.Y. Patel Education Society v. CIT [ITAppeal No.1280(PUNE) OF 2007, dated 27-9-2011]/ITA No.1280/pUN/2007 is reproduced here as under :
Quote. “13. Though the assessee has denied receipt of capitation fee/donations and running on commercial lines, however, without going into the merits of such plea, the pertinent question is the consequences of acceptance of capitation fee/donations by the assessee at the stage of examining assessee’s application for registration under section 12AA of the Act. Somewhat similar situation arose before the Mumbai Bench of the Tribunal in the case of Ramarao Adik Education Society (supra) wherein the Commissioner of income-tax was considering cancellation of registration on the basis of the plea that the assessee was accepting capitation fee/donations. Following discussion by our co-ordinate Bench is relevant:
“48. Now the question is the legal consequence of the assessee accepting capitation fees / donations from students seeking admission to various courses offered by the Institutions run by the Assessee-Trust. Even in the matter of capitation fees / donations, the Commissioner of Income Tax has no case that the funds collected by the Assessee- Trust through capitation fees / donations have been used for the purposes other than running the Institutions managed by the Assessee Trust. It is to be seen that all the Institutions run and managed by the Assessee Trust are carrying on the activities envisaged in the Memorandum of Association the Assessee-Trust. It is stated by the Commissioner in his order itself that the moneys collected by the Assessee-Trust by way of capitation fees / donations are used for the purpose of not only by the Assessee-Trust but also for other Institutions of similar nature It is to be seen that application of funds for the charitable activities of another eligible Institution amounts to application of funds for charitable purposes. The law has made it very clear that the charitable activities may be carried out directly by an eligible Institution or through another eligible Institution for that matter. Therefore, those observations of the Commissioner stated to be adverse to the Assessee-Trust are not in fact prejudicial to the case of the Assessee-Trust.
49. The Karnataka High Court in the case of Sanjeevamma Hanumanthe Gowda Charitable Trust v. Director of Income Tax (Exemption) [285 ITR 327] has considered that in matters of registration and exemption of Charitable Institutions, the satisfaction of the Commissioner should be regarding the application of the income of the trust for the specified purposes, which only entitles the assessee to claim exemption. The Court observed that for arriving at such satisfaction primarily he has to look at the object of the trust, when the same is reduced into writing in the form of trust deed. If on the date of the application the trust has received income from its property, then find out how the said income has been expended, and whether it can be said that the income is utilized towards charitable and religious purposes. Therefore, for the purposes of registration u/s.12AA of the Act, what the authorities have to satisfy is the genuineness of the activities of the trust or institution and how the income derived from the trust property is applied to charitable or religious purposes and not the nature of the activity by which the income was derived to the trust.
50. The above judgment proposes that what is to be looked into is the character of application of funds and the character of the activities carried out by an assessee and not the colour and nature of the sources out of which necessary funds were collected by the assessee. In other words, the source of funds is not an important ingredient in assessing the character of the activities carried on by a Charitable Institution. The Allahabad High Court in the case of CIT v. Red Rose School has held that educational activities carried on by a Society are for charitable purposes and not against the public policy. Therefore, the activities carried on by the Assessee-Society in the present case cannot in any way held as opposed to public policy. The objection expressed by the Commissioner could at a maximum be attributed to the question of accepting capitation fees / donations. In this context, the Commissioner-DR has raised a contention that the donations received by the Assessee-Trust are not voluntary and that fact also should be contributed to justify the cancellation of the registration.”
On the basis of the aforesaid decision of the Tribunal, which has been rendered after considering the judgments of the Hon’ble Karnataka High Court in the case of Sanjevamma Hanumanthe Gowda Charitable Trust (supra) and that of the Allahabad High Court in the case of CIT v Red Rose School (All.), it is quite clear that the objection raised by the Commissioner with regard to the receipt of capitation fee/donations are factors to be considered at the time of assessments while examining the eligibility of the assessee trust for the benefit of section 11 & 12 and the same do not come into play in the course of the examination by the Commissioner for the purposes of grant of registration under section 12AA of the Act.
14. In view of the aforesaid discussion, in our considered opinion, the Commissioner has examined the application of the assessee on irrelevant considerations which were beyond the scope of enquiry envisaged under section 12AA of the Act. We, therefore, deem it fit and proper to set aside the order of the Commissioner and restore the matter back to his file to be examined afresh strictly in terms of the scope of the enquiry envisaged under section 12AA(1) of the Act.
15. In so far as the assessee’s plea for condonation of delay for filing of the application is concerned, the same in our view also deserves to be revisited by the Commissioner in the light of the decision of our co-ordinate Bench in the case of Church of Our Lady Grace (supra). We may hasten to add here that our decision to remand the issue of condonation of delay back to the file of the Commissioner is no reflection on the merits which the Commissioner shall adjudicate appropriately in accordance with law.
16. In so far as the plea of the assessee that it had been granted registration earlier, the same in our view has been rightly rejected by the Commissioner and no fault can be found with the action of the Commissioner. The Commissioner shall examine the assessee’s claim of registration on merits as contained in the application dated 12.2.2007 on the basis that the assessee did not enjoy any registration under section 12A(a) of the Act on an earlier date. Needless to say, the Commissioner shall give a reasonable opportunity of being heard to the assessee in this regard, and thereafter adjudicate in accordance with law.
17. In the result, appeal of the assessee is partly allowed.” Unquote.
6. 1 Thus, ITAT Pune had categorically held following Hon’ble Karnataka High Court that at the time of granting registration u/s.12AA of the Act, the Commissioner cannot consider issue of capitation fee.
6. 2 Thus, ITAT Pune vide order dated 27.09.2011 in Assessee’s appeal in D.Y. Patel Education Society v. CIT [ITAppeal No.1280(PUNE) OF 2007, dated 27-9-2011]/ITA No.1280/pUN/2007 had set-aside the order u/s.12AA of the Act, dated 29.08.2007 to the Commissioner for fresh examination in terms of Section 12AA of the Act.
7. The Ld.Pr.CIT, Central, Pune passed an order dated 24.02.2016 under section 12AA r.w.s 254 of the Act, to give effect to the order of the ITAT. Ld.Pr.CIT, Central, Pune again rejected
Assessee’s application for registration u/s.12A of the Act. The reasons given by ld.Pr.CIT for rejection are as under :
| i. | | Collection of Capitation Fee. |
| ii. | | Use of the funds for the purpose of Trustee. |
| iii. | | Diversion of Trust Funds for construction of residence of the Trustee. |
| iv. | | Use of the Trust Vehicles for personal purpose. |
| v. | | Reference made to Special Audit Report. |
| vi. | | Search in the case of DY Patil Group on 20.07.2005. |
8. The Ld.Pr.CIT in para 4.7.2 has mentioned as under :
“4.7.2. As against this there is clear evidence of collection of capitation fee, but not used for the purpose of the objects of the institutes for which this capitation fees was collected. Further, in the very first year of scrutiny the assessing officer has brought on record specific instances of use of fund of the institutes for the personal use of trustees. During the course of assessment proceedings for A.Y. 2009-10 the issue of claim of depreciation on “Hospital Building” was investigated by the assessing officer. In the course of investigation the AO made a reference to the District Valuation Officer for valuation of Hospital Building at Kadamwadi site, Kolhapur. As per the Valuation Report there was a difference between the value shown by the assessee in the Books of Account and actual cost of construction as per DVO which indicated that the actual cost of construction of the hospital building was less than that shown in the books by the assesssee. This fact was cross checked with the paper seized from the residential premises of the assessee during the course of search, which contained details of expenses incurred on construction of hospital building as well as residence of the trustees. The difference clearly indicated that funds were being diverted for personal use and the objects of the trust were not being adhered to and simultaneously they were being used by the trustees towards personal aggrandizement like building their residences. Similarly, the issue of Vehicle Expense was also investigated by the assessing officer in the same year and details were called for from the assessee during the course of the proceedings. The assessee could not submit Log Books of the vehicles, Vehicle wise details of maintenance and details pertaining to amounts actually spent on Petrol or Maintenance, which could not lead to contravention of the fact that the vehicles were being used for personal purposes although they were purchased through funds received for carrying out charitable activities. These finding of facts not only in the year mentioned above but repeatedly over a period of time since the search proceedings were conducted in the case of the assessee refrains me from granting registration to the applicant u/s 12AA of the Income Tax Act 1961.”
8.1 Thus, the Ld.Pr.CIT has vaguely mentioned that there is clear evidence of collection of Capitation Fee, however, in the order dated 24.02.2016, the Ld.Pr.CIT has not mentioned any name of the students or the amount of so-called Capitation Fee alleged to be collected by the Assessee. The entire order is silent, except a vague allegation. During the hearing, we specifically asked ld.DR for the Revenue to show us the evidence regarding Capitation Fee. However, ld.DR for the Revenue has not brought on record any evidence.
9. Be it as it may be, the ITAT in D.Y. Patel Education Society v. CIT [ITAppeal No.1280(PUNE) OF 2007, dated 27-9-2011] has clearly held that at the time of granting registration, the Commissioner cannot look into the issue of Capitation Fee and Commissioner has to restrict enquiry as envisaged u/s.12AA of the Act. The order of the Ld.Pr.CIT, Central, Pune dated 24.02.2016 was to give effect to the order of the ITAT in D.Y. Patel Education Society (supra). Therefore, while giving effect to the order of the ITAT, ld.Pr.CIT was precluded to look into the issue of Capitation Fee. However, we have already mentioned above that no evidence has been brought on record regarding Capitation Fee.
10. Another allegation of the Ld.Pr.CIT is that Trust Funds were used for benefit of trustee. For this purpose, Ld.Pr.CIT has mentioned that there was a difference in the cost of construction of Hospital as arrived at by Departmental Valuation Officer and as shown by the Assessee. Therefore, Ld.Pr.CIT concluded that the funds were diverted for construction of Residential Premises of the Trustee. However, in the order dated 24.02.2016, the Ld.Pr.CIT has not mentioned any amount, has not mentioned the document based on which he has arrived at the said conclusion. Nowhere in the order, Ld.Pr.CIT has referred any seized document or impounded document or any other document to prove that Trust Funds were diverted for Construction of Residential Premises of the Trustee. In the absence of specific evidence, the allegation has got no meaning.
11. On the contrary, ld.AR for the Assessee submitted that the DVO’s Report is defective, Id.AR specifically pointed out the defects in the DVO’s Report. Ld.AR also submitted that DVO’s Report is based on estimation and Ld.Pr.CIT cannot arrive at a conclusion based on DVO’s Report, when detailed explanation and evidences were submitted by Assessee in connection with total cost of construction of hospital. Page no.132 to 149 of the paper book are the evidences of construction of hospital building. Ld.AR had specifically submitted that DVO’s Report regarding cost of construction of hospital building cannot be referred by the Ld.Pr.CIT to reject Assessee’s application for registration u/s.12A of the Act. Ld.AR had relied on the decision of Tribunal in the case of M.M.Patel Charitable Trust v. PCIT (Pune – Trib.).
12. Another ground on which ld.Pr.CIT, Central has rejected 12A was that Vehicles owned by Assessee Trust were used for personal purposes by the Trustee. The Ld.Pr.CIT arrived at this conclusion, because no log book was maintained. However, just because log book was not maintained does not mean that Vehicles were used for personal purposes by the Trustee.
13. Ld.Pr.CIT has not brought on record any positive evidence to prove that Vehicles were used by Trustee for their personal purposes. Therefore, we do not see any merit in the said allegation.
14. Assessee has filed copy of the Trust Deed at page no.1 to 20 of the paper book. The objects in the English Translation are as under :
| (i) | | Schools, University, Hostel, Research Centre, etc. to commence Educational Society. |
| (ii) | | To run Technical & Medical University. |
| (iii) | | Needy & Brilliant students for University study purpose provide them financial help. To provide Award & sponsorship. |
| (iv) | | Needy & Brilliant student’s for Higher Study purpose going Abroad country, provide Financial help, Awards and provide Sponsorship. |
| (v) | | Study purpose arrange Library and various types of education lectures, published the same. |
| (vi) | | For progress purpose Education, Social, Cultural area give them guidelines |
| (vii) | | As per Indian all types of Education Society to provide Financial Grant and any other way help them. |
14.1 Thus, objects of the society are charitable in nature as defined in section 2(15) of the Act. Ld.Pr.CIT, Central has not made any adverse observation on the objects of the society.
15. It is observed that Assessee Society was registered by Assistant Registrar on 23.11.1986(page no.21 of the paper book). Assessee’s Society was registered by Deputy Commissioner of Charity on 13.03.1987. Assessee had received certificate under 80G from Commissioner of Income Tax, Pune-1 on 09.06.1989(page no.23 of the paper book). The Ministry of Human Resource Development, Government of India vide order dated 01.09.2005 declared D.Y.Patil Education Society, Kolhapur consisting D.Y.Patil Medical College, Kolhapur as Deemed University under section 3 of University Grants Commission Act, 1956(page no.59 of the paper book).
16. The list of institutes run by the assessee are as under :
| 1. | | D.Y.Patil University, Kolhapur |
| a. | | D.Y.Patil Medical College, Kolhapur |
| b. | | D.Y.Patil Hospital, Kolhapur |
| c. | | D.Y.Patil College of Nursing, Kolhapur |
| 2. | | D.Y.Patil College of Agriculture Engineering & Technology, Talsande |
| 3. | | D.Y.Patil College of Agriculture, Talsande |
| 4. | | D.Y.Patil Krishi Vigyan Kendra, Talsande |
| 5. | | D.Y.Patil Institute of Nursing Education, Kolhapur. |
16.1 Thus, Assessee is running educational institutes and hospital, which is a charitable activity as defined in section 2(15) of the Income Tax Act, 1961.
17. Ld.Pr.CIT, Central, Pune has not made any adverse observations about the same in his order dated 24.02.2016.
18. The most important fact that the Pr.CIT, Central, vide order dated 16.08.2024 has granted registration u/s.12A to the Assessee. This explains that Ld.Pr.CIT(Central) while granting approval u/s.12A had satisfied himself regarding the objects and activity of the Assessee. This explains that objects and activity of the Assessee are charitable in nature, which has been verified by Ld.Pr.CIT-Central before granting registration u/s.12A of the Act, vide order dated 16.08.2024.
19. In these facts and circumstances of the case, we set-aside the order of Ld.Pr.CIT, Central, Pune dated 24.02.2016 and direct Ld.Pr.CIT to grant registration u/s.12A to the Assessee. Accordingly, Ground No.1 and 4 raised by the assessee are allowed.
19.1 Ground No.2 and 3 were not pressed by the Assessee. Assessee has filed written letter to that effect. Accordingly, Ground No.2 and 3 raised by the assessee are dismissed as not pressed.
19.2 Ground No.5 is general in nature, needs no adjudication, hence, Ground No.5 is dismissed.
20. Initially, along with Form No.36, Assessee had filed various grounds, however, subsequently, assessee concise the five grounds only. The concised grounds have been signed by President of the Assessee Society. Therefore, we have considered the concised grounds.
21. In the result, appeal of the assessee is partly allowed.