INCOME TAX ACT, 1961

--Charitable trust--Cancellation of registration Running of institution on commercial basis and alleged violation of --Assessee's registration was cancelled under section 12AAA(3) on the ground that educational institution was running on commercial basis and their was violation of provision of section 13(1)(c). Further, the DIT(E) noticed that assessee had carried out amendment to trust deed without approval of department. Held: Conditions precedent are satisfied by the assessee trust and there was no finding on the satisfaction of any condition that the objects of the trust was neither genuine nor any object was violated or non-charitable. Without finding of above satisfaction. As regards to violation of section 13(1)(c) it is not relevant for granting registration under section 12AA, and amendment of trust deed objects of trust remained instant.

A perusal of the provisions of section 12AA(3) shows that the power to cancel registration already granted can be done in two situations; (a) satisfaction of the Commissioner that the activities of the trust or institution are not genuine (b) satisfaction of the Commissioner that the activities of the trust or institution are not being carried out in accordance with the objects of the trust or institution. [Para 15] In the impugned order there is no finding on the satisfaction of any of the above two conditions. The objects of the appellant are charitable and on this aspect there is no dispute or doubt. There is no finding that the objects of the trust after the amendment of the trust deed are not charitable. Tribunal has perused the amendment to the trust deed and are of the view that the charitable nature of the trust remains intact. A mere finding that the objects of the appellant have been altered without the consent of the department would not be sufficient to exercise the power under section 12AA (3) of the Act without giving a finding that the appellant's objects are no longer charitable. On this score the impugned order is liable to set aside. [Para 16] Objects of the appellant even after the amendment of the trust deed continue to be charitable. In the case of the Appellant the objects continue to be the same even after amendment of the trust deed and therefore the very foundation on which the registration was granted to the appellant is not removed. [Para 17] None of the reasons given by the DIT(E) in the order under section 12AA(3) can be the basis to cancel the registration already granted to the assessee. In this regard, we are of the view that the assessee was already granted registration under section 12A of the Act, 1961. It only goes to show that the revenue was satisfied that the objects of the assessee trust were charitable. The question is whether the amendment of the trust deed in any way makes the assessee non-charitable. In the present case, the revenue was fully satisfied with the objects of the assessee was charitable and registration under section 12A of the Act was already granted. In proceedings under section 12AA(3) it was not open to the revenue to review its earlier registration granted under section 12A of the Act. Complaint with regard to violation of section 13(1)(c) are not relevant for the purpose of the proceedings under section 12AA(3) and as rightly submitted by the assessee, it was open to the assessing officer to examine any such violation in the assessment proceedings for the relevant assessment year of the assessee. [Para 18] Other reasons given by the DIT(E) in the order under section 12AA(3), do not make out any case, which can show the activities of the assessee are not genuine or that the activities of the assessee are not being carried out in accordance with the objects of the trust or institution. [Para 19] The fact that the assessee was paying commission to persons who solicit students for studying in the assessee's institution cannot lead to the conclusion that the assessee is not imparting education. Similarly purchase of a BMW car, borrowing of loans from Sindhi Financiers, non maintenance of regular books of accounts, violations of provisions of section 13(1)( c) in as much as the trustees were paid enormous salary are all by way of passing reference having no relevance to whether or not the assessee was pursuing education as its main object. There are enough safeguards provided in sections 12 and 13 to ensure that personal benefits of the persons in control of the trusts are not treated as having applied for charitable purpose and for being brought to tax like provisions of section 13(1)(c) which restricts unreasonable and excessive payments to certain category of persons connected with a trust or other institution. In such circumstances, the order under section 12AA(3) cannot be sustained. [Para 19] For the reasons given above, the impugned order under section 12AA(3) is quashed and allow the appeal. [Para 20]