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The Commissioner of Income Tax-II, Agra further recorded in her order that she is not satisfied that the objects of the Trust are charitable in nature and that since Trust deed is not registered as reported by JCIT on enquiry, the trust is not liable for approval under Section 80G also.

The Trust filed ITA No.443/444/Agra/2011, which was heard on 2.3.2012 and dismissed on 7th March, 2012. The Tribunal discussed the provisions of Section 12AA of the Act and judgment of Kerala High Court in the case of Self-Employers Service Society v. CIT, 247 ITR 18 Ker.; judgment of Delhi High Court in All India J.D. Educational Society v. Director General of Income Tax (Exemptions), 338 ITR 218 (Del.); judgment of Allahabad High Court in CIT v. Red Rose School, 212 CTR (Alld.) 394 (HC); the judgment of Karnataka high court in DIT v. Garden City Educational Trust, 28 DTR (Kar) 139 and one other judgment of Karnataka High Court in DIT (Exemption) v. Meenakshi Amma Endowment Trust, 50 DTR 243 and held that though apparently on consideration of the objects of the trust, the same is for educational or charitable in nature, but the findings of fact given by the learned Commissioner about the commercial activities of the group concern have not been refuted by the assessee by producing any material on record. The ITAT found that the assessee has spent considerable amount on advertisement of the institution, which has not started its activities as yet. The prospectus of the assessee Trust has devoted substantially on carrying out business activities of the group concern showing logo of milk product. The CIT thus rightly rejected both the applications of the assessee particularly, when no educational or charitable activities have been actually carried out and the assessee in initial stage, itself has tried to promote business of group concern. The Tribunal held:- "considering the totality of the facts and circumstances, we are of the view that the assessee failed to establish that it has carried out genuine activities towards the objects of the assessee trust. Whatever other activities were carried out were found for promoting commercial activities of the group concern. Therefore, the assessee has failed to satisfy the requirements u/s. 12AA of the Act and as such, the ld. Commissioner was justified in refusing to grant registration and approval under the above provisions of the IT Act. We are, therefore, of the view that there is no irregularity or illegality in the impugned order".

Shri Rahul Agrawal appearing for the appellant trust submits that there was no material with the Commissioner of Income Tax-II and the Income Tax Appellate Tribunal, Agra to record its conclusions against the Trust. The object of the trust is not to carry out commercial activity and promote the business of family concerned. As a new entity the appellant had to necessarily spend money on advertising and rely upon the established brand equity enjoyed by the other concern, to attract the students to its courses. The Commissioner never questioned the appellant on the lack of registration of the Trust deed. The Tribunal did not advert to the issue of registration and lack thereof. The trust deed was registered with the Sub-Registrar, Shikohabad on 26.11.2008. He further submits that the objects of the Trust are charitable in nature. There was no doubts expressed on the objects set out in the Trust deed. The genuineness of the activities of the Trust, in the year in question, when the construction of the college building was in progress, and the charitable activity had not yet commenced, was not required to be assessed until the commencement of the activity. He submits that the test of the genuineness of the activity of the Trust can be applied only after its activities actually commence. The use of the logo of one of the brand equities of the other concern, the heavy expenditure incurred on advertising and publishing the high quality prospectus, could not be a ground on which the registration could be denied.

Shri Govind Krishna on the other hand submits that the application for registration of the trust under Section 12AA should be moved within one year under Section 12A. The trust deed was executed on 7.11.2008 and the application for registration under Section 12AA was presented on 11.3.2011. The Trust has received heavy donations from the Societies of the same concern. A highly disproportionate amount of money was spent on advertisement of the institution to the extent of Rs.1,58,82,526 between 1.4.2011 to 2.8.2011. The construction of the college for medical, engineering and management studies was in progress. The Commissioner has not made any observations with regard to objects of the trust. He found that the prospectus was actually used for advertisement of the other industries of the group namely Hardayal Milk Product (Pvt.) Ltd. and carried the logo of the milk product company. The object was to promote the business of the family concern, and had commercial motive, which was subservient to the stated charitable motive. The Commissioner was not satisfied that the objects of the trust is charitable in nature and thus she refused to grant registration. Shri Govind Krishna has relied upon the same judgment, which have been cited by learned counsel appearing for the appellant and submits that so far as the substantial question of law no. (b) is concerned, the findings recorded by the Commissioner of Income Tax-II, Agra and the Tribunal are findings of fact, which cannot be treated as perverse. The appellant has not denied that while the construction of the college was in progress, a heavy amount was invested in publishing the prospectus, which carried one full page advertising the products of the group company and carried its logo. Shri Govind Krishna submits that the registration in the subsequent year cannot be a ground on which the orders passed by the Commissioner and Tribunal can be questioned. In the absence of registration for the year 2010-11, the donations made by the societies would not qualify for exemption.

The Punjab and Haryana High Court in CIT-II, Chandigarh v. Surya Educational & Charitable Trust also held that the object of Section12AA of the Act to examine the genuineness of the objects of the trust and not the income of the trust for charitable or religious purposes. The stage for allocation of income will arrive, when the trust or institution files its return.

The preponderance of the judicial opinion of all the High Court including this Court is that at the time of registration under Section 12AA of the Income Tax Act, which is necessary for claiming exemption under Section 11 and 12 of the Act, the Commissioner of Income Tax is not required to look into the activities, where such activities have not or are in the process of its initiation. Where a trust, set up to achieve its objects of establishing educational institution, is in the process of establishing such institutions, and receives donations, the registration under Section 12AA cannot be refused, on the ground that the Trust has not yet commenced the charitable or religious activity. Any enquiry of the nature would amount to putting the cart before the horse. At this stage only the genuineness of the objects has to be tasted and not the activities, which have not commenced. The enquiry of the Commissioner of Income Tax at such preliminary stage should be restricted to genuineness of the objects and not the activities unless such activities have commenced. The Trust or society cannot claim exemption, unless it is registered under Section 12AA of the Act and thus at that such initial stage the test of the genuineness of the activity cannot be a ground on which the registration may be refused.