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4 ITA 2849(Del)2010

4. In response, the assessee filed its income and expenditure account for the period ending 31.3.2009. Further, letters dated 5.3.2010 and 13.4.2010 were filed, furnishing the information called for by the DIT(E).

5. By virtue of the impugned order, the ld. DIT(E) rejected the application filed by the assessee. The ld. DIT(E), while doing so, observed, inter alia, that the examination of the agreement, between CLEIS and the assessee (CLEF) revealed that certain clauses therein showed that the assessee's intention was solely to engage in commercial/business activities with the moot object to earn profit; that the assessee's activities were against the aims and objects for which public charitable trust are created; that the two Directors of CLEIS came under the category of the "specified persons"

16. As evident, these services were for the effective running and management of Indus World Business School. Another Agreement, i.e., Trade Mark Licence Agreement dated 1.11.07 (copy at APB 30 to 38) was entered into between the assessee and CLIL. Under this Agreement, a licence fee was paid by the assessee Trust to CLIL. This payment was for grant of a non-exclusive licence to the assessee to use the Trade Mark "Career Launcher". Under the Agreement, fixed licence fee and continuing licence fee, based on net revenue, were to be paid to CLIL. The ld. DIT(E) has failed to appreciate these facts and has gone wrong in observing that the assessee's intention was solely to engage in commercial and business activities so as to earn profit and that the assessee's activities were against the Aims and Objects for which public charitable trusts are created. The ld.

17. It remains undisputed that the assessee has been providing formal education in Indus World Business School. The ld. DIT(E) has questioned the charging of fees by the School from its students, alleging that such fee was heavy fee and as the Institute was not recognized by any Government Authority, the charging of such heavy fee was illegal. In this regard, it is seen that the assessee Trust continues to enjoy registration u/s 12A of the Act. Though in the impugned order, in para 15, the ld. DIT(E) has, inter alia, observed that "....................In fact, after revealing all facts as above, the assessee's Trust does not even qualify for continuous of registration under sections 12A/12AA and separate proceedings need to be initiated for cancellation of the same", no such cancellation of registration has been shown to have been brought about, thereby re-enforcing the assertion that the assessee Trust is a charitable Trust. In "ACIT v. Surat City Gymkhana"(supra), it has been held that once registration u/s 12A of the Act has been maintained, it is not open for the AO in the assessment proceedings, till the registration is withdrawn, to hold that the objects of the Trust are not charitable in nature. 

      Financial Year                       Deficit (in Rs.)

      2006-07                               18,66,158.00

      2007-08                              1,19,33,876.08

      2008-09                              3,59,63,000.77
                                       26                     ITA 2849(Del)2010

29. Moreover, this issue cannot prejudice the case of the assessee even as an aside, since it is the objects of the Trust and not the surplus amount, which is of consideration. Also, merely because the Trustees were incidentally benefitted, as held in "ACIT v. Surat Art Silk", 121 ITR 1(SC), the Trust does not cease to be a charitable Trust. The test to be applied is as to whether the object alleged to be a non-charitable object is or is not the main object and as to whether it is incidental to the dominant charitable object. Herein, as seen above, the main object, i.e., 'education' is a charitable object. In this regard, reliance has been correctly placed on the following case laws:-