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Assessee's contentions:

37. Investments are made in pursuance to the charitable objects of the Assessee-trust. The said investments are done as valid application of income within the frame work of Section 11(l) of the Act towards the objects of the Assessee-trust. Furthermore, no doubt is raised on the documentary evidences provided which establish that the said investments are owned in the name of the Assessee-trust and are part and parcel of the necessary expansion activity to provide better education to the masses as per its charitable and educational goals.

"9. We have duly considered the rival contentions and gone through the record carefully. The basic issue is, whether surplus funds of a charitable institution can be used for the purpose of other than objectives of the Trust. We are of the view that surplus funds of a charitable Institution who enjoys benefit of Section 11 and12, are not akin to surplus funds of a business house because for a business entity, after payment of taxes onits own income, it is its discretion where to use that funds. It can donate, it can gift, it can give loan withoutcharging interest, because Income Tax Department can never persuade any assessee to earn income or anotional income out of those surplus funds, but this principle is not applicable on the funds of a charitableInstitution. The Trust is not enjoying those funds as its own funds. It is being held in a fiduciary capicity. Inother words, in a representative capacity of charitable Institution. Thus, funds can never be used for any otherpurpose except for charitable activity. If it is surplus, accumulated after achieving the objects of the Society,then it is to be accumulated under Section 11(5) in a prescribed mode and if not applied in future years, it hasto suffer tax. There is no concept of surplus fund with a charitable Institution because charitable Institutionenjoys exemption on all those incomes which are applied for its objectives. Therefore, it is an incorrect standof the assessee. However, we find that a careful perusal of Section 13(1)(d), 13(1)(c), 13(2) and 13(3), it will reveal that the status of the Institution cannot be changed from 'charitable' to 'non charitable' Institution if a minor violation is there. Sub-clause (3) of Section 13 would provide that if undue benefit is being provided to any Institution or individual because of its proximity with the Management, then that undue benefit is to be brought to tax but Section 11 and 12 would not be denied to the overall Society/Institution. Therefore, the ld. CIT(A) has erred in not analytically examining the issue and the AO has erred in denying the exemption as a whole to the assessee. He ought to have examined more analytically what is the objective of making advance to any related person and then he ought to have worked out for any interest income can be allocated/assumed on such investment. It is also pertinent to note that AO cannot make addition of surplus over expenditure inthe Society. He has to grant benefit under Section 11 and 12. The only exception is disallowance of anyamount which was unduly extended by the assessee to the persons mentioned in clause 13(3).Therefore, wedeem it appropriate to set aside both the orders and relegate both the issues to the file of AO for freshadjudication. The observations made by us will not impair or injure the case of the AO. They will not causeany prejudice to the defence/explanation of the Scholars Education Trust of India, jaipur assessee. The observations are only with regard to bring thepointed issue at home. The AO will be at liberty to decide afresh in accordance with law."

63. Regarding the advance to Shalu Construction, we find that the same stands being refunded to the assessee society, thereby not warranting any further discussion regarding the nature of investment of the same.

64. In totality of the above discussion, we find ourselves unable to agree with the version put forth by the Ld. CIT DR. There is ample evidence to establish, and a clear lack of any contrary material on record, that the assessee is a public Scholars Education Trust of India, jaipur charitable trust set up towards fulfilment of the objects of the trust/ society. That the activities of the assessee Society in furtherance of educational purposes is not in dispute/ accepted by the CIT(E) vide the impugned order also.