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(i) That the trust could not establish that it is working wholly for charitable purposes and applying its income to achieve the charitable purposes of the trust.
(ii) That the activities of the trust are not charitable though the trust deed refers to charitable objects. For example, trust deed no where mentions of charging fee of any amount for any of its services (objects) and this aspect has not been approved by the CIT while granting registration u/s 12AA(1)(b)(i) of the Act.
(iii) That Section 11(1)(a) of the Act refers to income derived from property of the trust and it does not cover the income earned by exploitation of the objects (referred as charitable) leading to surplus of income over the expenditure in running the business of the trust & using the trust as a colourable device to dodge the revenue & as well as the people of any 'charity' as the trust could not established that it is working for charitable purposes.

"06. In view of the above facts, it is held that

1. Trust is not wholly charitable as the trust is engaged in the activities which are other than charitable as discussed above.

2. Income arising to the trust is not being applied for the attainment of charitable objects.

And in the circumstances assessee is not entitled for benefit as provided u/s 11(1)(a) of the Act.

7.1. Aggrieved with the order of the A.O., the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A), after considering and appreciating the submission filed before him, adjudicated the issue of impugned exemption, in favour of the assessee. The society is established inter-alia for the purpose to establish and administer Educational institutions. Its primary object is to promote quality education and to impart knowledge, in the fields of Science, commerce, computer, Nursing, arts, sports, language and in the area to teaching and evaluation. The objects of the Trust/Society inter-ala is reproduced hereunder:

6.7. From the discussion above, it can be inferred that having profits per se does not disentitled an eligible trust or an institution from the exemption u/s 11 of the Act , if the sole or the dominant purpose of the trust or institution is charitable in nature. The question whether a trust is charitable or not has to be examined with reference of its object and activities as to whether they fall within the purview of section 2(15) of the Act. A determination in this regard has to be made by the Commissioner u/s 12A and, after 1.4.1997, u/s 12AA. Once the Commissioner had made the determination that the trust was a charitable one, the AO is not entitled to re-examine the question as to whether the trust is charitable or not, as held by the Hon'ble Supreme Court in the case of Surat City Gymkhana 300 ITR 214 (SC).During assessment the AO can only determine whether the income has been applied for charitable purpose. In the present case, the AO has denied the exemption on the ground that the assessee could not establish that it is wholly for charitable purpose and that it is applying its income for the charitable purpose. The reasons for holding such a view by the AO are predominantely that the assessee is earning surplus year after year even though the assessee has submitted that it had applied 85% of its income every year for charitable purposes. In my opinion, in light of the decision of the Hon'ble Supreme Court in the case of Surat City Gymkhana (supra), the AO was not empowered to take the view that the trust was not wholly for charitable purposes, since the CIT had granted registration u/s 12AA of the I.T. Act to the assessee. Section 12AA(3) grants power to the Commissioner to cancel the registration of the trust or institution if he is satisfied that the activities of the trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution. Hence, once the Commissioner has granted registration or u/s 12AA, it has to be taken that the objects of the institution and the genuineness of the activities of the trust are such that the institution is eligible for deduction of its income u/s 11. If the activities of the institution are not genuine or not in accordance with the objects, the Commissioner may cancel the registration granted earlier. The power of such cancellation is vested only with the Commissioner and not with the AO. The AO cannot determine that the objects of the instruction are not charitable. If the AO believes so, hem ay bring this belief, alongwith reason thereof to the knowledge of the Commissioner for determination as to whether the registration granted to the trust or institution should be withdrawn. However, till such time that the registration u/s 12A or 12AA is not cancelled, it has to be presumed that the trust or institution is charitable. Once that is so, the AO during assessment, cannot hold that the trust or institution is not 'eligible' for deduction u/s 11.The AO can, of course, examine if the income from property held under trust has been applied for the stated charitable or religious purposes, and if there is an excess over 15% of the income not so applied, then whether the other conditions for allowing deduction of the unspent amount have been fulfilled. For this proposition, I draw support from the decision in the case of Madhya Pradesh Madhyan Vs. CIT 256 ITR 277 (MP), in which it has been held that once registration has been granted u/s 12A, I.T. Authorities were bound by the same. The Hon'ble Supreme Court have also held in the case of ACIT Vs. Surat City Gymkhana (supra) that registration u/s 12A was a fait accompli to hold the AO back from further probe into the objects of the Trust. Considering the facts of the case and the decisions discussion above, I hold that the AO is precluded from examining the eligibility of the trust or institution for exemption u/s 11, though he may examine if the income has been applied for charitable purposes. Other than referring to the profits of the assessee trust, the AO has not given any finding that the expenditure incurred by the assessee was on anything other than on education. 6.8. The AO has relied on the decision reported in (1992) 3 (SCC) 390 in the case of MCD Vs. Children's Book Trust. In this decision the Hon'ble Apex Court held that if a society was making systematic profits, it could not claim exemption. This decision has been rendered in the context of another Statute. In my opinion, this decision may be applicable to the provisions of sections 10(22) or 10(23C) of the Act, where making of profit is prohibited. However, in the context of section 11 of the Act, the Hon'ble Apex Court have held that a trust or institution may run on commercial lines and make profits [see discussion on the issue in the case of CIT Vs. Andhra Pradesh State Road Trpt. Road Corpn. 159 ITR 1 (SC) above ].The interpretation of charitable purposes u/s 2(15) has been done by several courts including by the Hon'ble Supreme Court. As has been discussed earlier, merely making of profits or of surplus will not disentitled an eligible trust from exemption u/s 11 of the Act as long as the objects of the trust are charitable, its activities are genuine and the income is applied towards the charitable purposes authorized to be undertaken by the trust or the institution; conversely, if the income is diverted to persons mentioned in section 13 of the Act or is spent for purposes which are not charitable, exemption may be denied to the assessee trust or institution. No such converse finding has been given by the AO in this case. The appellant has stated that since the assessee was charging fees and having profits it was not engaged in charitable activities. This view is untenable in light of discussion above where it has been seen that a charitable organization may run on commercial principles. 6.9. In a recent decision in the case of CIT Vs. Manav Mangal Society, the Hon'ble Jurisdictional High Court in IT Appeal No.450 of 2008 dated 19.08.2009 (reported in 28 DTR (P&H) 129) have upheld the grant of exemption u/s 11 of the Act to the society. Two questions of law were raised before the Hon'ble High Court. The first question was whether in the facts and circumstances of the case the ld. Tribunal erred in law in allowing the exemption to the assessee u/s 11(1)(a) instead of exemption of 11(4A) because as per aims and objects and therefore, the establishment of school was incidental to promoting the aims and objects of the charitable societies/institutions. The second question was whether the ld. Tribunal erred in allowing the application of money on construction of building when no verification was done by AO nor was it put to the AO during the assessment proceedings. Besides, the construction of the building had been taken directly into the balance sheet and not into the income and expenditure account by the assessee and it was held by the Hon'ble Uttarakhand High Court in CIT Vs. Queens' Educational Society 223 CTR (Uttarakhand) 395 that investment in fixed assets like furniture and building were the properties of the society and may be connected with imparting of education but the same had been constructed and purchased out of income from imparting the education with a view to expand the institution and to earn more income and also referring to the decision of Hon'ble Supreme Court reported in (1992) 3 SCC 390 agreeing with the findings of the High Court.