Indian Kanoon - Search engine for Indian Law

4. In order to ascertain the charitable nature of the activities of the trust, an enquiry was got conducted through office of the ITO, Ward 2(1), who, vide his report dt. 28th April, 2005, has reported that 'that as per the objectives of the trust there is no mention of any charitable activity by the fees structure collected from the office of the Principal Dream Land Public School, Disco Road, Janipur, Jammu (copy placed on record). The fee charged by the school is at par with any other private educational institution'. It has also been reported that "the perusal of income and expenditure account of the trust for the year ending 31st March, 2005 shows that huge amount of excess of income over expenditure has been transferred to the trust fund instead of spending the same in the fulfilment of any charitable objectives of the trust as laid down in the trust deed. The genuineness of the trust is questionable in view of the above facts and circumstances and may be considered accordingly:

3. In response, the assessee filed the following reply:

1. The IT Act, 1961 does not debar family trusts from undertaking charitable objects. The said provisions are eligible for registration under Section 12A(a) of the IT Act, 1961 at par with other trusts. The board of trustees of the trust has appointed managing committee for management and administration of Dream Land Public School in terms of para (i) of powers and duties of the board of trustees appearing on p. 6 of the trust deed. The said committee, a copy of which enclosed for your reference, comprises of nominees of staff members of the institution, parents of students and Education Department, J&K, besides trustees. The affairs of the institution are managed by the said committee. The institution is recognised/affiliated by J&K Board of School Education.

Your kind attention is invited to main objects forming part of the trust deed under which it becomes amply clear that all the objects of the trust are of charitable nature. Moreover, the trust is a non-profit making organisation existing solely for educational purposes. The fact has been duly mentioned in the trust deed on p. 2 of trust deed. The notice under reference also confirms the charitable objectives of the trust as laid down in the trust deed. In his observation, the learned AO states that the trust has not spent the excess of income over expenditure on charitable activities. The learned AO is not correct in stating that the trust has surplus income. During the year the receipts of the trust amounted to Rs. 100 lacs and has applied Rs. 118.62 lacs. The balance has been utilized out of loans. In any case, this is something which has to be considered for purposes of assessment and not for purposes of registration under Section 12A. The fee structure of the institution has been devised by the managing committee as per the fee structure of other educational institutions. There are other institutions charging higher fee and those have been recorded charitable institutions. The trust is running a separate wing under the name of "Anchal" meant for slum children providing free education, free books, free uniforms and free midday meals. The aim of the management is to help under privileged and deserving students at the cost of privileged ones. There is thus no reason to come to the conclusion that the trust is not performing charitable activities.

19. In People Education & Economic Development Society (Peeds) v. ITO (2006) 104 TTJ (Chennai)(TM) 467: (2006) 100 LTD 87 (Chennai)(TM), it was held that while considering the application for registration under Section 12A, the CIT cannot examine the application aspect of the income and that he may examine whether the application under Section 12A is properly made and whether the objects of the trust are charitable.

20. In Acharya Sewa Niyas Uttaranchal v. CIT (2006) 105 TTJ (Del) 761, it was held that under Section 12AA, the jurisdiction of the CIT is confined to satisfying himself about the objects of the trust and the genuineness of its activities; that where the CIT had not taken any objection to the charitable nature of the trust, the reasons given by the CIT for refusal to grant registration were extraneous to Section 12AA; and that therefore, the registration was to be allowed to the assessee trust.