ADARSHA VIDYANIDHI TRUST Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The petitioner is a public charitable trust registered on 4th Dec, 1995. Ext. P1 is the trust deed. It applied to the respondent for getting itself registered under Section 12A of the IT Act, 1961 so that it can avail the benefits under Sections 11 and 12 of the IT Act. Ext. P2 is the application submitted by it. The respondent issued Ext. P3 defect memo pointing out the defects to be cured in the petitioner's application. On receipt of the said memo, the petitioner submits, it cured all the defects and Ext. P4 rectification deed was also executed so as to make the trust deed in conformity with the directions in Ext. P3. The petitioner was heard pursuant to Ext. P5 notice and the respondent passed Ext. P6 order rejecting its application for registration. It is an order passed under Section 12AA(b) of the IT Act, 1961. Petitioner attacks Ext. P6. According to the petitioner, the defects pointed out in the application of the petitioner were those mentioned in Ext. P3. Its application was rejected for not curing those defects. The ground mentioned in Ext. P6 for rejecting the application is that the trust is not carrying out the activities mentioned as its object in the trust deed. The only activity carried on is running of a school. So, the application was rejected by the respondent. The relevant portion of the said order reads as follows:

(2.) The petitioner points out that this was not a ground pointed out as a defect in Ext. P3. Further, the learned Counsel for the petitioner relied on the decision of the Allahabad High Court in Fifth Generation Education Society v. CIT, 1990 185 ITR 634 and of the Madras High Court in New Life in Christ Evangelistic Association v. CIT, 2000 246 ITR 532. These decisions would indicate that actually carrying on of charitable activities is not a relevant factor at the time of grant of registration and the same will be relevant only at the time of considering the eligibility of the trust to enjoy the benefits of Sections 11 and 12.

(3.) The respondent has filed a counter-affidavit resisting the prayers in the original petition. In the counter-affidavit it is stated that the respondent has made an enquiry into the affairs of the functioning of the trust. It was found that for running school the petitioner was collecting interest-free loan of Rs. 5,000 from its students at the time of admission and monthly tuition fee of Rs. 300. At present there are 255 students. So, the school being run by the trust on commercial lines, the same cannot be described as a charitable trust. The respondent also relied on the decision of the apex Court in Addl. CIT v. Surat Art Silk Cloth Mfrs. Association, 1980 121 ITR 1 . The observation in the said judgment is to the effect that if the activity is carried out for profiteering, the same should be treated as non-charitable, even if it may serve general public as public utility.