INDIAN MEDICAL TRUST,JAIPUR vs. PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), JAIPUR

PER: BENCH

The appeals of the Indian Medical Trust, Jaipur, being ITA

No. 252 & 253/JP/2018 have been filed by the assessee-appellant

against the separate impugned orders of even date 16/01/2018,

passed by the Ld. Pr. Commissioner of Income Tax (Central),

Rajasthan, Jaipur withdrawing the approval granted to the assessee

trust U/s 10(23C)(vi) and (via) of the Income Tax Act, 1961

(hereinafter referred as the Act) and cancellation of registration U/s

12AA(1)(b) of the Act, both w.e.f. 01/04/2016. The grounds taken

by the assessee in both the appeals are as under:

Grounds of ITA No. 252/JP/2018

(1) Ld. Pr.CIT(C) has erred in law and on facts in withdrawing approval under section 10(23C)(vi) and 10(23C)(via) by invoking 14th proviso to section 10(23C)(vi) and 10(23C)(via) of Income tax Act by misinterpreting the true facts of the case. (2) Ld. Pr. CIT (C) was not justified in:- (a) Not differentiating the Donations and Capitation fees, as the capitation fees is charged in advance and is of equal amount

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for each course whereas the donations are received voluntarily, of different sums and were paid by the Donors even after the admission of the students as per their own convenience, even in installments (identical nature of donations received up to A.Y. 2008-09 were accepted as such in scrutiny assessments up to that year when recorded in regular books of accounts) in withdrawing the approval under section 10 (23C) (vi) and (via) of IT Act. (b) Treating the activities of applicant Trust as not according to condition subject of which it was approved u/s. under section 10(23C) (vi) & 10(23C) (via) of IT Act; (c) Treating the assessee Trust as not carrying its activities as per conditions laid down in 10th proviso to section 10(23C) of IT Act. (d) Treating the additional donations of Rs.21.6 crores, estimated/ calculated by Hon’ble ITSC as further reason for withdrawal of approval under section under section 10(23C) (vi) & 10(23C) (via) of IT Act; (e) Avoiding the degrees and diploma by the assessee Trust in production of T.V. programmes and Films by advancing money to TV channel and in treating it as personal benefit and use of Trustees of assessee Trust. (f) Misinterpreting the facts of the case in treating at para 3.2.9 as misuse donations by the Trustees themselves though the assessee Trust has applied total income in accordance with the provisions contained in clause (a) and clause (b) of third proviso to section 10(23C) of IT Act and no personal use of any fund of the assessee Trust was found or established from any documents during course of search or thereafter. (g) Treating unsigned and rough agreement between earlier shareholders of Omega TV Channel Ltd. on one part and Dr.

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B.S. Tomar and Juhi Tomar on other part for which payment was made by assessee Trust to Omega TV Channel Pvt. Ltd. as personal payment by party of other part and as made in contravention to the provisions of section 11(5) of IT Act, though the major shareholder in Omega TV channel is Nims University holding 15,19,999 shares out of 15,20,000 shares of Rs.10 each. (h) Unsigned typed list of Doctors with proposed amount of their salaries as payment made to the Doctors in cash without finding any proof of actual payment or without examining the Recipients. (i) Not considering the benefits derived by the assessee Trust from Trustees in form of the rent-free city office accommodation, interest free loans and serving the assessee Trust without charging any salary or allowances by the Trustees. (3) That Id. Pr. CIT (A) had failed to appreciate and consider that each assessment year is an independent year and sufficient checks and balances are provided under the Income tax Act to bring to tax on violation of provisions of Act but the same cannot be equated to be a ground to withdraw the approval by applying 14th Prov. to section 10(23C) (vi) & (via) of IT Act. (4) Without prejudice to ground No. (1) to (3), above Id. Pr. CIT (C) has erred in law and on facts in withdrawing the approval under section 10(23C) ((vi) & (via) retrospectively w.e.f. 01.04.2006 without finding any such document or noticing any in-genuine activity of the Trust during the course of search justifying such action as the same being afterthought in order to nullify the effect of order dated 30th June 2017 u/s. 245D(4) of IT Act passed by Hon’ble Income tax Settlement Commission, Addl. Bench-2, New Delhi.”

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Grounds of ITA No. 253/JP/2018 (1) Ld. Pr.CIT(C) has erred in law and on facts in cancelling registration under section 12AA of IT Act by invoking provisions of section 12AA (3) of Income tax Act by misinterpreting the true facts of the case. (2) Ld. Pr. CIT (C) was not justified in:- (a) Not differentiating the Donations and Capitation fees, as the capitation fees is charged in advance and is of equal amount for each course whereas the donations are received voluntarily, of different sums and were paid by the Donors even after the admission of the students as per their own convenience, even in installments (identical nature of donations received up to A.Y. 2008-09 were accepted as such in scrutiny assessments up to that year when recorded in regular books of accounts) cancelling registration under section 12AA of IT Act by invoking provisions of section 12AA(3) of IT Act. (b) Treating the activities of applicant Trust as not according to condition subject of which registration under section 12AA of IT Act was granted. (c) Treating the assessee Trust as carrying its activities in violation of provisions of section 12A (1)(b) of IT Act. (d) Treating the additional donations of Rs.21.6 crores, estimated/ calculated by Hon’ble ITSC as further reason for cancelling registration under section 12AA of IT Act by invoking provisions of section 12AA(3); (e) Avoiding the degrees and diploma by the assessee Trust in production of T.V. programmes and Films by advancing

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money to TV channel and in treating it as personal benefit and use of Trustees of assessee Trust. (f) Misinterpreting the facts of the case in treating at para 3.2.9 as misuse donations by the Trustees themselves though the assessee Trust has applied total income in accordance with the provisions 11 and 12 of IT Act and no personal use of any fund or part thereof belonging to the assessee Trust was found or established as used by the Trustee from any evidence or documents during course of search or thereafter. (g) Treating unsigned and rough agreement between earlier shareholders of Omega TV Channel Ltd. on one part and Dr. B.S. Tomar and Juhi Tomar on other part for which payment was made by assessee Trust to Omega TV Channel Pvt. Ltd. as personal payment by party of other part and as made in contravention to the provisions of section 11(5) of IT Act, though the major shareholder in Omega TV channel is Nims University holding 15,19,999 shares out of 15,20,000 shares of Rs.10 each. (h) Unsigned typed list of Doctors with proposed amount of their salaries as payment made to the Doctors in cash without finding any proof of actual payment or without examining the Recipients. (i) Not considering the benefits derived by the assessee Trust from Trustees themselves in form of the rent-free city office accommodation, interest free loans and serving the assessee Trust without charging any salary or allowances by the Trustees. (2) That Id. Pr. CIT (A) had failed to appreciate and consider that each assessment year is an independent year and sufficient checks and balances are provided under the Income tax Act to bring to tax on violation of provisions of Act but the same

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cannot be equated to be a ground to revoke the registration under section 12AA of IT Act. (3) Without prejudice to ground No. (1) to (3), above Id. Pr. CIT (C) has erred in law and on facts in cancelling registration under section 12AA by invoking provisions of section 12AA(3) of IT Act retrospectively w.e.f. 01.04.2006 without finding any such document or noticing any in-genuine activity of the Trust during the course of search justifying such action as the same being afterthought in order to nullify the effect of order dated 30th June 2017 u/s. 245D(4) of IT Act passed by Hon’ble Income tax Settlement Commission, Addl. Bench-2, New Delhi.”

has been filed by the assessee against separate impugned orders

dated 29/08/2017, refusing the grant of registration U/s 12AA(1)(b)

of the Act; and order dated 19/03/2018 refusing the grant of

approval of exemption U/s 10(23C) (vi) and (via) of the Act by Ld.

Commissioner OF Income Tax (Exemptions).

are concerned, the facts and issues involved for cancellations of

Registration u/s 12AA (3) and withdrawal of approval u/s 10(23C)

are identical and similar finding has been given by the Ld. PCIT,

therefore, our finding and reasoning would be applicable to both the

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appeals except for examining the relevant provisions under which

such withdrawal of exemption/cancellation has been done. In the

case of NIMS University, Rajasthan, Jaipur also, facts and issues

are exactly similar in both the appeals, therefore, our finding given

would apply in both the appeals. Accordingly, all the four appeals

were heard together and for the sake of convenience and brevity, a

common order is being passed.

especially with regard to the withdrawal of approval for exemption

U/s 10(23C) of the Act.

Brief background of the case:

applicant/assessee Trust was constituted vide Trust Deed dated

23/02/2000 with the ‘objects’ which were in the nature of

“charitable purposes”. The objects have been incorporated in the

impugned order at page 2, wherein the main object related to

carrying out educational activities in the field of medical education

and other ancillary objects in field of education. Looking to its

objects which were solely for educational purposes, the assessee

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was granted approval by the Ld. Chief Commissioner of Income Tax

U/s 10(23C)(vi) & (via) of the Act, vide notification dated

20/03/2006 for the financial years 2003-04 to 2005-06, i.e., for the

assessment years 2004-05 to 2006-07; and thereafter vide another

notification dated 29/04/2008, the approval was granted by the ld.

Chief Commissioner of Income Tax, Jaipur for the assessment years

2007-08 and onwards. Apart from that, the assessee was also

earlier granted registration U/s 12AA of the Act vide certificate

dated 24/3/2000. Thus, in view of approval granted U/s 10(23C)

and registration U/s 12AA of the Act, the assessee Trust was

enjoying the exemption U/s 10 and also alternatively the benefit of

Section 11 to 13 of the Act. Search and seizure action U/s 132(1) of

the Act was carried out on 30.10.2014 at various premises of the

assessee Trust and the institutions run by it and the residential

premises of the trustees. During the course of search and seizure

operation, various documentary evidences were collected which as

per the Revenue were mostly incriminating in nature and also post

search enquiries established that the activities of the Trust were not

genuine. One of the key incriminating materials which is the

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subject matter of major dispute before us, was receipt of

unaccounted ‘capitation fees’ charged by the Trust outside its

regular books of account and income and expenditure account for

the various assessment years. Though, there were other materials

relating to undisclosed investments were found from the possession

of the Trustees and persons running the institution in the form of

unaccounted cash, jewellery, foreign currency etc., which may not

have that direct relevance for the cancellation of

approval/registration, albeit it may have some bearing in the hands

of the Trustees. The assessee post search proceedings had filed an

application before the Income Tax Settlement Commission, wherein

it had offered Rs. 1.7 crores on account of unaccounted ‘capitation

fees’, however, after calling for the details and report from the

department based on the seized material and post search enquiry,

the Settlement Commission had determined the unaccounted

receipts in the form of ‘capitation fees’ at Rs.22,63,46,000/-,

besides quantifying undisclosed investments. Another important

fact is that, the assessee Trust had established NIMS Medical

College and Hospital in the year 2008 and later on Dental College

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and Hospital were also established under the aegis of ‘NIMS

University’, which was wholly owned and controlled by the assessee

Trust. As culled out from the record, the NIMS University was

enacted by the Legislature of State of Rajasthan in the year 2008,

which received the consent of the Hon’ble Governor on

29/03/2008. After the establishment of the NIMS University, the

assessee through such an institution had expanded its educational

activities and at present NIMS University runs more than 345

courses besides its major field running medical and dental colleges.

Finding of the ld. Pr.CIT in the impugned order:

Jaipur had referred to various incriminating material found during

the search so as to reach to a conclusion that the Trust’s activities

were not being carried out in accordance with the objects and also

its activities were not genuine. The first and foremost issue which

has been raised in the impugned order is of unaccounted ‘capitation

fees’ collected by the assessee Trust for admission of various

courses mainly relating to medical and dental courses. He has

noted that certain diaries/registers, loose papers and computer

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printouts were found and seized from the chamber of Smt. Shobha

Tomar (one of the trustees and wife of Dr. B.S. Tomar) and Shri

Kailash Chandra Jat, who was the Registrar of the NIMS University

and also from their residences. In all, there were 638 entries of

‘capitation fees’ paid over the period of time from the financial year

2006-07 to 2014-15 which has been received by the assessee Trust

from various students. The details of these entries spreading into

various years have been elaborated in Annexure-A to the impugned

order. Ld. PCIT observed that detailed analysis and investigations

were carried by the department from various persons based on the

details found during search in respect of the entries of unaccounted

‘capitation fees’ received by the Trust from the assessment year

2006-07 to 2014-15, which as per the department aggregated to Rs.

79.09 crores. It was also gathered that the ‘capitation fees’ received

from the students were neither from the management quota nor NRI

quota but from general students. The documents wherein

‘capitation fees’ recorded, were found to be written in the

handwriting of the trustees and one of the main trustees, Dr. B.S.

Tomar has been stated to be keeping trail of such capitation fees. In

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response to the show case notice by the ld. Pr. CIT, the assessee

submitted that, firstly, it is in the nature of ‘voluntary donations’

received from the parents/students and up to assessment year

2008-09 all these donations were duly recorded in the regular

books of account, which were subjected to scrutiny u/s 143(3) and

the same were accepted by the Assessing Officer; and secondly,

from A.Y. 2009-10 onwards though such voluntary contributions

were not recorded but assessment were completed u/s 143(3).

However, the ld. Pr.CIT noted that from the A.Y. 2009-10 onwards,

the capitation fees which has been treated as voluntarily donations

by the assessee were collected in cash by the trustees and have

neither been recorded in the regular books of account nor has been

disclosed in the audited financial statements. Though, the

assessments have been completed U/s 143(3) of the Act, but the

issue of capitation fees/voluntary donation bases on such seized

material were never scrutinized, because assessments were made

on the basis of entries made in the regular books of account and

amount shown in the audited income and expenditure account. The

ld. Pr.CIT further noted that the Trust itself has admitted before the

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Income Tax Settlement Commission that voluntary donation

towards corpus were recorded in the books of account from A.Y.

2001-02 to 2008-09. However, no such entries were recorded after

2009-10. Therefore, reliance placed by the assessee on the earlier

assessment order passed U/s 143(3) will not have any relevance.

The assessee’s further contention before the ld. Pr.CIT that major

part of the donations received, which have not been recorded in the

books of account have been ultimately utilized in the construction

of educational and hospital buildings on existing lands and thus,

any such undisclosed amount on account of donation stands fully

utilized for the educational purposes. However, the Ld. Pr.CIT after

making various remarks held that, if capitation fees/voluntary

donations received in cash has not been recorded in the books of

account and stated to be expanded in construction of buildings,

then such assertions of the assessee is without any evidence or any

basis. The assessee has neither able to substantiate this contention

and nor any such document or material was found during the

course of search that the assessee had spent unaccounted

capitation fees for the construction of the hospital building or

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utilized for its objects. He has also rejected the assessee’s

contention that these voluntary donations have been received only

by NRI or management quota students for admission in MBBS and

PG courses after recording the finding of fact from the seized

material that in the F.Y. 2008-09, capitation fees were collected

from 82 students who were from general quota and similar other

number of students who were from general quota in other years.

Thus, the contention of the assessee was found to be misleading. In

so far as the assessee’s contention that the amount of voluntary

donation was not fixed and it purely depends upon the donor’s

sweet will, he held that the same does not have any force in wake of

evidences found and inquiries conducted that the students were

force to pay capitation fees for taking admissions and receiving final

“No Dues” certificate only when the entire capitation fees was paid.

Many instances have been found where installments with fixed

duration of payments of capitation fees was granted which only

goes to show that it was not voluntarily at all but was thrust upon

the parents/guardians of the students and were taken forcefully.

Further the assessee’s Trust was following a ‘package system’ in

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which the students were given fixed packages of capitation fee,

hostel fee and admission fee and this he held that it clearly goes to

prove that the students were required to compulsorily pay the

capitation fee to receive their degrees. Ld. PCIT has also demolished

the assessee’s contention that the major part of such voluntary

donation has been applied in construction of new educational

building on the ground that, firstly, there is no evidence for

application of capitation fees in the construction of educational

building which has been found during the course of search

proceedings; and secondly, on the contrary there were various

documents which shows the use of voluntary donation/capitation

fees for personal purposes, such as foreign travel by the trustees,

investment in benami property by the children of the trustee and

investment in a Real Estate Company. He has also referred to

certain observations of the Settlement Commission and the

documents furnished by the assessee during the course of the

Settlement Commission proceedings, wherein adverse view has

been taken by the ITSC. The Settlement Commission itself has

determined the amount of unaccounted voluntary donation /

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capitation fees at Rs. 21.06 crores and also there were various

evidences of unaccounted expenditure in the form of payment of

salary to Doctors in cash, unaccounted investments in construction

of property other than pertaining to the Trust, foreign travels etc.

The foreign currency and unaccounted cash found from the

residence of the trustees amounted to Rs. 3,36,09,610/-. He has

further observed that the fees of the students admitted in the

University were to be decided by the Fee Committee in which the

trustees themselves were the decision makers. It was only in the

wake of various Hon'ble Supreme Courts judgments strictly

prohibiting collection of capitation fees from the students, the

assessee Trust indulged in receiving capitation fees outside the

books in cash and in this way, it has not only violated the objectives

of the Trust and also its activities cannot be said to be genuine. He

has also noted various instances from the seized material about the

breakup of the fees and how the fee package was charged, like there

is mention about separate capitation fees in figures and also regular

fees and hostel fees. Based on the materials on record and rebutting

all the contention raised by the assessee, he held that the activities

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of the Trust cannot be held to be charitable, albeit it was for

profiteering by taking unaccounted capitation fees from students

and parents in the garb of fee and same cannot be held to be

genuine. Accordingly, he invoked the clause (ii)(a) of the 14th proviso

to Section 10(23C) (vi)&(via) of the Act.

finding as to how the activities of the Trust were not being carried

out in accordance with the conditions for which it was given

approval U/s 10(23C). He held that, the assessee has been earning

undisclosed income in cash from capitation fees, which was not

accounted for in the books of account and hence it violated the

conditions laid down in 10th proviso to Section 10(23C)(vi) & (via) of

the Act by earning undisclosed/suppressed income in the form of

capitation fees and not accounting for it in the books of account.

The receipts offered by the assessee before the ITSC and the

amount added by the ITSC were unaccounted receipts not found

recorded in the books of the Trust and therefore, it was clear cut

violation of 10th proviso. Thus, he concluded that in view of clear-

cut violation of provisions of Section 10(23C) (vi) & (vi) of the Act

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i.e., 10th proviso and 14th proviso whereby the assessee’s activities

has been found to be non-genuine, the approval granted to assessee

Trust needs to be withdrawn.

on account of expenditure being incurred in ‘News India Channel’,

by the Trust which was not as per the objectives of the Trust. The

ld. Pr.CIT has noted that the assessee Trust was operating a news

channel namely, “News India” at NIMS University and has two more

offices at Ranchi and Patna. The assessee’s claim was that the News

India Channel was established in accordance with its objectives,

because it was running courses for diploma in TV and film

production after 2013. However, the Ld. PCIT observed that the

assessee could not give any single audio/video CD containing

transmission of education related material on the News India

Channel. He has also referred to the observations made by the ITSC

that the expenditure incurred on acquiring and running of the

channel cannot be treated as for the objectives of the Trust as such

an expenditure has not actually been made to fulfill the objective. In

so far as the assessee’s plea that the channel is owned by ‘Omega

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TV Media Pvt. Ltd.’ which is separately assessed to tax, he held that

as per the MOU, the entire share holding including the rights title

and interest in Omega TV Media Pvt. Ltd. was given to Dr. B.S.

Tomar and Dr. Juhi Tomar for consideration of Rs. 3.00 crores,

which was paid by the assessee Trust on their behalf. Thus, he

concluded that the Trust’s fund has been utilized in contravention

of the objectives of the Trust. In so far as the assessee’s contention

at the objectives of the news channel was for its own educational

purpose and programme and courses run by the NIMS University,

the ld Pr.CIT has given a detailed reasoning as incorporated from

pages 21 and 22 of the impugned order and based on the reasoning

given therein, he came to the conclusion that setting up and

running of a commercial news channel by utilizing the funds of the

Trust is in violation of the objectives of the Trust. One most vital

finding given by him was that the conditions laid down in sub-

section (5) of Section 11; and clause (b) of 3rd proviso to Section

10(23C) (vi) & (via) of the Act have been violated as the trust cannot

invest in shares of Private Limited Company. He has further

discussed as to how such payment made by the Trust on behalf of

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the trustees for acquiring the shares and rights is in violation of

provisions of the Act and therefore, such an activity is neither in

accordance with the objectives nor can be reckoned as genuine.

cash payments of salary to Doctors and staffs. He has noted that

during the course of search proceedings, loose papers were seized

marked at page No. 79 as Annexure-A-2 and at page No. 66 of

Annexure-A-4 which goes to show that the cash payments were

made to Doctors which were not accounted for in the books. For

instance, in page 79 there is a noting of salary paid to Dr. Nilesh at

5.40 lacs, which is 90,000/- for six months and similar payment to

Dr. Harvey @ Rs.95,000/- for 12 months and Dr. Mahesh @ Rs.

70,000/- for three months. The total of these amounts has been

written as ‘18.9’, which was deduced by the department as Rs. 18.9

lacs. Similar noting was there regarding cash payment to Dr.

Thomas for Rs. 95,000+80,000. All these revealed that payments

were made to the doctors in cash to the tune of Rs. 20.65 lacs.

Similarly, noting is appearing at page No. 66 for the payment made

to the various doctors, the details of which has been noted by him

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in para 6.1 of the impugned order which aggregated to Rs. 6.25

lacs. From these seized documents, the ld. Pr.CIT concluded that

the Trust was incurring expenditure in cash from its unaccounted

receipts and this fact too has been accepted by the ITSC in para

16.15 of the order.

approval granted to the assessee Trust U/s 10(23C) (vi) & (via) of

the Act is to be withdrawn after invoking the 14th proviso to its

Section w.e.f. from 01/4/2006. The final conclusion of the ld. Pr.

CIT in para 7 reads as under: -

“7. In view of the facts stated above especially forcing students/parents to give unaccounted donations in lieu of admission, enriching the trustees from such unaccounted capitation fee, running of commercial channel & incurring unaccounted expenditure, it is established that activities of the trust cannot be held to be charitable as per sec. 2(15) of the Act, and hence not genuine. It has also been established that the activities of the assessee trust are not being carried out in accordance with the condition subject to which it was notified and the trust is being run not as per the objects mentioned in the trust deed. In view of the discussion made above, I am satisfied that the assessee trust (M/s Indian

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Medical Trust) has not applied its income in accordance with the provisions of clause (a) of 3rd proviso to section 10(23C)(vi) and s. 10(23C)(via), has not invested or deposited its funds in accordance with the provisions of clause (b) of 3rd proviso to section 10(23C)(vi) and s. 10(23C)(via), the activities of the assessee trust are not genuine and are not being carried out in accordance with the conditions subject to which it was notified. Therefore, the approval granted to the trust u/s 10(23C)(vi) and s.10(23C)(via) is hereby withdrawn by invoking the 14th Proviso to s. 10(23C)(vi) and s.10(23C)(via) of the I.T. Act, 1961 with effect from 01/04/2006.”

of the Act, exactly similar facts are permeating and exactly same

reasoning has been given by the ld. Pr. CIT based on the same facts

and material on record. The ld. Pr.CIT has analysed the same

material and has applied the same reasoning for holding that there

is clear cut violation of conditions laid down from Sections 11 to 13

of the Act and again vide para 7 of the impugned order, he has

cancelled the registration w.e.f. 01/4/2006, which reads as under:

“7. In view of the facts stated above especially forcing students/parents to give unaccounted donations in lieu of

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admission, enriching the trustees from such unaccounted capitation fee, running of commercial channel & incurring unaccounted expenditure, it is established that activities of the trust cannot be held to be charitable as per sec. 2(15) of the Act, and hence not genuine. The activities of the trust are not being carried out in accordance with its objects. In view of the discussion made above, I am satisfied that activities of the assessee trust (M/s Indian Medical Trust) are not genuine and are not being carried out in accordance with the objects of the assessee trust. Therefore, the registration of the assessee trust u/s 12AA(1)(b)(i) is hereby cancelled by invoking section 12AA (3) of the Income tax Act, 1961 with effect from 01/04/2006.”

Argument placed by the Ld. A.R. of the assessee:

after reiterating the entire facts and background of the case

submitted that the various allegations made by the ld. Pr. CIT, in

the impugned order cannot be sustained so as to cancel the

approval/registration from retrospective effect. One of the main

allegation of the ld. Pr.CIT was that the assessee has received

capitation fees in cash, the same is not correct appreciation of facts,

because these were purely in the nature of ‘voluntary donations’

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received from the parents/students and such voluntariness is

borne by the fact that, firstly, it has not been received by all the

students but from very few students as highlighted in the

Annexure-2 of the impugned order; secondly, there is no fixed

amount charged and in fact the amount varies from student to

student; and lastly, the so called capitation fee was not received at

the time of admission which generally is a feature where the

capitation fees are received by the colleges. Once, similar nature of

voluntary donation which were recorded in the books of account up

to A.Y. 2008-09, has been accepted to be genuine by the

department in the scrutiny assessment passed U/s 143(3) of the

Act, then for similar nature of voluntary donation, it cannot be held

that it is a capitation fee which needs to be adversely viewed in the

case of assessee. Earlier, these donations were recorded in the

regular books of account and now they are recorded in diaries and

most importantly all the donations have been fully utilized for its

charitable objects and there was no use or misuse of such fund by

the trustees or by any of their relatives. The assessee is carrying out

various philanthropic and charitable activities, which is evident

26 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

from the fact that it has undertaken free medical camps at villages

wherein major operations were conducted for a nominal fee and

even various medical investigation procedures like MRI, Scanning,

X-ray etc. were done for free for the poor citizens. In support, he

also showed us certain pamphlets and news cuttings. Apart from

that, he submitted that the assessee Trust had utilized the entire

funds of the Trust in expansion of infrastructure facilities, medical

equipment, modernization and construction of educational

buildings, etc. There is no evidence found from the search which

could indicate that the funds of the Trust have been misused by the

trustees. In fact, he pointed out that the trustees have not charged

any remuneration for their services rendered to the activities of the

Trust and in fact they have given huge interest free funds to the

Trust. None of its activities has been found to be carried out beyond

the objects. Once the activities of the assessee Trust are charitable

in nature as defined in Section 2(15) of the Act, then without any

material on record that the assessee has digressed from such

activities, the approval/registration granted under the Act cannot

be revoked/ cancelled. The Trust is still running hospital and

27 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

providing medical facilities and education. The observation and the

finding of the ld. Pr.CIT that the activities of the Trust are not in

accordance with the objects is not correct or based on any material

on record, but is based on surmises and conjectures with various

incorrect interpretation of facts wrong assumptions. Ld. Pr. CIT

could not show from the material on record that there has been

diversion of funds by the assessee Trust to the trustees and it was

used for the personal purposes as alleged in the impugned order.

He pointed out that the addition made on account of foreign travel

expenses, unaccounted investments, jewellery etc. in the hands of

the trustees and relatives have been subject matter of scrutiny

assessment U/s 153A of the Act in their hands and no adverse

inference has been drawn and all the additions have been deleted.

Thus, the observations of the ld. Pr.CIT that the Trust’s fund has

been misused are wholly divorced from the facts. The entire adverse

inference based on so called alleged capitation fees received in cash,

he submitted that though may not have been recorded in the books

of account but the same has been fully utilized for the objects and

activities of the Trust and therefore, no adverse inference

28 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

whatsoever could have been drawn. Mere mentioning of ‘capitation

fees’ at some places in the seized document does not make that the

whole payment received by the assessee was not voluntary donation

and there is no proof with the department that the donations were

not by free will of the donors. The department had recorded the

statement of donors behind the back of the assessee without cross

examination and therefore, such statement cannot be adversely

viewed against the assessee. He also pointed out that the ITSC after

examining nature of receipts of all the 638 entries recorded in the

diaries on account of voluntary donation which has been termed as

capitation fees by the department had been held to be ordinary

receipts which is evident from reading of page 40 of the Settlement

Commission order.

that, it was as per the decision of the Board of trustees for

education of the students in the field of running the TV channel and

not for relay of educational programmes on it. In pursuance of

objects for providing education on production of TV contents,

Feature Films, Journalism etc. to the students, advance of Rs.3

29 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

crores were given to earlier shareholders. Since the Omega TV

Channel had no liquid sources, therefore, in order to secure the

amount of advance so given, shares were transferred in name of

NIMS. Omega TV is separately assessed to tax and no personal

benefit from running of TV channel was gained by the Trustees as

alleged by Ld. Pr. CIT. Had any benefit was gained by any of the

Trustees, then additions would have been made in the hands of the

trustees in their assessment orders. Even the allegation of the Ld.

PCIT that running of TV channel was for publicity of Dr. B.S. Tomar

is without any basis and proof. By running of TV channel, the

assessee is providing degrees to the student and training, because it

is running various courses relating to running of TV channels,

production of TV contents, journalism, mass communication,

advertisement etc. and once it is part of curriculum, which is

relating to the objects, then running of TV channel cannot be a

basis for cancellation of registration. He pointed out that Omega TV

is separately assessed to tax and the assessee has acquired shares

to get the rights only to run the channel for the educational

purposes and not for any other commercial purpose.

30 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

Circular No. 21/2016 dated 27/05/2016 wherein clarification has

been given for cancellation of registration U/s 12AA of the Act that

it is not mandatory that the registration already granted U/s 12AA

on the ground that the cut-off specified in the proviso to section

2(15) of the Act has exceeded in a particular year and without there

being any change in the nature of activities of the institution, then

cancellation of registration without justifiable reasons cause

additional hardship to the assessee. Therefore, keeping the spirit of

the said circular, he prayed that cancellation of the registration of

charitable institution granted U/s 12AA of the Act is not warranted

just because of proviso to Section 2(15) of the Act comes into play.

could not be cancelled with retrospective effect especially in the

case of assessee, when no show cause notice or opportunity was

given by the ld. Pr. CIT that he is withdrawing the

registration/approval w.e.f. 01/4/2006. In support of his

contention that registration cannot be withdrawn from retrospective

date, he strongly relied upon the judgment of Hon’ble Allahabad

31 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

High Court in the case of ACIT Vs. Agra Development Authority

(2018) 302 CTR (All) 308; CIT Vs. Manav Vikas Avam Sewa

Sansthan (2011) 336 ITR 250 (All); and ITAT Mumbai Bench

decision in the case of the South Indian Education Society Vs CIT

in ITA No. 3288/Mum/2013.

Arguments placed by the Ld. CIT D.R.:

in 3 volumes containing all the materials and documents found

during the course of search. Some of the pages were also referred to

by him at the time of hearing. He submitted that here in this case,

specific evidences and materials were found in the course of search

and also in the post search enquiry which revealed that the

assessee was charging huge capitation fee from various students for

the courses offered in the medical colleges. Such capitation fees

were over and above the regular fees and hostel fees. These

capitation fees have neither been recorded in the books of account

nor have been shown or reflected in the audited statement of

income and expenditure. Such a capitation fee has been quantified

by the ITSC at more than Rs. 21.00 crores. Apart from that, he

32 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

submitted that the assessee was running a News TV channel on

commercial lines, which was beyond the objects of the Trust. There

were other incriminating materials found during search and

investigation pointing that the trustees were misusing the funds for

their personal benefits. This aspect too has been dealt in detail in

the order of the Settlement Commission. It is in the light of these

backgrounds and incriminating documents and evidences found,

the ld. Pr. CIT (Central), Rajasthan, Jaipur has initiated the

cancellation of the approval granted U/s 10(23C), as well as

registration U/s 12AA of the Act. In support of his contentions, he

strongly referred and relied upon to the various observations made

in the impugned order, which we have already discussed above. He

further submitted that the cancellation of registration has been

provided U/s 12AA (3) and also in the 14th proviso to Section

10(23C) (vi) & (via) of the Act, wherein it has been clearly provided

that if the assessee’s activities are not genuine or are not carried

out in accordance with the objects of the Trust or institution, then

the authorities have the power to cancel such registration. There

are twin conditions wherein the ld. Pr. CIT can cancel the

33 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

registration and both the conditions are independent and mutually

exclusive to each other. In other words, if either of the conditions is

violated, i.e., the activities are not carried out in accordance with

the objects; or the activities are not genuine, then the statute

provides power to rescind or cancel the approval/registration

granted earlier to the Trust. Here in this case, both the charges

have been framed against the assessee Trust and especially on non-

genuineness of the activities of the assessee Trust. He then tried to

impress upon as to what kind of activities of any Trust or

Institution can be reckoned to be non-genuine. These are, according

to him are as under: -

• activities are not legal as it has caused some infringement of law. • accounts are not properly maintained or the receipts are not accounted for in the books of accounts. • the trust/society is not registered with competent authority. • it has caused some misrepresentation of facts before any authority. • it has encroached public property. • it has given undue benefits to the trustees or office bearers. • it is selling education. • it is doing commercial activities

34 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

Herein in this case, he submitted that such kind of non-genuine

activities are clearly borne out from the material on record and

therefore, such non-genuine activities entails cancellation of

registration and that to be from retrospective date. Here the

registration/approval has not been cancelled since inception, i.e.,

from the date of registration/approval, albeit from the year or period

for which incriminating documents or evidences have been found.

The seized material and post search enquiries have revealed that

capitation fee has been received by the assessee in a systematic

manner. Since the incriminating materials found relates back only

from the assessment year 2006-07 and onwards, therefore, the

cancellation of registration has been made w.e.f. the assessment

year 2006-07 onwards.

that capitation fees are purely a voluntary donation, Ld. CIT DR

submitted that the concept of voluntary donation has a different

connotation and meaning and in support thereof, he has referred to

various dictionary meaning of the term ‘voluntary’, which are as

under:

35 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

“As per Collins dictionary a voluntary donation means: “performed, undertaken, or brought about by free choice, willingly, or without being asked” As per Merriam Webster dictionary: • “proceeding from the will or from one's own choice or consent • having power of free choice • acting or done of one's own free will without valuable consideration or legal obligation” As per Cambridge English Dictionary: • “done, made, or given willingly, without being forced or paid to do it: The word ‘donation’ has to be seen from the context that it has been

given by free will. On the other hand, the word ‘fee’ indicates

compulsion, i.e., there is some kind of force to charge fees.

Therefore, fee and voluntary donation cannot be equated and

treated at par. The word ‘fee’ does not bear the voluntary character

albeit it is to be understood as fixed charge or sum paid or a charge

for a service, i.e., it is some sort of consideration paid compulsorily

for utilization of services. The element of voluntariness is completely

missing in the term fee. In the seized documents found, he pointed

out that there are noting by the trustees in their own handwriting

for charging of capitation fee and that to be installments have been

36 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

granted. Voluntary donation cannot be charged or given in schedule

and fixed installments. Now whether capitation fee can be legally

collected by educational institution or not, he referred to the

Constitutional Bench judgment of the Hon'ble Supreme Court in

the case of TMA Pai Foundation Vs. State of Karnataka (2002) 8

SCC 481. He further submitted that a distinction has to be drawn

between the donation towards corpus and the donation for

earmarked purpose. Referring to the judgment of Hon'ble Supreme

Court in the case of Municipal Corporation of Delhi Vs. Children

Book Trust (1992) 63 Taxman 385, he pointed out that the

Hon’ble Court has held that term ‘voluntary contribution’ towards

the corpus fund must satisfy twin tests viz., (i) it should be

voluntary without any quid pro quo; and (ii) with a specific direction

towards corpus fund of the trust. Beneficiary’s contribution could

not be called as voluntary contributions, as there would be some

consideration for the contribution in the form of certain benefits

being direct or indirect. He submitted that similar view has been

expressed by the Hon’ble Karnataka High Court on similar set of

37 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

facts in the case of DIT Vs. Ramakrishna Sewa Trust, 205

Taxman 26 wherein following observations have been made:

“the capital of an assessee; a capital of a society, a capital of a trust; a capital of an institution. Therefore, if voluntary contribution is made with a specific direction that it is forming part of corpus, then it shall be treated as capital of the trust for carrying on its charitable or religious activities.”

Thus, corpus donation is a permanent capital which cannot be used

either as an application or for giving any loan or advance to any

other Trust or party. Here in this case, so called voluntary donation

was not for the corpus but extra money forced from the parents of

the students. Such forceful money cannot be reckoned as voluntary

donation.

the ‘Omega TV Media Pvt. Ltd.’, he submitted that first of all, there

is no such object in the trust deed so as to authorize the trust for

running a TV channel on commercial lines. Once such a channel is

being run without there being any object, then it goes to show that

the assessee’s activities are not being carried out in accordance

with its objects. Secondly, he pointed out that a Trust of Institution

38 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

cannot make investment in shares of a Private Limited Company

which has been specifically debarred in sub-section (5) of Section

11 read with Section 13(1)(d); and Section 10(23C) clause (b) of 3rd

proviso to Section 10(23C) (vi)&(via) of the Act. Thus, making such

investment in the shares of Private Limited Company by the

assessee trust, itself acts as a deterrent and whence there is a

violation of the statutory provision, then it can be held that its

activities are not genuine and they are not being carried out as per

the statutory provision. In the search proceedings, an MOU was

found wherein the trustees namely, Dr. B.S. Tomar and Dr. Juhi

Tomar were parties to such MOU and the entire funds for acquiring

of shares have been routed through Trust. He also drew our

attention to the share hold pattern wherein the NIMS University,

Rajasthan was held 15,99,999 shares at the face value of Rs. 10

with percentage of holding of 99.9999%; and Dr. B.S. Tomar was

having one share of face value of Rs. 10 and the percentage of his

holding was 0.0001%. Once the Trust is the owner of a Private

Limited Company practically having all the shares, then it is a

clear-cut violation of Section 11(5) and 10(23C) of the Act.

39 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

pointed out from the seized documents, which has been placed in

the paper book filed before us, that there is clear cut noting in the

handwriting of the trustees wherein cash payments had been made

to the doctors which shows that the assessee has incurred

unexplained expenditure outside the books, because in the regular

books of account only cheques payment have been reflected. If the

payments have been made in cash then there must be cash

earnings which are nothing but coming from capitation fees

received in cash. For this reason, also it can be held that the

assessee’s activities were not genuine.

can be cancelled from a retrospective date, ld. DR submitted that

here in this case, registration was granted in the year 2000,

whereas the same has been cancelled only w.e.f. 2006-07 which are

based on documentary evidences found. Thus, cancellation is not

from the date of inception but from the date when the documentary

evidences/material has been found that the assessee’s activities are

not genuine and it has been receiving huge capitation fees. He also

40 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

referred to the relevant provisions of Section 12AA (3) and also the

14th proviso to Section 10(23C) of the Act that the Act itself provides

that the cancellation can be done from the time when non-

genuineness of the activities is found. In support of his contention

that the registration/approval can be cancelled or withdrawn from

the retrospective date, he relied upon the following three judgments:

(i) U.P. Distillers Association (ITA 830/2017) (Delhi High Court); (ii) Sri Vidyaranya Sewa Sangha Vs CIT, Hubli (2016) 71 Taxmann.com 152 (Banglore Trib); (iii) Novodaya Education Trust Vs Union of India (2018) 90 Taxmann.com 148 (Kar.).

Decision:

material placed before us, submissions made by both the parties

and the findings given in the impugned order. We have already

discussed the facts and background of the case and the contentions

raised by the parties in detail. The assessee is an Indian Medical

Trust, which was formed on 23/2/2000 and was registered as a

Charitable Trust under the ‘Rajasthan Public Trust Act’. It was not

only granted approval U/s 10(23C) (vi) & (via) of the Act from time

41 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

to time, but was also granted registration U/s 12AA of the Act w.e.f.

24/3/2000. The registration and approval under the relevant

provisions of the Act was granted looking to the fact that the Trust

was carrying out educational activities by setting up several

colleges, schools and institutions for imparting education in various

disciplines and courses. A medical college and hospital were also

opened in the name of NIMS Medical College in the year 2004 and

later on the Trust has been extending its courses in various fields of

medical science and health services. The assessee has set up its

own private university as NIMS University, Rajasthan, Jaipur which

later on was enacted by the Legislature of Rajasthan through “NIMS

University Rajasthan, Jaipur Act 2008”. After the establishment of

NIMS University, the assessee Trust through NIMS University has

extended its educational activities on a very large scale. A global

search and seizure action were carried out by the Income Tax

department and Investigation Wing of the department on

30/10/2014 at various premises of the assessee Trust as well as

the residential premises of the trustees. Though, various

incriminating materials/documents and unexplained investments

42 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

and cash was found, however, in the present case, we are

concerned mostly with the documents and seized material which

indicates that the assessee Trust has been receiving ‘capitation fee’

in a very systematic and organized manner from various students

right from the A.Y. 2006-07 till the date of search. The

quantification of the ‘capitation fee’ which could be unearthed from

the search and post search enquiry were quantified to 650 students

as tabulated by the department which is also forming part of the

impugned order marked as “Annexure-A”. In the said annexure,

detail analysis of unaccounted capitation fee received by the

assessee Trust has been given which highlights the details of seized

annexure number, page number, financial year to which capitation

fees pertain, date of fees received, name of the student, name of the

father/relative of the student, professional courses opted by the

student, address, mobile number, courses, amount received in lacs,

and the name of the trustee in whose handwriting it has been

written and other details. These entire capitation fees have been

received in cash and it an undisputed fact that from the assessment

years 2009-10 onwards, such capitation fees have neither been

43 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

recorded in the books of account nor have they been disclosed in

the audited financial statements or income and expenditure

account. These entries of capitation fees have been found from the

diary kept by the trustees in their own handwriting. The

department has quantified the amount of capitation fee in various

years at Rs. 79.9 crores starting from the financial year 2006-07 to

2014-15.

subject matter of settlement before the ITSC wherein the Settlement

Commission has quantified the undisclosed capitation fee

chargeable to tax at Rs. 21,63,46,000/- from A.Y. 2009-10 to 2015-

been quantified by the ITSC for the reason that, for these three

years, the capitation fee has been duly recorded in the books of

account and also disclosed as a part of income and expenditure

account wherein the details of receipts as well as utilization has

been given. Apart from that, the income and expenditure account

were subjected to scrutiny assessments u/s 143(3) of the Act and in

the assessment made, no adverse inference has been drawn. Even

44 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

before us, the department could not establish that the capitation fee

from the period A.Y. 2006-07 to 2008-09 found from the seized

document were not recorded in the regular books of account; and

perhaps that is the reason why the ITSC also has also quantified

the undisclosed capitation fee only from the A.Y. 2009-10 onwards.

Regarding issue of capitation fee, the observations of the Settlement

Commission in its order only for the sake of reference is reproduced

herein below: -

“c) We have considered the issues raised and the evidence presented before us by the Department and the clarifications given by the applicant. On the basis of the evidence produced it is not possible to come to a definite conclusion about the voluntary nature of the donations or otherwise. The most damaging evidence would appear to be the use of word 'capitation' on a statement prepared by the applicant itself which was found during the search. However, the applicant argues that a mere statement which was prepared by an employee and not by a Trustee and in which word 'capitation' is used on a few entries cannot be made the basis to term the entire donations received by it during the years under consideration to be not voluntary in nature.

45 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

d) Whether the donations were voluntary or otherwise is of relevance for the proceedings before us only in the context of the stand taken by the applicant that these donations being voluntary contributions should be treated as 'corpus donations' which are to be treated as exempt. Sec 11(1)(d) of the Income- Tax Act provides that income in the form of voluntary contributions are not be included in the total income of a Trust. However, Sec. 11(1)(d) lays down another condition: such voluntary contributions are not to be treated as exempt unless the donor gives a specific direction that they shall form a part of the corpus of the trust or Institution. It is seen that in none of the 638 donations received by the applicant there is any declaration by the donor that the amount is to be form a part of the corpus of the applicant trust. In view of this none of this donations can be treated as 'corpus donations' exempt under sec 11(1)(d) and all these are to be treated as ordinary receipts which shall form a part of applicant's income and taxed subject to the conditions relating to application of income for the objective of the Trust. In view of this we are of the view that whether the donations were 'voluntary' or 'involuntary’ becomes of academic nature as far as the determination of the total Income of the applicant. Whether the amount in question may be treated as 'Capitation charges’ too is a question that would be relevant to the Prohibition of Capitation Fee Act and not the present proceedings. This question may however assume relevance in the context of withdrawal of registration granted to

46 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

the applicant under Sec 12A and withdrawal of approval under Sec 10(23C)(vi) which is also one of the issues raised before us. To that extent it would be dealt with when we deal with that issue little later in this order.”

The aforesaid observation of the Settlement Commission goes to

show that some of the entries of cash received has been captioned

as “capitation fees”, however, the issue whether capitation fees is

voluntary or not has been left open as they have held that this issue

would assume relevance only at the time of cancellation/withdrawal

of the registration U/s 12AA/10(23C) of the Act

order as well as the seized documents shown before us, it is quite

glaring that the assessee has been receiving huge money in cash

over and above the regular course fees and hostel fees from the

parents/guardians of the students in various years for the various

courses run by the trust. The ld. Pr.CIT had given various instances

where the capitation fee has been collected from various students

who were not from NRI or management quota but were from general

quota. For various medical courses, cash has been charged from

the students/parents which have been clearly specified and not

47 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

only that, fixed schedule of installments have been granted for

payment of such cash. There is very systematic and organized

manner in which such cash fees are being charged from the

students for various courses and in fact trustees have devised a

‘package system’ whereby the students were given fixed packages of

capitation fee, hostel fee and admission fee which this clearly goes

to prove that the students were required to compulsorily pay the

capitation fee to receive their degrees. Only when such cash was

received, the student was given “No Dues Certificate”. Such huge

cash received over and above the regular course fees and hostel

fees, which have been termed as ‘capitation fee’ by the department

and ‘voluntary donation’ by the assessee has not been recorded in

the books of account at all and which fact has also been admitted

by the assessee trust right from the A.Y. 2009-10. The reason given

by the assessee for not recording these cash fees/voluntary

donation /capitation fees before the authorities below and also

before us is that, the head of the accounts department has left the

job after assessment year 2008-09 and therefore, these amounts

could not be recorded in the regular books of account for all the

48 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

subsequent years. Such a reasoning and the argument ostensibly

cannot appeal to the conscience of any court, because if the

assessee has recorded all other receipts which are running into

hundred of crores of rupees in the regular books of account then to

say that these cash fees/voluntary donations could not been

recorded due to the lack of head of accounts is very vague and lame

excuse. One of the reason for not recording such huge cash fees in

the books of account, perhaps could be due to the fact that by this

time, various courts including the Hon'ble Supreme Court have

come out very heavily against the private educational institutions

especially the private medical colleges for receiving such huge

capitation fees from the students and such judicial pronouncement

later got ratified by subsequent Constitutional Bench judgments of

the Hon’ble Apex Court in several cases holding it to be illegal,

which we shall be discussing in brief in succeeding paragraphs. In

so far as assessee’s contention that once the assessments have

been completed u/s 143(3) from A.Y. 2009-10 to A.Y. 2011-12,

therefore, no adverse inference should be drawn, is not tenable at

all, because admittedly these cash donation/ capitation fees have

49 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

neither been recorded in the regular books of account nor has been

disclosed in the audited financial statements and even though, the

assessments have been completed U/s 143(3) earlier, but the issue

of capitation fees/cash donation only surfaced after the search and

seizure wherein huge incriminating material and evidence were

found, which could not have be subject matter of scrutiny, because

assessments were made much prior to the date of search on the

basis of entries made in the regular books of account and amount

shown in the audited income and expenditure account. Thus, such

a plea raised by the assessee lacks merits.

wake of clinching evidences found during the course of search and

corroborated by post search enquiry that the assessee has been

receiving huge capitation fees which admittedly was unaccounted

money, can it be held that the assessee’s activities are genuine or

not. First of all, such huge cash fees have been received over and

above the regular fees claimed to in the nature of ‘voluntary

donation’ by the assessee, cannot be treated as voluntary at all,

because the concept of ‘voluntary’ alludes to the concept of free will

50 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

and choice and there cannot be any element of force. The nature

and pattern of amount of cash received shows that, firstly, they are

over and above the regular fees and hostel fee charged; and

secondly, there is a systematic pattern of fixing of the capitation

fees course wise devised in a package system and also there is a

schedule for making the payments of such fees in installments.

Such systematic way of receiving cash fees cannot be held to be

given by consent or free choice and willingly, because there cannot

be any fixed amount for a sum which is given by free will and choice

and it completely lacks element of voluntariness. The donation has

element of free will and there cannot be any fixed amount and here

in this case it has been brought on record by the department that

once this amount is given then only ‘no dues certificate’ has been

issued to the students by the trustees. Thus, under no

circumstances, such a cash fees can be held to be given voluntarily

or is in the nature of voluntary donation. It is undoubtedly in the

nature of enforced fee charged over and above the regular fees by

the assessee trust through its trustees which has neither any

sanction of law nor has been recorded in the books of account.

51 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

Colleges and other educational institutions has received judicial

frown and admonition not only by the various Hon'ble High Courts

but also by the Hon'ble Supreme Court and that to be by the

Constitutional Bench on several occasions. Providing education for

various levels to the citizens is one of the paramount goals of a

welfare state and is regarded as the fundamental duty of the State

to provide the education to its citizens. Rather the Constitution of

India has enshrined such a goal in “Directive Principles” which is a

mandate not only for the Central Government but also upon the

State Governments and that is why it is in the ‘Concurrent List’ of

the Constitution whereby the Central and State Government have to

ensure that proper education in all the fields is provided to its

citizens as well as the children. Providing education is most solemn

duty of the government and to establish adequate number of

educational institutions in the country at all levels including

technical, scientific, professional and medical to cater to the varied

sections of the society. Since looking to the size of our country and

increasing need of education in all walk of life, the State has

52 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

encouraged private educational institutions to fulfill the

Constitutional goal of providing education, therefore, State has

always given a separate status to education and has treated it

distinct with other economic activities. That is why there are

various Regulations and Acts passed by the various State

Governments and Central Government to regulate and control

educational activities both for the private institutions as well as for

State institutions. For this reason alone, the providing of education

has been treated to be one of the paramount activities of charity

and has been enshrined as one of the “charitable purposes” u/s

2(15) of the Act. Carrying out such charitable activity by any Trust

or institution has been provided with certain benefits and

exemptions under Chapter III of the Act, especially under Section

10(23C) and Sections 11 to 13 of the Act. If any Trust or institution

transgresses such a noble activity of education on a commercial line

which is tainted with commerciality and for profiteering, then same

has to be adversely viewed and any such benefits enjoyed by the

Trusts or institutions has to be withdrawn or they have to be

derecognized from the exemption provisions. A whole procedure has

53 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

been laid down under the Income Tax Act not only for providing

benefit from exemption of tax but also if any violation is found, then

the Act authorizes the authorities to withdraw such benefit. For

instance, u/s 10 (23C) clauses (vi) and (via) read with 13th proviso

provides for rescinding and withdrawal of the approval granted

earlier. The relevant proviso reads as under:

Provided also that where the fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) is notified by the Central Government [or is approved by the prescribed authority, as the case may be,] or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via), is approved by the prescribed authority and subsequently that Government or the prescribed authority is satisfied that— (i) such fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not— (A) applied its income in accordance with the provisions contained in clause (a) of the third proviso; or (B) invested or deposited its funds in accordance with the provisions contained in clause (b) of the third proviso; or (ii) the activities of such fund or institution or trust or any

54 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

university or other educational institution or any hospital or other medical institution— (A) are not genuine; or (B) are not being carried out in accordance with all or any of the conditions subject to which it was notified or approved, it may, at any time after giving a reasonable opportunity of showing cause against the proposed action to the concerned fund or institution or trust or any university or other educational institution or any hospital or other medical institution, rescind the notification or, by order, withdraw the approval, as the case may be, and forward a copy of the order rescinding the notification or withdrawing the approval to such fund or institution or trust or any university or other educational institution or any hospital or other medical institution and to the Assessing Officer:]

Thus, if any Trust or institution’s activities are found to be not

genuine or are not been carried out in accordance with objects or

any of the conditions for which it was notified or approved, then

such notification can be rescinded or can be withdrawn. There is no

specific date prescribed under the said provision from which such

approval can be withdrawn. From the plain reading of aforesaid

provision, it can be interpreted that if from a particular year or date

55 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

it is found that the activities are not genuine or such activities are

not carried out in accordance with the objects then from that

date/year, approval/notification can be withdrawn.

of registration granted U/s 12A/12AA of the Act, which for the sake

of ready reference is reproduced herein:

“[(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) [or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)]] and subsequently the [Principal Commissioner or] Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution:”

The aforesaid provision thus, clearly provides that PCIT/CIT

has the power to cancel the registration granted u/s 12A or 12AA, if

he is satisfied that the activities of the trust or institution are not

genuine or are not carried out in accordance with the objects. Both

the conditions are mutually exclusive to each other and if any of the

56 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

one condition is satisfied, then the registration granted can be

cancelled.

be held to be genuine or not; or whether it is for the purpose of

education. One of the main contentions raised by the assessee was

that all such cash fees received, though not recorded in the books

has been fully utilized in the construction of college/ hospital

buildings and being used for expanding the infrastructure and

therefore, no adverse inference can be drawn regarding non-

genuineness. Such an argument is delusive and flawed, firstly for

the reason that it is purely based on hypothesis as no evidence or

material has been brought on record or has been found during the

course of search that these cash fees has been utilized for the

purpose of construction of building or applied for charitable

purposes; and secondly, such illicit charging of fees enforced upon

the students cannot be genuine education activity. If the assessee is

receiving huge unaccounted cash fees, which are not recorded in

the books of account and neither its application has been recorded

then there cannot be any presumption that such cash received

57 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

deemed to have been applied for charitable purposes. At no stage

assessee could substantiate such utilization of unaccounted

receipts with any evidence. In any case, even if some of the such

capitation fees has been utilized for construction of buildings, but

that cannot justify the illicit money from students. Here the end

cannot justify the means. Thus, we reject the contention of the ld.

counsel for the assessee that the assessee’s cancellation of

registration is not justified simply because the entire money

received in the form of capitation fee /donation has been fully

utilized for the purpose of education. The ‘capitation fee’ per se has

been strictly condemned and castigated by the Hon’ble

Constitutional Bench of the Hon'ble Supreme Court comprising of

seven judges in the case of P.A. Inamdar & ors. Vs State of

Maharashtra (2005) 6 SCC 537, wherein while referring the

principle laid down by the Hon’ble Constitutional Bench of 11

Judges in T.M.A. Pai Foundation & ors. Vs. State of Karnataka

(2002) 8 SCC 481, the Hon’ble Court had observed as under:

“Capitation fees 140. Capitation fee cannot be permitted to be charged and no seat can be permitted to be appropriated by payment of

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capitation fee. “Profession” has to be distinguished from “business” or a mere “occupation”. While in business, and to a certain extent in occupation, there is a profit motive, profession is primarily a service to society wherein earning is secondary or incidental. A student who gets a professional degree by payment of capitation fee, once qualified as a professional, is likely to aim more at earning rather than serving and that becomes a bane to society. The charging of capitation fee by unaided minority and non-minority institutions for professional courses is just not permissible. Similarly, profiteering is also not permissible. Despite the legal position, this Court cannot shut its eyes to the hard realities of commercialisation of education and evil practices being adopted by many institutions to earn large amounts for their private or selfish ends. If capitation fee and profiteering is to be checked, the method of admission has to be regulated so that the admissions are based on merit and transparency and the students are not exploited. It is permissible to regulate admission and fee structure for achieving the purpose just stated.”

Further, in the judgment of T.M.A. Pai Foundation & ors. Vs.

State of Karnataka (supra), the Hon’ble Apex Court had made a

very important observation which reads as under:

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“57. We, however, wish to emphasize one point, and that is that inasmuch as the occupation of education is, in a sense, regarded as charitable, the government can provide regulations that will ensure excellence in education, while forbidding the charging of capitation fee and profiteering by the institution. Since the object of setting up an educational institution is by definition "charitable”, it is clear that an educational institution cannot charge such a fee as is not required for the purpose of fulfilling that object. To put it differently, in the establishment of an educational institution, the object should not be to make a profit, inasmuch as education is essentially charitable in nature. There can, however, be a reasonable revenue surplus, which may be generated by the educational institution for the purpose of development of education and expansion of the institution.”

[Emphasis in bold is ours]

institution cannot charge capitation fees and are not permitted to

charge any such fee. Strong contempt and obloquy have been

expressed by the Supreme Court of Land that the capitation fee and

profiteering by the educational institution defeats the noble cause of

education and it has to be checked and regulated. If an educational

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institution is charging capitation fees, then educational institution’s

activity cannot by any means be reckoned to be genuine. Thus, this

reason alone is sufficient to hold that the activities of the assessee

trust are not genuine and accordingly, we hold that the Ld. Pr.CIT

is justified in law and on facts in cancelling the

approval/notification issued U/s 10(23C) of the Act and also

registration granted U/s 12AA of the Act.

the NIMS University which is controlled and managed by the

assessee Trust can be held to be in accordance with objects of the

trust or under the law. Before us, the ld AR of the assessee has

harped upon the fact that one of the curriculums run by the NIMS

University is that, it is providing course of Mass communication,

journalism, TV production, feature film etc. and it is for this

purpose, the University has desired to have its own TV channel for

the benefit of its students. The ld. counsel has also shown us the

various courses and curriculum wherein the students were required

to participate in the activities of the TV channel. However, one of

the most noticeable fact is that Omega TV Media Pvt. Ltd. which

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owns and has the rights to run a news channel is an independent

assessee separately assessed to tax, however, the entire investment

in the said private limited company has been made by the Trust.

Such an investment made in the shares of the private limited

company is clearly prohibited u/s 11(5) of the Act and also under

3rd proviso to Section 10(23C) (vi) & (via) of the Act wherein it has

been provided that a Trust or institution cannot invest in the shares

of private limited company. This has been specifically provided in

Sub-section (5) of Section (11) of the Act. Once there is a clear-cut

bar upon a Trust or institution carrying out charitable activity to

invest in the shares of private limited company, then if such a Trust

or institution violates such provision then it has to be held that the

activities of the Trust is not genuine as it is not in accordance with

the law governing benefit given to the charitable trust or institution.

On this point also, we hold that the assessee’s activities are not

genuine.

outside the books, we find from perusal of the seized documents

that the revenue has not been able to properly correlate or establish

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that such payments have been made outside the books or such

cash has actually been made. In any case, even it is treated as some

adverse material, however, we are not dwelling upon this aspect as

we have already held on two counts that the assessee’s activities are

not genuine and therefore, we are not adjudicating this allegation of

the Revenue.

approval u/s 10(23C) or registration U/S 12AA granted earlier can

be withdrawn from a retrospective date; and if the answer is yes,

then what would be the relevant date/period from which such

cancellation be made effective. In so far as the withdrawal of

approval /notification U/s 10(23C) is concerned, we have already

observed in the foregoing paragraphs that there is no such

provision which specifically provides that withdrawal cannot be

made from retrospective date as the statutes provides that the

authorities have the power to withdraw the approval once it is

found that the activities of the Trust or institution are not carried

out in accordance with its objects or its activities are not genuine.

63 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

If, such non-genuineness is found from a particular date then such

approval can be withdrawn from that date.

conditions for cancelling the registration is that, firstly, the

activities of such Trust or institution are not genuine; or secondly,

its activities are not being carried out in accordance with its objects.

Prior to 1.04.1997 the registration was granted u/s 12A and after

the amendment by the Finance (No. 2) Act, 1996 w.e.f. 1.04.1997,

the registration is granted u/s 12AA. Assessee Trust was granted

registration on 24/3/2000 u/s 12AA. In sub-section (3) two

amendment have been brought, one which has been brought w.e.f.

01/10/2004 by which sub-section (3) was introduced wherein the

CIT was given power to cancel the registration which was granted

under clause (b) of sub-section (1) of Section 12AA of the Act. Such

granting of registration as discussed above U/s 12AA was brought

in the statute w.e.f. 01/4/1997. Thus, any registration granted

after 01/4/1997, was U/s 12AA and prior to this date, the

registrations were granted U/s 12A of the Act. If the registration

was granted under the earlier provision of Section 12A, then if such

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a registration is cancelled by invoking the provisions of Section

12AA (3) then in that case the courts have held that the CIT cannot

cancel such registration from the retrospective date, because these

provisions were meant only to cancel the registration granted U/s

12AA of the Act and not for the earlier registration granted u/s 12A

with retrospective date. In order to examine the conditions for

cancellation of registration granted u/s 12A, the Parliament

brought an amendment by the Finance Act, 2010 w.e.f. 01/6/2010,

wherein it has been provided that the registration granted at any

time U/s 12A can also be cancelled by the Pr.CIT or CIT. The

intention of the Legislature was thus to bereft any charitable trust

for enjoying benefit of exemptions if its activities are found to be

non-genuine or is not carried out in accordance with objects for

which it was granted registration. Though the section does not

provide clearly from which date registration can be cancelled,

however on plain reading it is quite palpable that the cancellation

can be done from the time when the activities are found to be non-

genuine or is found not being carried out in accordance with

objects. If non-genuineness is not found from an earlier date but

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from the present date then cancellation cannot be made from back

date, however if the trust or institution based on any material or

information is found to be carrying non-genuine activity from the

earlier period then from that period registration can be cancelled.

The date from when the non-genuineness is found is the decisive

and determinative factor. There are set of judgments as cited by the

Ld. DR like U.P. Distillers Association (ITA 830/2017) (Delhi High

Court); Sri Vidyaranya Sewa Sangha Vs CIT, Hubli (2016) 71

Taxmann.com 152 (Banglore Trib); and Novodaya Education Trust

Vs Union of India (2018) 90 Taxmann.com 148 (Kar), wherein the

courts have held that the cancellation can be made from the

retrospective date. However, there are other set of judgments which

has been relied upon by the ld. counsel wherein the courts have

held that the registration cannot be cancelled from the date of

inception. Here in this case, we have held that the non-genuineness

of the activities of the assessee Trust has been found from A.Y.

2009-10 when the assessee had received huge capitation fee in cash

which has not been recorded in the books of account and from this

date onwards i.e. A.Y. 2009-10, the non-genuineness of the

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activities is writ at large and therefore, the cancellation of

registration or withdrawal of approval has to be given from A.Y.

2009-10 and not from the date of inception. Though, the revenue’s

case is that the withdrawal/cancellation should be made from A.Y.

2006-07 onwards, however, before us, the revenue has failed to

establish that the capitation fee which has been found during the

course of search is over and above what has been recorded in the

regular books of account and duly accepted in the scrutiny

proceedings U/s 143(3) of the Act. Perhaps that is the reason why

the Settlement Commission also has quantified the undisclosed

capitation fee from A.Y. 2009-10 onwards and not for the earlier

years. If the revenue seeks to cancel registration w.e.f. A.Y. 2006-

07, then the onus was upon the Revenue to show that the

capitation fee received by the assessee is outside the books of

account. Accordingly, we hold that the cancellation of registration

u/s 12AA (3) or withdrawal of approval u/s 10(23C) should be only

from the A.Y. 2009-10 onwards and not from the A.Y. 2006-07.

the assessee that the cancellation should not be made from

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retrospective effect, especially the judgment of the Hon’ble

Allahabad High Court in the case of ACIT Vs. Agra Development

Authority (supra), on perusal of the said judgment, it is seen that it

was a case of registration of a Development Authority, which was

granted registration U/s 12AA of the Act w.e.f. 01/4/2003. The

registration was cancelled by the ld. CIT U/s 12AA (3) vide order

dated 04/4/2012 from the date of registration. The reason for

cancellation of registration was that a proviso was inserted in

Section 2(15) w.e.f. 01/4/2009 and therefore, the activities of the

authority was violating the conditions of such proviso and therefore,

the assessee’s registration was cancelled from the date of inception.

In this background, the Hon'ble High Court held that the

registration cannot be cancelled from the retrospective date.

However, the Hon'ble High Court by way of obiter dicta did observe

that even after the amendment in Section 12AA (3), it does not

indicate that the ld. CIT can cancel the registration with

retrospective effect. At the same, there is a judgment of Hon’ble

Karnataka High Court in the case of Navodaya Education Trust Vs

Union of India (supra) wherein it has been held that withdrawal can

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be made from retrospective date if the evidence and material has

been found about the non-genuineness of the activities of the Trust.

Similarly, the Hon’ble Delhi High Court in the case of U.P. Distillers

Association (supra) have opined that the cancellation of registration

on that particular case can relate back from the date of introduction

of Section 12AA (3) of the Act w.e.f. 01/10/2004. Since in this case,

the cancellation has not been done from the date of granting of

registration, albeit we have held that such a cancellation or

withdrawal of approval should be done from A.Y. 2009-10 onwards,

because there are specific material and evidences to show that the

assessee’s activities from that period has been non-genuine.

Accordingly, on the facts and circumstances of the case, we hold

that the ld. Pr.CIT was justified in cancelling the registration U/s

12AA and also withdrawing the approval U/s 10(23C) of the Act,

but with a rider that such cancellation/ withdrawal would be from

the A.Y. 2009-10 onwards and not from the earlier years.

Accordingly, both the appeals of the assessee are dismissed in the

manner indicated above.

69 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

Appeals of NIMS University

No.736/JP/2017 & ITA No. 545/JP/2018 for the A.Y. 2017-18.

Both these appeals have been filed by the assessee against two

separate orders passed by the ld. CIT (Exemptions), Jaipur dated

29/08/2017 and 19/03/2018 respectively. In both these appeals,

the assessee has taken following grounds of appeal:

“Grounds of ITA No. 736/JP/2017 (1) Ld. CIT(Exemptions) was not justified in denying registration U/s 12AA of Income Tax Act to the assessee university merely on basis that certain Khasara of land were not in ownership of the sponsoring body (M/s Indian Medical Trust- though the sponsoring body was already granted registration U/s 12AA by ld. CCIT, Jaipur and was carrying out educational activities from the year 2000) (2) The ld. CIT(Exemptions) was not justified in ignoring the charitable objects of the assessee University for the purpose of granting registration U/s 12AA of IT Act (392 ITR 285 Raj), to assessee University who came into existence by an Act passed by Rajasthan Legislative Assembly and accordingly started its educational activities after transfer of all the assets and liabilities of the sponsoring body- Indian Medical Trust.

Grounds of ITA No. 545/JP/2018

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Rajasthan, Jaipur against the refusal of grant of registration U/s

12AA of the Act and refuse to grant approval for notification U/s

10(23C) (vi) & (via) of the Act. The facts and the reasoning given by

the ld. CIT(E) to deny the same are exactly same, therefore, our

finding would be applicable for both the appeals.

set up its own private University under the aegis of NIMS

University, Rajasthan, Jaipur. Such University was enacted by the

‘NIMS University Rajasthan Act, 2008’ by the Legislature of the

Rajasthan which got ascent from the Hon’ble Governor on

29/03/2008. Thus, the NIMS University was established in the year

2008. The Indian Medical Trust was running and controlling the

said University. Later on, an agreement was entered into between

the Indian Medical Trust and NIMS University, vide agreement

dated 30/09/2016, wherein it was agreed that Trust will transfer all

the assets and liabilities to the NIMS University w.e.f. 01/10/2016

and all the activities of education and medical hospital would

henceforth be run by the NIMS University only. All the assets owned

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by the Indian Medical Trust was transferred in the ownership of the

NIMS University including all the liabilities. However, no

registration of the properties/assets held by the Trust has been

transferred by registered documents by way Registry or by paying

the stamp duty. Similarly, the liabilities have also not been assigned

specifically to the assessee by way of registered agreement. The

sponsoring body continued to be the Indian Medical Trust by same

trustees. All the recognition and approval by the State and Central

Government for running the educational and other courses and

medical hospital run by the Indian Medical Trust was to be treated

and considered as taken by the NIMS University. The ‘objects’ of the

NIMS University continued to be the same.

16/2/2017 before the ld. CIT(E). However, such an application for

granting registration U/s 12AA has been denied by the ld. CIT(E)

mainly on the ground that certain ‘Khasra’ Nos. of land allotted as

per the notification of the Government was not in the ownership of

the sponsoring body, i.e., Indian Medical Trust. In the impugned

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order, the ld CIT(E) in the show cause notice to the assessee has

made following observations:

“In this connection, spot visit & verification report of inspector of this office is submitted herewith for kind perusal & necessary action. As per the spot visit report & other information’s gathered, the NIMS University is engaged in educational and medical activities, in addition to the above, following facts are submitted herewith: - 1. As per the Gazette notification issued dated 29-03-2008 by the Rajasthan Government as well as prospectus of the University. The University having 60.67 acres of land comprising in Khasara Nos. 152, 514, 515, 516, 517, 518, 519, 528, 529, 530, 531, 532, 519/666, 519/ 668, 396, 397, 398 & 520 of Village Jugalpura, Tehsil- Amer. Shobha Nagar, Distt.- Jaipur (Rajasthan). During verification of the same, following discrepancies have been notice. 1.1 The Khasara No. 152 (Khata Sankhya-32) pertains to Goverdhan S/o Ghasi Ram, Cast - Meena.

1.2 Khasara No. 514 (Khata Sankhya- 169) pertains to Public Works Departments. 1.3 Khasara No. 515 (Khata Sankhya- 02) pertains to Agarwal Farms Pvt. Ltd. Registered office Raja Raoji ka Khurra, Ramganj Bazar, Jaipur Director Sh. Girish Chandra S/o Hari Prasad, Part 14 F 35 Ghiya Marg, Bani Park, Jaipur,

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M/s Bholaram & Sons investment Pvt. Ltd. Through Director Shri Vinod Kashera Post- Panitola Aasam part 1/2. 1.4 Khasra No. 516 (Khata Sankhya -01) pertains to Government of Rajasthan. Khasra No. 518 (Khata Sankhya- 165) pertains to Jaipur Development Authority, Jaipur. 1.5 Khasra No. 528 (Khata Sankhya-165) pertains to Jaipur Development Authority, Jaipur. 1.6 Khasra No. 531 & 532 (Khata Sankhya - 165) pertains to Jaipur Development Authority, Jaipur. 1.7 Khasra No. 519 (Khata Sankhya - 1) pertains to Indian Medical Trust Registered Office 4 Govin.d Marg, Adarsh Nagar, Jaipur through Trustee Smt. Rajeshwari Devi W/o Late Hotam. Singh Tomar part. 306/490 Sajjan Kumar S/o Chaturbhuj AgarwaI Part 138/490 Mahandra Kumar Fahher Chaturbhuj Agarwal part 46/490 residence 20, in front of Sawai Jai Singh Highway Tagore, Bani Park, Jaipur.

1.8 Khasra No. 396/397/398 (Khata Sankhya- 89) pertains to Madhusudan HUF S/o Ram Ratan Agarwal Karta Madhusudan Part ¼ Madhusudan Son Ramratan Part ¼ Sushila W/o Ramratan Cast Agarwal, Residence Ruiyawalan Post- Topkhana Hujuri, Jaipur.

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From the above, it appears that major part of the land which is occupied by the applicant i.e. NIMS, University, Jaipur does not pertain to it.”

In response to the said show cause notice, the assessee submitted

that the ‘Khasra’ Nos. as been mentioned in the notice was never in

the ownership of the Indian Medial Trust nor was transferred to

NIMS University. Further the NIMS University had not yet become

the owner of the land bearing said ‘Khasra’ numbers. However, the

Ld. CIT (E) noted that, as per the notification issued by the

government, Schedule-1 provided that the University will have

60.67 acres of land comprising of various ‘Khasra’ numbers, but

some of the Khasra numbers were not found to be in the ownership

of the University. Thus, he concluded that there is a clear-cut

contradiction from the Govt Gazette Notification and the reply filed

by the assessee that the ownership of the land intended to be

vested in the university is not established. Accordingly, he has

refused to grant registration after observing as under: -

“11. Once it is found that the ownership of land intended to be vested in university is not with the sponsoring body, the next question comes whether such issue can be examined while

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granting registration u/s 12AA of the IT Act, 1964 in present case where university came into existence in 2008, almost 9 years back. Section 12AA clearly empowers Commissioner of Income Tax to examine objects of the university as well as genuineness of the activities. Both the phrases “objects of the institution” and “genuineness of its activities” used in the act are coupled with the word “and” which clearly indicates that they should be satisfied simultaneously as well as independently. As in the present case, the ownership of land which is intended to be transferred from the sponsoring body to the university is in doubt, it cannot be held as genuine activity. As the activities of transfer to assets for creation of university does not seems to be genuine, it is not a fit case for registration u/s 12AA of the Act.

refused by the ld. CIT (E) by holding as under: -

“Thus from 1.10.2016 the applicant took over all the assets and liabilities of X 1MT alongwith all of its activities. Therefore, it becomes imperative to examine the genuineness of activities of 1MT. It is also worthwhile to mention here that the in the case of M/s Indian Medical Trust, Jaipur, which is the sponsoring body the applicant, a search operation u/s 132(1) of the I.T. Act was

77 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

carried out on 30.10.2014. During the search proceedings - unaccounted cash, jewellery, foreign currency and various incriminating documents were found and seized. After examining the documents and various evidences collected during the course of search, and considering assessee’s submissions the approval granted to the trust u/s 10(23C)(vi) and 10(23C)(via) has been withdrawn by the Pr.CIT(Central), Jaipur vide order dated 16.01.2018. The approval of the trust has been withdrawn due to following irregularities and facts noticed in the functioning of the trust-

7.1 The trust is profiteering by taking unaccounted capitation fee from the students and parents. It cannot held to be genuine, and in the accordance with the objectives as per the trust deed. 7.2 The trust has violated the condition laid down in 10th proviso to sec. 10(23C)(vi) and (via) of the I.T. Act ,as the receipts of Rs. 21.6 crores were not accounted by the assessee. Sufficient evidence of misuse of trust funds has been found during the search proceedings. 7.3 The trust is operating a news channel namely “NEWS INDIA” at NIMS University, Shobha Nsgar, Jaipur, whose city office is at Sahakar Marg, Jaipur. It is clear that the trust has utilized its funds in contravention of its objectives as running a commercial news channel is not as per the stated objectives of the trust. Hence, it has violated the 3rd proviso to section 10(23C) of the Act.

78 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

7.4 The trust has also made unaccounted cash payment of salaries to doctors/staff, over and above the salaries given to these doctors/staff by way of cheque. In view of the above facts, the approval granted u/s 10(23C)(vi) & (via) to the Indian Medical Trust has been withdrawn w.e.f. 01.04.2006. Thus, it can be concluded, when activities of the sponsoring Body taken over by NIMS University are not genuine, the activities of the sponsored body i.e. NIMS University cannot be independently considered as genuine. Thus, the activities of the applicant are held as non-genuine. 8. It is also important to note that the applicant University applied for approval under both the Sec./clauses 10(23C)(vi) & 10(23C)(via) by filing common form. On giving show cause regarding correct section under which approval is sought the applicant replied- “It is therefore requested that single application may please treated as application for approval under section 10(23C) (vi) as well as under section 10 (23C) (via) of IT Act.” The section 10(23C)(vi) & 1O(23C)(via) are mutually exclusive because of world ‘solely’ used in both the clauses. The applicant can seek approval under one clause only. Seeking approval under both the clauses is technically and legally wrong. The reliance in this regard has been placed on the judgement of Hon’ble Rajasthan High Court in the case of C1T Vs Maharaja Sawai Mansingh ji Museum Trust (1988) 169 1TR

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379(Raj.) wherein it was held that It is amply clear from a bare reading of sec. 10(22) that the “educational institutions” must exist “solely” for educational purposes. “Solely” means exclusively and not primarily. The emphasis in sec. 10(22) is on word “solely.” Section 10(22) has been inherited by section 10(23C) and decisions applicable on erstwhile sec. 10(22) holds good for the present section of 10(23C).

that only ground taken for rejecting the application of the assessee

U/s 12AA is that, some of the land as per the Government

Notification was neither in the ownership of the Indian Medical

Trust nor could be transferred to NIMS University, Rajasthan. It has

not been doubted that the University has been carrying out various

educational activities and is running a hospital. He further

submitted that what is required to be seen while granting

registration U/s 12AA of the Act is whether the assessee’s objects

ae charitable in nature or not and whether its activities are genuine

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or not. In support of this contention he strongly relied upon the

judgment of Hon’ble Jurisdictional High Court in the case of

Commissioner of Income-tax, Bikaner v. Gopi Ram Goyal

Charitable Trust 392 ITR 285 (Raj). He further submitted that the

Government had issued a notification only when verification was

done that the hospital and education activities of the Indian Medical

Trust was being run and was duly approved by the various

authorities at Central and State Government. Thus, the ownership

of certain land bearing certain ‘Khasra’ numbers is irrelevant

consideration for refusing the registration U/s 12AA of the Act.

is found that the assessee has not found to be running its hospital

and educational activities on the land which has been notified by

the government, then it cannot be said that its activities are

genuine. He, thus strictly relied upon the order of the ld. CIT (E).

the material facts placed on record, we find that the NIMS

University, Rajasthan, Jaipur has been notified by an enactment

passed by the Legislature of Rajasthan. The said university was

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enacted to provide higher education in various fields. The

sponsoring body of the University was Indian Medical Trust.

Thereafter in the Gazette Notification, Schedule-1 provided that the

University will have 60.67 acres of land comprising of various

khasras numbers in village Jugalpura, Teshil- Amber, district-

Jaipur. The said schedule also enlists various buildings, academic

facilities and various kinds of degrees run by the said University. In

an enquiry conducted by the ld. CIT (E), it was found that certain

‘Khasra’ number as mentioned in the Government Notification for

the allotment of land to the University was not in the ownership of

the Indian Medical Trust or NIMS University. Solely on this ground,

he has refused to grant registration. No where he has discussed the

“objects” for which the said University is running; nor there is any

whisper about the genuineness of the activities qua the objects. It is

well settled position of law that at the time of granting registration

u/s 12AA, the ld CIT(E) is required to examine the ‘objects’ of the

Trust or institution as to whether they are for the charitable

purposes or not and also to see the genuineness of the activities

qua the objects. If certain ‘Khasra’ numbers as notified by the

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Government has not been acquired or is not owned by the Indian

Medical Trust or by the NIMS University and it is standing on some

different land bearing different ‘Khasra’ numbers, but that does not

mean that its activities are not genuine or is not carrying out

charitable activities. Even if there is some technical breach or

violation of the Notification pertaining to land that the said

University is not standing on a particular ‘Khasra’ notified, then

that would be a subject matter of issue of dispute with State

authorities and not the Income Tax Department. What is required

to be seen in terms of Section 12AA is, only the ‘objects’ and the

genuineness of the activities. Accordingly, the reasons given by the

ld. CIT (E) for refusing the registration cannot be upheld. Since the

objects and the genuineness of the activities have not been

examined, therefore, we are remitting the issue of grant of

registration back to the file of the ld. CIT (E), who shall examine the

‘objects’ of the institution whether they are for educational or

charitable purposes or not; and whether its activities are being

carried out in accordance with such objects including the

genuineness of the activities qua that ‘objects’. With this direction,

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the entire matter is restored back to the ld. CIT (E) who shall decide

and examine the issue of registration u/s 12AA afresh and in

accordance with law after giving due and effective opportunity of

hearing to the assessee to substantiate its case. Accordingly, the

appeal relating to refusal of registration U/s 12AA of the Act is

allowed for statistical purposes only.

CIT(E) while refusing the approval U/s 10(23C) of the Act that,

firstly, during the course of search and seizure operation U/s 132(1)

of the Act, it was found that the Indian Medical Trust was

profiteering by taking unaccounted capitation fee and such fee was

not accounted by the assessee in view of the 10th proviso to Section

10(23C)(vi) & (via); and secondly, the Trust was operating News

Channel, namely, News India at NIMS University which is not

genuine. While coming to this conclusion he has referred to the

decision and finding given by Pr. CIT in his order for withdrawal of

approval u/s 10(23C) in the case of Indian Medical Trust and on

that basis, he has refused to grant approval to NIMS University

also. In so far as the issue of material found during the course of

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search in the case of Indian Medical Trust that it was receiving

unaccounted capitation fee, the same was applicable till the date of

search and that to be in the case of Indian Medical Trust for which

we have already given our finding while deciding the case of the

Indian Medical Trust. However, the same charge or allegation

cannot be imported in the case of NIMS University also until and

unless there is some incriminating material or any kind of enquiry

has been conducted leading to any adverse inference, for instance,

receiving of unaccounted capitation fee is still continuing or is

permeating in the subsequent years also, that is, from the date

when NIMS University has taken over by entire assets and liabilities

of the Trust and also the educational activities. We are of opinion

that the issue of grant of approval u/s 10(23C) needs to be

examined afresh. On the issue of running of a news channel also,

the issue needs to be examined under the scope of 3rd proviso to

Section 10(23C) (vi) & (via) and Section 11(5) of the Act. The ld. CIT

(E) shall examine this aspect also without getting prejudice with the

finding given in the appeals of the Indian Medical Trust as decided

above for the reason that here the activities of the NIMS University

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had only started after 01/10/2016 when all the assets and

liabilities of the Indian Medical Trust has been transferred to NIMS

University by way of an agreement between the Indian Medical

Trust and NIMS University. The genuineness of the agreement

whereby entire assets and liabilities have been transferred from the

Indian Medical Trust to NIMS University also can be examined

whether it is in accordance with relevant provisions of law and there

is actual transfer of assets and liability or it is mere paper entry or

is just a façade. Accordingly, the issue of approval U/s 10(23C) of

the Act is also remanded back to the file of the ld. CIT(E) to be

examined denovo and afresh and in accordance with law after

examining the objects and genuineness of the activities. Needless to

say, the ld. CIT (E) shall give due and proper opportunity to the

assessee to present its case. Accordingly, this appeal of the assessee

is also allowed for statistical purposes only.

No. 252 & 253/JP/2018 are dismissed; and the appeals of NIMS

University in ITA No. 736/JP/2017 & 545/JP/2018 are allowed for

statistical purposes.

86 ITA 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018 Indian Medical Trust Vs. Pr.CIT

Order pronounced in the open court on 12th October, 2018.

Sd/- Sd/- (OM PRAKASH KANT) (AMIT SHUKLA) Accountant Member Judicial Member

Dated:- 12th October, 2018

*Ranjan

Copy of the order forwarded to: 1.The Appellant- (i) Indian Medical Trust, Jaipur. (ii) The NIMS University, Rajasthan, Jaipur 2. The Respondent- (i) The Pr.CIT (Central), Jaipur. (ii) The CIT (Exemptions), Jaipur. 3. CIT 4. The CIT (A) 5. DR, ITAT, Jaipur 6. Guard File (ITA No. 252 & 253/JP/2018, 736/JP/2017 & 545/JP/2018)

By order,

Asst. Registrar