Brief facts are that the assessee was registered as trust on 01.02.2001.Its application for registration as a charitable trust was granted on 27.12.2001. On 30.06.2002 the assessee received the IILM Undergraduate Business School,from the Ram Krishna and Sons Charitable Trust (RKSCT). It is not in dispute that the assessee has established and manages other educational institutions and has derived income from them.
For Assessment Year (AY) 2003-04 and 2004-05, based upon certain remittances made by the assessee to RKSCT, the AO held that the assessee was not in fact carrying on charitable activities and was, therefore, not entitled to the benefit of Section 12A of the Income Tax Act, 1961. Thus the Assessment orders were carried in appeal; the CIT (Appeals) confirmed them. On further appeal the Income Tax Appellate Tribunal (ITAT) granted relief to the assessee. The ITAT reasoned that the AO was not empowered to comment either on the correctness or otherwise of the certificate which had been granted under Section 12A and that the appropriate statutory authority in that regard was the Director of Income Tax (DIT) (Exemption). Against the orders of ITAT, Revenue’s appeals have arisen in ITA 1312/2010 & 1322/2010.
Having regard to the submissions of the parties and the provisions of Section 12A, we are of the opinion that the ITAT’s finding as to the absence of power of the AO to doubt the certificate granted under Section 12A cannot be faulted. Whilst the AO is certainly empowered to examine the nature of expenditure in the application of trust, he cannot go behind the certificate issued under Section 12A. Such being the established position, the question of law framed in these appeals is to be answered against the Revenue and in favour of the assessee.