This appeal, filed by assessee, is directed against order of CIT-II, Lucknow dt. 19th Oct., 2007 passed under s. 12AA of IT Act, 1961. only ground raised by assessee in this appeal reads as under: "1. learned CIT-II, Lucknow (hereinafter referred to as learned CIT) erred on facts and in law in refusing to register appellant society under s. 12AA(1)(b) of IT Act, 1961 in present case." Briefly stated, facts of case are that Dr. Bhim Rao Ambedkar Educational Society is registered with Registrar of Societies U.P. w.e.f. 22nd March, 1994, which happens to be date of its creation. Chandra Dental College and Hospital Safedabad, Barabanki is being run by society. assessee society moved application on 11th April, 2007 in Form 10A (under r. 17A) for registration under s. 12A of IT Act together with list of its members, revised memorandum of aims and objects, and audit report in Form 10B accompanied by balance sheet, income and expenditure statement for financial years 2003-04, 2004-05 and 2005-06. CIT called for report from ITO-V(1), Lucknow and Addl. CIT, Range-V, Lucknow. Both above authorities reported that main object of society is running of dental college and offering free dental treatment to patients. ITO-V(l), Lucknow, before sending his report through range Addl. CIT, also examined books of accounts etc. with reference to claims raised in application for registration and activities of society, which were found to be in accordance with its objects. During course of hearing before CIT, assessee submitted details of activities of Chandra Dental College and Hospital, including detailed working of income utilized during financial year 2005-06. society also filed list, containing names, addresses of students, who contributed sums towards head Building development charges receipt in financial year 2005-06. assessee, vide its written submission dt. 11th Sept., 2007 stated that it has set up college solely for educational purposes and without any motive of profit. It was also stated that fee being charged is just sufficient to meet cost of maintaining and running college. It was also submitted that fee was being charged in terms of fee prescribed by CPMT for its affiliated colleges. CIT observed that for imparting education in dental science, assessee through dental college, charges certain fees. He further observed that assessee has shown income from hostel fee, miscellaneous income, other fee, tuition fee and building fee. As per income and expenditure statement, assessee has shown its income from receipts from students and other income. During financial year 2005-06 assessee has also shown receipts from students viz. tuition fee, other fee, hostel charges and bus fee. According to CIT, there was no mention of building development charges receipt in financial year 2005-06. However, assessee society submitted list of 59 students having names of students, names of their parents, permanent address and amount paid for building development charges receipt in financial year 2005-06. As per list all 59 students have during financial year 2005-06 paid Rs. 25,000 each towards building development of Chandra Dental College and Hospital, Safedabad, Barabanki. CIT observed that when matter was enquired into, it came to notice that none of parents ever paid any amount towards building development charges receipt in financial year 2005-06. CIT held that assessee s claim that 59 students have during financial year 2005-06 contributed sum of Rs. 25,000 each has been found to be untrue. He further observed that society has not issued receipt except fee charged for providing study of dental science. CIT has also stated that amount shown as building development charges receipt was certainly not in nature of donation from parents of students. society has also not been registered in IT Department as trust . He therefore observed that provisions of ss. 11 and 12 of IT Act will not apply till entity is granted registration. CIT came to conclusion that accounts have been fabricated and were unreliable as assessee had on its own diverted part of fee for building construction and not as per direction of donor. CIT also observed that in objectives of society fact of free treatment of patients and free imparting of health education has been emphasized even though in accounts OPD receipts have been shown. He further observed that in annexures attached with accounts submitted, donations of Rs. 7,60,000 and Rs. 22,00,000 for addition to college building have been mentioned. According to CIT, no details of such donations have been furnished. CIT concluded that society has diverted funds to building account on its discretion which is against purpose for which parents have contributed to corpus. He further held that since there is no restriction on application of funds, assessee society ceases to be society having its objects as charitable. CIT has also cited decision of Hon ble Supreme Court (sic-Patna High Court) in case of Bihar State Forest Development Corporation vs. CIT (1997) 224 ITR 757 (Pat). CIT held that assessee society was not engaged in any charitable work and therefore he refused registration to assessee society under s. 12A of IT Act, 1961. Before us, Shri Kanchan Kaushal, learned counsel for assessee submitted that learned CIT has accepted this fact that assessee society is running dental college and offering free dental treatment to patients. He further submitted that CIT, after examination of books of account, accepted this fact that activities of society were found to be in accordance with its objects and therefore he was not justified in refusing registration to assessee society under s. 12A of IT Act, 1961. He further submitted that in refusing registration to assessee society, CIT erred on facts in making alleged observation in relation to accounts in body of order which are not at all relevant or material for deciding scope of registration of society under s. 12A of Act, He therefore submitted that CIT was not justified in refusing registration to assessee society. Further it was also submitted by learned counsel for assessee that CIT alleges that assessee society had received fee from students in lieu of providing dental education, had been partly accounted for under building fund and so assessee fabricated account and diverted income. However there is no finding that objectives of trust are not charitable or against public policy, submitted learned counsel for assessee. Learned counsel for assessee vehemently argued that on contrary, CIT accepts that assessee is imparting education. All funds have been duly recorded in accounts. Merely accounting them in particular head does not mean diversion of fund or fabrication of accounts. Learned counsel for assessee submitted that CIT s jurisdiction is limited to see genuineness of activities of assessee society and not look into application of income derived by assessee from its objectives only. Learned counsel for assessee heavily relied on decision of Hon ble Allahabad High Court in case of CIT vs. Red Rose School (2007) 212 CTR (All) 394. On other hand, Shri Debashish Chanda, learned senior Departmental Representative kly supported order of CIT. He further submitted that learned CIT has rightly observed that accounts of assessee society have been fabricated and, therefore, not reliable. According to learned Departmental Representative assessee had diverted part of fee for building construction and not as per direction of donor. He further submitted that objects of society provides free treatment of patients and free imparting of health education. However, in accounts of OPD, assessee society had shown OPD receipts also. This gives impression that real objective has been camouflaged. He further submitted that no details of donations of Rs. 7,60,000 and Rs. 22,00,000 were submitted before learned CIT. How above amounts were utilized is also not clear, submitted learned Departmental Representative. In view of above, learned Departmental Representative submitted that learned CIT has rightly rejected application of assessee for registration under s. 12A of IT Act, 1961. Accordingly, it was submitted that order of CIT may be upheld. We have carefully considered rival submissions and have also perused materials available on record. assessee has come into existence with purpose of setting up educational institutions providing treatment of persons suffering from illness. assessee society received permission from DCI (Dental Council of India), New Delhi in year 2003 and set up dental college providing post graduate, five-year bachelor degree course in dental science. college has been set up with approval of State Government and registered with DCI, New Delhi. course is monitored by DCI and examinations are conducted by Avadh University, Faizabad. admission to college is also through combined pre-medical entrance test conducted by DGME. college is allotted students on basis of their ranking and preference. Thus, Government agencies have full control and check over college. society set up college solely for educational purposes and without any motive of profit. fee being charged by college is just sufficient for maintaining and running college. It is in terms of fee prescribed by CPMT maintaining and running college. It is in terms of fee prescribed by CPMT for its affiliated colleges. In addition, college has set up dental 100 chair OPD clinic with full qualified doctors and surgeons providing free treatment to villagers at nominal registration fee of Rs. 5 only. college daily attends to about 75-100 patients giving dental treatment. society has also tied up with Civil Hospital, Barabanki for indoor treatment of its patients and affiliation for treatment for oral surgery, pedodentics (sic) speciality cases and providing practical training to students. Since inception society has been organizing and running camps and health centres in village areas and remote areas for promotion and improvement of oral health. We find that there is no finding by CIT that objects of trust are not charitable or against public policy. On contrary CIT accepts that assessee society is imparting education. In our view, in facts and circumstances of present case, CIT has wrongly refused registration to assessee society. In fact learned CIT has not given sufficient reason while refusing registration to assessee society. In our considered view, at time of registration, CIT was obliged only to see that (i) objects of society are not against public policy; and (ii) activities of society are genuine. Learned counsel for assessee has rightly pointed out that CIT s jurisdiction is limited to see genuineness of activities and not to look into application of income derived by assessee from its objects only. Hon ble Allahabad High Court, in case of Red Rose School (supra), held that "the objects of trust can be had from bye-laws or deed of trust, as case may be and unless, of course, objects of trust apparently make out that they were not in consonance with public policy or that they were not objects of any charitable purpose, registration cannot be refused accordingly on this ground." Hon ble Allahabad High Court further held as under: "20. In regard to genuineness of activities of trust or institution, whose objects do not run contrary to public policy and are, in fact, related to charitable purposes, CIT is again empowered to make enquiries as he thinks fit. In case activities are not genuine and they are not being carried out in accordance with objects of trust/society or institution, of course, registration can again be refused. But on mere presumptions and on surmises that income derived by trust or institution is being misused or that there is some apprehension that same would not be used in proper manner and for purposes relating to any charitable purpose, rejection cannot be made." We have perused objects of assessee society which are available at p. 6 of assessee s paper book. In our view, none of objects of assessee s society is against public policy and main activity of assessee society is to provide education to students. For this purpose, assessee society has set up dental college providing post graduate, five year bachelor degree course in dental science. We may also mention that institutes set up by assessee society are providing free treatment to persons suffering from illness. In case of Red Rose School (supra), Hon ble Allahabad High Court held that education in itself is charitable purpose and activities related thereto, which include both physical and mental development and also instilling of feeling of self-confidence through exercise, sports and extensive reading of good books, cannot, in any manner, be described as non-charitable purpose or much less non-educational activity. Hon ble High Court further held that education means and includes not only knowledge of text books or prescribed educational courses but overall development of child, which includes personality development and his physical fitness, apart from his capacity to analyse things and reach to logical conclusion on given issue. In view of above, we hold that objects of school are not against public policy and activities of society are genuine. We also observe that there is no dispute that all funds have been duly recorded in accounts. Merely accounting them in particular head does not mean diversion of fund or fabrication of accounts as alleged by CIT. In case of Red Rose School (supra), Hon ble Allahabad High Court has categorically held that on mere presumptions and on surmises that income derived by trust or institutes is being misused or there is some apprehension that same would not be used in proper manner and for purpose relating to any charitable purpose, rejection cannot be made. Hon ble Allahabad High Court in Red Rose School (supra) held that s. 12AA does not speak anywhere that CIT, while considering application for registration, shall also see that income derived by trust or institution is either not being used for charitable purposes or such institution is earning profit. relevant observations as mentioned in para 21 of report, read as under: "21. Sec. 12AA, which lays down procedure for registration, does not speak anywhere that CIT, while considering application for registration, shall also see that income derived by trust or institution is either not being spent for charitable purpose or such institution is earning profit. language used in section only requires that activities of trust or institution must be genuine, which accordingly would mean, they are in consonance with objects of trust institution, and are not mere camouflage but are real, pure and sincere, nor against proposed objects. profit earning or misuse of income derived by charitable institution from its charitable activities, may be ground for refusing exemption only with respect to that part of income but cannot be taken to be synonym to genuineness of activities of trust or institution." Hon ble Allahabad High Court in case of Red Rose School (supra) further held that enquiry by CIT shall remain restricted to examination, as to whether assessee, who has moved application for registration under s. 12A, is actually in activities which are genuine. relevant observations of Hon ble High Court are as under: "Genuineness of activities of trust or institution has to be seen, keeping in mind objects thereof, which necessarily means that CIT shall satisfy himself about fact that activities are genuine and in consonance with objects of trust or institution. In other words, if establishing and running school is object of society, as given in its bye-laws, it has to be satisfied that society has established school, where education is being imparted as per rules and factum of establishment and running school is genuine activity. enquiry regarding genuineness of activities cannot be stretched beyond this." In case of Red Rose School (supra), Hon ble Allahabad High Court held that profit earned or misuse of income derived by charitable institution from its charitable activities, may be ground for refusing exemption only with respect to that part of income but cannot be taken to be synonym to genuineness of activities of trust or institution. Hon ble High Court further held that enquiry regarding genuineness of activities cannot be stretched beyond this. Sufficient safeguards having been given in ss. 11, 12 and 13 of IT Act, 1961 for assessing income which has not been applied to purpose of trust or institution, intention of law maker and scope and purport of provision is apparent while considering question of registration. Applying ratio laid down by Hon ble jurisdiction High Court in case of Red Rose School (supra), we hold that CIT was not justified in refusing registration to assessee society under s. 12A of IT Act, 1961. Accordingly, we direct concerned CIT, Lucknow to grant registration under s. 12A of IT Act, 1961. In result, appeal is allowed. *** DR. BHIM RAO AMBEDKAR EDUCATIONAL SOCIETY v. COMMISSIONER OF INCOME TAX