Dismissed

Commissioner of Income Tax (Exemption) v. Pragatisheel Chhattisgarh Satnami Samaj

Chhattisgarh HC20 Nov 2024TAXC/75/2023

Case brief

AI extract

What is this about?

This tax appeal challenged the ITAT's order granting registration to a society with both charitable and religious objects. The High Court held that since the trust had mixed objects, Section 13(1)(b) restricting exemption did not apply, and registration under Section 12AA was justified.

What did the court decide?

The substantial questions of law were answered in favour of the assessee. The tax appeal was dismissed.

Commissioner of Income Tax (Exemption) Vs Pragatisheel… — Income Tax | Chhattisgarh HC (2024)

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Page 1 of 10

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(Tax Case No.75/2023)

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Digitally signed by SISTA SOMAYAJULU SISTA SOMAYAJULU Date: 2024.11.25 11:30:03 +0530

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2024:CGHC:45557-DB

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NAFR

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HIGH COURT OF CHHATTISGARH AT BILASPUR

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TAX CASE No.75 of 2023

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(Arising out of order dated 21-9-2022 passed by the Income Tax Appellate Tribunal, Raipur Bench, Raipur in ITA No.106/RPR/2018)

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Commissioner of Income Tax (Exemption), Bhopal (M.P.)

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... Appellant

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versus

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Pragatisheel Chhattisgarh Satnami Samaj, Guru Ghasidas Sanskritik Bhawan, New Rajendra Nagar, Raipur, District Raipur (C.G.)

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... Respondent

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For Appellant : Mr. Amit Chaudhari & Mr. Vijay Chawla, Advocates. For Respondent : Mr. Nikhilesh Begani, Advocate.

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Division Bench: - Hon'ble Shri Sanjay K. Agrawal and Hon'ble Shri Radhakishan Agrawal, JJ.

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Judgment On Board (21/11/2024)

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Sanjay K. Agrawal, J.

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This tax appeal under Section 260A of the Income-tax Act, 1961

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(for short, ‘the IT Act’) has been preferred by the Revenue calling in question legality, validity and correctness of judgment & order dated 21-9-2022 passed by the Income Tax Appellate Tribunal,

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Raipur Bench, Raipur in ITA No.106/RPR/2018, by which the

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Page 2 of 10

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(Tax Case No.75/2023)

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appeal preferred by the assessee / respondent herein has been allowed and the Revenue has been directed to grant registration to the respondent herein under Section 12AA of the IT Act.

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This appeal was admitted for final hearing by this Court on 29-72024, on the following two substantial questions of law: -

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“1. Whether on facts & circumstances of the case, ITAT is correct in directing the CIT(E) to grant the registration u/s 12 AA of that Act irrespective of the findings by the CIT(E) that the activities of the trust is not entirely charitable for public at large?

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Whether in the facts of the case and in law the ITAT was justified in holding that when assessee Trust has objects which are both Charitable and religious in nature the section 13(1)(b) is not applicable when Hon’ble Supreme Court in the case of CIT Vs. Dawoodi Bohra Jamaat (2014) 364 ITR 0031: (2014) 268 CTR 0001: (2014) 102 DTR 0361 gave clear findings in Para 45 & Para 46 of the order that section 13(1)(b) of the Act applies to charitable Trusts as well as to charitable cum religious Trusts?”

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The aforesaid questions can be answered on the following factual

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backdrop: -

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The respondent assessee, which is a Society, made an application for registration under Section 12AA of the IT Act and the Commissioner of Income Tax (Exemption) {for short, ‘the CIT(E)’} on verification of the objects and activities of the respondent assessee Society, found that the assessee Society is established for a particular community and finding no merit in the application, rejected the application of the respondent assessee for registration

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Page 3 of 10

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(Tax Case No.75/2023)

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under Section 12AA of the IT Act by order dated 25-4-2018. Feeling aggrieved against the order passed by the CIT(E), the respondent assessee preferred an appeal before the Income Tax Appellate Tribunal (for short, ‘the ITAT’) and by the impugned order, the ITAT allowed the appeal holding that on perusal of the bye-laws of the assessee Society, it is quite evident that the assessee Society has charitable as well as religious objects, therefore, the assessee is entitled for registration under Section 12AA of the IT Act. Now, challenging the order passed by the ITAT, the Revenue has preferred this appeal before this Court which has been admitted on the two substantial questions of law incorporated and catalogued in paragraph 2 of this judgment.

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Mr. Amit Chaudhary, learned Standing Council appearing for the appellant herein / Revenue, would submit that the ITAT is absolutely unjustified in granting the application for registration of the assessee Society under Section 12AA of the IT Act. He would further submit that the assessee Society is established for a particular community and almost all the objects of the assessee Society are for the benefit of a particular community and the assessee Society carried out activities for the benefit of Satnami Samaj, as such, the order passed by the CIT(E) rejecting the application for registration could not have been reversed by the ITAT. Therefore, the substantial questions of law be answered in

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(Tax Case No.75/2023)

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favour of the Revenue and against the assessee Society / community and the present tax appeal be allowed.

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Mr. Nikhilesh Begani, learned counsel appearing for the respondent assessee Society, would oppose the appeal and support the order impugned passed by the ITAT and submit that the case is covered by a decision of the coordinate Bench of this Court in the matter of Commissioner of Income Tax (Exemption) v. Kanyakubj Sabha 1.

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We have heard learned counsel for the parties and considered their rival submissions made herein-above and also went through the record of the case with great care and circumspection as well.

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In order to consider the plea raised at the Bar, it would be advantageous to notice Section 12AA of the IT Act, which deals with the registration of charitable trusts and institutions, and states as under:-

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“12AA. Procedure for registration.—

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(1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) or clause (ab) of sub-section (1) of section 12A, shall—

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(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about,—

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(i) the genuineness of activities of the trust or institution; and

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1 2024:CGHC:38421-DB

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(Tax Case No.75/2023)

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(ii) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects, and may also make such inquiries as he may deem necessary in this behalf; and

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(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities as required under sub-clause (i) of clause (a) and compliance of the requirements under subclause (ii) of the said clause, he—

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(i) shall pass an order in writing registering the trust or institution;

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(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant:

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Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.

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(1A) All applications, pending before the Principal Chief Commissioner or Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Principal Commissioner or Commissioner and the Principal Commissioner or Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.

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(2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) or clause (aa) or clause (ab) of sub-section (1) of section 12A.

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(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,

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(Tax Case No.75/2023)

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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:

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Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.

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(4) Without prejudice to the provisions of sub-section (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 it is noticed that

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(a) the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13; or

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(b) the trust or institution has not complied with the requirement of any other law, as referred to in sub-clause (ii) of clause (a) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality, then, the Principal Commissioner or the Commissioner may, by an order in writing, cancel the registration of such trust or institution:

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Provided that the registration shall not be cancelled under this sub-section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner.

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(5) Nothing contained in this section shall apply on or after the 1st day of April, 2021. ”

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(Tax Case No.75/2023)

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On a careful perusal of the aforesaid provisions of law, it is clear that at the time of granting registration what the Commissioner of Income Tax (Exemption) is required to look into mainly, is the object of the trust; whether the trust has applied for registration under Section 12AA of the IT Act with proper details as enshrined in the said Act and whether the prescribed format for application as in the said Act has been complied with and to conduct an enquiry to satisfy himself of the genuineness of activities and the objects of the trust and upon reaching satisfaction of the objects and the authenticity of the activities of the trust, he would grant the registration.

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In the matter of Commissioner of Income Tax, Ujjain v. Dawoodi

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Bohara Jamat 2, their Lordships of the Supreme Court have observed qua Section 12AA of the IT Act in paragraphs 12, 13 & 14 as under:-

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“12. Section 12AA lays down the procedure to be followed by the Commissioner for grant or refusal of application for registration made under Section 12A. According to procedure so laid down, the Commissioner shall call for documents and information and conduct an enquiry to satisfy himself of the genuineness of the trust and upon reaching satisfaction of the charitable or religious nature of the objects and the authenticity of the activities of the trust, he would grant the registration. If he is not satisfied of the aforesaid, the request made in the application may be declined.

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2 (2014) 16 SCC 222

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Page 8 of 10

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(Tax Case No.75/2023)

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13. Section 13 enacts a complete bar to the availability of exemption under Section 11 in respect of various incomes enumerated therein. Section 11 does not apply when the provisions of Section 13 are attracted. Section 13(1)(b) is relevant for the purpose of this case. The same is noticed:

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"13. Section 11 not to apply in certain cases .—

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(1) Nothing contained in Section 11 or Section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof—

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(a) ** ** **

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(b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste;" (emphasis supplied)

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The provision conceptualizes that income of a charitable trust created or established for the benefit of any particular religious community or caste would not be entitled for the benefit of Section 11 or 12 of the Act. Thus, when read in conjunction, while under Section 11 a trust which is established for charitable purposes to benefit a particular religious community may be a valid charitable trust, under Section 13(1)(b) such trust would not be entitled to exemption and consequently, the said income would be exigible to tax under the Act.

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14. Therefore, under the scheme of the Act, Sections 11 and 12 are substantive provisions which provide for exemptions available to a religious or charitable trust. Income derived from property held by such public trust as well as voluntary contributions received by the said trust are the subject-matter of exemptions from the taxation under the Act. Sections 12-A and 12-AA detail the procedural requirements for making an application to claim exemption under Sections 11 or 12 by the assessee and the grant or rejection of such application by the Commissioner. A conjoint reading of Sections 11, 12, 12-A and 12-AA makes

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(Tax Case No.75/2023)

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it clear that registration under Sections 12-A and 12-AA is a condition precedent for availing the benefit under Sections 11 and 12. Unless an institution is registered under the aforesaid provisions, it cannot claim the benefit of Sections 11 and 12. Section 13 enlists the circumstances wherein the exemption would not be available to a religious or charitable trust otherwise falling under Sections 11 or 12 and therefore, requires to be read in conjunction with the provisions of Sections 11 and 12 towards determination of eligibility of a trust to claim exemption under the aforesaid provisions. ”

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In this regard, the decision of the Gujarat High Court rendered in

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the matter of Commissioner of Income Tax v. Barkate Saifiyah Society 3 also deserves to be noticed in which it has been held that the provisions of Section 13(1)(b) will apply only to the Trusts which are purely charitable purposes. If the Assessee Trust has both charitable and religious objects, the provisions of Section 13(1)(b) of the IT Act would not apply.

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Similarly, the Rajasthan High Court in the matter of Commissioner of Income-tax v. 4 has also Vijay Vargiya Vani Charitable Trust

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specifically held that at the time of granting registration, the objects of the Trust for which it was formed is only to be looked into and the satisfaction of the Commissioner of Income-Tax about genuineness of activities of the Trust was not criteria as the Trust was just commencing activities and therefore the issue regarding satisfaction or genuineness of the activities of the Trust is not a

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3 (1995) 213 ITR 492

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4 (2014) 369 ITR 360

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(Tax Case No.75/2023)

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matter to be looked into at the time of granting registration under Section 12AA of the IT Act.

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In the instant case, the learned ITAT relying upon the decision of the Gujarat High Court in Barkate Saifiyah Society’s case (supra) and considering the bye-laws of the assessee Society has clearly held that the assessee Society has charitable as well as religious objects, therefore, entitled for registration under Section 12AA of the IT Act. The said finding is a simple finding of fact based on the evidence available on record, it is neither perverse nor contrary to the record as also the law. Considering the finding recorded by the ITAT and the evidence available on record, the respondent assessee Society has both charitable as well as religious objects.

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In that view of the matter, the ITAT is absolutely justified in holding that the assessee Society is entitled for registration under Section 12AA of the IT Act. The substantial questions of law are answered in favour of the assessee and against the Revenue.

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The tax appeal stands dismissed.

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Sd/Sd/(Sanjay K. Agrawal) (Radhakishan Agrawal) JUDGE JUDGE

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Soma

Commissioner of Income Tax (Exemption) v. Pragatisheel Chhattisgarh Satnami Samaj

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Commissioner of Income Tax (Exemption) v. Pragatisheel Chhattisgarh Satnami Samaj

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