PR. COMMISSIONER OF INCOME TAX, JAIPUR vs. DALI BAI SEWA SANSTHAN

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ITA/40/2017HC RajasthanRJHC01039447201703 April 2018Author: GOPAL KRISHAN VYAS,RAMCHANDRA SINGH JHALA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the learned ITAT had not committed any error in allowing the appeal filed by the assessee. The ITAT's observation that Section 12A and 12AA of the Act intend only a registration simpliciter of the trust entity was affirmed. The Court agreed that no examination of the modus of application of funds or the ethical background of settlers is required at the time of registration. The stage for such scrutiny arises during assessment proceedings when benefits under Sections 11 and 12 are claimed. The ITAT correctly noted that the primary consideration for registration is whether the trust is genuine and not a sham. The High Court also considered the detailed objects of the Trust, which were aimed at providing relief to the poor and were not for profit. Based on these findings, the High Court dismissed the appeal, upholding the ITAT's direction to the CIT(E) to grant registration under Sections 12AA and 80G with effect from the date of application. No substantial question of law arose for consideration.

What were the facts?

The assessee, Dali Bai Sewa Sansthan, Jodhpur, a Trust, applied for exemption under Section 12AA and approval under Section 80G of the Income Tax Act, 1961, on August 19, 2016. The Commissioner of Income Tax (Exemption), Jaipur, rejected the application on February 2, 2017, stating that registration under Section 12A/12AA is a prerequisite for approval under Section 80G. The assessee appealed to the Income Tax Appellate Tribunal (ITAT), Jodhpur Bench. The ITAT allowed the appeal on May 22, 2017, holding that registration under Section 12AA is a simple registration of the trust and does not involve an examination of the application of funds or the ethical background of settlers. The High Court is hearing an appeal filed by the Revenue against the ITAT's order.

What were the issues?

1. Whether the learned ITAT erred in allowing the appeal of the assessee and directing the CIT(E) to grant registration under Section 12AA and approval under Section 80G of the Income Tax Act, 1961, when the initial application was rejected by the CIT(E)? (Question of law) Assessee's Contention (as inferred from the ITAT's reasoning and High Court's affirmation): Registration under Section 12AA is a simple procedural step and does not require an in-depth examination of the trust's activities or the application of its funds. The stage for such examination arises during the assessment proceedings when exemptions under Sections 11 and 12 are claimed. The primary concern at the registration stage is the genuineness of the trust and whether it is a sham institution. The ITAT found no such adverse findings in the impugned order. Revenue's Contention: The Revenue's appeal challenges the ITAT's decision to grant registration and approval, implying disagreement with the ITAT's interpretation of the scope of inquiry at the registration stage and the prerequisite for Section 80G approval.

Which sections of the Income-tax Act were involved?

Section 260A,Section 12AA,Section 80G,Section 12A,Section 23(c),Section 11,Section 12

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Income Tax Appeal No. 40 / 2017 Commissioner of Income Tax-Exemption, Jaipur. ----Appellant Versus Dali Bai Sewa Sansthan, Near Dali Bai Mandir, Chopasani by Pass Jodhpur (Rajasthan) ----Respondent _____________________________________________________ For Appellant(s) : Mr. K.K. Bissa. _____________________________________________________ HON'BLE MR. JUSTICE GOPAL KRISHAN VYAS HON'BLE MR. JUSTICE RAMCHANDRA SINGH JHALA

Judgment Per Hon’ble Mr. G.K. Vyas, J. 03/04/2018

In this income tax appeal filed by appellant- C.I.T. (E), Jaipur under Section 260A of the Income Tax Act, 1961 (for brevity, hereinafter referred to as ‘Act’), the judgment dated 22.05.2017 passed by learned Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur (ITAT) in I.T.A. No.125/Jodh/2017, is under challenge.

As per facts of the case, the respondent/assessee- Dali Bai Sewa Sansthan, Jodhpur, a Trust, filed an application for exemption under Section 12AA in Form No.10-A and Section 80G in Form No.10G of the Act on 19.08.2016. The said application filed under Section 12AA of the Act as also under Section 80G of (2 of 4) [ITA-40/2017]

the Act was rejected by the learned Commissioner of Income Tax (Exemption), Jaipur vide its order dated 02.02.2017 as the registration under Section 12A and12AA by notification u/s 23 (c) is pre-condition for granting approval u/s 80G of the Act.

Being aggrieved by the rejection order u/s 12A of the Act dated 02.02.2017, the respondent/assessee preferred appeal before the learned ITAT, Jodhpur Bench, Jodhpur and the same was allowed by the learned ITAT vide its order dated 22.05.2017 whereby the learned ITAT while considering the provisions of Section 12A of the Act, observed that it is clear from a plain reading of sections 12A and 12AA of the Act that what is intended thereby is only a registration simpliciter of the entity of a Trust. This has been made a condition precedent for claiming of benefits under the other provisions of the Act regarding exemption of income, contribution etc. No examination of the modus of the application of the funds of the Trust or an examination of the ethical background of its settlers is called for while considering an application for registration. The stage for consideration of the reliance of the object of the Trust and the application of its funds arises at the time of assessment. Where benefits are claimed by assessee in terms of Sections 11 and 12 of the Act, the question as to the nature of such contribution and income can be looked into. At the time of registration of the Trust going by the binding judgments of the apex court, what is to be looked into is whether the Trust is a genuine one and whether it is a sham institution floated only to avail the benefits of exemption under the Act. The learned ITAT held that there is no such finding in the impugned

(3 of 4) [ITA-40/2017]

order passed by the assessing authority and CIT (E), Jaipur.

We have examined the detailed objects of the Trust, which was taken into consideration by the learned ITAT, which are reproduced herein below: - “1- ;kf=;ksa ds fy, Hkkstu] ikuh o Bgjus dh fu%”kqYd O;oLFkk djukA 2- Hkknok ekg ds esys ds nkSjku ;kf=;ksa ds fy, fu%”kqYd fpfdRlk lqfo/kk miyC?k djkus gsrq f”kfoj yxkus dh O;oLFkk djukA 3- Mkyh ckbZ efUnj esa jkf= tkxj.k] lHkk] lRlax dk vk;kstu djokuk rFkk bl gsrq es?koky lekt ds izfrf’Br O;fDr;ksa lk/kq larksa dks cqykukA 4- i;kZoj.k dh lqj{kk gsrq isM+&ikS/ks yxkukA 5- xjhc ekuo dh gj rjg ls lsok djukA 6- es?koky lekt esa f”k{kk dk izpkj o izlkj djuk] cky fookg jksduk] dqjhfr;ksa dks feVkus dk iz;Ru djukA 7- ladV ds le; esa jkT; ljdkj dk lg;ksx djuk o lg;ksx ysukA 8- laLFkk dh py ,oa vpy lEifRr dh j{kk ,oa ns[kHkky djukA mijksDr mn~ns';ksa dh iwfrZ esa dksbZ ykHk fufgr ugha gSA”

Upon perusal of the above objects, and the findings of the learned ITAT, we are of the opinion that the assessee- Trust was created in the memory of late Dali Bali, who was sister of Baba Ramdev (yksd nsork). The people of the Trust had a vision to provide relief to poor and from the study of its trust-deed, it reveals that the maximum number of members and trustees are from scheduled castes and scheduled tribes and other backward classes of rural areas. The members of the society are illiterate and coming from different villages. They follow late Dali Bai as goddess. The history of Dali Bai is placed on record.

(4 of 4) [ITA-40/2017]

In view of above, we are of the opinion that no error has been committed by the learned ITAT, Jodhpur Bench, Jodhpur in allowing the appeal filed by the respondent/assessee and directing the C.I.T. (E), Jaipur to grant registration u/s 12AA & 80G of the Act to the assessee with effect from filing of its application. No substantial question of law arises for consideration.

Consequently, the instant income tax appeal is hereby dismissed.

(RAMCHANDRA SINGH JHALA) J. (GOPAL KRISHAN VYAS) J.

DJ/- 40

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