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

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ITA/41/2017HC RajasthanRJHC01079545201715 March 2018Author: GOPAL KRISHAN VYAS,RAMCHANDRA SINGH JHALA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arises for consideration. The ITAT, in its order, had reasoned that Section 12A and 12AA of the Act intend for a registration simpliciter of a trust, which is a prerequisite for claiming exemptions. The ITAT held that an examination of the modus operandi of fund application or the ethical background of settlers is not required at the registration stage. The stage for considering the relevance of the trust's objects and fund application arises during assessment when benefits are claimed under Sections 11 and 12. The ITAT further held that at the time of registration, the focus should be on whether the trust is genuine and not a sham institution created solely for availing exemptions. Based on this reasoning, the ITAT allowed the assessee's appeal and granted registration under Section 12AA and 80G with effect from the date of application. The High Court, after considering the facts, law, and the trust's objects, found no substantial question of law and dismissed the revenue's appeal.

What were the facts?

The assessee, Dali Bai Sewa Sansthan, applied for registration 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 (the revenue), rejected the Section 12AA application on February 2, 2017, citing the assessee's failure to produce details and documents to support its claim for registration, despite opportunities. The assessee appealed this rejection to the Income Tax Appellate Tribunal (ITAT). The ITAT, in its order dated May 22, 2017, allowed the assessee's appeal, setting aside the CIT's order. The revenue, aggrieved by the ITAT's decision, filed the present appeal before the High Court under Section 260A of the Act.

What were the issues?

1. Whether, on the facts and circumstances of the case and in law, the ITAT was right in allowing the assessee's claim for registration under Section 12AA of the Act, despite the assessee not complying with the requirements of Rule 17A of the Income Tax Rules, 1962? 2. Whether the ITAT committed an error in holding that the CIT (Exemption) was not supposed to inquire into the conduct of the charitable trust? Assessee's arguments: The judgment does not record any specific arguments made by the assessee before the High Court. However, the ITAT's reasoning, as described in the judgment, suggests the assessee likely argued that the CIT's role was limited to registration simpliciter and that the genuineness of activities and application of funds are matters for assessment stage. Revenue's arguments: The revenue contended that the ITAT's order was not in consonance with law. Specifically, it argued that there was a substantial question of law regarding the ITAT's allowance of registration under Section 12AA when the assessee failed to comply with Rule 17A. The revenue also argued that the ITAT erred in holding that the CIT (Exemption) should not inquire into the conduct of the charitable trust.

Which sections of the Income-tax Act were involved?

Section 260A,Section 12AA,Section 80G,Section 12A,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. 41 / 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 KISHAN VYAS HON'BLE MR. JUSTICE RAMCHANDRA SINGH JHALA

J U D G M E N T 15/03/2018

The defect/s pointed out by the office are overruled.

Heard learned counsel for the appellant.

The instant appeal has been filed by the appellant- C.I.T. (Exemption), Jaipur under Section 260A of the Income Tax Act, 1961 against the judgment dated 22nd of May, 2017 passed by learned Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur in ITA No.126/Jodh/2017 (regarding issuance of approval sought under Section 80G of the Act).

Learned counsel for the appellant submits that the order impugned passed by learned I.T.A.T. is no in consonance with law. Further submitted that the respondent/assessee filed an application under Section 12AA of the Act in Form No.10A and (2 of 4) [ITA-41/2017]

80G of the Act in Form No.10G on 19.08.2016. The application filed under Section 12AA of the Act was declined by the C.I.T. (E), Jaipur and being aggrieved by rejection order dated 02.02.2017, the respondent/assessee preferred an appeal before the learned I.T.A.T. and the learned I.T.A.T. allowed the appeal No.126/Jodh/2017 vide order dated 22.05.2017 while giving finding without considering the legal issue and facts.

Learned counsel for the appellant, therefore, submitted that there is substantial question of law whether on the facts and circumstances of the case and in law the I.T.A.T. was right in allowing assessee’s claim for registration under Section 12AA of the Act inspite of the fact that the assessee did not comply with the requirement as per Rule 17A of the Income Tax Rules, 1962. He further argued that the learned I.T.A.T. committed an error in holding that C.I.T. (E) was not supposed to enquire into the conduct of the charitable trust, therefore, the substantial legal question arose in the present case, which requires consideration.

After hearing the learned counsel for the appellant, we have perused the order passed by learned Commissioner of India (E) dated 02.02.2017 and the order dated 22.05.2017, whereby the order of C.I.T. (E) was set aside and appeal filed by the respondent/assessee was allowed. It emerges from the facts that the assessee is registered society under the Rajasthan Societies Act 1958 w.e.f. 21.04.2011 for charitable and general public utility services. There are by laws of the society registered with the Registrar of the Societies, Jodhpur. The respondent/assessee filed an application for its registration under Section 12AA of the Act in (3 of 4) [ITA-41/2017]

the prescribed form 10A and application under Section 80G in the prescribed form 10G to the C.I.T. (E), Jaipur. Along with application, the respondent/assessee filed registration certificate, representation letter, trust-deed, copy of PAN Card and other details, however, the C.I.T. (E) rejected the application of the assessee filed under Section12AA of the Act on the ground that to decide the matter of seeking registration under Section 12AA, the genuineness of the activities being undertaken by the assessee were to be examined but inspite of granting sufficient opportunity, the assessee failed to produce details and documents in support of its claim for registration under Section 12AA of the Income Tax Act, 1961. Therefore, his application was rejected.

Against the said order, an appeal was preferred before the I.T.A.T. and the learned I.T.A.T. while considering the objects (Annex.6) of the charitable Trust, held that as per Section 12A and 12AA of the Act what is intended thereby is only a registration simplicitor of the entity of a Trust, which is 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 I.T.A.T. further held that stage for consideration of relevance of the object of the Trust and application of its fund arise at the time of assessment, when benefits are claimed by assessee in terms of Sections 11 and 12, the question as to the nature of such contribution and income can be looked into. At the time of (4 of 4) [ITA-41/2017]

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 is a sham institution floated only to avail the benefits of exemption under the Act, therefore, the learned I.T.A.T. allowed the appeal filed by the respondent/assessee and passed order to grant registration under Section 12AA and 80G of the Act to the assessee with effect from filing of application.

After considering the facts, relevant provisions of law and the object of the Trust reproduced in paragraph 8 of the order, we are of the opinion that no substantial question of law arises for consideration.

In view of above, there is no force in this appeal, hence, the same hereby dismissed.

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

DJ/- 27

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