THE COMMISSIONER OF INCOME TAX vs. SHRI SADHUMARGI SHANTKRANTI JAIN

Facts

The Revenue (Commissioner of Income Tax, Exemption, Bhopal) has filed a tax appeal under Section 260A of the Income-tax Act, 1961, challenging an order dated January 22, 2024, passed by the Income Tax Appellate Tribunal (ITAT), Raipur Bench. The ITAT had allowed an appeal filed by the assessee, Shri Sadhumargi Shantkranti Jain, CG Orisa, and directed the Revenue to grant exemption/approval under Section 80G(5) of the IT Act. The assessee had applied for this approval, but the Commissioner of Income Tax (Exemption) rejected it on April 21, 2023, holding that the assessee was established for both charitable and religious purposes, not solely charitable. The ITAT's decision was based on the fact that the assessee already had registration under Section 12AA of the IT Act.

Held

The High Court held that the issue is no longer res integra and stands decided by the decisions of the Gujarat High Court in Hiralal Bhagwati v. Commissioner of Income-Tax and the Supreme Court in Assistant Commissioner of Income Tax v. Surat City Gymkhana. The principle laid down is that once registration under Section 12A(a) (now 12AA) of the IT Act is granted, the grant of benefit under Section 80G of the IT Act cannot be denied. The Supreme Court, in Surat City Gymkhana, affirmed that once an application under Section 12A of the IT Act is granted, there is no need for further inquiry regarding the parties to the trust or whether it is for charitable purposes. Therefore, since the assessee was registered under Section 12AA of the IT Act, no substantial question of law arises, and the appeal is dismissed in limine. The operative direction is the dismissal of the Revenue's appeal.

Key Issues

1. Whether the Income Tax Appellate Tribunal was justified in holding that the assessee Society is entitled to grant of exemption/approval under Section 80G(5) of the Income-tax Act, 1961, solely on the basis of its registration under Section 12AA of the IT Act? (Question of law) Assessee's Contention: The assessee argued that having obtained registration under Section 12AA of the IT Act, it is eligible for approval under Section 80G(5). The ITAT allowed the appeal on this basis. Revenue's Contention: The Revenue contended that the ITAT was unjustified in holding that the assessee Society is entitled to grant of exemption/approval under Section 80G(5) of the IT Act in view of the grant of its registration under Section 12AA of the IT Act. The Revenue argued that the ITAT's reasoning was flawed.