COMMISSIONER OF INCOME TAX (EXEMPTION) vs. PRAGATISHEEL CHHATTISGARH SATNAMI SAMAJ

Facts

The Revenue has appealed against an order dated 21-9-2022 passed by the Income Tax Appellate Tribunal (ITAT), Raipur Bench. The ITAT had allowed the appeal of the assessee, Pragatisheel Chhattisgarh Satnami Samaj, and directed the Commissioner of Income Tax (Exemption) (CIT(E)) to grant registration under Section 12AA of the Income-tax Act, 1961. The CIT(E) had previously rejected the assessee's application for registration on 25-4-2018, finding that the society was established for a particular community and its activities were not entirely charitable for the public at large. The High Court admitted the appeal on two substantial questions of law.

Held

The High Court held that the ITAT was justified in allowing the registration under Section 12AA. The Court noted that the ITAT, relying on the bye-laws of the assessee society, found that it had both charitable and religious objects. The Court cited the Gujarat High Court's decision in CIT v. Barkate Saifiyah Society, which held that Section 13(1)(b) applies only to purely charitable trusts and not to trusts with both charitable and religious objects. The Court also referred to the Rajasthan High Court's decision in CIT v. Vijay Vargiya Vani Charitable Trust, stating that at the time of granting registration, only the objects of the trust are to be looked into, and the genuineness of activities is not a criterion for initial registration. Therefore, the finding of the ITAT that the assessee society has both charitable and religious objects was considered a finding of fact, not perverse, and supported by evidence. The substantial questions of law were answered in favour of the assessee.

Key Issues

1. Whether, on the facts and circumstances of the case, the ITAT was correct in directing the CIT(E) to grant registration under Section 12AA of the Act, irrespective of the CIT(E)'s finding that the trust's activities were not entirely charitable for the public at large? 2. Whether, in the facts of the case and in law, the ITAT was justified in holding that Section 13(1)(b) is not applicable when the assessee Trust has objects that are both charitable and religious in nature, given the Supreme Court's ruling in CIT Vs. Dawoodi Bohra Jamaat? Assessee's Contentions: The assessee supported the ITAT's order, relying on a coordinate bench decision in CIT (Exemption) v. Kanyakubj Sabha. Revenue's Contentions: The Revenue argued that the ITAT was unjustified in granting registration as the assessee society was established for a particular community and its activities primarily benefited that community, thus the CIT(E)'s rejection should not have been reversed.