THE COMMISSIONER OF INCOME TAX (EXEMPTIONS), CHANDIGARH vs. M/S NANAK CHAND JAIN CHARITABLE TRUST, GHARAUNDA, KARNAL, (PAN: AACTN1456D)

Facts

The Revenue (Commissioner of Income Tax (Exemptions), Chandigarh) has appealed against an order of the Income Tax Appellate Tribunal (ITAT) which allowed appeals filed by the assessee, M/s. Nanak Chand Jain Charitable Trust. The ITAT had set aside orders passed by the CIT(E) rejecting the trust's applications for registration under Section 12AA and approval under Section 80G(5)(vi) of the Income Tax Act, 1961. The assessee trust was registered on March 27, 2015, by M/s. Veers Overseas Ltd. for Corporate Social Responsibility (CSR) activities, including eradicating hunger, promoting education, and gender equality. The CIT(E) rejected the applications on grounds that the trust was formed solely for CSR compliance and that its activities were not in sync with the Companies Act, 2013.

Held

The High Court dismissed the appeals filed by the Revenue. It held that the ITAT had rightly examined the case for grant of registration under Section 12AA, focusing on the two parameters required: the object of the trust and the genuineness of its activities. The Court affirmed that the Commissioner is not to examine eligibility or activities in sync with the Companies Act, as these fall under the Assessing Officer's domain during assessment for exemption under Section 11. The High Court, referencing the Full Bench judgment of the Allahabad High Court in CIT(E) U.P.State Cons and Infra vs. M/s. Reham Foundation, held that the ITAT's power under Section 254(1) is unfettered, allowing it to direct registration if it disagrees with the Commissioner's satisfaction based on existing material. Since the ITAT had recorded its satisfaction that the trust fulfilled the conditions of charitable objects and genuine activities, remanding the matter would serve no useful purpose. Therefore, the ITAT rightly directed the CIT to grant registration under Section 12AA and approval under Section 80G(5)(vi).

Key Issues

1. Whether the ITAT was correct in directing the CIT(E) to grant registration under Section 12AA of the Income Tax Act, 1961, instead of remanding the matter for re-examination, in light of the Allahabad High Court's judgment in CIT, Meerut vs. M/s. A.R.Trust, Meerut. Assessee's Contention (as per ITAT's reasoning): The ITAT held that the CIT(E) erred in rejecting the registration. The primary reasons for denial by the CIT(E) were that the trust was formed for CSR compliance, its objects included public charity beyond CSR, and that CSR activities are inherently charitable. The ITAT found that the CIT(E) should only examine the charitable nature of the objects and the genuineness of activities, not their sync with the Companies Act or whether funds were transferred to other societies. The ITAT relied on Ministry of Corporate Affairs notifications implicitly allowing dedicated trusts for CSR. Revenue's Contention (as per High Court's framing of the issue): The Revenue argued that the ITAT, by directing registration straight away, exceeded its jurisdiction, as there must be satisfaction recorded by the registering authority, which was lacking. The Revenue relied on the Allahabad High Court's judgment in CIT, Meerut vs. M/s. A.R.Trust, Meerut, which held that the Tribunal could set aside the order refusing registration but could not direct registration itself.