Commissioner Of Income Tax vs. Chhattisgarh Urology Society

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TAXC/159/2017HC ChhattisgarhCGHC01012331201716 January 2018Author: HON'BLE SHRI JUSTICE PRASHANT KUMAR MISHRA,HON'BLE SHRI JUSTICE RAM PRASANNA SHARMA5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Appellate Tribunal had rightly interfered with the order of the CIT. The Court reasoned that Section 12A of the Income Tax Act, 1961, does not empower the CIT to assess the objects of the trust in relation to the books of accounts. The stage of Section 12A registration is not for examining the application of income or the detailed carrying on of activities. The CIT's role is limited to ensuring the application is made as per the requirements of Section 12A and Rule 17A, and that Form No. 10A is properly filled. The Court also noted that the CIT's order did not definitively state that the objects were not charitable. Merely because the trust comprises Urologist Doctors and the activities might mutually benefit them does not negate the charitable nature of the objects. The Court found no substantial question of law arising from the ITAT's decision, citing the plain language of Section 12A and the principles laid down in cited precedents.

What were the facts?

The Revenue (Commissioner of Income Tax) has appealed against an order of the Income Tax Appellate Tribunal (ITAT) which allowed the respondent (Chhattisgarh Urology Society) registration under Section 12A of the Income Tax Act, 1961. The respondent applied for registration on October 18, 2013. The Commissioner of Income Tax (CIT) rejected the application on September 29, 2014, primarily because the respondent failed to produce books of accounts for the Financial Year 2013-14, and the CIT opined that the society was essentially a club for the mutual benefit of Urologist Doctors rather than a charitable institution. The ITAT allowed the appeal, holding that the CIT's scope at the Section 12A stage is limited and does not extend to examining the application of income or the genuineness of charitable activities.

What were the issues?

1. Whether the Appellate Tribunal was correct in allowing the respondent's appeal for registration under Section 12A of the Income Tax Act, 1961, despite the respondent's failure to produce books of accounts for FY 2013-14 before the CIT? Assessee's Contention (Implicit from ITAT's reasoning and cited cases): The ITAT held that at the stage of Section 12A registration, the CIT is not empowered to examine the application of income or the detailed working of the trust's activities. The focus should be on whether the application is made in accordance with the prescribed rules and if the objects of the trust are charitable. Reliance was placed on Commissioner of Income Tax vs Vijay Vargiya Vani Charitable Trust and Fifth Generation Education vs Commissioner Income Tax. Revenue's Contention: The Revenue argued that the Tribunal failed to appreciate the issue concerning the requirement under Section 12A, as the genuineness of the trust's application and the charitable nature of its objects could be relevant factors, even if books of accounts were not to be seen at this stage. The failure to produce accounts and the nature of the society (a club for Urologist Doctors) indicated it was not genuinely charitable.

Which sections of the Income-tax Act were involved?

Section 12A,Section 11,Section 12,Section 260-A

AI-generated summary — verify with the full judgment below

1 AFR HIGH COURT OF CHHATTISGARH, BILASPUR TAXC No. 159 of 2017 Commissioner Of Income Tax Central Revenue Building, Civil Lines, Raipur, Chhattisgarh., Chhattisgarh ---- Petitioner Versus Chhattisgarh Urology Society B-04, Jaglivian Urology Centre, Main Road, Samta Colony, Raipur, Chhattisgarh., Chhattisgarh ---- Respondent For Petitioner Ms Naushina Afrin Ali, Advocate. For Respondent None Hon'ble Shri Justice Prashant Kumar Mishra Hon'ble Shri Justice Ram Prasanna Sharma Order On Board by Hon'ble Prashant Kumar Mishra J. 17/01/2018

1.

Heard.

2.

Revenue has preferred this appeal under Section 260-A of the Income Tax Act, 1961 (henceforth 'the Act, 1961') assailing the legality and validity of the order passed by the Income Tax Appellate Tribunal, Raipur Bench, Raipur, whereby the appeal preferred by the respondent has been allowed and consequently the respondent has been directed to be registered under Section 12A of the Act, 1961 for the applicability of Sections 11 and 12 thereof.

2

3.

The short question arising in this appeal is whether the Appellate Tribunal has rightly allowed the respondent's appeal to grant registration under Section 12A despite the fact that before the Commissioner of Income Tax (CIT), the respondent has failed to produce books of accounts for FY 2013-14. 4. A perusal of the record would indicate that the respondent moved an application for grant of approval under Section 12A of the Act, 1961 on 18.10.2013. On scrutiny of the application and for its further processing, the CIT issued notice to the respondent to produce copies of audited accounts and other documents together with the books of accounts for FY 2013-14. Despite show cause notice for production of books of accounts, the respondent failed to produce the account, therefore, by order dated 29.09.2014, the CIT rejected the respondent's application under Section 12A of the Act.

5.

The Appellate Tribunal has allowed the appeal on the ground that it was not open for the CIT to consider whether the objects of the trust are charitable or not. Similarly, it has held that at the stage of Section 12A, the CIT is not required to examine the application of income or carrying on any activity by trust or institution.

6.

It is argued that even if the books of accounts or income is not to be seen at this stage, the real intent of the registration of the trust itself may be a relevant factor for determining as to whether the application is genuinely filed or the object of the trust is infact charitable or not, therefore, the Tribunal has not appreciated the issue vis-a-vis the requirement under Section 12A of the Act,

3 1961. 7. Sections 11 and 12 of the Act, 1961 provides for exemption of income of charitable trust for the purpose of levy of income tax. Section 12A makes provision for conditions for applicability of Sections 11 and 12 further prescribing the mode and manner in which such application for registration can be moved. The registration under Section 12A is a pre-condition for availing all the benefit under Sections 11 and 12. The application for registration under Section 12A has to be made in Form No. 10A of the Act before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later, and such trust or institution is registered under Section 12AA.

8.

Indisputably, the respondent has moved the application before the expiry of one year from the date of its creation. In course of processing of the application, the trust was noticed to submit the books of accounts for FY 2013-14. While rejecting the application, the CIT has opined that the trust having failed to produce the books of accounts and further that the charitable activity is for promoting the Urologist so that more and more patients visit these Urologists, therefore, the society is basically in the nature of club of Urologist Doctors for the mutual benefit of Doctors who are its members, it is not entitled for registration.

9.

As against the above findings, the Appellate Tribunal has referred in paragraph 6 of its impugned order, the aims and objects for which the association is established. The aims and 4 objects categorically refer to conduct of pre-medical checkup camps for public at large without discriminating on the basis of caste, creed, community and religion and to reach out public at large to educate them about healthy life and benefit of cleanliness, amongst other objects. 10.The provision contained under Section 12A nowhere empowers the CIT to assess the objects vis-a-vis the books of accounts. Akhilesh

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