COMMISSIONER OF INCOME TAX 1 LUDHIANA vs. VED NIKETAN DHAM PUBLIC CHARITABLE TRUST LUDHIANA

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ITA/70/2013HC Punjab & HaryanaPHHC01105281201321 August 2013Bench: MR. JUSTICE DR. BHARAT BHUSHAN PARSOON,MR. JUSTICE RAJIVE BHALLA5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the substantial questions of law framed by the revenue did not arise for adjudication. The Court found that Section 12AA(3) of the Act empowers the Commissioner to cancel registration only if the activities of the trust are not genuine or are not carried out in accordance with its objects. A precondition for cancellation is the recording of such findings by the Commissioner. The Court observed that the Commissioner's order cancelling the registration did not record any such finding as required by Section 12AA(3). Therefore, the Income Tax Appellate Tribunal was justified in reversing the Commissioner's order. The Court found no merit in the appeal and dismissed it. The operative direction was the dismissal of the revenue's appeal.

What were the facts?

The assessee, Ved Niketan Dham, a Public Charitable Trust, was granted registration under Section 12AA of the Income Tax Act, 1961, on 17.10.2003. Subsequently, it applied for approval under Section 80G(5)(v). The Commissioner of Income Tax (CIT), Ludhiana, initiated proceedings to cancel the registration based on a report from the Assessing Officer. The CIT issued a show cause notice, and after considering the assessee's reply, cancelled the registration. The CIT held that the trust's activities, including publishing monthly magazines to propagate Vedic ideology for the advancement of Hindu religion, did not fall within the expression 'general public utility'. The assessee appealed this order.

What were the issues?

The Tribunal had to decide the following substantial questions of law raised by the revenue: 1. Whether the Tribunal was justified in holding that the Commissioner is not required to examine the conditions of Sections 11 to 13 of the Act while granting registration under Section 12AA, which would otherwise allow satisfaction regarding the genuineness of the trust's aims, objects, and activities as per Section 12AA(1)(b)? 2. Whether the Tribunal was justified in directing the Commissioner to grant registration under Section 12AA when the trust's funds were allegedly utilized for the benefit of trustees, contrary to the investment modes specified in Section 11(5)? 3. Whether the Tribunal was justified in holding the trust's activities as genuine, despite trustees and their successors being long-life members, which is inconsistent with a public trust's nature? 4. Whether the Tribunal was justified in accepting the assessee as both a Trust and a Society, thereby having an ambiguous status, which the Commissioner had concluded? The revenue contended that the Commissioner's satisfaction regarding Sections 11-13 is crucial for 12AA registration and that funds were misused. The assessee's arguments are not explicitly recorded, but the Tribunal's decision implies they argued for the genuineness of activities and proper procedure.

Which sections of the Income-tax Act were involved?

Section 11,Section 11(5),Section 12A,Section 12AA,Section 12AA(1)(b),Section 12AA(3),Section 13,Section 80G(5)(v)

AI-generated summary — verify with the full judgment below

Income Tax Appeal No.70 of 2013 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. Income Tax Appeal No.70 of 2013 Date of Decision: 21.08.2013 Commissioner of Income Tax-I, Ludhiana ..Appellant versus Ved Niketan Dham, Public Charitable Trust, Ludhiana ..Respondent CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLA HON'BLE MR. JUSTICE DR. BHARAT BHUSHAN PARSOON Present: Mr. Rajesh Katoch, Advocate, for the appellant. RAJIVE BHALLA, J. CM No. 9341-CII of 2013 Allowed as prayed. Income Tax Appeal No.70 of 2013 The revenue challenges order dated 22.6.2012 passed by the Income Tax Appellate Tribunal, Chandigarh Bench `B' Chandigarh on the following substantial questions of law:- “ i) Whether on the facts and law, the Hon'ble Income Tax Appellate Tribunal was justified in holding that the satisfaction of condition of section 11 to 13 of the Act is not to be gone into by the Commissioner of Income-tax while granting registration u/s 12AA of the Act, whereas such examination would allow Commissioner of Income Tax to satisfy himself about the genuineness of the aims and objects of the Trust/Society and genuineness of its Varinder Kumar 2013.09.09 16:04 I attest to the accuracy and integrity of this document High Court Chandigarh

Income Tax Appeal No.70 of 2013 2 activities as enumerated in Sub-clause (b) of clause (1) of Section 12AA? (ii) Whether on the facts and in law, the Hon'ble Income Tax Appellate Tribunal was justified in directing the Commissioner of Income Tax to grant Registration to the Trust u/s 12AA of the Act, where the funds of the trust are utilized for the benefit of the trustee while the funds was supposed to be invested in the modes specified in Section 11(5)?” (iii) Whether on the facts and in law, the Hon'ble Income Tax Appellate Tribunal was justified in holding that the activities of the Trust are genuine even the trustee and their successor were long life members while being a public Trust, it can not opt for life long status for one single trustee or his heir?” (iv) Whether on the facts and in law, the Hon'ble Income Tax Appellate Tribunal was justified in accepting that the assessee is a Trust and also a Society and is governed by different laws whereas the Commissioner of Income-tax has concluded that the status of the assessee is very ambiguous as it is a Trust and it is also a society.” The facts that have given rise to this appeal are that the assessee-trust was granted registration under Section 12AA of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) on 17.10.2003. The assessee, thereafter, filed an application in Form No.10G for approval under Section 80G(5)(v) of the Act on Varinder Kumar 2013.09.09 16:04 I attest to the accuracy and integrity of this document High Court Chandigarh

Income Tax Appeal No.70 of 2013 3 19.02.2009. The Commissioner of Income Tax, Ludhiana, directed the Assessing Officer to submit a report with respect to the activities of the trust. The Assessing Officer submitted a report that expenses incurred by the assessee are primarily religious in nature. The Commissioner of Income Tax issued a show cause notice to the assessee for cancellation of registration. After considering the reply, the Commissioner cancelled the registration by holding that as the assessee publishes a monthly magazines to propagate the ideology of Vedas etc. for advancement of Hindu religion, it does not fall within the expression “general public utility”. Aggrieved by this order, the assessee filed an appeal. The Income Tax Appellate Tribunal allowed the appeal, set aside order passed by the Commissioner by holding that as no finding has been recorded that activities of the trust are not genuine, the Commissioner was not empowered to cancel registration. We have heard counsel for the appellant and are of the firm opinion that questions of law framed by the revenue do not arise for adjudication. A trust is registered under Section 12AA of the Act after due consideration of its activities. Section 12AA(3) of the Act empowers the Commissioner to cancel registration if the activities of the trust or institution are not genuine or are not being carried out, in accordance with the objects of the trust or the institution. Section 12AA(3) of the Act reads as follows:- “ Procedure for registration. Varinder Kumar 2013.09.09 16:04 I attest to the accuracy and integrity of this document High Court Chandigarh

Income Tax Appeal No.70 of 2013 4 12AA XX XX XX (1) XX XX XX (2) XX XX XX (3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) [or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No.2) Act, 1996 (33 of 1996)] and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.”

A perusal of Section 12AA(3) of the Act, reveals that a precondition to cancellation of registration are findings that activities of the trust are not genuine or are not being carried out, in accordance with objects of the trust. Thus, before cancelling registration, a Commissioner is required to record a finding that activities of the trust are not genuine or are not being carried out, in accordance with objects of the trust. A perusal of the order passed by the Commissioner reveals that he did not record any finding as required by Section 12AA(3) of the Act. The Income Tax Appellate Tribunal, therefore, rightly reversed the order passed by the Varinder Kumar 2013.09.09 16:04 I attest to the accuracy and integrity of this document High Court Chandigarh

Income Tax Appeal No.70 of 2013 5 Commissioner. We find no reason arising whether from arguments advanced or from the order passed by the Commissioner to take a different view. In view of what has been stated hereinabove, we find no merit in the appeal and dismiss the same. ( RAJIVE BHALLA )

JUDGE 21.08.2013 ( DR. BHARAT BHUSHAN PARSOON ) VK JUDGE Varinder Kumar 2013.09.09 16:04 I attest to the accuracy and integrity of this document High Court Chandigarh

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