COMMISSIONER OF INCOME TAX (EXEMPTION) vs. KANYAKUBJ SABHA RAIPUR

1 / 12 (TAXC No. 76 of 2023) 2024:CGHC:38421-DB AFR HIGH COURT OF CHHATTISGARH AT BILASPUR TAX CASE

NO. 76 OF 2023

(Arising out of Order dated 21.9.2022 passed by Income Tax Appellate Tribunal, Raipur Bench, Raipur in ITA No.16/RPR/2019)  Commissioner of Income Tax (Exemption), Bhopal (M.P.) ... Appellant(s) Versus  Kanyakubj Sabha, Raipur, Pt. Ravishankar Shukla, Kanyakubj Chhatravas, Byron Bazar, Raipur (C.G.) ... Respondent(s) ---------------------------------------------------------------------------------- For Appellant :- Mr. Amit Chaudhary, Advocate. ---------------------------------------------------------------------------------- Division Bench Hon'ble Shri Justice Sanjay K. Agrawal Hon'ble Shri Justice Amitendra Kishore Prasad Order

on Board

[27.09.2024] Sanjay K. Agrawal, J. 1. Heard on admission of the appeal and also on the formulation of substantial question of law. 2. The present is a Revenue’s appeal filed under Section 260-A of the Income Tax Act, 1961 (hereinafter shall be referred to as, ‘Act of 1961’) assailing the Order

2 / 12 (TAXC No. 76 of 2023) dated 21.9.2022 passed by the Income Tax Appellate Tribunal, Raipur Bench, Raipur (hereinafter shall be referred to as, ‘ITAT’) in ITA No.16/RPR/2019. 3. A brief overview of the case is that the Assessee Society i.e. Respondent herein had applied for its registration under Section 12AA of the Act of 1961 in Form No.10A before the Commissioner of Income Tax (Exemption), Bhopal (hereinafter shall be referred to as, ‘CIT(E)’). In order to verify the objectives and activities of the Society and to ascertain the fulfillment of the conditions mentioned under Section 12AA, the CIT(E) issued notice to the Assessee Society. The Assessee Society filed its Written Statement stating that the object of the Society is to work for the betterment of Kanya Kubj society and public at large as well and also submitted that the Society is duly registered before the Registrar of Societies, Durg and the main object of the Society as per their bye-laws are also to spread awareness of education among Kanya Kubj community, to help that community and also to educate the children of that community. However, the Joint Commissioner of Income Tax and the Assessing Officer vide their report dated 31.10.2018 did not

3 / 12 (TAXC No. 76 of 2023) recommend the case of the Assessee Society for registration under Section 12AA of the Act of 1961 on the ground that the Society is not doing any charitable activity. Eventually, the CIT(E) by its Order dated 28.11.2018, passed under Section 12AA(1)(b)(ii) of the Act of 1961, rejected the said application of the Assessee Society holding that the Society has not furnished any details or evidence regarding charitable work carried out by the Society for public at large and the sole object of the Society is to benefit a particular community i.e. “Kanya Kubj Samaj” which is a sub community in the Brahmin Community belonging to Kanya Kubj gotra and in that view of the matter, the Society is not entitled for registration under Section 12AA of the Act of 1961, thereby refused the registration of the Assessee Society. Feeling aggrieved and dissatisfied by the said order of the CIT(E), the Assessee Society preferred an appeal before the ITAT who by impugned Order dated 21.9.2022 allowed the appeal of the Assessee Society directing for the registration of the Society under Section 12AA of the Act of 1961. It is this order of the ITAT which is under challenge in the present appeal.

4 / 12 (TAXC No. 76 of 2023) 4. Mr. Amit Choudhary, learned Counsel appearing for the Appellant Revenue submits that the ITAT is absolutely unjustified in granting the application for registration of the Assessee Society under Section 12AA of the Act of 1961 and setting aside the order passed by the CIT(E) by recording a finding that is totally perverse and contrary to law and evidence on record, as the object of the Assessee Society is purely religious in nature and therefore the ITAT ought not to have entertained the appeal of the Assessee Society but should have rejected the said appeal. As such, the appeal involves substantial question of law for determination and accordingly it be formulated. 5. We have heard learned Counsel for Appellant Revenue, considered his submission made herein above and also perused the record of the case with utmost care and circumspection. 6. First of all, it would be advantageous to notice Section 12AA of Act of 1961 which deals with the registration of charitable trusts and institutions and states as under:-

5 / 12 (TAXC No. 76 of 2023) “12AA. Procedure for registration.— (1) The

Principal

Commissioner

or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) or clause (ab) of sub-section (1) of section 12A, shall— (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about,— (i) the genuineness of activities of the trust or institution; and (ii) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects, and may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities as required under sub-clause (i) of clause (a) and compliance of the requirements under sub-clause (ii) of the said clause, he— (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant: Provided that no order under sub- clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard. (1A)All applications, pending before the Principal Chief Commissioner or Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand

6 / 12 (TAXC No. 76 of 2023) transferred on that day to the Principal Commissioner or Commissioner and the Principal Commissioner or Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day. (2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) or clause (aa) or clause (ab) of sub-section (1) of section 12A. (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 Principal Commissioner or 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. (4) Without prejudice to the provisions of sub-section (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 it is noticed that (a) the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such

7 / 12 (TAXC No. 76 of 2023) trust or institution due to operation of sub-section (1) of section 13; or (b) the trust or institution has not complied with the requirement of any other law, as referred to in sub-clause (ii) of clause (a) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non- compliance has occurred, has either not been disputed or has attained finality, then, the Principal Commissioner or the Commissioner may, by an order in writing, cancel the registration of such trust or institution: Provided that the registration shall not be cancelled under this sub-section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner. (5) Nothing contained in this section shall apply on or after the 1st day of April, 2021.” 7. On a careful perusal of the aforesaid provisions of law, it is clear that at the time of granting registration what the Commissioner of Income Tax (Exemption) is required to look into mainly, is the object of the trust; whether the trust has applied for registration under Section 12AA of the Act of 1961 with proper details as enshrined in the said Act and whether the prescribed format for application as in the said Act has been complied with and to conduct an enquiry to satisfy himself of the genuineness of activities and the objects of the trust and upon reaching satisfaction of the objects and the authenticity of the activities of the trust, he would grant the registration.

8 / 12 (TAXC No. 76 of 2023) 8. In the matter of Commissioner of Income Tax, Ujjain v. Dawoodi Bohara Jamat

1, their Lordships of the Supreme Court have observed qua Section 12AA of the Act of 1961 in paragraphs 12, 13 & 14 as under:- “12. Section 12AA lays down the procedure to be followed by the Commissioner for grant or refusal of application for registration made under Section 12A. According to procedure so laid down, the Commissioner shall call for documents and information and conduct an enquiry to satisfy himself of the genuineness of the trust and upon reaching satisfaction of the charitable or religious nature of the objects and the authenticity of the activities of the trust, he would grant the registration. If he is not satisfied of the aforesaid, the request made in the application may be declined. 13. Section 13 enacts a complete bar to the availability of exemption under Section 11 in respect of various incomes enumerated therein. Section 11 does not apply when the provisions

of Section

13 are attracted. Section 13(1)(b) is relevant for the purpose of this case. The same is noticed: "13. Section 11 not to apply in certain cases.— (1) Nothing contained in Section 11 or Section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof— (a)** ** ** (b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of 1 (2014) 16 SCC 222

9 / 12 (TAXC No. 76 of 2023) any particular religious community or caste;" (emphasis supplied) The provision conceptualizes that income of a charitable trust created or established for the benefit of any particular religious community or caste would not be entitled for the benefit of Section 11 or 12 of the Act. Thus, when read in conjunction, while under Section 11 a trust which is established for charitable purposes to benefit a particular religious community may be a valid charitable trust, under Section 13(1)(b) such trust would not be entitled to exemption and consequently, the said income would be exigible to tax under the Act. 14.  Therefore, under the scheme of the Act, Sections 11 and 12 are substantive provisions which provide for exemptions available to a religious or charitable trust. Income derived from property held by such public trust as well as voluntary contributions received by the said trust are the subject- matter of exemptions from the taxation under the Act. Sections 12-A and 12-AA detail the procedural requirements for making an application to claim exemption under Sections 11 or 12 by the assessee and the grant or rejection of such application by the Commissioner. A conjoint reading of Sections 11, 12, 12-A and 12-AA makes it clear that registration under Sections 12-A and 12-AA is a condition precedent for availing the benefit under Sections 11 and 12. Unless an institution is registered under the aforesaid provisions, it cannot claim the benefit of Sections 11 and 12. Section 13 enlists the circumstances wherein the exemption would not be available to a religious or charitable trust otherwise falling under Sections 11 or 12 and therefore, requires to be read in conjunction with the provisions of Sections 11 and 12 towards determination of eligibility of a trust to claim exemption under the aforesaid provisions.”

10 / 12 (TAXC No. 76 of 2023) 9. In this regard, the decision of the Gujarat High Court rendered in the matter of Commissioner of Income Tax

v. Barkate Saifiyah Society

2 also deserves to be noticed in which it has been held that the provisions of Section 13(1)(b) will apply only to the Trusts which are purely charitable purposes. If the Assessee Trust has both charitable and religious objects, the provisions of Section 13(1)(b) of the Act of 1961 would not apply. 10. Similarly, the Rajasthan High Court in the matter of Commissioner of Income-tax

v. Vijay Vargiya Vani

Charitable Trust3 has also specifically held that at the time of granting registration, the objects of the Trust for which it was formed is only to be looked into and the satisfaction of the Commissioner of Income-Tax about genuineness of activities of the Trust was not criteria as the Trust was just commencing activities and therefore the issue regarding satisfaction or genuineness of the activities of the Trust is not a matter to be looked into at the time of granting registration under Section 12AA of the Act of 1961. 2 (1995) 213 ITR 492 3 (2014) 369 ITR 360

11 / 12 (TAXC No. 76 of 2023) 11. In the instant case, relying upon the above-referred decisions of the Gujarat High Court and the Rajasthan High Court and also considering the bye-laws of the Assessee Society, the ITAT has come to a categorical conclusion that the Society has both charitable as well as religious objects and therefore it is entitled to be registered under Section 12AA of the Act of 1961. 12. At the time of hearing, a copy of the application for registration of the Assessee Society in Form No.10A has been placed before us. Column No.4 of the said application clearly specifies the objects of the Society, which are to — impart education; relief of the poor; advancement of other objects of general public utility and working for betterment of the Kanyakubj Society and public at large as well. 13. In the matter of Dawoodi Bohara Jamat (supra), the Supreme Court has clearly held that where the Assessee Trust is formed with both religious and charitable objects, in terms of Section 13(1)(b) of the Act of 1961, its claim for registration under Section 12AA can be denied only in a case when such objects are carried out for benefit of a particular religious community or caste.

12 / 12 (TAXC No. 76 of 2023) 14. Reverting to the facts of the case, it is quite vivid that the object of the Assessee Society, as is evident from its application for registration in Form No.10A, is for betterment of the Kanyakubj Society as well as public at large. That is to say, the Assessee Society has both charitable and religious objects. In that view of the matter, the ITAT is absolutely justified in holding that the Assessee Society is entitled for registration under Section 12AA of the Act of 1961, which is pure and simple finding of fact based on evidence available on record and is neither perverse nor contrary to law. We therefore do not find any substantial question of law involved for determination in the present appeal. 15. Accordingly, the appeal stands dismissed in limine without noticing to the other side. Sd/- Sd/- (Sanjay K. Agrawal) (Amitendra Kishore Prasad) sharad Judge Judge SHARAD KUMAR YADAV Digitally signed by SHARAD KUMAR YADAV Date: 2024.10.03 17:32:44 +0530