Commissioner Of Income Tax (Exemption) Bhopal vs. Somani Charitable Trust

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ITA/171/2018HC Madhya Pradesh08 April 2019Bench: HON'BLE SHRI JUSTICE SANJAY YADAV3 pages
For Petitioner: Dhrirendra Pratap Singhbh
AI SummaryDismissed

What did the High Court hold?

The High Court held that when considering an application for registration under Section 12AA of the Income Tax Act, the Commissioner of Income Tax has to examine whether the application is made in accordance with Section 12A read with Rule 17-A and whether Form No.10A has been properly filled. The Commissioner may also examine whether the objects of the trust are charitable. However, Section 12AA does not require the Commissioner to examine whether the income derived by the trust is being spent for charitable purposes or if the trust is earning profit. The Act only requires that the activities of the trust must be genuine and in consonance with its objects. The High Court relied on its previous decisions in CIT Vs. M/s DPR Charitable Trust, Satna; The CIT, Bhopal Vs. Maa Vaishnav Education Society; The CIT, Bhopal Vs. Ayushmati Education and Social Society; and CIT (E) Bhopal Vs. Sewa Drishti Samiti. The ratio decidendi is that the stage of examining the application of income arises after registration, not during the process of granting registration under Section 12AA. The appeal fails and is dismissed.

What were the facts?

The appeal, filed under Section 260A of the Income Tax Act, 1961, challenges an order dated 30.07.2018 by the Income Tax Appellate Tribunal (ITAT), Agra Bench. The ITAT had set aside an order passed by the Commissioner of Income Tax (Exemption) and directed the concerned authority to grant registration to the respondent assessee, Somani Charitable Trust, under Section 12AA of the Act. The Commissioner had declined registration after examining that the income derived by the trust was not shown to have been spent for charitable purposes. The High Court of Madhya Pradesh is considering the appeal filed by the Revenue.

What were the issues?

1. Whether, while considering an application for grant of registration under Section 12AA of the Income Tax Act, 1961, the Commissioner of Income Tax (Exemption) must consider the objects of the applicant trust and the genuineness of its activities, and not the application of the trust's income? (Question of law) Assessee's Contention: The judgment does not record any specific contentions made by the assessee. The ITAT's decision, which is under challenge, implies that the Commissioner should focus on the objects and genuineness of activities, not the application of income. Revenue's Contention: The Revenue, through its counsel, is appealing the ITAT's order. The basis for the Commissioner's denial of registration, as stated in the facts, was the alleged non-expenditure of income for charitable purposes, suggesting the Revenue likely argued that the application of income is a relevant factor for registration.

Which sections of the Income-tax Act were involved?

Section 260A,Section 12AA,Section 12A

AI-generated summary — verify with the full judgment below

THE HIGH COURT OF MADHYA PRADESH ITA.171.2018 [Commissioner of Income Tax (Exemption), Bhopal Vs. Somani Charitable Trust] 1 Gwalior, Dated:- 08.04.2019 Shri DPS Bhadoriya, learned counsel for the appellant. Shri K.N. Gupta, learned Senior Counsel with Shri Pavan Dwivedi, learned counsel for respondent. This appeal, under Section 260A of the Income Tax Act, 1961 (for brevity “1961 Act”), is directed against the impugned order dated 30.07.2018 passed by the Income Tax Appellate Tribunal Agra Bench, Agra; whereby, while setting aside the order passed by the Commissioner, Income Tax (E), Tribunal has directed the authority concerned to grant registration to respondent/assessee under Section 12AA of 1961 Act. Evident it is that the registration was declined after examining that the income derived by the trust is not shown to have been spent for charitable purposes. Issue as to whether while considering an application for grant of registration under Section 12AA of the Income Tax Act, 1961 [for brevity “IT Act”], the Commissioner Income Tax (E) has to consider the objects of the applicant/trust and the genuineness of its activities and not the application of income of the applicant/trust, is no more res integra in view of the decision by co-ordinate Bench of this Court in CIT Vs. M/s DPR Charitable Trust, Satna [ILR 2012 MP 296]; The CIT, Bhopal Vs. Maa Vaishnav Education Society [ITA.169/2012] and The CIT, Bhopal Vs. Ayushmati Education and Social Society THE HIGH COURT OF MADHYA PRADESH ITA.171.2018 [Commissioner of Income Tax (Exemption), Bhopal Vs. Somani Charitable Trust] 2 [ITA.171/2012] decided on 19.06.2013; CIT (E) Bhopal Vs. Sewa Drishti Samiti [ITA.65/2015] decided on 21.09.2015. In M/s DPR Charitable Trust, Satna (supra), it is held: “8. Section 12A of the Act prescribes conditions for registration of the trust whereas Section 12AA of the Act prescribes the procedure for registration. A careful reading of the relevant provisions would reveal that application for registration under Section 12A has to be made in form No.10A prescribed by Rule 17-A before the expiry of one year from the date of creation of the trust or establishment of the institution whichever is later. The application has to be made by a person in receipt of income of the trust. Thus, while dealing with the application for registration the Commissioner of Income Tax has to examine whether the application is made in accordance with Section 12A read with Rule 17-A and whether form No.10A has been properly filled up. He may also examine whether objects of the trust are charitable or not. Section 12AA nowhere provides that Commissioner of Income Tax while considering the application for registration is also required to examine whether the income derived by the trust is being spent for charitable purposes or the trust is earning profit. The language employed by the Legislature in Section 12AA only requires that activities of the trust or institution must be genuine which should be in consonance with the object of the trust. At this stage, the Commissioner is not required to examine the application of income. All that he may examine is whether the application is made in accordance with the requirements of Section 12A read with rule 17A and whether Form No.10A has been properly filled up. He has also to see whether the objects of the trust are charitable or not. Our view finds support from the Division Bench decision of the Allahabad High Court rendered in the case of Red Rose School (supra) and the decisions in the cases of New Life in Christ Evangelistic Association (supra), Fifth Generation Education Society (supra) and Shantagauri Ramniklal Trust (supra).” In the light of the provision contained under Section 12A and THE HIGH COURT OF MADHYA PRADESH ITA.171.2018 [Commissioner of Income Tax (Exemption), Bhopal Vs. Somani Charitable Trust] 3 Section 12AA of IT Act, we are not persuaded to take a different view, as would give rise to any substantial question of law. Consequently, appeal fails and is dismissed. No cost. (Sanjay Yadav) (Vivek Agarwal) Judge

Judge pd PAWAN DHARKAR 2019.04.16 11:20:12 -07'00'

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