COMMISSIONER OF INCOME TAX vs. M/S.SWETHANBAR SHANAKWASI

PDF · subscribers
TCA/609/2021HC Madras21 February 2022Bench: Hon`ble Mr Justice R. MAHADEVAN6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the substantial question of law is answered in favour of the assessee and against the Revenue. The court noted that the Revenue's counsel fairly conceded that the issue was covered against the Revenue by this court's decision in Director of Income Tax Exemptions v. Seervi Samaj Tambaram Trust. This decision, in turn, referred to earlier decisions of the same court. The reasoning adopted was that Section 12AA of the Income Tax Act does not stipulate that a trust cannot have both religious and charitable objects. The Commissioner's satisfaction is primarily about the genuineness of the objects and activities. The judgment cited the Gujarat High Court's decision in CIT Vs. Kutchi Dasa Oswal Moto Pariwar Ambama Trust, which was respectfully agreed with. The court found no reason to refuse registration merely because the trust had not commenced its activities at the time of application, especially when the genuineness of the objects was not doubted and the power to cancel registration for non-compliance exists under Section 12AA(3). Therefore, the Tax Case Appeal filed by the Revenue was dismissed.

What were the facts?

The Revenue, represented by the Commissioner of Income Tax, Chennai, filed a Tax Case Appeal before the High Court of Judicature at Madras. The appeal challenged an order dated 29.06.2012 passed by the Income Tax Appellate Tribunal ('A' Bench, Chennai) in ITA No.849/Mds/2012. The appeal was filed under Section 260A of the Income Tax Act, 1961. The assessee is M/s.Swethanbar Shanakwasi Jain Sangh. The core of the dispute revolves around the assessee trust's entitlement to registration under Section 12AA of the Act.

What were the issues?

1. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the assessee trust is entitled for registration under Section 12AA of the Act, having objects of both religious and charitable nature, when Section 11(1)(a) allows exemptions to a trust which is either charitable or religious and not both? (Question of law) The Revenue's contention, as implied by the substantial question of law, was that a trust cannot have both religious and charitable objects for the purpose of registration under Section 12AA, as Section 11(1)(a) permits exemption for either religious OR charitable purposes. The Revenue's argument was that the Tribunal erred in granting registration to a trust with dual objectives. The assessee's argument was not explicitly recorded in the judgment. However, the Revenue's counsel fairly submitted that the issue was covered against the Revenue by this court's decision in Director of Income Tax Exemptions v. Seervi Samaj Tambaram Trust.

Which sections of the Income-tax Act were involved?

Section 260A,Section 12AA,Section 11(1)(a)

AI-generated summary — verify with the full judgment below

T.C.A.No.609 of 2021 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 21.02.2022 CORAM THE HONOURABLE MR.JUSTICE R.MAHADEVAN and THE HONOURABLE MR. JUSTICE J.SATHYA NARAYANA PRASAD T.C.A.No. 609 of 2021 The Commissioner of Income Tax, Chennai. .. Appellant

Vs. M/s.Swethanbar Shanakwasi Jain Sangh 200 Paper Mills Road, Chennai 600 082.

.. Respondent

Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal 'A' Bench, Chennai dated 29.06.2012 in ITA No.849/Mds/2012. For Appellant : Mr. J.Narayanasamy 1/6 https://www.mhc.tn.gov.in/judis T.C.A.No.609 of 2021 J U D G M E N T (Judgment of the court was made by R.MAHADEVAN, J.) This tax case appeal at the instance of the Revenue, is directed against the order dated 29.06.2012 passed by the Income Tax Appellate Tribunal, 'A' Bench, Chennai, in I.T.A.No.849/Mds/2012 by suggesting the following substantial question of law: “Whether on the facts and circumstances of the case, the Tribunal was right in holding that the assessee trust is entitled for registration under Section 12AA of the Act to the assessee trust, having objects of both religious cum charitable in nature, when Section 11(1)(a) allows exemptions to the trust which is either charitable or religious and not both?” 2.When the matter was taken up for consideration, the learned counsel appearing for the appellant fairly submitted that the issue involved herein is covered against the Revenue as per the decision of this court in the case of Director of Income Tax Exemptions v. Seervi Samaj Tambaram Trust, [(2014) 88 CCH 0029 ChenHC], wherein, after referring to the earlier decisions of this court in (i)CIT v. Arulmighu Sri Kamatchi Amman 2/6 https://www.mhc.tn.gov.in/judis T.C.A.No.609 of 2021 Trust [(2012) 206 Taxman 69] and (ii)the Director of Income Tax (Exemptions), chennai v. The Chartered Accountant Study Circle [CDJ 2012 MHC 658], it was held that “where the genuineness of object of trust was not doubted, registration under section 12AA cannot be refused on the ground that trust had not yet started its activities”. For better appreciation, the relevant paragraphs of the said decision are reproduced hereunder: “9.In the present case also, the Revenue only question the trust not having commenced its activity for the grant of registration. The provision under Section 12AA of the Income Tax Act does not stipulate such a condition for grant of registration. On the other hand, Section 12AA(1) contemplates satisfaction of the Commissioner about the objects of the Trust and the genuineness of the activities and make such enquiry as may be necessary for the purpose of grant of registration. In so considering the application, the Commissioner has to give an opportunity to the assessee as provided for under proviso to sub-section (1) of Section 12AA. Under sub-section (3) of Section 12AA, the Commissioner is given power to cancel the registration, if he satisfies that the objects of such trust are not genuine or not being carried on in accordance with the objects of the trust. When such an authority is vested with the Commissioner to cancel the registration in the event of the 3/6 https://www.mhc.tn.gov.in/judis T.C.A.No.609 of 2021 trust not being carried on in accordance with the objects of the trust, we do not find any ground to say that merely on the date of the application, the assessee trust had not commenced its activities, hence, registration could not be granted. It is not denied by the assessee that on the date of the application under Section 12AA, it was yet to commence its operation. But nevertheless the genuineness of the objects of the trust were not questioned by the Commissioner. Considering the fact that the continuance of registration is further a subject matter of scrutiny by the Commissioner as contemplated under Section 12AA(3) of the Income Tax Act, we do not think that the Revenue would be justified in refusing the registration at the threshold. The Tribunal had followed the decision of the Gujarat High Court in the case of CIT Vs. Kutchi Dasa Oswal Moto Pariwar Ambama Trust reported in 29 Taxman 228. We respectfully agree with the decision of the Gujarat High Court. 10.In the light of the above, we do not find any question of law arises for consideration in this Tax Case(Appeal). Accordingly, this Tax Case (Appeal) stands dismissed.” 4/6 https://www.mhc.tn.gov.in/judis T.C.A.No.609 of 2021 3.In the light of the aforesaid decision, which is squarely applicable to the facts of the present case, the substantial question of law is answered in favour of the assessee and against the Revenue. Accordingly, the Tax case Appeal filed by the Revenue stands dismissed. No costs. [R.M.D., J.] [J.S.N.P., J.] 21.02.2022 Index : Yes/No Speaking/Non-Speaking Order vkr To 1.The Commissioner of Income Tax Chennai. 2.The Income Tax Appellate Tribunal 'A' Bench, Chennai 3.The Director of Income-tax (Exemptions) Chennai. 5/6 https://www.mhc.tn.gov.in/judis T.C.A.No.609 of 2021 R. MAHADEVAN, J. and J.SATHYA NARAYANA PRASAD

, J.

vkr /rk T.C.A.No.609 of 2021

21.02.2022 6/6 https://www.mhc.tn.gov.in/judis

More judgments on Section 12AA

All 4,243 judgments and leading authorities on Section 12AA →

Recent GST High Court judgments

Search GST case law →