M/S GURUKUL FOUNDATION,PURNEA vs. CIT(EXEMPTION), PATNA

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ITA 63/PAT/2017Status: DisposedITAT Patna12 March 20187 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that at the stage of granting registration under Section 12AA, the CIT is only required to examine whether the objects of the trust are charitable in nature, not the genuineness of its activities. The CIT should not have refused registration solely on the ground that activities had not commenced.

What were the facts?

The assessee trust applied for registration under Section 12AA of the Income-tax Act, 1961. The CIT (Exemptions) rejected the application because the trust had not yet commenced its activities.

What were the issues?

Whether the CIT can refuse registration under Section 12AA based on the non-commencement of activities, when the objects of the trust are charitable?

Which sections of the Income-tax Act were involved?

Section 12AA,Section 11,Section 12,Section 2(15)

AI-generated summary — verify with the full judgment below

IN THE INCOME TAX APPELLATE TRIBUNAL PATNA BENCH, PATNA Before Sh. N. K Saini; AM and Sh. Sudhanshu Srivastava, JM ITA No. 63/Pat./2017 Asstt: Year : MIs Gurukul Foundation; Vs Commissioner of Income Tax Purnea (Exemptions) Patna (Bihar (APPELLANT) (RESPONDENT) PAN No. AACTG50ITF Assessee by :Shri A.K Rastogi and Shri Rakesh Kumar Adv. Revenue by Shri Rishi Raj Sinha, Sr. S.C: Date of Hearing 12.03.2018 Date of Pronouncement 12 .03.2018 ORDER Per Sudhanshu Srivastava,_JM: This appeal has been preferred by the assessee against order dated 20.02.2017, passed by the Ld. CIT(Exemptions)- Patna and challenges his action in rejecting assessee s application for grant of registration u/s 12AA of the Income-tax Act, 1961 (hereinafter referred to as "the Act") 2 The Ld _ AR submitted that the assessee trust had come into existence vide registered trust deed dated 06.07.2016 and had immediately, thereafter, filed application in Form No.10A for registration u/s12AA of the Act on 07.092016. It was submitted that the Ld. CIT (E) rejected the assessee' S application for registration on 2 ITA No. 63/Pat./2017 the ground that the trust was yet to start its activities The Ld _ AR emphasized that at the time of registration the Ld_ CIT(E) has to examine whether or not the trust is charitable in nature and further as many as the objects of the trust are charitable in nature, the registration cannot be refused_ It was submitted that here in the present appeal the Ld_ CIT(E) had not doubted the aims and objects of the trust but had refused registration on the ground that the trust was yet to start the activities It was submitted that suitable directions may be issued to the Ld_ CIT (E) to grant registration to the trust. 3 In response, the Ld_ Sr . Standing Counsel for the Department submitted that the Ld. CIT (E) was correct in refusing the registration as the activities of the trust had not been commenced and, therefore, as the Ld. CIT (E) was in no position to ascertain the genuineness of the activities, how could the registration have been granted. 4 _ We have heard the rival submissions and have also perused the material on record. We find force in the contention of the Ld. AR that at the time of granting registration u/s12AA of the Act; 3 ITA No. 63/Pat /2017 the Ld. CIT (E) is expected only to examine whether or not the objects of the trust are charitable and that the Ld. CIT (E) cannot, at this juncture, enter into the realm of examining the genuineness of the activities of the trust: We find that in the case before us, the Ld. CIT (Exemptions) Patna has, nowhere in his order, disputed that the objects of the assessee society were charitable in nature. 4.1 In the case of CIT US. Vijay Vargiyavani Charitable Trust; reported in 369 ITR 360(Raj); it has been by the Honble High Court of Rajasthan as follows: - "

8.

In our view, the object of section 12AA is to examine the genuineness of the objects of the trust but not the income of the trust for charitable or religious purpose: The Commissioner cannot sit in the chair of the Assessing Officer to look into the amount spent on charitable activities at the time Of creation of the trust. The stage for reviewing the application of income has not arrived at when such trust or institution files application for registration of the trust/ society: 4.2 Similarly, the Honble High Court of Punjab and Haryana, in the case of Commissioner Of Income Tax-I vs. Sri Guru Gorakh Nath ITA No. 63/Pat./2017 Charitable Trust; reported in 378 ITR 685 (P&H); has held as follows: - (7. A perusal of the above section would go on to show that the Commissioner has to satisfy himself of the objects of the trust and the genuineness of the activities and after giving an opportunity of being heard to the trust or the institution, a refusal can be made to register the trust. Thus, the section gives power to the Commissioner to look into the genuineness of the activities of the trust and to satisfy himself about its activities: Under Section 12A, the provisions of Sections 11 and 12 shall not apply in relation to the income of any trust or institution unless various conditions are fulfilled. The said sections provide that income from property held for charitable purposes shall not be included in the total income of the previous year of the person in receipt of the income.

8.

The provisions of Section 12AA, thus, also give the power under sub-section (3) to cancel the registration of the activities of the trust if it is not carried out in accordance with the objects but the Commissioner has to keep in mind that it is not to act as an Assessing Authority while deciding the application under Section 12AA and the enquiry regarding the genuineness of the activities of imparting education with a charitable purpose is to be kept in mind. The objects of the trust, thus, have to be taken into consideration: Section 2(15) defines 5 ITA No. 63/Pat./2017 charitable purpose and the same includes relief in education and advancement of any other object of general public utility: In case the utility is carried out in the nature of trade, commerce, business, the proviso provides that the same will not be a charitable purpose. Sub-section 2(15) reads as under: 'Sub-section 2 (15) "charitable purpose includes relief of the poor; education, medical relief; [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,] and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity: Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is [twenty-five lakh rupees] or less in the previous year; ITA No. 63/Pat./2017 4.3 A perusal of the impugned order shows that the Ld. CIT (E) has nowhere made any reference to the objects of the assessee trust, which was incumbent upon him at the time considering the assessee s application for grant of registration. In our considered opinion, the Ld. CIT (E) should have examined the objects of the trust vis-a-vis they being charitable in nature and should not have ventured into the activity part. Accordingly, we restore the file to the office of the Ld: CIT (E) with the direction to examine the assessee s application in light of the objects of the trust and adjudicate the issue in accordance with law after giving proper opportunity of being heard to the assessee to represent its case. 5_ In the result, the appeal of the assessee stands allowed for statistical purposes. (Order Pronounced in the Court on 12/03/2018) / - N.K Saini) - (Sudhanshu Srivastava) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 15 /03/2018 S.sinha* ITA No. 63/Pat./2017

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