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1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU
ON THE 20TH DAY OF NOVEMBER, 2018
BEFORE
THE HON'BLE MR. JUSTICE RAVI MALIMATH
AND
THE HON’BLE MR.JUSTICE K.NATARAJAN
INCOME TAX APPEAL NO.44 OF 2014
BETWEEN:
DIRECTOR OF INCOME TAX (EXEMPTION), 3RD FLOOR, C.R.BUILDINGS, BENGALURU. ... APPELLANT
(BY SRI E.I.SANMATHI, ADVOCATE)
AND:
D.R.RANKA CHARITABLE TRUST NO.532, 2ND FLOOR, BRINDAVAN BUILDING, DUDI MARKET, AVENUE ROAD, BENGALURU. ... RESPONDENT
(BY SRI K.K.CHAYTHANYA,ADVOCATE)
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF THE INCOME-TAX ACT 1961, ARISING OUT OF ORDER DATED 11.10.2013 PASSED IN ITA NO.678/BANG/2012 PRAYING TO DECIDE THE FOREGOING QUESTION OF LAW AND OR SUCH OTHER QUESTIONS OF
2 LAW AS MAY BE FORMULATED BY THE COURT AS DEEMED FIT; SET ASIDE THE APPELLATE ORDER DATED 11.10.2013 PASSED IN ITA NO.678/BANG/2012 BY THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH, BENGALURU AS SOUGHT FOR, IN THE ABOVE CASE. ***** THIS INCOME TAX APPEAL COMING ON FOR ADMISSION THIS DAY, RAVI MALIMATH J., DELIVERED THE FOLLOWING: JUDGMENT The assessee is a charitable Trust. It was granted registration under Section 12-A of the Income Tax Act,1961 on 21-7-1986. It was also granted registration under Section 80-G of the Act up-to 31-3-2008. On an application for renewal, the Director of Income Tax found that the Trust had not carried out charitable activities during the financial years 2005-2006, 2006-2007, 2007- 2008 except for a negligible amount of donations made to other persons. Therefore, the application for renewal of recognition under Section 80-G was rejected. The same was challenged before the Tribunal by the assessee. The Tribunal by its order dated 18-2-2010 expressed a doubt
3 as to whether the assessee is entitled even for the benefit under Section 11. Therefore, the matter was remanded. Consequently, the Commissioner having re-considered the matter cancelled the registration under section 12-A of the Act. Aggrieved by the same, the assessee approached the Tribunal with effect from assessment year 2009-10. The Tribunal by the impugned order, set aside the order of DIT (Exemption) holding that the DIT (Exemption) was not right in withdrawing the registration granted under Section 12-A of the Act. It also came to the conclusion that whether the assessee is involved in a charitable activity or not can be considered in an assessment proceeding. Aggrieved by the said order, the present appeal is filed.
By the order dated 22-9-2014 the appeal was admitted to consider the following 4 substantial questions of law:-
“i) Whether on the facts and in the circumstances of the case, the Honourable Tribunal was right in law in holding that the
4 Appellate Trust is not eligible for renewal of approval under Section 80G?
ii) Whether on the facts and in the circumstances of the case, the Tribunal was right in law failing to hold that the Appellant Trust is eligible for automatic renewal of approval under section 80G?
iii) Whether on the facts and in the circumstances of the case, the Tribunal was right in perversely holding that the Appellant Trust was not engaged in charitable activity?
iv) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in directing the lower authority to relook at the registration granted under section 12A and thereby exceeding the jurisdiction of section 254(1)?”
Learned counsels submitted that the questions of law require to be reframed. Hence, they have addressed arguments on the same.
5 3. On hearing learned counsels, we are of the view the following substantial question of law arise for consideration in this appeal:- “i) Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the withdrawal of registration granted under Section 12-A of the Act is not correct?”
The learned counsel for the revenue contends that the Tribunal committed an error in firstly coming to the conclusion that whether the assessee indulged in charitable activity and whether the income therefrom is eligible for exemption can be considered only during the assessment proceedings is incorrect. The finding of the Tribunal that the Director of Income-Tax (Exemption) was not right in withdrawing the registration granted under Section 12-A of the Income Tax Act, is also erroneous. He submitted that the substantial question of law be answered in his favour. The same is disputed by the counsel for the assessee. He pleads that all the questions with regard to
6 the activity of the assessee could only be gone into during the assessment proceedings. That this is not the stage to consider whether the application is to be renewed or not. 4. In support of his case he relies on the Judgment of this Court in the case of DIRECTOR OF INCOME-TAX vs. GARDEN CITY EDUCATIONAL TRUST reported in [2010] 191 TAXMAN 238(KAR) and the subsequent authority in the case of DIRECTOR OF INCOME TAX vs. M/s.VENKATESHA EDUCATION SOCIETY reported in 2012-TIOL-561-HC-KAR-IT, wherein it was held that the two relevant considerations are that the authority should firstly satisfy itself that the objects of the Trust should be in the nature of charitable purposes and secondly whether the activities of the Trust are genuine. So far as the object of the Trust is concerned, so long as it fits into any one of the objects as enumerated under Section 2(15) of the Act, such a requirement stands fulfilled. So far as the second requirement with regard to the genuineness of the activities is concerned, the same could be arrived at only
7 during the assessment proceedings. Under these circumstances, we are of the view that the Tribunal was justified in coming to the conclusion that so far as the factum of the assessee being involved in any charitable activities or not, whether the income so derived has to be apportioned towards any other purpose or not, could be considered only during the assessment proceedings. Considering of the application is quite different from the assessment of the income of the assssee. Therefore, at this stage, it is suffice to hold that the conditions for grant of exemption have been satisfied by the assessee. The Tribunal was justified on facts and in law to pass the impugned order. Under these circumstances, we concur with the view of Tribunal. Consequently, following the aforesaid Judgment of this Court, we are of the considered view that the Tribunal was justified in coming to the conclusion that the assessee is entitled for registration under Section 12-A of the Act.
8 Hence, the substantial question of law is answered in favour of the assessee and against the revenue. Appeal is disposed off accordingly.
SD/- SD/- JUDGE
JUDGE
rsk/-