IT: Object of section 12AA is to examine genuineness of objects of trust, and not application of income of trust for charitable or religious purposes
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[2013] 39 taxmann.com 2 (Punjab & Haryana)
HIGH COURT OF PUNJAB AND HARYANA
Commissioner of Income-tax, Panchkula
v.
Janki Ji Education Society*
AJAY KUMAR MITTAL AND G.S. SANDHAWALIA, JJ.
IT APPEAL NO. 187 OF 2012 (O & M)†
OCTOBER 4, 2012
Section 12AA of the Income-tax Act, 1961 - Charitable or religious trust - Registration procedure [Conditions precedent] - Assessment year 2008-09 - Assessee was declined registration under section 12AA on ground that funds were surplus and were not utilized for charitable purpose - Tribunal reversed order relying upon an earlier decision wherein it was held that object of section 12AA is to examine genuineness of objects of trust, but not application of income of trust for charitable or religious purposes - Whether assessee was rightly allowed registration under section 12AA - Held, yes [Para 4] [In favour of assessee]
CASES REFERRED TO
Surya Educational & Charitable Trust v. CIT [IT Appeal No. 223 (Chd.) of 2009] (para 3).
Yogesh Putney for the Appellant.
ORDER
Ajay Kumar Mittal, J. - The present appeal has been filed under Section 260A of the Income-tax Act, 1961 (for short 'the Act') against the order dated 20-01-2012 passed by the Income-tax Appellate Tribunal (for short 'the Tribunal'), Bench 'B' passed in ITA No.1103/Chd/2009 for the assessment year 2008-09 claiming the following substantial question of law:—
"Whether the Ld. ITAT has erred in law in setting-aside the order passed by the Commissioner of Income-tax, Panchkula and allowing registration u/s 12AA of the Income-tax Act, 1961 to the applicant society despite the clear findings recorded by the Commissioner of Income-tax, Panchkula that though the applicant institutions activities are covered under the definition of charitable purpose, however, it is being run with the motive/object to earn profit."
2. The issue raised herein relates to grant of registration to the respondent-assessee under Section 12AA of the Act. The appellant had declined the registration to the respondent on the ground that the funds were surplus and were not being utilized for the charitable purpose. The said order was reversed by the Tribunal vide order impugned herein by relying upon its earlier decision in Surya Educational & Charitable Trust v. CIT ITA No.223 (Chd.) of 2009.
3. Learned counsel for the revenue fairly admitted that against the aforesaid order, the revenue had approached this Court by way of ITA No.701 of 2010 wherein this Court on 05-10-2011, while dismissing the said appeal had observed as under:—
"We have heard learned counsel for the appellant, but find no merit in the present appeals. As per Section 12AA of the Act, an application for registration of the Trust and Institution is required to be made within one year from the date of creation of the Trust or the Establishment of such Institution. The procedure for registration of the Trust or Institution is prescribed under Section 12AA of the Act. In terms of Clause (a) of Section 12AA of the Act, the Commissioner is to satisfy himself about the genuineness of the activities of the Trust on such inquiries as he may deem necessary. Sub-section (1A) and (2) of Section 12AA of the Act, are procedural in nature, whereas Sub-section (3) of Section 12AA of the Act, empowers the Commissioner to cancel the registration of the Trust or Institution, if he is satisfied that the activities of such Trust or Institution are not genuine or are not carried out in accordance with the objects of the Trust or Institution.
Section 11 of the Act contemplates that the income as specified therein shall not be included in the total income of the previous year of the person in receipt of the income derived from the property held under the Trust wholly for charitable or religious purposes, whereas Section 12 of the Act, deals with the contributions received by the Trust or an Institution, established for charitable and religious purposes, receiving contribution, shall not be an income in terms of Section 11 of the Act. The benefit of Sections 11 and 12 of the Act, are available only if such Trust or Institution is registered under Section 12AA of the Act.
On the other hand, Section 10(23C) of the Act are the provisions of the Act in substitution of the earlier provisions of Section 10(22) of the Act as to which income shall not be included in computing the total income of any person. Therefore, the provisions of Sections 11, 12 or Section 10(23C) of the Act, deal with the income of a Trust or of the Institution and the circumstances as to when such income is to be excluded for computing the total income, but the basis of such benefit is the registration under Section 12AA of the Act. Unless a Trust or Institution is registered under Section 12AA of the Act, such Trust or Institution shall not be entitled to exclude from its total income, deductions or contributions or from other sources. Therefore, the principles laid down for excluding the income from consideration under Section 10(22) now 10(23)(C) or Sections 11 and 12 are not applicable while considering the application for registration under Section 12AA of the Act. The application for registration is required to be made within one year of the creation of the Trust. Section 12AA of the Act, requires satisfaction in respect of the genuineness of the activities of the Trust, which includes the activities which the Trust is undertaking at present and also which it may contemplate to undertake. The insertion of sub-section (3) to Section 12AA of the Act, clarifies the said fact, when it empowers the Commissioner to cancel the registration if the activities of the Trust are not carried out in accordance with such objects.
Therefore, the object of Section 12AA of the Act, is to examine the genuineness of the objects of the Trust, but not the income of the Trust for charitable or religious purposes. The stage for application of income is yet to arrive i.e. when such Trust or Institution files its return. Therefore, we find that the judgments referred to by the learned counsel for the appellant are not applicable to the facts of the present case arising out of the question of registration of the Trust and not of assessment."
4. In view of the above, no substantial question of law arises for consideration in this appeal.
5. The present appeal is dismissed accordingly.
VARSHARegards
Prarthana Jalan
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