Commissioner Of Income Tax (Exemption), Bhopal, Madhya Pradesh v. Aic@36Ince, 3[Rd] Floor, City Centre Mall, Raipur, Chhattisgarh, Pan-Aagaa0318L

(Tax Case No.20/2023) 2024:CGHC:47779-DB Digitally 2024:CGHC:47779-DBsigned bySISTASISTASOMAYAJULUSOMAYAJULUDate:2024.12.0612:56:39HIGH COURT OF CHHATTISGARH AT BILASPUR+0530 NAFR Tax Case No.20 of 2023 (Arising out of order dated 19-7-2022 passed by the Income TaxAppellate Tribunal, Raipur Bench, Raipur in ITA No.65/RPR/2019) Commissioner of Income Tax (Exemption), Bhopal, Madhya Pradesh ... Appellant versus AIC@36INCE, 3[rd] Floor, City Centre Mall, Raipur, Chhattisgarh, PAN- ... Respondent For Appellant:Mr. Amit Chaudhari, Standing Counsel for theIncome Tax Department and Mr. Vijay Chawla,Advocate.Income Tax Department and Mr. Vijay Chawla,Advocate.For Respondent:Mr. Shobhit Mishra, Advocate. -Division Bench: Hon'ble Shri Sanjay K. Agrawal andHon'ble Shri Radhakishan Agrawal, JJ. Judgment on Board (04/12/2024) Sanjay K. Agrawal, J. 1. This tax appeal under Section 260A of the Income Tax Act, 1961(for short, ‘the IT Act’) was admitted for hearing on 2-8-2023 by(for short, ‘the IT Act’) was admitted for hearing on 2-8-2023 by formulating the following substantial question of law: - “Whether on facts & circumstances of the case, ITAT iscorrect in directing to CIT(E) to grant registration u/s 12AA (Tax Case No.20/2023) of the Act irrespective of the findings by the CIT (E) thatthe activities of the trust is in the nature of trade, commerceor business and covered by proviso to Section 2 (15) of theAct.” 2. The respondent herein / assessee had filed an application on 4-7-2018 for grant of registration under Section 12AA of the IT Act inForm No.10A, as the assessee Society was registered with theDeputy Registrar of Societies on 30-6-2017 under the ChhattisgarhSociety Registration Act, 1973 and the main area of activitiesclaimed to be conducted by the Society are, to implement theChhattisgarh Innovation & Entrepreneurship Policy, 2015; toestablish Accelerators/Technology business Incubators in the State;to start up incubated in the State to have funding raised fromVenture Capitalists, Financial Instituted and Angel Investors; etc..Opportunity was provided to the assessee on 30-11-2018 by issuingnotice to explain the genuineness of activities claimed by him,which he responded and has submitted his written submission on31-12-2018 and ultimately, the Joint Commissioner of Income Tax(Exemption) and the Assessing Officer (Exemption) have notrecommended the case of the assessee for grant of registrationholding that the assessee is not involved in any charitable activity.Ultimately, by order dated 30-1-2019, the application filed by theassessee under Section 12AA of the IT Act was rejected by theCommissioner of Income Tax (Exemption), Bhopal against which (Tax Case No.20/2023) the assessee filed appeal before the Income Tax Appellate Tribunal(ITAT) and the learned ITAT by its impugned order, allowed theappeal and set aside the order of CIT(E) and directed the CIT(E) togrant registration under Section 12AA of the IT Act against whichthis appeal has been preferred by the Revenue. 3. Mr. Amit Chaudhari, learned Standing Counsel for the Income TaxDepartment appearing for the appellant herein / Revenue, wouldsubmit that the learned ITAT is absolutely unjustified in directingthe CIT(E) to grant registration by recording a finding perverse tothe record, as the object of the respondent assessee Society is notfor charitable purpose, as such, registration should not have beendirected under Section 12AA of the IT Act.Department appearing for the appellant herein / Revenue, wouldsubmit that the learned ITAT is absolutely unjustified in directingthe CIT(E) to grant registration by recording a finding perverse tothe record, as the object of the respondent assessee Society is notfor charitable purpose, as such, registration should not have beendirected under Section 12AA of the IT Act. 3. Mr. Amit Chaudhari, learned Standing Counsel for the Income TaxDepartment appearing for the appellant herein / Revenue, wouldsubmit that the learned ITAT is absolutely unjustified in directingthe CIT(E) to grant registration by recording a finding perverse tothe record, as the object of the respondent assessee Society is notfor charitable purpose, as such, registration should not have beendirected under Section 12AA of the IT Act.Department appearing for the appellant herein / Revenue, wouldsubmit that the learned ITAT is absolutely unjustified in directingthe CIT(E) to grant registration by recording a finding perverse tothe record, as the object of the respondent assessee Society is notfor charitable purpose, as such, registration should not have beendirected under Section 12AA of the IT Act. 4. Mr. Shobhit Mishra, learned counsel appearing for the respondentherein / assessee Society, would submit that the learned ITAT isabsolutely justified in allowing the appeal of the assessee anddirecting for registration under Section 12AA of the IT Act.herein / assessee Society, would submit that the learned ITAT isabsolutely justified in allowing the appeal of the assessee anddirecting for registration under Section 12AA of the IT Act. 5. We have heard learned counsel for the parties and considered theirrival submissions made herein-above and also went through thematerial available on record minutely and thoroughly as well.rival submissions made herein-above and also went through thematerial available on record minutely and thoroughly as well. 6. Section 12AA(1)(b)(i) of the IT Act states as under: - “12AA. Procedure for registration.—(1) The PrincipalCommissioner or Commissioner, on receipt of anapplication for registration of a trust or institution madeCommissioner or Commissioner, on receipt of anapplication for registration of a trust or institution made (Tax Case No.20/2023) under clause (a) or clause (aa) or clause (ab) of sub-section(1) of section 12A, shall— (a) xxxxxxxxx (b) after satisfying himself about the objects of the trustor institution and the genuineness of its activities asrequired under sub-clause (i) of clause (a) andcompliance of the requirements under sub-clause (ii) ofthe said clause, he— (i) shall pass an order in writing registering the trustor institution;or institution; (ii) xxxxxxxxx and a copy of such order shall be sent to the applicant:” 7. A careful perusal of the aforesaid provision would show that thePrincipal Commissioner or the Commissioner has to satisfy himselfabout the objects of the trust or institution and the genuineness of itsactivities as required under sub-clause (i) of clause (a) andcompliance of the requirements under sub-clause (ii) of the saidclause, and has to pass an order in writing registering the trust orinstitution and a copy of the order so passed will be sent to theapplicant. 8. In the matter of Commissioner of Income Tax v. Chhattisgarh Urology Society1, a coordinate Bench of this Court has consideredthe issue and held that the said provision nowhere empowers theCommissioner of Income Tax to assess the objects vis-a-vis thebooks of accounts and even otherwise, it is not to be seen at this (Tax Case No.20/2023) stage as to whether the fulfillment of the charitable trust wouldeventually benefit the members of the society, and observed inparagraphs 10, 11, 12 and 13 as under: - 8. In the matter of Commissioner of Income Tax v. Chhattisgarh Urology Society1, a coordinate Bench of this Court has consideredthe issue and held that the said provision nowhere empowers theCommissioner of Income Tax to assess the objects vis-a-vis thebooks of accounts and even otherwise, it is not to be seen at this (Tax Case No.20/2023) stage as to whether the fulfillment of the charitable trust wouldeventually benefit the members of the society, and observed inparagraphs 10, 11, 12 and 13 as under: - “10.The provision contained under Section 12A nowhereempowers the CIT to assess the objects vis-a-vis the booksof accounts. Even otherwise, it is not to be seen at thisstage as to whether the fulfillment of the charitable trustwould eventually benefit the members of the society. If theconstituent of the trust engage in some genuine charitableactivity which may benefit them in some other aspect oftheir personality which may include their vocation in life, itwould not affect the genuineness of the objects of the trust.A person does not engage in charity for not doing anythingin the other walks of life. A charity for one particular objectis not for destroying the career for an individual which he isotherwise entitled to profess. If this ground is considered tobe affecting the genuineness of the trust, people successfulin different walks of life would never engage in charitableactivity. 11.In the matters of Commissioner of Income Tax vsVijay Vargiya Vani Charitable Trust[2] and FifthGeneration Education vs Commissioner Income Tax[3],itis held that at the stage of Section 12A, the Commissioner isnot to examine the application of income. All that he mayexamine is whether the application is made in accordancewith the requirements of Section 12A read with Rule 17Aand whether Form No.10A has been properly filled up. Hemay also see whether the objects of the trust are charitableor not. At this Stage, it is not proper to examine theapplication of income. 12.In the case at hand, the order passed by the CIT doesnot say in definite terms, that the objects of the society arenot charitable in nature. Merely because the trust consists ofUrologist Doctors and the charitable activity may mutuallybenefit those members, the object itself would not cease tobe charitable in nature. 2(2014) 271 CTR 0698 (Raj) 3(1990) 185 ITR 634 All (Tax Case No.20/2023) 13.For the foregoing, we are satisfied that the AppellateTribunal has rightly interfered with the order passed by theCIT. No substantial question of law arises in this appeal fordetermination in view of the plain language of Section 12Aof the Act, 1961. The appeal being sans substance, itdeserves to be and is hereby dismissed.” 9. A careful perusal of the order impugned would show that thelearned ITAT has clearly recorded a finding in paragraph 12 that theactivity of respondent / assessee Society is charitable in nature, andrecorded the following finding: - 2(2014) 271 CTR 0698 (Raj) 3(1990) 185 ITR 634 All (Tax Case No.20/2023) 13.For the foregoing, we are satisfied that the AppellateTribunal has rightly interfered with the order passed by theCIT. No substantial question of law arises in this appeal fordetermination in view of the plain language of Section 12Aof the Act, 1961. The appeal being sans substance, itdeserves to be and is hereby dismissed.” 9. A careful perusal of the order impugned would show that thelearned ITAT has clearly recorded a finding in paragraph 12 that theactivity of respondent / assessee Society is charitable in nature, andrecorded the following finding: - “12.On careful consideration of the material placed beforeus by the assessee, we are of the considered view that thereasons placed by CIT(E) while rejecting approval u/s.12AA of the Act are not sufficient to deny the recognitionconsidering the facts on record. The assessee is SpecialPurpose Vehicle (SPV) and runs from the grants andsupport of the state government. Except the pointsobserved by him on all the other sphere the assessee trust isfulfilling all the conditions for registration under section12AA of the Act. The reasons based on which therecognition denied are not in accordance with the law whenthis special purpose vehicle created in the name of thesociety and funded it by way of grant to develop andimprove the economic activities by the state governmentand it helps start-up entrepreneurship. This is an activity ofcharitable in nature merely the trust activity has scopeoutside India is and memorandum of the assessee trust doesnot include the investment and dissolution clause andutilization of fund, when this trust is promoted by the stateGovernment how it can be termed as commercial in nature.The observation of ld. CIT(E) considering the object forwhich the society is created is not tenable while granting theregistration. In our considered view the society fulfill allthe condition to grant the registration and in our view thereasons presented while taking the decision ld. CIT(E) isnot in accordance with the law and the assessee should beconsidered for registration u/s. 12AA of the Act. Soma (Tax Case No.20/2023) Accordingly, the grounds of appeal raised by the assessee isallowed.”allowed.” 10. Reverting to the facts of the present case in light of the order passed’s’sby this Court in Chhattisgarh Urology Societycase (supra) andin view of the finding of the learned ITAT, it is quite vivid that theactivities of the assessee Society are for charitable purpose forpublic at large and in that view of the matter, the learned ITAT isabsolutely justified in directing the CIT(E) to grant registrationunder Section 12AA of the IT Act by setting aside the order of theCIT(E), as such, the order impugned passed by the ITAT is inaccordance with law. Accordingly, the finding recorded by theCIT(E) that the activities of the respondent assessee Society is inthe nature of trade, commerce or business and covered by proviso toSection 2(15) of the IT Act was not the correct finding. Thesubstantial question of law is answered in favour of the assessee andagainst the Revenue. Consequently, the tax appeal stands dismissedin view of the finding of the learned ITAT, it is quite vivid that theactivities of the assessee Society are for charitable purpose forpublic at large and in that view of the matter, the learned ITAT isabsolutely justified in directing the CIT(E) to grant registrationunder Section 12AA of the IT Act by setting aside the order of theCIT(E), as such, the order impugned passed by the ITAT is inaccordance with law. Accordingly, the finding recorded by theCIT(E) that the activities of the respondent assessee Society is inthe nature of trade, commerce or business and covered by proviso toSection 2(15) of the IT Act was not the correct finding. Thesubstantial question of law is answered in favour of the assessee andagainst the Revenue. Consequently, the tax appeal stands dismissed