Commissioner Of Income Tax (Exemption), Bhopal (M.p v. M/S Shri Agrasen Jan Kalyan Trust, Kharsia, District Raigarh (C.g

(Tax Case No.118/2024) Digitally 2025:CGHC:40695-DBsigned bySISTASISTASOMAYAJULUNAFRSOMAYAJULUDate:2025.08.1410:50:50+0530HIGH COURT OF CHHATTISGARH AT BILASPUR TAXC No. 118 of 2024 {Arising out of order dated 4-7-2023 passed by the Income TaxAppellate Tribunal, Raipur Bench, Raipur in ITA No.334/RPR/2016} Commissioner of Income Tax (Exemption), Bhopal (M.P.) ... Appellant versus M/s Shri Agrasen Jan Kalyan Trust, Kharsia, District Raigarh (C.G.)... Respondent For Appellant : Mr. Ajay Kumrani, Advocate, on behalf of Mr. AmitChaudhari, Standing Counsel for the Income TaxDepartment.Chaudhari, Standing Counsel for the Income TaxDepartment. For Respondent: Mr. S. Rajeswara Rao, Advocate. -Division Bench: Hon'ble Shri Sanjay K. Agrawal and Hon'ble Shri Sachin Singh Rajput, JJ.Judgment on Board(13/08/2025) Sanjay K. Agrawal, J. 1. The substantial question of law involved, formulated and to beanswered in this tax appeal preferred under Section 260A of theanswered in this tax appeal preferred under Section 260A of the Income Tax Act, 1961 (for short, ‘the IT Act’) states as under: - “Whether the ITAT is justified in reversing the order ofCIT(Exemption) holding that the assessee is entitled forregistration under Section 12AA of the Income Tax Act byrecording a finding perverse to the record?” (Tax Case No.118/2024) 2. The aforesaid substantial question of law has to be answered in thefollowing factual backdrop: -following factual backdrop: - 3. On 29-12-1978, the respondent assessee Trust namely, “ShriAgrasen Jan Kalyan Trust” was registered under the Public TrustAct by the Sub-Divisional Officer, Kharsia. It was formed byprominent philanthropic spirited citizens, Late Shri LakhiramAgrawal and Shri Niranjan Agrawal, with charitable objectsincluding renovation of public properties, promotion of libraries,relief to poor, education, aid to widows/orphans, and supply ofdrinking water without caste or creed discrimination. The assesseeTrust filed an application in Form No.10A before the Commissionerof Income Tax (Exemption), Raipur seeking registration underSection 12AA of the IT Act on 21-3-2016. On 18-7-2016 & 4-8-2016, in order to verify the objects and activities of the assesseeTrust and to ascertain the fulfillment of conditions mentionedunder Section 12AA of the IT Act, notices were issued to theassessee Trust requesting to produce the documents in response towhich on 10-8-2016, Shri Krishna Sultania, Treasurer of the Trust,attended and filed written submission. On 26-8-2016, anundertaking has been submitted before the CIT (Exemption) thatin the event of dissolution, the Trust’s assets shall not bedistributed among the Trustees but shall be transferred to anothercharitable trust with similar objects. However, on 9-9-2016, theCIT (Exemption) passed order rejecting the application forregistration under Section 12AA of the Act on the ground that the (Tax Case No.118/2024) (Tax Case No.118/2024) assessee Trust was engaged in activities akin to trade, commerce,or business, exceeding the permissible limit under the proviso toSection 2(15) of the IT Act, and citing absence of dissolution clause.Feeling aggrieved against that order, on 3-11-2016, the assesseeTrust preferred an appeal before the ITAT and thereafter, on 6-10-2020, the assessee Trust filed another application for registrationunder Section 12AA of the IT Act on same facts upon which on 25-3-2021, the Department granted registration to the assessee Trustunder Section 12AA of the IT Act. On 25-4-2023, during the courseof hearing before the ITAT, it was submitted on behalf of theassessee Trust that the Trust’s activities were not in the nature oftrade or commerce, nominal charges for Dharamshala cannot beequated with commercial activity and registration should begranted based on the objects of the Trust. However, the ITAT bythe impugned order, allowed the appeal preferred by the assesseeTrust against which the present tax appeal has been preferred bythe Revenue. 4. Mr. Ajay Kumrani, learned counsel appearing on behalf of theappellant herein/Revenue, would submit that the ITAT haswrongly relied upon the decision of the Supreme Court in thematter of Ananda Social and Educational Trust v.Commissioner of Income Tax and another1 while grantingrelief to the assessee and ignored the fact that the assessee isinvolved in General Public Utility and engaged in commercialappellant herein/Revenue, would submit that the ITAT haswrongly relied upon the decision of the Supreme Court in thematter of Ananda Social and Educational Trust v.Commissioner of Income Tax and another1 while grantingrelief to the assessee and ignored the fact that the assessee isinvolved in General Public Utility and engaged in commercial 1(2020) 17 SCC 254 (Tax Case No.118/2024) activities, as such, the order impugned deserves to be set-aside byallowing the appeal. 5. Mr. S. Rajeswara Rao, learned counsel appearing for therespondent herein/assessee Trust, would oppose the appeal andsupport the impugned order passed by the ITAT and submit thatthe ITAT has clearly recorded a finding that the objects of theassessee Trust are charitable objects eligible for approval underSection 12AA of the IT Act, therefore, the ITAT has rightly grantedthe application for registration in favour of the assessee Trustunder Section 12AA of the IT Act.respondent herein/assessee Trust, would oppose the appeal andsupport the impugned order passed by the ITAT and submit thatthe ITAT has clearly recorded a finding that the objects of theassessee Trust are charitable objects eligible for approval underSection 12AA of the IT Act, therefore, the ITAT has rightly grantedthe application for registration in favour of the assessee Trustunder Section 12AA of the IT Act. 6. We have heard learned counsel for the parties and considered theirrival submissions made herein-above and also went through therecord with utmost circumspection.rival submissions made herein-above and also went through therecord with utmost circumspection. 7. 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 madeunder 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; (ii) xxxxxxxxx (Tax Case No.118/2024) and a copy of such order shall be sent to the applicant:” 7. 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 madeunder 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; (ii) xxxxxxxxx (Tax Case No.118/2024) and a copy of such order shall be sent to the applicant:” 8. 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 ofits activities 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. 9. The Supreme Court in Ananda Social and Educational Trust(supra) held that newly registered trust on basis of its objects,without any activity having been undertaken, is entitled forregistration under Section 12AA of the IT Act, and observed asunder: - “9.Section 12-AA undoubtedly requires the Commissionerto satisfy himself about the objects of the trust or institutionand genuineness of its activities and grant a registration onlyif he is so satisfied. The said section requires theCommissioner to be so satisfied in order to ensure that theobjects of the trust and its activities are charitable since theconsequence of such registration is that the trust is entitled toclaim benefits under Sections 11 and 12 of the Act. In otherwords, if it appears that the objects of the trust and itsactivities are not genuine that is to say not charitable theCommissioner is entitled to refuse and in fact, bound torefuse such registration. 10.It was argued before us that the Commissioner isrequired to be satisfied about two things — firstly that theobjects of the trust and secondly, its activities are genuine. Ifthere have been no activities undertaken by the trust then theCommissioner cannot assess whether such activities are genuine and therefore, the Commissioner is bound to refusethe registration of such a trust. 11.We have given our anxious consideration to the abovesubmissions made by Ms Aishwarya Bhati, the learned SeniorCounsel appearing for the appellant Director of Income Taxand find that it is not possible to agree with the same. Thepurpose of Section 12-AA of the Act is to enable registrationonly of such trust or institution whose objects and activitiesare genuine. In other words, the Commissioner is bound tosatisfy himself that the objects of the trust are genuine andthat its activities are in furtherance of the objects of the trust,that is equally genuine. genuine and therefore, the Commissioner is bound to refusethe registration of such a trust. 11.We have given our anxious consideration to the abovesubmissions made by Ms Aishwarya Bhati, the learned SeniorCounsel appearing for the appellant Director of Income Taxand find that it is not possible to agree with the same. Thepurpose of Section 12-AA of the Act is to enable registrationonly of such trust or institution whose objects and activitiesare genuine. In other words, the Commissioner is bound tosatisfy himself that the objects of the trust are genuine andthat its activities are in furtherance of the objects of the trust,that is equally genuine. 12.Since Section 12-AA pertains to the registration of thetrust and not to assess of what a trust has actually done, weare of the view that the term “activities” in the provisionincludes “proposed activities”. That is to say, aCommissioner is bound to consider whether the objects of thetrust are genuinely charitable in nature and whether theactivities which the trust proposed to carry on are genuine inthe sense that they are in line with the objects of the trust. Incontrast, the position would be different where theCommissioner proposes to cancel the registration of a trustunder sub-section (3) of Section 12-AA of the Act. There theCommissioner would be bound to record the finding that anactivity or activities actually carried on by the trust are notgenuine being not in accordance with the objects of the trust.Similarly, the situation would be different where the trust hasbefore applying for registration been found to haveundertaken activities contrary to the objects of the trust.” 10. The principle of law laid down in Ananda Social and Educational Trust(supra) has been followed by the SupremeCourt with approval in the matter of Commissioner of IncomeTax Exemptions v. M/s International Health CareEducation and Research Institute2 in which it has been held in paragraphs 14 and 15 as under: - “14.We may agree to a certain extent with the learned ASGthat the very purpose for any assessee to seek registrationthat the very purpose for any assessee to seek registration 2Special Leave Petition (Civil) Diary No.19528/2018, decided on 11-2-2025 Soma (Tax Case No.118/2024) under Section 12AA of the Act is to claim exemption underSections 10 and 11 respectively of the Act, as the case may be.Therefore, before seeking registration, it is essential that theTrust should adduce cogent material to the satisfaction of theCommissioner that the activities are genuinely charitable innature. 15.To the aforesaid extent there is no problem. We mayonly say that mere registration under Section 12-AAautomatically does not entitle any charitable trust to claimexemption under Section 10 and 11 respectively of the Act,1961. When a return is filed by any trust claiming exemptionit is for the assessing officer to look into all the materials andsatisfy itself whether the exemption has been claimedgenuinely or not. If the assessing officer is not convinced it isalways open for him to decline grant of exemption.“ 11. In the instant case, the ITAT after considering the submissions of parties, recorded a categorical finding in paragraph 10 of the orderthat the objects of the assessee Trust are charitable objects eligiblefor approval under Section 12AA of the IT Act, which issubstantiated by the Department itself by granting registrationunder Section 12AA on 25-3-2021. Therefore, the order directinggrant of registration under Section 12AA of the IT Act is neitherperverse nor contrary to the record. We do not find any goodground to allow this appeal. Accordingly, the present tax appeal ishereby dismissed leaving the parties to bear their own cost(s) andthe substantial question of law is answered in favour of the assessee and against the Revenue. Sd/- Sd/-(Sanjay K. Agrawal) (Sachin Singh Rajput)JUDGEJUDGE