Commissioner Of Income Tax (Exemption), Bhopal (M.p v. Pragatisheel Chhattisgarh Satnami Samaj, Guru Ghasidas Sanskritikbhawan, New Rajendra Nagar, Raipur, District Raipur (C.g

(Tax Case No.75/2023) Digitally signedby SISTASOMAYAJULUSISTASOMAYAJULUDate:2024.11.2511:30:03+0530 2024:CGHC:45557-DB NAFR HIGH COURT OF CHHATTISGARH AT BILASPUR TAX CASE No.75 of 2023 (Arising out of order dated 21-9-2022 passed by the Income TaxAppellate Tribunal, Raipur Bench, Raipur in ITA No.106/RPR/2018) Commissioner of Income Tax (Exemption), Bhopal (M.P.) ... Appellant versus Pragatisheel Chhattisgarh Satnami Samaj, Guru Ghasidas SanskritikBhawan, New Rajendra Nagar, Raipur, District Raipur (C.G.) ... Respondent For Appellant :For Respondent: Mr. Nikhilesh Begani, Advocate. : Mr. Amit Chaudhari & Mr. Vijay Chawla, Advocates. -Division Bench: Hon'ble Shri Sanjay K. Agrawal andHon'ble Shri Radhakishan Agrawal, JJ. Judgment On Board(21/11/2024) Sanjay K. Agrawal, J. 1. This tax appeal under Section 260A of the Income-tax Act, 1961(for short, ‘the IT Act’) has been preferred by the Revenue callingin question legality, validity and correctness of judgment & orderdated 21-9-2022 passed by the Income Tax Appellate Tribunal,Raipur Bench, Raipur in ITA No.106/RPR/2018, by which the(for short, ‘the IT Act’) has been preferred by the Revenue callingin question legality, validity and correctness of judgment & orderdated 21-9-2022 passed by the Income Tax Appellate Tribunal,Raipur Bench, Raipur in ITA No.106/RPR/2018, by which the appeal preferred by the assessee / respondent herein has beenallowed and the Revenue has been directed to grant registration tothe respondent herein under Section 12AA of the IT Act. 2. This appeal was admitted for final hearing by this Court on 29-7- 2024, on the following two substantial questions of law: - “1.Whether on facts & circumstances of the case, ITATis correct in directing the CIT(E) to grant the registration u/s12 AA of that Act irrespective of the findings by the CIT(E)that the activities of the trust is not entirely charitable forpublic at large? 2.Whether in the facts of the case and in law the ITATwas justified in holding that when assessee Trust has objectswhich are both Charitable and religious in nature the section13(1)(b) is not applicable when Hon’ble Supreme Court inthe case of CIT Vs. Dawoodi Bohra Jamaat (2014) 364 ITR0031: (2014) 268 CTR 0001: (2014) 102 DTR 0361 gaveclear findings in Para 45 & Para 46 of the order that section13(1)(b) of the Act applies to charitable Trusts as well as tocharitable cum religious Trusts?” 3. The aforesaid questions can be answered on the following factualbackdrop: -backdrop: - 4. The respondent assessee, which is a Society, made an applicationfor registration under Section 12AA of the IT Act and theCommissioner of Income Tax (Exemption) {for short, ‘the CIT(E)’}on verification of the objects and activities of the respondentassessee Society, found that the assessee Society is established for aparticular community and finding no merit in the application,rejected the application of the respondent assessee for registration (Tax Case No.75/2023) under Section 12AA of the IT Act by order dated 25-4-2018.Feeling aggrieved against the order passed by the CIT(E), therespondent assessee preferred an appeal before the Income TaxAppellate Tribunal (for short, ‘the ITAT’) and by the impugnedorder, the ITAT allowed the appeal holding that on perusal of thebye-laws of the assessee Society, it is quite evident that the assesseeSociety has charitable as well as religious objects, therefore, theassessee is entitled for registration under Section 12AA of the ITAct. Now, challenging the order passed by the ITAT, the Revenuehas preferred this appeal before this Court which has been admittedon the two substantial questions of law incorporated and cataloguedin paragraph 2 of this judgment. (Tax Case No.75/2023) under Section 12AA of the IT Act by order dated 25-4-2018.Feeling aggrieved against the order passed by the CIT(E), therespondent assessee preferred an appeal before the Income TaxAppellate Tribunal (for short, ‘the ITAT’) and by the impugnedorder, the ITAT allowed the appeal holding that on perusal of thebye-laws of the assessee Society, it is quite evident that the assesseeSociety has charitable as well as religious objects, therefore, theassessee is entitled for registration under Section 12AA of the ITAct. Now, challenging the order passed by the ITAT, the Revenuehas preferred this appeal before this Court which has been admittedon the two substantial questions of law incorporated and cataloguedin paragraph 2 of this judgment. 5. Mr. Amit Chaudhary, learned Standing Council appearing for theappellant herein / Revenue, would submit that the ITAT isabsolutely unjustified in granting the application for registration ofthe assessee Society under Section 12AA of the IT Act. He wouldfurther submit that the assessee Society is established for aparticular community and almost all the objects of the assesseeSociety are for the benefit of a particular community and theassessee Society carried out activities for the benefit of SatnamiSamaj, as such, the order passed by the CIT(E) rejecting theapplication for registration could not have been reversed by theITAT. Therefore, the substantial questions of law be answered in (Tax Case No.75/2023) favour of the Revenue and against the assessee Society / community and the present tax appeal be allowed. 6. Mr. Nikhilesh Begani, learned counsel appearing for the respondentassessee Society, would oppose the appeal and support the orderimpugned passed by the ITAT and submit that the case is coveredby a decision of the coordinate Bench of this Court in the matter ofCommissioner of Income Tax (Exemption) v. KanyakubjSabha1. assessee Society, would oppose the appeal and support the orderimpugned passed by the ITAT and submit that the case is coveredby a decision of the coordinate Bench of this Court in the matter ofCommissioner of Income Tax (Exemption) v. KanyakubjSabha1. 7. We have heard learned counsel for the parties and considered theirrival submissions made herein-above and also went through therecord of the case with great care and circumspection as well.rival submissions made herein-above and also went through therecord of the case with great care and circumspection as well. 8. In order to consider the plea raised at the Bar, it would beadvantageous to notice Section 12AA of the IT Act, which dealswith the registration of charitable trusts and institutions, and statesas under:-advantageous to notice Section 12AA of the IT Act, which dealswith the registration of charitable trusts and institutions, and statesas under:- “12AA. Procedure for registration.— (1)The Principal Commissioner or Commissioner, onreceipt of an application for registration of a trust orinstitution made under clause (a) or clause (aa) or clause(ab) of sub-section (1) of section 12A, shall— (a)call for such documents or information fromthe trust or institution as he thinks necessary in orderto satisfy himself about,— 12024:CGHC:38421-DB (i)the genuineness of activities of the trustor institution; and (Tax Case No.75/2023) (ii)the compliance of such requirements ofany other law for the time being in force by thetrust or institution as are material for thepurpose of achieving its objects, and may alsomake such inquiries as he may deem necessaryin this behalf; and (b)after satisfying himself about the objects of thetrust or institution and the genuineness of itsactivities as required under sub-clause (i) of clause(a) and compliance of the requirements under sub-clause (ii) of the said clause, he— (i)shall pass an order in writing registeringthe trust or institution; (a)call for such documents or information fromthe trust or institution as he thinks necessary in orderto satisfy himself about,— 12024:CGHC:38421-DB (i)the genuineness of activities of the trustor institution; and (Tax Case No.75/2023) (ii)the compliance of such requirements ofany other law for the time being in force by thetrust or institution as are material for thepurpose of achieving its objects, and may alsomake such inquiries as he may deem necessaryin this behalf; and (b)after satisfying himself about the objects of thetrust or institution and the genuineness of itsactivities as required under sub-clause (i) of clause(a) and compliance of the requirements under sub-clause (ii) of the said clause, he— (i)shall pass an order in writing registeringthe trust or institution; (ii)shall, if he is not so satisfied, pass anorder in writing refusing to register the trust orinstitution, and a copy of such order shall besent to the applicant: Provided that no order under sub-clause (ii)shall be passed unless the applicant has been given areasonable opportunity of being heard. (1A) All applications, pending before the Principal ChiefCommissioner or Chief Commissioner on which no orderhas been passed under clause (b) of sub-section (1) beforethe 1st day of June, 1999, shall stand transferred on that dayto the Principal Commissioner or Commissioner and thePrincipal Commissioner or Commissioner may proceedwith such applications under that sub-section from the stageat which they were on that day. (2)Every order granting or refusing registration underclause (b) of sub-section (1) shall be passed before theexpiry of six months from the end of the month in which theapplication was received under clause (a) or clause (aa) orclause (ab) of sub-section (1) of section 12A. (3)Where a trust or an institution has been grantedregistration under clause (b) of sub-section (1) or hasobtained registration at any time under section 12A [as itstood before its amendment by the Finance (No. 2) Act, (Tax Case No.75/2023) 1996 (33 of 1996)] and subsequently the PrincipalCommissioner or Commissioner is satisfied that theactivities of such trust or institution are not genuine or arenot being carried out in accordance with the objects of thetrust or institution, as the case may be, he shall pass anorder in writing cancelling the registration of such trust orinstitution: Provided that no order under this sub-section shall bepassed unless such trust or institution has been given areasonable opportunity of being heard. (4)Without prejudice to the provisions of sub-section(3), where a trust or an institution has been grantedregistration under clause (b) of sub-section (1) or hasobtained registration at any time under section 12A as itstood before its amendment by the Finance (No. 2) Act,1996 (33 of 1996) and subsequently it is noticed that (a)the activities of the trust or the institution arebeing carried out in a manner that the provisions ofsections 11 and 12 do not apply to exclude eitherwhole or any part of the income of such trust orinstitution due to operation of sub-section (1) ofsection 13; or (b)the trust or institution has not complied withthe requirement of any other law, as referred to insub-clause (ii) of clause (a) of sub-section (1), andthe order, direction or decree, by whatever namecalled, holding that such non-compliance hasoccurred, has either not been disputed or has attainedfinality, then, the Principal Commissioner or theCommissioner may, by an order in writing, cancel theregistration of such trust or institution: Provided that the registration shall not becancelled under this sub-section, if the trust orinstitution proves that there was a reasonable causefor the activities to be carried out in the said manner. (5)Nothing contained in this section shall apply on orafter the 1st day of April, 2021.” Page 7 of 10 (Tax Case No.75/2023) (b)the trust or institution has not complied withthe requirement of any other law, as referred to insub-clause (ii) of clause (a) of sub-section (1), andthe order, direction or decree, by whatever namecalled, holding that such non-compliance hasoccurred, has either not been disputed or has attainedfinality, then, the Principal Commissioner or theCommissioner may, by an order in writing, cancel theregistration of such trust or institution: Provided that the registration shall not becancelled under this sub-section, if the trust orinstitution proves that there was a reasonable causefor the activities to be carried out in the said manner. (5)Nothing contained in this section shall apply on orafter the 1st day of April, 2021.” Page 7 of 10 (Tax Case No.75/2023) 9. On a careful perusal of the aforesaid provisions of law, it is clearthat at the time of granting registration what the Commissioner ofIncome Tax (Exemption) is required to look into mainly, is theobject of the trust; whether the trust has applied for registrationunder Section 12AA of the IT Act with proper details as enshrinedin the said Act and whether the prescribed format for application asin the said Act has been complied with and to conduct an enquiry tosatisfy himself of the genuineness of activities and the objects of thetrust and upon reaching satisfaction of the objects and theauthenticity of the activities of the trust, he would grant theregistration.that at the time of granting registration what the Commissioner ofIncome Tax (Exemption) is required to look into mainly, is theobject of the trust; whether the trust has applied for registrationunder Section 12AA of the IT Act with proper details as enshrinedin the said Act and whether the prescribed format for application asin the said Act has been complied with and to conduct an enquiry tosatisfy himself of the genuineness of activities and the objects of thetrust and upon reaching satisfaction of the objects and theauthenticity of the activities of the trust, he would grant theregistration. 10. In the matter of Commissioner of Income Tax, Ujjain v. Dawoodi Bohara Jamat2, their Lordships of the Supreme Court haveobserved qua Section 12AA of the IT Act in paragraphs 12, 13 & 14as under:- “12. Section 12AA lays down the procedure to befollowed by the Commissioner for grant or refusal ofapplication for registration made under Section 12A.According to procedure so laid down, the Commissionershall call for documents and information and conduct anenquiry to satisfy himself of the genuineness of the trust andupon reaching satisfaction of the charitable or religiousnature of the objects and the authenticity of the activities ofthe trust, he would grant the registration. If he is notsatisfied of the aforesaid, the request made in theapplication may be declined. (Tax Case No.75/2023) 13.Section 13 enacts a complete bar to the availability ofexemption under Section 11 in respect of various incomesenumerated therein. Section 11 does not apply when theprovisions of Section 13 are attracted. Section 13(1)(b) isrelevant for the purpose of this case. The same is noticed: "13. Section 11 not to apply in certain cases.— (1) Nothing contained in Section 11 or Section 12shall operate so as to exclude from the total incomeof the previous year of the person in receipt thereof— (a) ** ** ** (b) in the case of a trust for charitable purposes or acharitable institution created or established after thecommencement of this Act, any income thereof ifthe trust or institution is created or established forthe benefit of any particular religious community orcaste;" (emphasis supplied) 13.Section 13 enacts a complete bar to the availability ofexemption under Section 11 in respect of various incomesenumerated therein. Section 11 does not apply when theprovisions of Section 13 are attracted. Section 13(1)(b) isrelevant for the purpose of this case. The same is noticed: "13. Section 11 not to apply in certain cases.— (1) Nothing contained in Section 11 or Section 12shall operate so as to exclude from the total incomeof the previous year of the person in receipt thereof— (a) ** ** ** (b) in the case of a trust for charitable purposes or acharitable institution created or established after thecommencement of this Act, any income thereof ifthe trust or institution is created or established forthe benefit of any particular religious community orcaste;" (emphasis supplied) The provision conceptualizes that income of acharitable trust created or established for the benefitof any particular religious community or castewould not be entitled for the benefit of Section 11 or12 of the Act. Thus, when read in conjunction,while under Section 11 a trust which is establishedfor charitable purposes to benefit a particularreligious community may be a valid charitable trust,under Section 13(1)(b) such trust would not beentitled to exemption and consequently, the saidincome would be exigible to tax under the Act. 14.Therefore, under the scheme of the Act, Sections 11and 12 are substantive provisions which provide forexemptions available to a religious or charitable trust.Income derived from property held by such public trust aswell as voluntary contributions received by the said trust arethe subject-matter of exemptions from the taxation underthe Act. Sections 12-A and 12-AA detail the proceduralrequirements for making an application to claim exemptionunder Sections 11 or 12 by the assessee and the grant orrejection of such application by the Commissioner. Aconjoint reading of Sections 11, 12, 12-A and 12-AA makes (Tax Case No.75/2023) it clear that registration under Sections 12-A and 12-AA is acondition precedent for availing the benefit under Sections11 and 12. Unless an institution is registered under theaforesaid provisions, it cannot claim the benefit of Sections11 and 12. Section 13 enlists the circumstances wherein theexemption would not be available to a religious orcharitable trust otherwise falling under Sections 11 or 12and therefore, requires to be read in conjunction with theprovisions of Sections 11 and 12 towards determination ofeligibility of a trust to claim exemption under the aforesaidprovisions.” 11. In this regard, the decision of the Gujarat High Court rendered in the matter of Commissioner of Income Tax v. Barkate Saifiyah Barkate SaifiyahSociety3 also deserves to be noticed in which it has been held thatthe provisions of Section 13(1)(b) will apply only to the Trustswhich are purely charitable purposes. If the Assessee Trust has bothcharitable and religious objects, the provisions of Section 13(1)(b)of the IT Act would not apply. the provisions of Section 13(1)(b) will apply only to the Trustswhich are purely charitable purposes. If the Assessee Trust has bothcharitable and religious objects, the provisions of Section 13(1)(b)of the IT Act would not apply. 12. Similarly, the Rajasthan High Court in the matter of Commissioner 11. In this regard, the decision of the Gujarat High Court rendered in the matter of Commissioner of Income Tax v. Barkate Saifiyah Barkate SaifiyahSociety3 also deserves to be noticed in which it has been held thatthe provisions of Section 13(1)(b) will apply only to the Trustswhich are purely charitable purposes. If the Assessee Trust has bothcharitable and religious objects, the provisions of Section 13(1)(b)of the IT Act would not apply. the provisions of Section 13(1)(b) will apply only to the Trustswhich are purely charitable purposes. If the Assessee Trust has bothcharitable and religious objects, the provisions of Section 13(1)(b)of the IT Act would not apply. 12. Similarly, the Rajasthan High Court in the matter of Commissioner 4-of Incometax v. has also Vijay Vargiya Vani Charitable Trust Vijay Vargiya Vani Charitable Trustspecifically held that at the time of granting registration, the objectsof the Trust for which it was formed is only to be looked into andthe satisfaction of the Commissioner of Income-Tax aboutgenuineness of activities of the Trust was not criteria as the Trustwas just commencing activities and therefore the issue regardingsatisfaction or genuineness of the activities of the Trust is not aof the Trust for which it was formed is only to be looked into andthe satisfaction of the Commissioner of Income-Tax aboutgenuineness of activities of the Trust was not criteria as the Trustwas just commencing activities and therefore the issue regardingsatisfaction or genuineness of the activities of the Trust is not a 3(1995) 213 ITR 492 4(2014) 369 ITR 360 Soma (Tax Case No.75/2023) matter to be looked into at the time of granting registration underSection 12AA of the IT Act. 13. In the instant case, the learned ITAT relying upon the decision of ’sthe Gujarat High Court in Barkate Saifiyah Society case (supra)and considering the bye-laws of the assessee Society has clearlyheld that the assessee Society has charitable as well as religiousobjects, therefore, entitled for registration under Section 12AA ofthe IT Act. The said finding is a simple finding of fact based on theevidence available on record, it is neither perverse nor contrary tothe record as also the law. Considering the finding recorded by theITAT and the evidence available on record, the respondent assesseeSociety has both charitable as well as religious objects. and considering the bye-laws of the assessee Society has clearlyheld that the assessee Society has charitable as well as religiousobjects, therefore, entitled for registration under Section 12AA ofthe IT Act. The said finding is a simple finding of fact based on theevidence available on record, it is neither perverse nor contrary tothe record as also the law. Considering the finding recorded by theITAT and the evidence available on record, the respondent assesseeSociety has both charitable as well as religious objects. 14.In that view of the matter, the ITAT is absolutely justified inholding that the assessee Society is entitled for registration underSection 12AA of the IT Act. The substantial questions of law areanswered in favour of the assessee and against the Revenue. holding that the assessee Society is entitled for registration underSection 12AA of the IT Act. The substantial questions of law areanswered in favour of the assessee and against the Revenue. 15. The tax appeal stands dismissed. Sd/- Sd/-(Sanjay K. Agrawal) (Radhakishan Agrawal)JUDGEJUDGEJUDGEJUDGE