Commissioner Of Income Tax, Exemption, Jaipur v. M/S Pali Textile Common Effluent Treatment Plant, Industrialarea, Mandia Road, Pali Marwar

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Income Tax Appeal No. 5/2024 Commissioner of Income Tax, Exemption, Jaipur ----Appellant Versus M/s Pali Textile Common Effluent Treatment Plant, IndustrialArea, Mandia Road, Pali Marwar. ----Respondent For Appellant(s): Mr. K.K. BissaFor Respondent(s): - HON'BLE MR. JUSTICE SHREE CHANDRASHEKHAR HON'BLE MR. JUSTICE KULDEEP MATHUR Judgment 24/07/2024 By the Court (Per, Hon’ble Justice Kuldeep Mathur): 1.Though the matter is listed today in the category “foradmission”, however, the same has been heard and is beingdecided today itself. 2.The present Income Tax Appeal under Section 260A of theIncome Tax Act, 1961 (hereinafter referred to as ‘the Act’) hasbeen filed by the appellant being aggrieved by the judgment dated22.08.2023 passed by the Income Tax Appellate Tribunal, JodhpurBench, Jodhpur in ITA No.67/JODH/2019 & 294/JODH/2019 forA.Y. 2016-2017. 3.Brief facts relevant and pertinent for the disposal of thepresent appeal are that the respondent – assessee trust wasconstituted with an object of carrying out work/activities by way ofsetting up of a special purpose vehicle (SPV) having complete operational autonomy for establishing, running and maintainingcommon effluent treatment plant etc. On 20.01.2016 theassessee-trust applied for registration under Section 12AA of theAct, however since some of the activities in furtherance of theobject clause of the assessee-trust, were either commercial innature or were encompassing activities outside India, certainclauses of the objects were amended vide supplementary deeddated 10.06.2016 and consequently, the trust came to beregistered under Section 12AA of the Act. Further, the assessee-trust filed its return of income for the assessment year 2016-17on 17.10.2016 showing its income as “NIL”. A notice under Section143(2) of the Act was issued to the assessee-trust on 27.06.2017and during the course of scrutiny, the Assessing Officer noticedthat the assessee-trust in its return of income had declared grossreceipts of huge sums of money being received from Ministry ofTextile and Pali Water Pollution Treatment Plant and ResearchFoundation and had claimed exemption under Section 11(1)(d) ofthe Act. The Assessing Officer further noticed that the assessee-trust was not granted registration for the period underconsideration and thus, held that since the assessee was notregistered and did not possess a valid certificate for registrationunder Section 12AA of the Act therefore, as laid down underSection 12A(1)(a) of the Act for the relevant time period, it wasnot entitled to claim deduction/ exemption under Section 11 of theAct. Thus, the Assessing Officer vide order dated 18.12.2018added the gross amount claimed under exemption, to the totalincome of the respondent- assessee-trust. 4.Being aggrieved by the assessment order dated 18.12.2018,the assessee preferred an appeal No. 364/2018-19 before theOffice of Commissioner of Income Tax (Appeals)-2, Jodhpur(hereinafter referred to as ‘the Appellate Authority’). The AppellateAuthority vide order dated 04.06.2019 while holding theassessee-trust registered under section 12AA of the Act allowedthe appeal preferred by the assessee-trust on the ground that thesame was registered under Section 12A at a later stage and thereis no change in the activities of the trust till date of registrationand in the previous year. It was held that no action under Section147 of the Act should be taken against the assessee-trust. 5.The appellant thereafter preferred an appeal against theorder dated 04.06.2019 passed by the Appellate Authority alleginginter alia that the benefit of exemption cannot be accorded to theassessee-trust on the ground that it had changed its object andtherefore, the order of the Assessing Officer be restored. 5.The appellant thereafter preferred an appeal against theorder dated 04.06.2019 passed by the Appellate Authority alleginginter alia that the benefit of exemption cannot be accorded to theassessee-trust on the ground that it had changed its object andtherefore, the order of the Assessing Officer be restored. 6.The assessee-trust also preferred a separate appeal againstthe order dated 04.07.2016 passed by the learned CIT(Exemption), Jaipur, whereby the exemption was granted to theassessee-trust under Section 11 of the Act as prescribed underSection 12A of the Act from 10.06.2016, that is, the date ofamendment of object clause and not from the date of application,that is, 20.01.2016. 7.The learned ITAT Jodhpur Bench, Jodhpur by way of commonorder dated 22.08.2023, dismissed the appeal filed by theappellant herein and allowed the appeal preferred by theassessee- trust and held as under: “10.We have heard the rival contentions and perused thematerial placed on record. The Apple of discord that theregistration granted to the assessee w.e.f. 10.06 2016shall be applied for the F. Y. 2015-16 relevant to the A. Y.2016-17 or not The revenue has preferred the appealagainst the decision of the Id. CIT(A) who has granted thebenefit of registration to the assessee from A. Y. 2016-17whereas the contention of the revenue that the assesseechanged the object of the trust and therefore, theregistration was not granted to the assessee from the dateof application (date of application 20.01.2016) but wasgranted from the date when the amendment made in theobject of the trust and thus the assessee trust gotregistration w.e.f. 10.06.2016. In the assessmentproceeding consequent to the order of the Commissionerof Income Tax, (Exemption), Jaipur dated 04.07.2016 thebenefit of section 11 & 12 was denied. The relevantfinding of the Id. AO while making the assessment isreiterated here in below: Considering the facts available on record, it isestablished that the assessee has not fulfilledthe condition for claiming benefit of exemptionu/s 111 of the I.T. Act. Neither the assessee hasgot approval u/s. 12AA of the Act during theassessment year relevant to previous year norany assessment proceeding was pending duringthe date of registration u/s. 12AA of the Act.Hence, the assessee trust is not entitled for thebenefit of section 11 & 12 and accordingly theclaim of exemption u/s. 11 & 12 is here byrejected and income of the assessee is assed asan AOP. 10.1 Aggrieved from the said order of the Id. AO assesseepreferred an appeal before the Id. CIT(A) wherein basedon the arguments presented by the Id. AR of the assesseethe appeal of the assessee was allowed on a detailed orderof the Id. CIT(A). Against that order of the Id. CIT(A) therevenue has challenged the decision of the Id. CIT(A) onthe ground that when the registration was granted withspecific order w.e.f. 10.06.2016 and not from the date ofapplication 20. 01 2016 the action of the Id. CIT(A) ingranting the benefit from 20.01 2016 relevant to A. Y2016-17. On the issue the bench noted that the assesseetrust is constituted on 26 12.2015. The assessee trustmade an application for registration of the trust u/s12AA(1)(b) on 20.01.2016. The Id. CIT(E) noted in theorder that the assessee amended trust deed on10.06.2016 and has granted the registration observing asunder: "After considering the material available on record,the applicant Trust /Society /Company/Institutionis granted registration as "General Public Utility”Trust /Society /Company /Institution and theprovisions of Sections 11 and 12 shall apply in thecase from 10.06.2016. The Trust /Society/Company/Institutionisregisteredat "After considering the material available on record,the applicant Trust /Society /Company/Institutionis granted registration as "General Public Utility”Trust /Society /Company /Institution and theprovisions of Sections 11 and 12 shall apply in thecase from 10.06.2016. The Trust /Society/Company/Institutionisregisteredat 10.2 We have also persuaded the order of the Id. CIT(A)who upon consideration of the submission and argumentsof the assessee and upon the submission of the proof ofregistration u/s. 12AA. The said registration was grantedvide order dated 04.07.2016 w.e.f. 10.06.1016 u/s. 12 ofthe Act. We note that the provision of section 12Aimposition a responsibility upon a trust to apply forregistration within one year from the date of the creationof the trust or establishment of the institution. Thus, wenote that in the case the trust came into existence on26.12.2015 made and application for registration on20.01.2016, which within the time allowed under the Act.The CBDT while issuing the explanatory notes to theprovision of the Finance (No. 2) Act, 2014 issued a circularno. 01/2015 circulated vide F. No. 142/12/2014-TPLclearly spell out the intent of amendment. The content ofthe circular is not duly reflected in the order of the Id.CIT(A) and the same is not reproduced for the sake ofbrevity but the same is duly considered by the bench. 10.3 On conjoint reading of the provision of law and thecircular of the board and since the registration was appliedwith in the timeline under the act and finally based on thatapplication the registration was granted to the assessee.Thus, the legislative intent is very clear that if theassessee comes under the purview of the exemption, theassessee should be given the exemption in earlier yearsalso in circumstances when there is no change in theactivities of the assessee trust/society. In the present casethe assessee applied for registration within time, duringthe pendency of the registration the change was madeand were also made known to the CIT(E) which has beenconsidered by the Id. CIT(E) without any adverseobservation and thus looking to the provision of law andthe clarification of the board we are of the considered viewthat there is no error on the part of the Id. CIT(A) inallowing the benefit of registration to the assessee for theprevious year also. The Id. CIT(A) has also following thedecision of the jurisdiction high court in the case of CITVs. Krishi Upaj Mandli Samiti, Didwana in Appeal no.181/2010 dated 16.01.2015 wherein the jurisdictionalhigh court has observed that if the society get registrationu/s. 12A later, it is entitled for getting its incomecomputed by taking into consideration of provision ofsection 11(1) of the Act. The Id. DR did not broughtanything contrary on the record as to controvert thedetailed finding of the Id. CIT(A) and therefore, we do notforce in grounds so raised by the revenue in this appealand thus, the grounds of the appeal of the revenue in ITANo. 294/Jodh/2019 stands dismissed. 11. The assessee in ITA no. 67/Jodh/2019 challenged thedecision of the Id. CIT(E) granting the registration w.e.f.10.06.2016 even though the assessee applied on20.01.2016, contending that the same should have been granted from the date of application. Since, we have in ITAno. 294/Jodh/2019 considered the applicability of theregistration w.e.f. A. Y. 2016-17. The appeal filed by theassessee becomes educative in nature. Based on theseobservations of the matter the bench did not feel to repeatall the facts and arguments of the parties and consideringthat aspect of the dispute the appeal filed by the assesseeis allowed statistically.” 8.Learned counsel for the appellant contended that the learned 11. The assessee in ITA no. 67/Jodh/2019 challenged thedecision of the Id. CIT(E) granting the registration w.e.f.10.06.2016 even though the assessee applied on20.01.2016, contending that the same should have been granted from the date of application. Since, we have in ITAno. 294/Jodh/2019 considered the applicability of theregistration w.e.f. A. Y. 2016-17. The appeal filed by theassessee becomes educative in nature. Based on theseobservations of the matter the bench did not feel to repeatall the facts and arguments of the parties and consideringthat aspect of the dispute the appeal filed by the assesseeis allowed statistically.” 8.Learned counsel for the appellant contended that the learned ITAT has failed to examine the matter in its entirety and thefindings recorded by the learned Tribunal are ex-facie contrary tofacts and law. Learned counsel for the appellant submitted thatthe assessee-trust had applied for registration on 20.01.2016,however since certain objects of the assessee-trust werecommercial in nature or were encompassing activities outsideIndia, the deed was amended on 10.06.2016 and the same wasrightly accorded registration under Section 12AA of the Act witheffect from 10.06.2016. It was also submitted that the learnedITAT has erroneously allowed exemption to be granted in favour ofthe assessee-trust for the reason that one of the prime conditionsfor application of Section 12A(2), that is, the objects and activitiesof the trust should not be changed and shall remain the same asin the earlier financial years, was not fulfilled in the present case.Learned counsel thus implored the Court that in light of thesubstantial question of law involved in the present case, as towhether the learned ITAT was justified in holding assessee-trusteligible for exemption for the period when its objects were ‘non-charitable’, the order dated 22.08.2023 passed by the learnedTribunal be quashed and set aside and the assessment order under Section 143(3) passed by the CIT(Exemption), Jodhpur berestored. 9.Heard learned counsel for the appellant. Perused thematerial available on record. 10.Having perused the orders impugned and record of the case,we find that the issue involved in the present appeal relates to theexemption allowed to the assessee-trust under Section 11 of theAct, keeping in view the fact that assessee-trust had submittedproof of registration under Section 12AA of the Act, which wasgranted to it vide order dated 04.07.2016 w.e.f. 10.06.2016 underSection 12A of the Act. This Court finds that concurrent findings offact have been recorded by the Appellate Authority and thelearned ITAT in their judgments dated 04.06.2019 and 22.08.2023respectively. There is nothing on record to indicate that findings offact arrived at by both the authorities are contrary to the materialavailable on record or the same have been recorded withoutconsidering the facts giving rise to the present dispute betweenthe parties, in its correct perspective. It is a settled law that theconcurrent findings of fact can be interfered with only in the casewhere the findings recorded by the authorities below areerroneous or perverse. 11.This Court is conscious of the Judgment rendered by theHon’ble Supreme Court in the case of SirChunilal V. Mehta andSons, Ltd. v. The Century Spinning and Manufacturing Co., Ltd. reported in [1962] Supp3 SCR 549: “6. We are in general agreement with the viewtaken by the Madras High Court and we think thatwhile the view taken by the Bombay High Court is 11.This Court is conscious of the Judgment rendered by theHon’ble Supreme Court in the case of SirChunilal V. Mehta andSons, Ltd. v. The Century Spinning and Manufacturing Co., Ltd. reported in [1962] Supp3 SCR 549: “6. We are in general agreement with the viewtaken by the Madras High Court and we think thatwhile the view taken by the Bombay High Court is rather narrow the one taken by the former HighCourt of Nagpur is too wide. The proper test fordetermining whether a question of law raised in thecase is substantial would, in our opinion, be whether itis of general public importance or whether it directlyand substantially affects the rights of the parties and ifso whether it is either an open question in the sensethat it is not finally settled by this Court or by the PrivyCouncil or by the Federal Court or is not free fromdifficulty or calls for discussion of alternative views. Ifthe question is settled by the highest Court or thegeneral principles to be applied in determining thequestion are well settled and there is a mere questionof applying those principles or that the plea raised ispalpably absurd the question would not be asubstantial question of law.” 12.Further, in the case of Santosh Hazariv.PurushottamTiwari (Dead) by L.Rs. reported in (2001)3 SCC 179, theHon’ble Supreme Court while construing the meaning of‘substantial question of law’ held as under: “12. The phrase “substantial question of law”, asoccurring in the amended Section 100 is not defined inthe Code. The word substantial, as qualifying “questionof law”, means — of having substance, essential, real, ofsound worth, important or considerable. It is to beunderstood as something in contradistinction with —technical, of no substance or consequence, or academicmerely. However, it is clear that the legislature haschosen not to qualify the scope of “substantial questionof law” by suffixing the words “of general importance”as has been done in many other provisions such asSection 109 of the Code or Article 133(1)(a) of theConstitution. The substantial question of law on which asecond appeal shall be heard need not necessarily be asubstantial question of law of general importance… . . 14. A point of law which admits of no two opinions maybe a proposition of law but cannot be a substantialquestion of law. To be '’substantial'’, a question of lawmust be debatable, not previously settled by law of theland or a binding precedent, and must have a materialbearing on the decision of the case, if answered eitherway, in so far as the rights of the parties before it areconcerned. To be a question of law “involving in thecase” there must be first a foundation for it laid in thepleadings and the question should emerge from the sustainable findings of fact arrived at by court of factsand it must be necessary to decide that question of lawfor a just and proper decision of the case. An entirelynew point raised for the first time before the High Courtis not a question involved in the case unless it goes tothe root of the matter. It will, therefore, depend on thefacts and circumstance of each case whether a questionof law is a substantial one and involved in the case, ornot; the paramount overall consideration being the needfor striking a judicious balance between theindispensable obligation to do justice at all stages andimpelling necessity of avoiding prolongation in the life ofany lis.” 13.In the opinion of this Court, the questions raised in the present appeal are neither of general public importance nordirectly or substantially affect the rights of the parties. 14.In view of the aforesaid discussion, the present appeal isdismissed. 15.No order as to costs. (KULDEEP MATHUR),J 58-himanshu/- (SHREE CHANDRASHEKHAR),J