Director Of Income Tax (Exemptions v. Stock Exchange Of Ahmedabad....opponent(S

O/TAXAP/578/2006 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 578 of 2006 TO TAX APPEAL NO. 583 of 2006 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ?the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ?to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================DIRECTOR OF INCOME TAX (EXEMPTIONS)....Appellant(s)Versus STOCK EXCHANGE OF AHMEDABAD....Opponent(s) ================================================================ Appearance: MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1 MRS SWATI SOPARKAR, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI andHONOURABLE MR.JUSTICE K.J.THAKER Date : 10/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Being aggrieved and dissatisfied with the impugned judgment and order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench ‘C’ (hereinafter referred to as ‘the Tribunal’), the revenue has preferred the present Tax Appeals assailing the following orders 2.These appeals were admitted on 07.10.2006 for consideration of the following substantial question of law: “Whether the Appellate Tribunal is right in law and on facts in coming to the conclusion that the assessee-Association is entitled to the benefit of Section 11 and Section 12 of the Act despite the order passed by the Central Board of Direct Taxes on behalf of the Central Government under Section 10(23C)(iv) of the Act holding that the assessee is not an organization engaged in charitable purposes?” 2.1The assessee claimed benefit of exemption u/s 11 and the same was allowed upto assessment year 1983-84. From A.Y 1984-85 to A.Y. 1988-89, exemption u/s 10(23C)(iv) was allowed. The assessee made an application for renewal of exemption u/s 10(23C)(iv) for the subsequent years but the same was rejected. Since there was no notification under section 10(23C)(iv) of the Act, the Assessing Officer examined the claim of the assessee keeping in view the provisions of section 11,12 and 13 of the Act. The assessee preferred appeal before the CIT(A) who upheld the order passed by AO for not giving exemption u/s 11 of the Act. The Assessee preferred second appeal before the Tribunal and the Tribunal vide impugned order allowed the same and reversed the order passed by the CIT(A) in this regard. 3. The question for consideration in the present appeals is now not res integra in view of the decision of this Court dated 14.10.2010 rendered in Tax Appeal No. 471 of 1999 and allied matters. This Court in the case of the same assesseeinthe said decision has held as under: 3. The question for consideration in the present appeals is now not res integra in view of the decision of this Court dated 14.10.2010 rendered in Tax Appeal No. 471 of 1999 and allied matters. This Court in the case of the same assesseeinthe said decision has held as under: “The fact that the assessee was granted registration under section 12A of the Act is not in dispute. The Tribunal after going through the Rules and Bye-laws of the assessee Association has taken note of the fact that the assessee is a Recognised Stock Exchange and has been constituted for the purpose of developing the stock market. The basic objective of the stock market falls within the ambit of ‘charitable purpose’ as defined under section 2(15) of the Act and is clearly covered as a charitable object for the purpose of exemption of income under section 11 of the Act. After appreciating the evidence on record and recording the aforesaid findings, the Tribunal has dealt with the effect of grant of registration by the Commissioner of Income-tax under section 12A of the Act and held thus: “Section 12A of the Act provides that for claiming exemption u/s.11 it is mandatory that an application for registration of the trust or institution in prescribe form No.10A is filed before the Commissioner of Income-tax along with the instrument under which the institution is established accompanied with the accounts of the institution relating to such prior year or years for which such accounts have been made up. The grant of registration by the CIT u/s.12A does not constitute an empty formality which is to be completed within a routine and mechanical fashion by the CIT without any scrutiny regarding the charitable nature of the trust or institution required to be registered under the I.T. Act. In the instant case the CIT granted registration to the assessee Association vide order dated 1-6-1987 even though the application for registration has obviously been scrutinised by the CIT while granting registration. It goes without saying that registration under section 12A is to be granted only if the CIT is satisfied that the trust or the institution is a charitable institution and its objects are covered as charitable under section 2(15) of the I.T. Act. Once the institution has been registered under section 12A it is for the AO to find out whether the income of the institution has been applied for the objects of the institution and the statutory conditions contained u/s.11 to 13 are fulfilled by the assessee. In our opinion, it is beyond the province of the AO to reject the claim of exemption u/s.11 by looking into the objects of the Association and holding the same as non-charitable in nature.” u/s.11 by looking into the objects of the Association and holding the same as non-charitable in nature.” 11.This High Court in the case of Hiralal Bhagwati v. Commissioner of Income Tax (supra), has held that the registration of a charitable trust under section 12A is not an empty formality. This is apparent from the tenor of the provisions of section 12A. It requires that not only an application should be filed in the prescribed form, setting the details of the origin of the trust, but also names and addresses of the trustees and/or managers should be furnished. The CIT has to examine the objects of creation as well as an empirical study of the past activities of the applicant. The CIT has to examine that it is really a charitable trust or institution eligible for registration. The Court further held that once the registration under section 12A(a) of the Act is granted, the Income Tax Officer is not justified in refusing the benefit which would, otherwise, accrue under the registration. Bhagwati v. Commissioner of Income Tax (supra), has held that the registration of a charitable trust under section 12A is not an empty formality. This is apparent from the tenor of the provisions of section 12A. It requires that not only an application should be filed in the prescribed form, setting the details of the origin of the trust, but also names and addresses of the trustees and/or managers should be furnished. The CIT has to examine the objects of creation as well as an empirical study of the past activities of the applicant. The CIT has to examine that it is really a charitable trust or institution eligible for registration. The Court further held that once the registration under section 12A(a) of the Act is granted, the Income Tax Officer is not justified in refusing the benefit which would, otherwise, accrue under the registration. 12.In the case of Assistant Commissioner of Income Tax v. Surat City Gymkhana (supra), the Supreme Court was called upon to deal with the question as to whether on the facts and circumstances of the said case, Income Tax Appellate Tribunal was justified in law in holding that registration under section 12A was a fiat accompli to hold the Assessing Officer back from further probe into the objects of the trust. On a perusal of the judgment of the Gujarat High Court in the case of Hiralal Bhagwati, the Supreme Court held that the question stands concluded by the said judgment, which has attained finality since the revenue did not challenge the decision in the said case.Income Tax v. Surat City Gymkhana (supra), the Supreme Court was called upon to deal with the question as to whether on the facts and circumstances of the said case, Income Tax Appellate Tribunal was justified in law in holding that registration under section 12A was a fiat accompli to hold the Assessing Officer back from further probe into the objects of the trust. On a perusal of the judgment of the Gujarat High Court in the case of Hiralal Bhagwati, the Supreme Court held that the question stands concluded by the said judgment, which has attained finality since the revenue did not challenge the decision in the said case. 13.This High Court, in the case of AUDA v. Deputy Director of Income Tax [Exemption] [supra], has held thus: “9. Section 12AA of the Act lays down 13.This High Court, in the case of AUDA v. Deputy Director of Income Tax [Exemption] [supra], has held thus: “9. Section 12AA of the Act lays down the procedure for registration in relation to the conditions for applicability of sections 11 & 12 as provided in section 12A of the Act. Therefore, once the procedure is complete as provided in sub-section (1) of section 12AA of the Act and a Certificateisissuedgranting registration to the Trust or Institution it is apparent that the same is a document evidencing satisfaction about : (1) genuineness of the activities of the Trust or institution, (2) about the objects of the Trust or Institution. Section 12A of the Act stipulates that provisions of sections 11 & 12 shall not apply in relation to income of a Trust or an Institution unless conditions stipulated therein are fulfilled. Thus granting of registration under section 12AA of the Act denotes, as per legislative scheme, that conditions laid down in section 12A of the Act stand fulfilled.” Applying the principles laid down by the Apex Court in the case of Gestetner Duplicators v Commissioner of Income Tax, (1979) 117 ITR 1 (SC), the Court held that while framing assessment order, it was not open to the Assessing Officer to ignore the certificate of registration granted under section 12AA of the Act by the Director of Income Tax [Exemption]. 14.Thus, it is apparent that the impugned order of the Tribunal is in consonance with the principles propounded in the above referred decisions, that is, once an assessee has been granted certificate of exemption under section 12AA of the Act, the conditions laid down under section 12A of the Act stand fulfilled. The Assessing Officer, thereafter, while framing assessment cannot ignore such certificate of exemption and question the eligibility of the assessee for grant of benefit under sections 11 and 12 of the Act. Tribunal is in consonance with the principles propounded in the above referred decisions, that is, once an assessee has been granted certificate of exemption under section 12AA of the Act, the conditions laid down under section 12A of the Act stand fulfilled. The Assessing Officer, thereafter, while framing assessment cannot ignore such certificate of exemption and question the eligibility of the assessee for grant of benefit under sections 11 and 12 of the Act. 15.In the light of the aforesaid discussion, it is not possible to state that the Tribunal has committed any legal error so as to warrant interference. The question is, therefore, answered in the affirmative. The Income Tax Appellate Tribunal was right in law and on facts in coming to the conclusion that the assessee association is entitled to the benefit of sections 11 and 12 of the Act. The appeals are accordingly dismissed.” 4. Having heard learned advocates for the parties and considering the question posed for consideration for us reproduced hereinabove and considering the decision cited, the question which is raised in the present appeals are required to be answered in favour of the assessee. We are not giving any elaborate reasons for the same as this Court in similar case/similar assessee has answered the very same question in favour of assessee. 5. In view of the above, the question raised in the present appeal is answered in favour of the assessee and consequently, the impugned judgment and order passed by the Tribunal is confirmed. The present Tax Appeals are accordingly dismissed. (K.S.JHAVERI, J.) (K.J.THAKER, J)