Director Of Income Tax Exemptionschennai v. M/S.seervi Samaj Tambaram Trust33, Brindavan Avenue,Tambaram West, Chennai – 600 045

In the High Court of Judicature at Madras Dated: 27.01.2014 Coram The Honourable Mrs.JUSTICE CHITRA VENKATARAMANandThe Honourable Mr.JUSTICE T.S.SIVAGNANAM Tax Case (Appeal) No.579 of 2013 Director of Income Tax ExemptionsChennai. .... Appellant Vs. M/s.Seervi Samaj Tambaram Trust33, Brindavan Avenue,Tambaram West, Chennai – 600 045. .... Respondent APPEAL under Section 260A of the Income Tax Act, 1961 againstthe order dated 20.3.2013 made in ITA No.2144/Mds/2012 on the fileof the Income Tax Appellate Tribunal Madras 'C' Bench against theorder the Director of Income Tax (Exemption) made in DIT (E) No.2(46)/12-13 dated 19.10.12. For Appellant : Mr.J.NaryanasamyStanding Counsel for Income TaxFor Respondent: Mr.J.James-------- J U D G M E N T (Judgment of the Court was delivered by T.S.SIVAGNANAM,J.) This Tax Case (Appeal), filed by the Revenue, is directedagainst the order of the Income Tax Appellate Tribunal dated20.3.2013 in ITANo.2144/Mds/2012. The Revenue seeks admission ofthis Tax Case (Appeal) raising the following substantial questionsof law: "1. Whether on the facts and in the circumstancesof the case, the Tribunal was right in holding thatregistration under Section 12AA can be granted to thetrust with both charitable and religious objects onapplication of section 11(1)(a)?2. Whether on the facts and circumstances of the https://hcservices.ecourts.gov.in/hcservices/ case, the Tribunal was right in holding that the assesseetrust is entitled for registration under Section 12AAwhen activities were not started by the trust?" 2. The respondent/assessee is a trust formed for carrying oncharitable and religious activities. The assessee filed anapplication before the Director of Income Tax (Exemptions), Chennaiunder Section 12AA of the Income Tax Act, 1961. The Director ofIncome Tax (Exemptions) held that the activities of the respondentare charitable and religious; both should not be mixed up and thesame is not in conformity with the provisions of Section 11(1)(a) ofthe Income Tax Act. Further, the Director of Income Tax(Exemptions) held that though the Trust is in existence from13.8.2010, no activity has been started. Based on the abovereasons, by order dated 19.10.2012, the application under Section12AA of the Income Tax Act was rejected. 3. Challenging the same, the respondent preferred an appealbefore the Income Tax Appellate Tribunal and relied on the decisionof this Court in the case of CIT V. Arulmighu Sri Kamatchi AmmanTrust reported in (2012) 206 Taxman 69 and submitted that there wasno bar in granting registration though the Trust having objects ofboth charitable as well as religious. Reliance was also placed onthe decision of the Gujarat High Court in the case of CIT V. KutchiDasa Oswal Moto Pariwar Ambama Trust reported in 29 Taxman 228 andsubmitted that merely because the activities have not been commencedis not a ground for rejection of the application under Section 12AAof the Income Tax Act. 4. The Tribunal, after taking into consideration the decision ofthis Court in the case of CIT V. Arulmighu Sri Kamatchi Amman Trustreported in (2012) 206 Taxman 69, allowed the appeal filed by therespondent. Aggrieved by the same, the Revenue has preferred thepresent Tax Case (Appeal). 5. Learned standing counsel appearing for the Revenue reiteratedthe submissions made before the Tribunal and contended that theregistration under Section 12AA of the Income Tax Act cannot begranted to a trust having both charitable and religious objects onan application under Section 11(1)(a) of the Income Tax Act. 4. The Tribunal, after taking into consideration the decision ofthis Court in the case of CIT V. Arulmighu Sri Kamatchi Amman Trustreported in (2012) 206 Taxman 69, allowed the appeal filed by therespondent. Aggrieved by the same, the Revenue has preferred thepresent Tax Case (Appeal). 5. Learned standing counsel appearing for the Revenue reiteratedthe submissions made before the Tribunal and contended that theregistration under Section 12AA of the Income Tax Act cannot begranted to a trust having both charitable and religious objects onan application under Section 11(1)(a) of the Income Tax Act. 6. The very issue raised by the Revenue has been dealt with by aDivision Bench of this Curt in the case of CIT V. Arulmighu SriKamatchi Amman Trust reported in (2012) 206 Taxman 69. In the saidcase, the respondent/assessee sought for registration under Section12AA of the Income Tax Act on the ground that the object of theTrust was religious. The Commissioner of Income Tax rejected theapplication on the ground that the Trust was spending money inreceipts towards religious and administrative purposes and theactivities claimed to be carried on by the said Trust were an https://hcservices.ecourts.gov.in/hcservices/ admixture of both religious and charitable. The said Trust filed anappeal before the Income Tax Appellate Tribunal. Following thedecision in the case of CIT V. Upper Ganges Sugar Mills Ltd.reported in 227 ITR 578 and in the case of State of Kerala V.MP.Shantiverma Jain reported in (1998) 231 ITR 787 (SC), theTribunal allowed the appeal. Challenging the same, the Revenuefiled an appeal before this Court contending that the Tribunalfailed to appreciate the activities claimed to be carried on by thesaid assessee, which was an admixture of both religious andcharitable in nature. Therefore, the Tribunal ought not to haveinterfered with the order of the Commissioner of Income Tax. TheDivision Bench of this Court, after taking into consideration theprovision under Section 11(1)(a) of the Income Tax Act, which statesthat subject to the provisions of sections 60 to 63, the incomederived from property held under trust wholly for charitable orreligious purposes, to the extent of which such income is applied tosuch purposes in India; and, where any such income is accumulated orset apart for application to such purposes in India, to the extentto which the income so accumulated or set apart is not in excess offifteen per cent of the income from such property shall not beincluded in the total income of the previous year of the person inreceipt of the income. Thus, the Division Bench held "from a readingof the above, it is clear that the income derived from the propertyheld under trust wholly for charitable or religious purpose, shallnot be included in the total income of the Trust. Therefore, thesaid provision would be applicable to both the Trusts establishedwith the object of charitable as well as religious purposes.Therefore, Section 12AA of the Income Tax Act does not make anydifference between the Trusts created with the object of charitableand religious purposes and, even if the Trust is not created withboth the objects, law does not make any disqualification for thetrust to make an application for registration. Therefore, theTribunal has correctly applied the provision of law and allowed theappeal." 7. The above-said decision squarely applies to the facts of thepresent case. Further, in the case of The Director of Income Tax(Exemptions), Chennai V. The Chartered Accountant Study Circlereported in CDJ 2012 MHC 658, the Division Bench of this Court,after taking note of the objects of the said Trust, which amongother things was to conduct periodical meetings on professionalsubjects and to achieve the said objects, the assessee waspublishing books, booklets, etc. on professional subjects andselling the same only on the subjects related to audit and not onany other subject and after analysing the objects of the said trust,pointed out that the activities of the said trust in publishing andselling books of professional interest, which were meant to be usedas a reference material even by the general public as well as theprofessionals in respect of Bank Audit, Tax Audit etc., could not beconstrued to be one of commerce in nature. Further, it was pointed out that under Section 12AA of the Income Tax Act, while consideringthe application, the Officer has to satisfy about the genuineness ofthe activity of the trust or the institution and for that reason, hemay also make such enquiries as he deem it necessary in that behalf. 8. In the above-said case, the genuineness not being in doubt,the Division Bench of this Court confirmed the order of theTribunal. 9. In the present case also, the Revenue only questions thetrust not having commenced its activity for the grant ofregistration. The provision under Section 12AA of the Income TaxAct does not stipulate such a condition for grant of registration.On the other hand, Section 12AA (1) contemplates satisfaction of theCommissioner about the objects of the Trust and the genuineness ofthe activities and make such enquiry as may be necessary for thepurpose of grant of registration. In so considering theapplication, the Commissioner has to give an opportunity to theassessee as provided for under proviso to sub-section (1) of Section12AA. Under sub-section (3) of Section 12AA, the Commissioner isgiven power to cancel the registration, if he satisfies that theobjects of such trust are not genuine or not being carried on inaccordance with the objects of the trust. When such an authority isvested with the Commissioner to cancel the registration in the eventof the trust not being carried on in accordance with the objects ofthe trust, we do not find any ground to say that merely on the dateof the application, the assessee trust had not commenced itsactivities, hence, registration could not be granted. It is notdenied by the assessee that on the date of the application underSection 12AA, it was yet to commence its operation. Butnevertheless the genuineness of the objects of the trust were notquestioned by the Commissioner. Considering the fact that thecontinuance of registration is further a subject matter of scrutinyby the Commissioner as contemplated under Section 12AA(3) of theIncome Tax Act, we do not think that the Revenue would be justifiedin refusing the registration at the threshold. The Tribunal hadfollowed the decision of the Gujarat High Court in the case of CITV. Kutchi Dasa Oswal Moto Pariwar Ambama Trust reported in 29 Taxman228. We respectfully agree with the decision of the Gujarat HighCourt. 10. In the light of the above, we do not find any question oflaw arises for consideration in this Tax Case (Appeal).Accordingly, this Tax Case (Appeal) stands dismissed. No costs. Sd/-Asst.Registrar(Ad-I)6.2.2014/True Copy/Sub Asst.RegistrarslTo1. The Income Tax Appellate Tribunal Madras 'C' Bench.Aayakar Bhavan Annexe III Floor, No.121, MG Road,Nungambakkam, Chennai.2. The Director of Income Tax (Exemptions), Chennai-34.+1cc to Mr.J.James, Advocate Sr 3713+1cc to Mr.J.Narayanasamy, Advocate Sr 3050NM(CO)km/10.2.2014T.C.(A) No.579 of 2013