The Commissioner Of Income Tax (Exemptions), Chandigarh v. M/S Lord Krishna Charitable Trust, Rohtak

ITA-153-2017 IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-153-2017 Date of Decision: 11.7.2017 The Commissioner of Income Tax (Exemptions), Chandigarh ...Appellant. Versus M/s Lord Krishna Charitable Trust, Rohtak ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MR. JUSTICE AMIT RAWAL. Present:Mr. Denesh Goyal, Senior Standing Counsel, for the appellant. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the revenue under Section260A of the Income Tax Act, 1961 (in short “the Act”) against the orderdated 6.7.2016 (Annexure A-2) passed by the Income Tax AppellateTribunal, Delhi Bench 'D', New Delhi (hereinafter referred to as “theTribunal”) in ITA No. 6799/Del/2013, claming the following substantialquestions of law:- I.Whether on the facts and in the circumstances ofthe case, the order of the ITAT is not perverse inholding the assessee eligible for registration and indirecting the CIT to grant registration whereas inthe rejection order the CIT had established that theassessee's activities were not genuine?the case, the order of the ITAT is not perverse inholding the assessee eligible for registration and indirecting the CIT to grant registration whereas inthe rejection order the CIT had established that theassessee's activities were not genuine? II.Whether on the facts and in the circumstances ofthe case, the order of the ITAT is not perverse indirecting the CIT to grant registration withoutgoing into the applicant's stated aims/objects andthe case, the order of the ITAT is not perverse indirecting the CIT to grant registration withoutgoing into the applicant's stated aims/objects and -2- activities and without satisfying itself about thegenuineness of the same?genuineness of the same? III.Whether on the facts and in the circumstances ofthe case, the ITAT's order is not perverse inholding that the nature of activities by whichincome is derived is not relevant for the purpose ofdrawing satisfaction about the genuineness ofactivities of trust while granting registration?the case, the ITAT's order is not perverse inholding that the nature of activities by whichincome is derived is not relevant for the purpose ofdrawing satisfaction about the genuineness ofactivities of trust while granting registration? IV.Whether on the facts and in the circumstances ofthe case, the ITAT was justified in ignoring thespecific findings of the CIT that the applicant'saims/objects and terms of memorandum were notof charitable nature?the case, the ITAT was justified in ignoring thespecific findings of the CIT that the applicant'saims/objects and terms of memorandum were notof charitable nature? V.Whether on the facts and in the circumstances ofthe case, the order of the ITAT is not perverse inignoring CIT's conclusion that applicant's activitieswere not genuine even as it was based on its failureto prove genuineness of cash credits?the case, the order of the ITAT is not perverse inignoring CIT's conclusion that applicant's activitieswere not genuine even as it was based on its failureto prove genuineness of cash credits? 2.Briefly stated, the facts necessary for adjudication of the instant appeal as narrated therein may be noticed. The assessee moved anapplication under Section 12AA of the Act in Form 10A to theCommissioner of Income Tax (CIT) along with a copy of the trust deeddated 14.12.2007, income and expenditure accounts and balance sheets ofthe Trust along with audit reports for the financial years 2007-08, 2008-09and 2009-10 for grant of registration. The CIT vide order dated 26.9.2011dismissed the said application. Feeling aggrieved by the order dated ITA-153-2017 -3- 2.Briefly stated, the facts necessary for adjudication of the instant appeal as narrated therein may be noticed. The assessee moved anapplication under Section 12AA of the Act in Form 10A to theCommissioner of Income Tax (CIT) along with a copy of the trust deeddated 14.12.2007, income and expenditure accounts and balance sheets ofthe Trust along with audit reports for the financial years 2007-08, 2008-09and 2009-10 for grant of registration. The CIT vide order dated 26.9.2011dismissed the said application. Feeling aggrieved by the order dated ITA-153-2017 -3- 26.9.2011, the assessee filed an appeal before the Tribunal. The Tribunalvide order dated 31.8.2012 restored the issue of registration under Section12AA to the CIT for deciding afresh on merits in accordance with law afteraffording reasonable opportunity of being heard. In compliance thereto, theCIT called for a report from the Assessing Officer through the JointCommissioner of Income Tax, Rohtak who furnished his report dated18.10.2013 and did not recommend for registration under Section 12AA ofthe Act. The CIT vide order dated 5.11.2013 (Annexure A-1) rejected theapplication of the assessee under Section 12AA of the Act for grant ofregistration holding, that the aims and objections of the assessee were notcharitable in nature. Against the order dated 5.11.2013 (Annexure A-1), theassessee filed an appeal before the Tribunal who vide order dated 6.7.2016(Annexure A-2) allowed the appeal and directed the CIT to grantregistration to the assessee as per law. Hence, the present appeal by therevenue. 3.After hearing learned counsel for the revenue, we do not findany merit in the appeal. 4.Examining the factual matrix, nothing had been placed by therevenue to show that the fees charged by the assessee from the students hadbeen used for the purposes other than running the Educational Institutionmanaged by the assessee-trust. There is nothing on record to suggest that theobjects and activities of the assessee-trust are not of charitable character.Further, the Assessing Officer while passing the assessment order underSection 143(3) of the Act for the assessment year 2012-13 had accepted theincome of the assessee at Nil as returned by the assessee. Therefore, theincome derived by the assessee by way of fees from the students was ITA-153-2017 -4- applied for the aims and objects of the trust. The CIT had not found that theactivities carried out by the assessee were not in consonance with itsobjects. Still further, in the enquiry report submitted by the AssessingOfficer, nothing was mentioned as to on what basis he did not recommendfor registration to the assessee. The Tribunal had rightly held that the trustwas eligible for registration and directed the CIT to grant registration to theassessee, with the following observations:- “6.We have considered the rival submissions andhave perused the material available before us. Theprovisions of Section 12AA provide for a procedure tobe followed by the Commissioner for the grant ofregistration to a trust or an institution. According to thisprocedure, the Commissioner shall call for documentsand information and conduct enquiries to satisfy aboutthe genuineness of the activities of the trust or institution.After the Commissioner is satisfied about the charitableor religious nature of the objects and genuineness of theactivities of the trust or institution, he will pass an ordergranting registration. If he is not so satisfied, theprovisions of Section 12AA require him to pass an orderrefusing such registration. We thus note that Section12AA of the Act prescribes the scope and ambit of theenquiry that the Commissioner is authorized to carry outat the time of grant of registration to a trust or institution.The scope and ambit of the enquiry revolves around thenature of the objects being charitable or religious and the genuineness of the activities of the trust or institution. Inthis context, Hon'ble Karnataka High Court in the case ofSanjeevamma Hanumathe Gowda Charitable Trustv. Director of Income Tax (Exemption) [285 ITR 327]has set out the guidelines that for the purposes ofregistration under Section 12AA the authorities have tobe satisfied about the genuineness of the activities of thetrust or institution and how the income derived from thetrust property is applied to charitable purpose and not thenature of the activity by which the income is beingderived by the trust. The Assessing Officer whilepassing the scrutiny assessment u/s. 143(3) for A.Y.2012-13 has accepted the income of assessee at Nil asreturned by the assessee. In this view of the matter, itcan hardly be said that the income derived by the trust byway of fees from the students were applied by theassessee trust for the purpose other than the aims andobjects of the trust. It is also not the case of theCommissioner that the fees charged from the studentshave been used for the purposes other than running theEducational Institution managed by the Assessee Trust.It is also not the case of the Commissioner that theactivities carried out by the assessee are not inconsonance with its objects. The learned CIT has alsonot mentioned the exact enquiry report sent by thedepartmental authorities to ascertain as to on what basis -6- they did not recommend for registration to the assessee.The decision relied upon by the Commissioner in thecase of Kale Khan Mohammad Hanif v. CIT may berelevant for assessment proceedings, but not forregistration u/s. 12AA and hence, distinguishable onfacts. Therefore, in view of decision of Hon'bleKarnataka High Court referred to above and variousother decisions relied upon by the learned counsel for theassessee-trust, we are of the considered opinion that thelearned CIT was not justified in rejecting the applicationof assessee for grant of registration. Accordingly, wehold that that appellant-trust is eligible for registrationand accordingly direct the learned CIT to grantregistration to the assessee trust as per law.” 5.No illegality or perversity could be demonstrated by learnedcounsel for the revenue in the aforesaid findings recorded by the Tribunal. 6.In view of the above, no scope for interference by this Court ismade out so as to take a different view expressed by the Tribunal. Thus, nosubstantial question of law arises. The appeal stands dismissed. (AJAY KUMAR MITTAL) JUDGE July 11, 2017gbs (AMIT RAWAL) JUDGE Whether Speaking/Reasoned Whether Reportable YesYes