Director Of Income T... v. M/S. Seervi Samaj Ta...

JUDGMENT

(Judgment of the Court was delivered by T.S SIVAGNANAM, J.)

This Tax Case (Appeal), filed by the Revenue, is directed against the order of the Income Tax Appellate Tribunal dated 20.3.2013 in ITA No. 2144.Mds/2012. The Revenue seeks admission of this Tax Case (Appeal) raising the following substantial questions of law:

“1. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that registration under Section 12AA can be granted to the trust with both charitable and religious objects on application of section 11(1)(a)?

2. Whether on the facts and circumstances of the case, the Tribunal was right in holding that the assessee trust is entitled for registration under Section 12AA when activities were not started by the trust?”

2. The respondent/assessee is a trust formed for carrying on charitable and religious activities. The assessee filed an application before the Director of Income Tax (Exemptions), Chennai under Section 12AA of the Income Tax Act, 1961. The Director of Income Tax (Exemptions) held that the activities of the respondent are charitable and religious; both should not be mixed up and the same is not in conformity with the provisions of Section 11(1)(a) of the Income Tax Act. Further, the Director of Income Tax (Exemptions) held that though the Trust is in existence from 13.8.2010, no activity has been started. Based on the above reasons, by order dated 19.10.2012, the application under Section 12AA of the Income Tax Act was rejected.

3. Challenging the same, the respondent preferred an appeal before the Income Tax Appellate Tribunal and relied on the decision of this Court in the case of CIT v. Arulmighu Sri. Kamatchi Amman Trust reported in (2012) 206 Taxman 69 and submitted that there was no bar in granting registration though the Trust having objects of both charitable as well as religious. Reliance was also placed on the decision of the Gujarat High Court in the case of CIT v. Kutchi Dasa Oswal Moto Pariwar Ambama Trust reported in 29 Taxman 228 and submitted that merely because the activities have not been commenced is not a ground for rejection of the application under Section 12AA of the Income Tax Act.

4. The Tribunal, after taking into consideration the decision of this Court in the case of CIT v. Arulmighu Sri. Kamatchi Amman Trust reported in (2012) 206 Taxman 69, allowed the appeal filed by the respondent. Aggrieved by the same, the Revenue has preferred the present Tax Case (Appeal).

5. Learned standing counsel appearing for the Revenue reiterated the submissions made before the Tribunal and contended that the registration under Section 12AA of the Income Tax Act cannot be granted to a trust having both charitable and religious objects on an application under Section 11(1)(a) of the Income Tax Act.

6. The very issue raised by the Revenue has been dealt with by a Division Bench of this Curt in the case of CIT v. Arulmighu Sri. Kamatchi Amman Trust reported in (2012) 206 Taxman 69. In the said case, the respondent/assessee sought for registration under Section 12AA of the Income Tax Act on the ground that the object of the Trust was religious. The Commissioner of Income Tax rejected the application on the ground that the Trust was spending money in receipts towards religious and administrative purposes and the activities claimed to be carried on by the said Trust were an admixture of both religious and charitable. The said Trust filed an appeal before the Income Tax Appellate Tribunal. Following the decision 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), the Tribunal allowed the appeal. Challenging the same, the Revenue filed an appeal before this Court contending that the Tribunal failed to appreciate the activities claimed to be carried on by the said assessee, which was an admixture of both religious and charitable in nature. Therefore, the Tribunal ought not to have interfered with the order of the Commissioner of Income Tax. The Division Bench of this Court, after taking into consideration the provision under Section 11(1)(a) of the Income Tax Act, which states that subject to the provisions of sections 60 to 63, the income derived from property held under trust wholly for charitable or religious purposes, to the extent of which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property shall not be included in the total income of the previous year of the person in receipt of the income. Thus, the Division Bench held “from a reading of the above, it is clear that the income derived from the property held under trust wholly for charitable or religious purpose, shall not be included in the total income of the Trust. Therefore, the said provision would be applicable to both the Trusts established with the object of charitable as well as religious purposes. Therefore, Section 12AA of the Income Tax Act does not make any difference between the Trusts created with the object of charitable and religious purposes and, even if the Trust is not created with both the objects, law does not make any disqualification for the trust to make an application for registration. Therefore, the Tribunal has correctly applied the provision of law and allowed the appeal.”

7. The above-said decision squarely applies to the facts of the present case. Further, in the case of The Director of Income Tax (Exemptions), Chennai v. The Chartered Accountant Study Circle reported in CDJ 2012 MHC 658, the Division Bench of this Court, after taking note of the objects of the said Trust, which among other things was to conduct periodical meetings on professional subjects and to achieve the said objects, the assessee was publishing books, booklets, etc. on professional subjects and selling the same only on the subjects related to audit and not on any other subject and after analysing the objects of the said trust, pointed out that the activities of the said trust in publishing and selling books of professional interest, which were meant to be used as a reference material even by the general public as well as the professionals in respect of Bank Audit, Tax Audit etc., could not be construed to be one of commerce in nature. Further, it was pointed out that under Section 12AA of the Income Tax Act, while considering the application, the Officer has to satisfy about the genuineness of the activity of the trust or the institution and for that reason, he may 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 the Tribunal.

9. In the present case also, the Revenue only questions the trust not having commenced its activity for the grant of registration. The provision under Section 12AA of the Income Tax Act does not stipulate such a condition for grant of registration. On the other hand, Section 12AA(1) contemplates satisfaction of the Commissioner about the objects of the Trust and the genuineness of the activities and make such enquiry as may be necessary for the purpose of grant of registration. In so considering the application, the Commissioner has to give an opportunity to the assessee as provided for under proviso to sub-section(1) of Section 12AA. Under sub-section(3) of Section 12AA, the Commissioner is given power to cancel the registration, if he satisfies that the objects of such trust are not genuine or not being carried on in accordance with the objects of the trust. When such an authority is vested with the Commissioner to cancel the registration in the event of the trust not being carried on in accordance with the objects of the trust, we do not find any ground to say that merely on the date of the application, the assessee trust had not commenced its activities, hence, registration could not be granted. It is not denied by the assessee that on the date of the application under Section 12AA, it was yet to commence its operation. But nevertheless the genuineness of the objects of the trust were not questioned by the Commissioner. Considering the fact that the continuance of registration is further a subject matter of scrutiny by the Commissioner as contemplated under Section 12AA(3) of the Income Tax Act, we do not think that the Revenue would be justified in refusing the registration at the threshold. The Tribunal had followed the decision of the Gujarat High Court in the case of CIT v. Kutchi Dasa Oswal Moto Pariwar Ambama Trust reported in 29 Taxman 228. We respectfully agree with the decision of the Gujarat High Court.

10. In the light of the above, we do not find any question of law arises for consideration in this Tax Case (Appeal). Accordingly, this Tax Case (Appeal) stands dismissed. No costs.