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TMI Blog2011 (8) TMI 510X X X X Extracts X X X X X X X X Extracts X X X X ..... consequential in nature. Answer to question no.A would, therefore, cover question no.B also. These questions arise in the following factual background. 3. The respondent-assessee is Saurashtra Kutch Stock Exchange Ltd. (hereinafter referred to as "the stock exchange"). While framing the assessment, the assessee was granted registration under Section 12A of the Act by the Commissioner by an order dated 20.2.1998. One of the conditions contained in the said order for registration was as under:- "However, since the applicant has fulfilled other condition, it is granted registration u/s. 12A(a) of the Act w.e.f. 1.4.1994 (i.e. the first day of the financial year in which a valid application u/s. 12A was filed) subject to condition that the matter regarding exemption u/s. 11 will be examined by the Assessing Officer, at the time of passing of assessment order for each assessment year, and the registration u/s. 12A of the I.T. Act shall now by itself confer any right on the applicant for grant of exemption u/s. 11 of the Act for any assessment year." 4. For the assessment year 1996-97, the assessee filed return of the income. The Assessing Officer while framing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the revenue assailed the decision of the Tribunal contending that in the present case, facts were different from those involved in the case of Hiralal Bhagwati (supra) and the decision of this Court would not, therefore, apply. Heavy reliance was placed on the conditional registration granted by the Commissioner under Section 12A of the Act. In particular it was pointed out that the registration order itself permitted the Assessing Officer to examine applicability of Section 11 for each assessment year. It was, therefore, contended that the Assessing Officer having found that the objects of the trust cannot be stated to be for charitable purpose, decision of the Apex Court in the case of Delhi Stock Exchange would apply. It was further contended that the assessee not having challenged the order of registration of the Commissioner, cannot now dispute the conditions contained therein as invalid or impermissible. Counsel further contended that the Assessing Officer as well as the CIT Appeals were justified in invoking the disqualifications contained in Section 13 of the Act. The Tribunal without any discussion discarded such grounds on which the orders of the revenue autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registration under Section 12A of the Act granted by the Commissioner was in operation during the assessment year in question. Ordinarily, therefore, in view of the decision of this Court in case of Hiralal Bhagwati (supra), no further inquiry could have been undertaken by the Assessing Officer while granting exemption under Section 11 or 12 of the Act. In the present case, however, counsel for the revenue heavily relied on the condition on which such registration was granted. We have already recorded the relevant portion of the registration order which contained such condition. Short question is whether in the present case, in view of such condition, the Assessing Officer could have examined applicability of Section 11 of the Act. 13. Section 12A of the Act pertains to conditions for applicability of Sections 11 and 12 and provides inter-alia that the provisions of Sections 11 and 12 of the Act shall not apply in relation to the income of any trust or institution unless the conditions contained in Clauses (a) to (c) of sub-section (1) are fulfilled. Clause (a) which is referred for our purpose reads as under:- "(a) the person in receipt of the income has made an ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12A of the Act, the Commissioner has to make necessary inquiries and such registration would be granted only if necessary requirements are fulfilled. It was in this background that this Court in case of Hiralal Bhagwati (supra) held and observed that "It is also required to be noted that once the registration under Section 12A(a) of the Act is granted, the grant of benefit cannot be denied. The Income Tax Officer was not justified in refusing the benefits which would otherwise accrue under the registration. If there is no registration, as contemplated under Section 12A(a) read with Rule 17(A), the revenue would have been justified in making the submission that the benefit cannot be granted but where the application for registration is submitted and the registration having been granted, the benefit cannot be denied on the ground that the scheme is not for the benefit of the public at large." 15. Looked from this angle, the condition contained in the registration which is at the center of the controversy, has to be read and appreciated. To recall the said condition permitted the Assessing Officer at the time of passing of assessment order for each year to examine the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove discussion, we do not find that the view any different from the case of Hiralal Bhagwati (supra) could be taken in the present case also. In our view, therefore, the Assessing Officer was not justified in examining different clauses of the objects of the trust to reopen the question of eligibility of the trust for exemption under Sections 11 and 12 of the Act. In view of this discussion, we do not find it necessary to consider other contentions of the assessee in this regard. 19. Coming to the question of applicability of Section 13 of the Act, though we find that the Tribunal has not examined this question at any length, it would not be necessary to remand the issue for fresh consideration by the Tribunal in view of the following discussion. 20. Section 13 of the Act in so far as the same is relevant for our purpose reads as under:- "13(1)(c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof- (i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of Section 13 would apply in the present case so as to deny exemption to the assessee under Section 11 of the Act. 22. Upon reading the order of the Assessing Officer as well as CIT Appeals in no way do we find any reference to any of the bodies or persons referred to in sub-section (3) of Section 13 which would enable the Assessing Officer to rely on clause (c) of sub-section (1) of Section 13 to withhold exemption under Section 11 of the Act. In general terms, the Assessing Officer noted certain irregularities of the assessee in managing its funds as pointed out by SEBI. However, there is no conclusion that any part of the funds were diverted or applied as not permitted under sub-section (3) of Section 13. In this view of the matter, it was not open for the Assessing Officer to resort to Section 13 of the Act to withhold exemption under Section 11 of the Act. In our opinion, the Assessing Officer made certain general observations to point out that some of the application of the funds of the stock exchange were not approved by the SEBI. But that itself would not be sufficient to activate sub-section (3) of Section 13 without any specific finding. In this view of the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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