TMI Blog2019 (8) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... even if there is an order rejecting the application for grant of registration u/s 12A or Section 12AA, the same has to be annexed along with the application under Rule 17A. The Appellate Tribunal, instead of addressing itself on the aforesaid issue, straightway looked into Section 2(15). Section 2(15) of the Act merely defines the term 'charitable purpose'. The issue in the present case is with regard to the grant of approval u/s 80G in the absence of any valid registration certificate u/s 12A. Once a charitable trust is registered u/s 12A, the question whether the assessee Trust is for charitable purpose need not be gone into. Indisputably, in the case on hand, the charitable trust is not registered u/s 12A. The order passed by the Appellate Tribunal is not sustainable in law. This Tax Appeal succeeds and is hereby allowed. The impugned order passed by the Income Tax Appellate Tribunal is hereby quashed and set-aside. The two substantial questions of law formulated in the present Tax Appeal are answered in favour of the Revenue and against the assessee. - R/TAX APPEAL NO. 29 of 2019 - - - Dated:- 22-7-2019 - MR J. B. PARDIWALA AND MR A. C. RAO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1AA(2)(i) of Income Tax Rules, 1962, for the approval of an institution or fund under section 80G, registration of the trust under section 12A of the I.T. Act is essential. However, it is noticed from the records that the trust has not been able to obtain registration u/s.12A of the I.T. Act. Since, the Trust has not fulfilled all the conditions laid down under section 80G(5) of the Income Tax Act and Rule 11AA(2)(i) of Income Tax Rules, 1962, the application for issue of certificate u/s.80G of the I.T. Act, 1961 is therefore rejected. 5. The assessee, being dissatisfied with the order passed by the Commissioner of Income Tax, preferred an appeal before the Income Tax Appellate Tribunal, Surat Bench, Surat. The Appellate Tribunal allowed the appeal preferred by the assessee holding that the assessee is entitled for approval under Section 80G of the Act. The Commissioner of Income Tax, Valsad, was accordingly directed by the Appellate Tribunal to pass an appropriate order granting approval to the assessee Trust under Section 80G of the Act. The order passed by the Appellate Tribunal is as follows : 4. As per the Trust D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety as to maintain Trust. ix) This Trust shall do all the truthful non violent works without partiality to any caste or religion. x) Trust shall publish relating to local religious place. xi) To create hall, garden for religious get-together along with youth development activity doing with socio-cultural activity. xii) To bring forth temple at such place from where, en masse shall gainfully achieve the desirement devotion towards the country xiii) To do welfare works for the people. xiv) To provide aids to the disables. xv) To provide help monetary for free, scholarship, prize, food, cloths, educational tools, books to the student, pupil, who pursuit of learning at educational institution. The above mentioned intentions has been constituted without parity of casteism. 6. Therefore, it was contended that the assessee Trust is engaged in the imparting education to all religions, hence, it is solely exist for the purpose of education and human wellbeing, therefore, CIT, Valsad was not justified in not issuing certification u/s.80G of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. Therefore, in the circumstances, we are inclined to hold that when a Trust mainly engaged in spreading and promoting religious scriptures reading, distribute consecrated food, running gymnasium, upliftment of economically poorer sections of the society, doing socio cultural activities in society without any bar of any caste, filling devotions towards the country for human well being and contribute in imperative services like students education books, scholarships, foods and clothes etc., then it cannot be said that the assessee Trust has ceased to exist for the purpose of charitable and education as provided u/s.2(15) of the Act. Therefore, we are of the considered opinion that the assessee is entitled for approval u/s.80G of the Act. Accordingly, the order of the CIT, Valsad set aside with the direction to pass appropriate order granting approval u/s.80G to the assessee Trust. 6. The Revenue, being dissatisfied with the order passed by the Appellate Tribunal, has come up with the present Tax Appeal. 7. Ms.Mauna Bhatt, the learned senior standing counsel appearing for the Revenue, vehemently submitted that the Appellate Tribunal committe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fills the following conditions, namely :- ( i) where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 or clause (23AA) or clause (23C) of section 10: Provided that where an institution or fund derives any income, being profits and gains of business, the condition that such income would not be liable to inclusion in its total income under the provisions of section 11 shall not apply in relation to such income if, - ( a) the institution or fund maintains separate books of account in respect of such business; ( b) the donations made to the institution or fund are not used by it, directly or indirectly, for the purposes of such business; and ( c) the institution or fund issues to the person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not be used, directly or indirectly, for the purposes of such business; ( ii) the instrument un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to the income of any trust or institution unless the following conditions are fulfilled, namely :- ( a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Principal Commissioner or Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later and such trust or institution is registered under section 12AA: Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,- ( i) from the date of the creation of the trust or the establishment of the institution if the Principal Commissioner or Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made. 12. Section 12AA of the Act provides for the procedure for registration. The same reads as under : 12AA. Procedure for registration.- (1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) or clause (ab) of sub-section (1) of section 12A, shall- ( a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and ( b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he - ( i) shall pass an order in writing registering the trust or institution; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income of such trust or institution due to operation of sub-section (1) of section 13, then, the Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution: Provided that the registration shall not be cancelled under this sub-section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner. 13. Rule 11AA of the Rules, 1962, stipulates for the requirement for the approval of an institution or fund under Section 80G of the Act. Rule 11AA reads as under : 11AA. Requirements for approval of an institution or fund under Section 80G. (1) The application for approval of any institution or fund under clause (vi) of sub-section (5) of section 80G shall be in Form No. 10G and shall be made in triplicate. ( 2) The application shall be accompanied by the following documents, namely :- ( i) Copy of registration granted under section 12A or copy of notification issued under section 10(23) or 10(23C); ( ii) Notes on activities of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of creation of the trust or the establishment of the institution, whichever is later. It has to be made by the person in receipt of the income of the trust. 15. Section 80G of the Act does not relate to the assessment of the trust or the institution whose income are not liable to be included in the computation of taxable income under the various provisions of the Act referred therein. Primarily, Section 80G is related to giving deduction in respect of the donations made by a person who, but for this provision, would not be eligible for such deduction because the donations are not ordinarily considered to be expenses incurred for the purpose of earning income and liable to be deducted therefrom, since all the donations generally are not treated as eligible for deduction, but only such donations as are made to the funds or institutions named in sub-section (2) of Section 80G of the Act are eligible for such deduction. It also includes general clause any fund or institution to which this section applies a provision which was needed to identify the trusts or funds or institution not specifically named in the statute, but fell in that category. That object was achieved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds on its status or character. The second is actual assessment of income, which necessarily takes place in future after donation is received by the donee on fulfillment of other conditions about application of income by the eligible trusts, which in the very nature of things can operate only after receipt of income. The actual extent of exclusion from or inclusion in the computation of total income, the receipts of such institution or fund, depends on fulfillment of further conditions which may or may not exist at the close of the year and has no direct relation to the purpose with which the provision is made. The latter falls in the realm of the assessment of the trust, institution or fund which derives income which is not ordinarily includible in its total income. The liability to assessment is not affected by issuance of recognition certificate or approval certificate issued under clause (vi) of sub-section (5) of Section 80G nor it depends upon the fact whether donor is ultimately gets deduction in respect of such donation. It may be relevant to take cognizance that all donations are not in their entirety eligible for deduction. There exists a maximum limit also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17A (1). An application under clause (aa) or clause (ab) of sub-section (1) of section 12A for registration of a charitable or religious trust or institution shall be made in Form No. 10A and accompanied by the following documents, namely :- ( a) where the trust is created, or the institution is established, under an instrument, self-certified copy of the instrument creating the trust or establishing the institution; ( b) where the trust is created, or the institution is established, otherwise than under an instrument, selfcertified copy of the document evidencing the creation of the trust, or establishment of the institution; ( c) self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be; ( d) self-certified copy of the documents evidencing adoption or modification of the objects, if any; ( e) where the trust or institution has been in existence during any year or years prior to the financial year in which the application for registration is made, se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icate under Section 12A of the Act. Once a charitable trust is registered under Section 12A, the question whether the assessee Trust is for charitable purpose need not be gone into. Indisputably, in the case on hand, the charitable trust is not registered under Section 12A of the Act. 21. In the aforesaid context, we may refer to a decision of the Punjab and Haryana High Court in the case of Commissioner of Income-Tax v. Surya Educational and Charitable Trust and another, reported in (2013)355 ITR 280 (P H). Justice Hemant Gupta (as His Lordship then was), speaking for the Bench, observed as under : We have heard learned counsel for the appellant, but find no merit in the present appeals. As per Section 12AA of the Act, an application for registration of the Trust and Institution is required to be made within one year from the date of creation of the Trust or the Establishment of such Institution. The procedure for registration of the Trust or Institution is prescribed under Section 12AA of the Act. In terms of Clause (a) of Section 12AA of the Act, the Commissioner is to satisfy himself about the genuineness of the activities of the Trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te to undertake. The insertion of sub-section (3) to Section 12AA of the Act, clarifies the said fact, when it empowers the Commissioner to cancel the registration if the activities of the Trust are not carried out in accordance with such objects. Therefore, the object of Section 12AA of the Act, is to examine the genuineness of the objects of the Trust, but not the income of the Trust for charitable or religious purposes. The stage for application of income is yet to arrive i.e. when such Trust or Institution files its return. Therefore, we find that the judgments referred to by the learned counsel for the appellant are not applicable to the facts of the present case arising out of the question of registration of the Trust and not of assessment. 22. We may refer to and rely upon a Division Bench decision of the Delhi High Court in the case of M.K.Nambyar Saarf Law Charitable Trust v. Union of India, reported in (2004)269 ITR 556, wherein B.C.Patel, CJ (as His Lordship then was), has observed as under : Section 12AA prescribes the procedure for registration. Reading the section, it becomes clear that after the applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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