{Arising out of order dated 4-7-2023 passed by the Income Tax Appellate Tribunal, Raipur v. M/s
Case Details
Page 1 of 7 (Tax Case No.118/2024) SISTA SOMAYAJULU Digitally signed by SISTA SOMAYAJULU Date: 2025.08.14 10:50:50 +0530 2025:CGHC:40695-DB NAFR HIGH COURT OF CHHATTISGARH AT BILASPUR TAXC No. 118 of 2024 {Arising out of order dated 4-7-2023 passed by the Income Tax Appellate Tribunal, Raipur Bench, Raipur in ITA No.334/RPR/2016} Commissioner of Income Tax (Exemption), Bhopal (M.P.) ... Appellant versus M/s Shri Agrasen Jan Kalyan Trust, Kharsia, District Raigarh (C.G.) ... Respondent For Appellant
Legal Reasoning
: Mr. Ajay Kumrani, Advocate, on behalf of Mr. Amit Chaudhari, Standing Counsel for the Income Tax Department. For Respondent : Mr. S. Rajeswara Rao, Advocate. Division Bench: - Hon'ble Shri Sanjay K. Agrawal and Hon'ble Shri Sachin Singh Rajput, JJ. Judgment on Board (13/08/2025) Sanjay K. Agrawal, J. 1. The substantial question of law involved, formulated and to be answered in this tax appeal preferred under Section 260A of the Income Tax Act, 1961 (for short, ‘the IT Act’) states as under: - “Whether the ITAT is justified in reversing the order of CIT(Exemption) holding that the assessee is entitled for registration under Section 12AA of the Income Tax Act by recording a finding perverse to the record?” Page 2 of 7 (Tax Case No.118/2024) 2. The aforesaid substantial question of law has to be answered in the following factual backdrop: - 3. On 29-12-1978, the respondent assessee Trust namely, “Shri Agrasen Jan Kalyan Trust” was registered under the Public Trust Act by the Sub-Divisional Officer, Kharsia. It was formed by prominent philanthropic spirited citizens, Late Shri Lakhiram Agrawal and Shri Niranjan Agrawal, with charitable objects including renovation of public properties, promotion of libraries, relief to poor, education, aid to widows/orphans, and supply of drinking water without caste or creed discrimination. The assessee Trust filed an application in Form No.10A before the Commissioner of Income Tax (Exemption), Raipur seeking registration under Section 12AA of the IT Act on 21-3-2016. On 18-7-2016 & 4-8- 2016, in order to verify the objects and activities of the assessee Trust and to ascertain the fulfillment of conditions mentioned under Section 12AA of the IT Act, notices were issued to the assessee Trust requesting to produce the documents in response to which on 10-8-2016, Shri Krishna Sultania, Treasurer of the Trust, attended and filed written submission. On 26-8-2016, an undertaking has been submitted before the CIT (Exemption) that in the event of dissolution, the Trust’s assets shall not be distributed among the Trustees but shall be transferred to another charitable trust with similar objects. However, on 9-9-2016, the CIT (Exemption) passed order rejecting the application for registration under Section 12AA of the Act on the ground that the Page 3 of 7 (Tax Case No.118/2024) assessee Trust was engaged in activities akin to trade, commerce, or business, exceeding the permissible limit under the proviso to Section 2(15) of the IT Act, and citing absence of dissolution clause. Feeling aggrieved against that order, on 3-11-2016, the assessee Trust preferred an appeal before the ITAT and thereafter, on 6-10- 2020, the assessee Trust filed another application for registration under Section 12AA of the IT Act on same facts upon which on 25- 3-2021, the Department granted registration to the assessee Trust under Section 12AA of the IT Act. On 25-4-2023, during the course of hearing before the ITAT, it was submitted on behalf of the assessee Trust that the Trust’s activities were not in the nature of trade or commerce, nominal charges for Dharamshala cannot be equated with commercial activity and registration should be granted based on the objects of the Trust. However, the ITAT by the impugned order, allowed the appeal preferred by the assessee Trust against which the present tax appeal has been preferred by the Revenue. 4. Mr. Ajay Kumrani, learned counsel appearing on behalf of the appellant herein/Revenue, would submit that the ITAT has wrongly relied upon the decision of the Supreme Court in the matter of Ananda Social and Educational Trust v. Commissioner of Income Tax and another1 while granting relief to the assessee and ignored the fact that the assessee is involved in General Public Utility and engaged in commercial 1 (2020) 17 SCC 254 Page 4 of 7 (Tax Case No.118/2024) activities, as such, the order impugned deserves to be set-aside by allowing the appeal. 5. Mr. S. Rajeswara Rao, learned counsel appearing for the respondent herein/assessee Trust, would oppose the appeal and support the impugned order passed by the ITAT and submit that the ITAT has clearly recorded a finding that the objects of the assessee Trust are charitable objects eligible for approval under Section 12AA of the IT Act, therefore, the ITAT has rightly granted the application for registration in favour of the assessee Trust under Section 12AA of the IT Act. 6. We have heard learned counsel for the parties and considered their rival submissions made herein-above and also went through the record with utmost circumspection. 7. Section 12AA(1)(b)(i) of the IT Act states 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) xxx xxx xxx (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities as required under sub-clause (i) of clause (a) and compliance of the requirements under sub-clause (ii) of the said clause, he— (i) shall pass an order in writing registering the trust or institution; (ii) xxx xxx xxx Page 5 of 7 (Tax Case No.118/2024) and a copy of such order shall be sent to the applicant:” 8. A careful perusal of the aforesaid provision would show that the Principal Commissioner or the Commissioner has to satisfy himself about the objects of the trust or institution and the genuineness of its activities as required under sub-clause (i) of clause (a) and compliance of the requirements under sub-clause (ii) of the said clause, and has to pass an order in writing registering the trust or institution and a copy of the order so passed will be sent to the applicant. 9. The Supreme Court in Ananda Social and Educational Trust (supra) held that newly registered trust on basis of its objects, without any activity having been undertaken, is entitled for registration under Section 12AA of the IT Act, and observed as under: - “9. Section 12-AA undoubtedly requires the Commissioner to satisfy himself about the objects of the trust or institution and genuineness of its activities and grant a registration only if he is so satisfied. The said section requires the Commissioner to be so satisfied in order to ensure that the objects of the trust and its activities are charitable since the consequence of such registration is that the trust is entitled to claim benefits under Sections 11 and 12 of the Act. In other words, if it appears that the objects of the trust and its activities are not genuine that is to say not charitable the Commissioner is entitled to refuse and in fact, bound to refuse such registration. It was argued before us that the Commissioner is 10. required to be satisfied about two things — firstly that the objects of the trust and secondly, its activities are genuine. If there have been no activities undertaken by the trust then the Commissioner cannot assess whether such activities are Page 6 of 7 (Tax Case No.118/2024) genuine and therefore, the Commissioner is bound to refuse the registration of such a trust. 11. We have given our anxious consideration to the above submissions made by Ms Aishwarya Bhati, the learned Senior Counsel appearing for the appellant Director of Income Tax and find that it is not possible to agree with the same. The purpose of Section 12-AA of the Act is to enable registration only of such trust or institution whose objects and activities are genuine. In other words, the Commissioner is bound to satisfy himself that the objects of the trust are genuine and that its activities are in furtherance of the objects of the trust, that is equally genuine. 12. Since Section 12-AA pertains to the registration of the trust and not to assess of what a trust has actually done, we are of the view that the term “activities” in the provision includes “proposed activities”. That is to say, a Commissioner is bound to consider whether the objects of the trust are genuinely charitable in nature and whether the activities which the trust proposed to carry on are genuine in the sense that they are in line with the objects of the trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a trust under sub-section (3) of Section 12-AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the trust are not genuine being not in accordance with the objects of the trust. Similarly, the situation would be different where the trust has before applying for registration been found to have undertaken activities contrary to the objects of the trust.” 10. The principle of law laid down in Ananda Social and Educational Trust (supra) has been followed by the Supreme Court with approval in the matter of Commissioner of Income Tax Exemptions v. M/s International Health Care Education and Research Institute2 in which it has been held in paragraphs 14 and 15 as under: - “14. We may agree to a certain extent with the learned ASG that the very purpose for any assessee to seek registration 2 Special Leave Petition (Civil) Diary No.19528/2018, decided on 11-2-2025 Page 7 of 7 (Tax Case No.118/2024) under Section 12AA of the Act is to claim exemption under Sections 10 and 11 respectively of the Act, as the case may be. Therefore, before seeking registration, it is essential that the Trust should adduce cogent material to the satisfaction of the Commissioner that the activities are genuinely charitable in nature. To the aforesaid extent there is no problem. We may 15. only say that mere registration under Section 12-AA automatically does not entitle any charitable trust to claim exemption under Section 10 and 11 respectively of the Act, 1961. When a return is filed by any trust claiming exemption it is for the assessing officer to look into all the materials and satisfy itself whether the exemption has been claimed genuinely or not. If the assessing officer is not convinced it is always open for him to decline grant of exemption.“ 11. In the instant case, the ITAT after considering the submissions of parties, recorded a categorical finding in paragraph 10 of the order that the objects of the assessee Trust are charitable objects eligible for approval under Section 12AA of the IT Act, which is substantiated by the Department itself by granting registration under Section 12AA on 25-3-2021. Therefore, the order directing grant of registration under Section 12AA of the IT Act is neither perverse nor contrary to the record. We do not find any good ground to allow this appeal. Accordingly, the present tax appeal is hereby dismissed leaving the parties to bear their own cost(s) and the substantial question of law is answered in favour of the assessee and against the Revenue. Sd/- (Sanjay K. Agrawal) JUDGE Soma Sd/- (Sachin Singh Rajput) JUDGE