TaxTMI 
TaxTMI 
2019 (8) TMI 511
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....tances of the case and in law, the Appellate Tribunal has erred in setting aside the order of the CIT and in directing to pass order granting approval u/s.80G to the assessee without appreciating that the assessee trust has not fulfilled the condition laid down for approval u/s.80G(5) read with rule 11AA(2)(i) of the Income Tax Rules, 1962 ? (B) Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal has erred in not appreciating that as the assessee was not registered u/s.12AA of the Act, which is a pre-requisite for grant of approval u/s.80G, approval u/s.80G could not have been granted to the assessee trust ?" 4. It appears from the materials on record that the respondent assessee preferred an application addressed to the Commissioner of Income Tax, Valsad, seeking approval under Section 80G(5) of the Act. The Commissioner of Income Tax, Valsad, rejected the application observing as under : "The trust is constituted as public charitable trust and registered with the ofice of the Assistant Charity Commissioner VIDE Registration No.E-2584, Valsad on 08.08.2011. The trust has filed an application for issue of certificate u/s....
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....essee took us through the paper book, page nos. 18 to 19 wherein para 5 defines the Trust works, according to which the assessee Trust is to spread and promote religious scriptures reading, distribute consecrated food, running gymnasium, upliftment of economically poorer sections of the society, doing sociocultural 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. According to which the aims of the Trust are as under : "i) To repair Shree Tapeshwar Hanumanji Bajrang temple. ii) To appoint pujari for temple iii) To celebrate religious worship prayers enchanting devotional holy story of several kinds, during then to distribute consecrated food great consecrated food. iv) To run gymnasium, religious reading room v) To colonize devotee sitting prayer hall along with necessary furniture. vi) To arrange tours enmasse to visit other religious places to achieve divinity. vii) To provide help in whole to economically poors of the society. viii) To accept t....
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....ved as under: "Charitable purpose, under Section 2(15) of the Act, is defined to include education. The order of the D.I.T.(E) records that the Society has been sponsoring diploma course in banking sections with the Osmania University and full-fledged post-graduate course- M.Tech. (Information Technology) with specialization in banking technology and information security with costs with the University of Hyderabad. Sponsoring educational courses would fall within the ambit of "education" as defined under Section 2(15) of the Act. Merely because education is provided at cost does not result in the Society ceasing to carry on its activities for a charitable purpose. There is no material on record, nor has any finding been recorded by the D.I.T. (E) referring to particular instances, to hold that the respondent-assessee was carrying on its educational activities with a profit motive or on commercial lines. The Tribunal has rightly held that the reasons assigned by the D.I.T.(A) in cancelling registration of the respondent-assessee, was vague and without reference to any particular instance." 10. Therefore, in the circumstances, we are inclined to hold that when a Tru....
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....requires satisfaction in respect of the genuineness of the objects of the Trust. In the absence of any inquiry and a certificate under Section 12A of the Act, no approval can be granted to any trust under Section 80G of the Act. 8. In such circumstances referred to above, Ms.Bhatt prays that there being merit in the present Tax Appeal, the same be allowed and the two questions formulated may be answered in favour of the Revenue. ANALYSIS : 9. Before adverting to the submissions canvassed on behalf of the Revenue, we must look into few relevant provisions of the Act as well as the Rules. 10. Section 80G of the Act applies for deduction in respect of donations to certain funds, charitable institutions, etc. Section 80G(5) of the Act, which is relevant for our purpose is as follows : "(5) This section applies to donations to any institutions or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfills 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 pr....
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....March, 2008, such institution or fund shall, for the purposes of this section and notwithstanding anything contained in the proviso to clause (15) of section 2, be deemed to have been,- (a) established for charitable purposes for the previous year beginning on the 1st day of April, 2008 and ending on the 31st day of March, 2009; and (b) approved under the said clause (vi) for the previous year beginning on the 1st day of April, 2008 and ending on the 31st day of March, 2009." 11. Section 12A is with respect to the conditions for the applicability of Sections 11 and 12 of the Act. Section 12A reads as follows : "12A. Conditions for applicability of sections 11 and 12. - (1) The provisions of section 11 and section 12 shall not apply in 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 c....
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....n the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed. (ba) the person in receipt of the income has furnished the return of income for the previous year in accordance with the provisions of sub-section (4A) of section 139, within the time allowed under that section. (c) xxx xxxx (2) Where an application has been 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 sect....
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....on has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996) and subsequently it is noticed that the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the 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-sec....
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....case may be, he must obtain registration under Section 12A. The application for registration under Section 12A has to be made in Form No. 10A prescribed by Rule 17A before the expiry of one year from the date 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 t....
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.... in computation of total income. The two are different concepts. First, whether an institution or fund is such whose income is not liable to be included in the computation of total income it depends 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 g....
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....es, 1962. Rule 17A is with regard to application for registration of charitable or religious trusts, etc. The same reads as follows : "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....
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....ssee - 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 Trust on such inquiries as he may deem necessary. Sub-section (1A) and (2) of Section 12AA of the Act, are procedural in nature, whereas Sub-section (3) of....
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....e 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 application is made, the officer has to call for documents or information from the trust to satisfy himself about the genuineness of the activities of the trust. He can make further enquiry as he may deem necessary. It....