Allahabad High Court
Commissioner Of Income Tax, Faizabad vs Malik Hasmulllah Islamic Educational & ... on 28 February, 2017
Author: Sudhir Agarwal
Bench: Sudhir Agarwal
HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH A.F.R. Court No. - 3 Case :- INCOME TAX APPEAL No. - 16 of 2012 Appellant :- Commissioner Of Income Tax, Faizabad Respondent :- Malik Hasmulllah Islamic Educational & Welfare Society Counsel for Appellant :- Prashant Kumar, Mr. Sidharth Dhaon, Talha A Rahman, Alok Mathur Counsel for Respondent :- Abhishek Tewari Hon'ble Sudhir Agarwal,J.
Hon'ble Ravindra Nath Mishra-II,J.
1. Heard Sri Alok Mathur, learned counsel for appellant. None has appeared on behalf of respondent though this appeal has been called in revised. Hence we proceed to decide ex parte, after hearing learned counsel for appellant.
2. This appeal has been preferred on behalf of Revenue, assailing judgment and order dated 03.07.2012 passed by Income Tax Appellate Tribunal, Lucknow (hereinafter referred to as "Tribunal") in Income Tax Appeal No. 735/Lkw/2011.
3. Appeal was admitted on following substantial question of law:
i) Whether provision contained in Sections 11, 12 and 13 may be taken into account while considering application for registration under Section 12AA of Income Tax Act, 1961?".
4. However, during course of argument we find that aforesaid question need be examined from another angle also and, therefore, with the consent of parties, we formulate following further substantial questions of law as under:
ii) Whether registration itself would amount to conferment of right to exemption or even after registration it is open to Assessing Authority to examine whether Assessee deserves exemption under Section 11 and/or 12 ?;
iii) Whether Tribunal was justified in directing Commissioner to grant registration to Assessee without application for registration having been considered by Commissioner in the light of requirement of Sections 12A and 12AA?
5. From a bare reading of Sections 11 and 12 it is evident that the same are substantive provisions providing exemption where income from property held under trust wholly for charitable or religious purposes or income of Trust or Institution is from voluntary contributions received for charitable or religious purposes etc. Section 13 is also a substantive provision setting out circumstances when exemption would not be available to a religious or charitable Trust or Institution.
6. In order to claim exemption under Section 11 and 12, registration under Sections 12A and 12AA is a condition precedent. Section 12AA mandates that Commissioner has to satisfy itself, after calling for documents and information from the Trust, about genuineness of activities of Trust or Institution and the object of Trust, but not that it satisfy requirement to qualify for exemption under Sections 11 and 12.
7. This Court in Fifth Generation Education Society Versus CIT (1990) 185 ITR 684 (Alld) considered the question, whether Commissioner, while examining issue of registration, can examine question of application of income, and answered in negative.
8. In New Life in Christ Evangelistic Association Versus CIT (2000) 246 ITR 532 (Mad.), Court held, while considering application for registration under Section 12A, Commissioner is not to examine application of income. All that he requires to examine, whether Application Form for registration is made in accordance with the requirements of Section 12A read with Rule, 17A and whether Form No. 10-A has been properly filled up. He may also enquire whether objects of Trust are charitable or not. However, at this stage it is not necessary or proper to examine application of income.
9. In ACIT Versus Surat Tennis Club 2002(166) Taxation 65 (Gujrat), it was held that Registration by itself would not confer right to exemption.
10. The purpose for which registration is required, to establish identity of Institution for being able to claim benefits under Sections 11 and 12 of Act, 1961. Therefore, at the stage of registration, Commissioner should not insist upon Institution to show application of income.
11. Sections 12A and 12AA makes no reference to application of income at all. Commissioner is required to apply only the requirement as contended in the aforesaid provisions with the purpose of Trust that its activities are genuine. There is no reason to deny registration, if the requirement of Section 12A and 12AA are satisfied.
12. The question of examination application of income under Section 11 will arrive before Assessing Authority when that question arises and not at the stage of registration.
13. However, Bombay High Court in Visvesvaraya Industrial Research and Development Centre (M) Versus ITAT (2001) 251 ITR 852 (Bom) observed, when a Registration Certificate is issued, Tribunal still can examine whether there was proper application of income during the account year relevant to the assessment and whether Trust/Institution was entitled to avail benefit under Sections 11 and 12.
14. In Commissioner of Income Tax, Ujjain Versus M/s Dawoodi Bohara Jamat 2014(364) ITR 31 (SC), Court held that Section 12AA lays down procedure to be followed by Commissioner for grant or refusal of application for registration under Section 12A. According to the procedure, so laid down, Commissioner shall call for documents and information and conduct an inquiry to satisfy himself of the genuineness of Trust and upon reaching satisfaction of charitable or religious nature of the object and authenticity of the activity of Trust, he would grant registration. Sections 11 and 12 are substantive provisions provided for exemption available to a religious or charitable trust. The conjoint reading of Sections 11, 12A and 12AA make it clear that registration under Sections 12A and 12AA is a condition precedent for availing benefit under Section 11 and 12. Unless an institution is registered under the aforesaid provision, it cannot claim benefit of Sections 11 and 12.
15. The aforesaid observations make it clear that registration under Sections 12A and 12AA is a procedure for registration, which is a condition precedent to attract Sections 11 and 12, but for grant of registration under Sections 12A and 12AA Commissioner is not supposed to examine whether exemption under Sections 11 and 12 can be granted to the Institution/Trust seeking registration. Scope of such inquiry is subsequent i.e. after registration and can be examined by Assessing Authority initially and thereafter appellate authorities, if question raised therein.
16. The aforesaid decision has been followed in Income Tax Appeal No. 64 of 2014 Shri Agarwal Sabha (Regd) Versus Commissioner of Income Tax decided on 24.3.2014 (All.).
17. In U.P. Forest Corporation and another Versus Deputy Commissioner of Income Tax, Lucknow 2007(14) SCC 610, Court held that registration under Section 12A is a condition precedent for availing benefit under Sections 11 and 12 of Act, 1961. Unless and until Institution is registered under Section 12A, it can not claim benefit of Section 11.
18. Distinction with regard to application of income for the purpose of exemption under Section 11 and registration under Section 12A read with Section 12AA has been made explicit in Commissioner of Income Tax Versus Gujrat Maritime Board (2007) 14 SCC 704, where Court observed that it is concerned to registration and not with application of money. Therein, we find that Income Tax Department denied registration observing that since Gujrat Maritime Board is not entitled to avail benefit of Section 11 of Act, 1961 as Board was not a trust, under Public Trust Act, therefore, it was not entitled to claim registration under Section 12A of 1961. Court examined whether Board satisfy the requirement of charitable purposes under Section 11 read with Section 2 (15) and held that Board was established for predominant purpose of development of Minor Board within the State of Gujrat. The Management and Control of Board was in the hands of State Government, there was no profit motive, hence it was entitled for registration under Section 12A. Court observed that under Scheme of Section 11, source of income must be held under Trust or under other legal obligation.
19. It is thus clear that for the purpose of registration Section 12A read with Section 12AA, scope of scrutiny by Commissioner is with regard to requirements provided therein, which may go to the extent whether Trust satisfy such requirement, but registration by itself cannot be denied by examining the question whether exemption under Section 11 or 12 would be available to the body applying for registration or not and that will not be relevant.
20. We, therefore, answer question 1 in negative holding that while considering application for registration, Commissioner cannot examine question, whether Institution or Trust would get exemption under Sections 11 and 12 or not, but its examination will be confined to the requirement of Sections 12A and 12AA, including the question whether institution satisfy definition of religious or charitable trust or not.
21. So far as question 2 is concerned, since commissioner denied registration only in the light of Sections 11 and 12, in our view it ought to be directed to examine application in the light of requirement of Sections 12A and 12AA. Question 2, therefore is answered in favour of Revenue.
22. Appeal is partly allowed. Judgment and order dated 03.07.2012 passed by Tribunal is hereby set aside. Matter is remanded to Commissioner to pass fresh order in accordance with law and in the light of observation made above, on the application of registration of Institution concerned.
Order Date :- 28.2.2017 Arvind/-