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Judgment
S.R. Alam, C. J.
This appeal u/s 260A of the Income Tax Act has been preferred by the Revenue against the order dated 30.9.2002 passed by the Income Tax Appellate Tribunal (in short ''the tribunal''). Facts shorn of unnecessary details are that the respondent is a Trust registered under the provisions of the M.P. Public Trust Act, 1951. The aforesaid Trust was created vide trust deed dated 22.8.2001 for public charitable purposes which include providing education and medical reliefs etc. to the weaker sections of the society. The Trust has set-up an engineering college. Vide Communication dated 8.2.2002, Commissioner, Income Tax required the respondent to give details with regard to the admission procedure and also to state whether in the college run by the respondent, free education would also be imparted. The respondent submitted a reply to the aforesaid communication vide letter dated 6.3.2002. The respondent trust filed an application for registration u/s 12A of the Income Tax Act, 1961. The Commissioner of Income Tax vide order dated 15.3.2002 inter-alia held that since the rules and regulations of granting admission/education facilities have not yet been decided therefore, it is not clear as to whether there would be any restriction for admission to any particular category of students. It was further held that mere establishment of an engineering college does not constitute a charitable activity. Accordingly, the application preferred by the respondent u/s 12A of the Income Tax Act, 1961 was rejected.
The respondent preferred an appeal against the order passed by the Commissioner of Income Tax before the tribunal. The tribunal vide order dated 30.9.2002 inter-alia held that Section 10(2AD), Section 12A and Section 11 have to be read along with Section 2(15) of the Income Tax Act, 1961. The purpose of seeking registration is to get recognition under the Act for exemption for charitable purposes subject to fulfillment of other conditions. It was further held that while considering the application for registration u/s 12A of the Act, the Commissioner of Income Tax has to examine whether formalities for registration are satisfactorily complied with or not and that the purpose of institution is charitable. Accordingly, the order passed by the Commissioner of Income Tax was set aside and the Commissioner was directed to register the respondent u/s 12A of the Act.
This Court while admitting the appeal vide order dated 10.8.2006 formulated the following substantial question of law:
Whether on the facts and circumstances of the case, the learned Income Tax Appellate Tribunal was justified in canceling the order of CIT dated 15.3.2002 refusing the assessee for registration as a charitable trust u/s 12A of the Act of 1961 read with Section 12AA of the Act of 1961?
Mr. Sanjay Lal, learned counsel for the Revenue submitted that finding recorded by the appellate authority i.e. the Income Tax Appellate Tribunal is based on additional evidence. Rule 29 of the Rules framed under the Act provides that the reasons have to be recorded by the authority while permitting additional evidence to be adduced. It was also submitted that the tribunal erred in relying on 256 ITR 277(MP) as the ratio laid down in the aforesaid case had no bearing on the controversy involved in the appeal pending before the tribunal. It was also urged that as the additional evidence was permitted to be adduced, the matter should have been remanded by the tribunal. It was further submitted that there was no material on record to show that the respondent is engaged in charitable work. In support of his submissions, learned counsel has placed reliance on the decisions rendered by Kerala High Court in the case of Self Employers Service Society Vs. Commissioner of Income Tax,
On the other hand, Mr. G.N. Purohit, learned senior counsel for the respondent has drawn our attention to Section 2(15) of the Act and has submitted that charitable purposes include education. It was also submitted that until and unless the trust is registered u/s 12A of the Act, the trust is not entitled to the benefit of Sections 11 and 12. It was further submitted that trust deed was filed before the Commissioner of Income Tax and therefore, there was material on record to show that the trust is engaged in charitable activities. It was argued that objects of the trust are in tune with Section 2(15) of the Act. While referring to clauses 15 and 16 of the trust deed, learned senior counsel submitted that from perusal of aforesaid clauses, it is apparent that income of the trust has to be applied for the purpose of the objects for which the trust was constituted, and even if application for adducing additional evidence is ignored, then also there was material on record to show that the trust is engaged in charitable activities. It was urged that while deciding the application u/s 12A of the Act, the procedure for admission in the institution run by the respondent-trust was not required to be gone into. The Commissioner, Income Tax, while dealing with the application did not properly appreciate the scope and ambit of Section 12A of the Act. In support of his submissions, learned senior counsel has placed reliance on the decisions rendered in the cases of Ahmedabad Rana Caste Association Vs. The Commissioner of Income Tax, Gujarat, Commissioner of Income Tax Vs. Red Rose School, 163 Taxman 19, New Life in Christ Evangelistic Association Vs. Commissioner of Income Tax and Another, , Fifth General Foundation Society Vs. Commissioner of Income Tax, 135 ITR 634, the Trustees of the Tribune In Re, (1939) 7 ITR 415 (PC) , Fifth Generation Education Society Vs. Commissioner Income Tax, and Shantagauri Ramniklal Trust v. Commissioner of income tax [1999] 239 ITR 528 (Guj).
We have considered the submissions made on both sides. Before proceeding to deal with the Controversy we deem it appropriate to notice relevant provisions, namely, Sections 2 (15), 12A and 12AA of the Act. Sections 2(15) and 12A, as they stood at the relevant time, read as under:
Definitions.
2(15) charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility;
12A. Conditions as to registration of trusts etc.
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 Commissioner before the Ist 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 u/s 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 Section 11 and Section 12 shall apply in relation to the income of such trust or institution, -
(i) from the date of creation of the trust or the establishment of the institution if the 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;
(ii) Where the total income of the trust or institution as computed under this Act without giving effect to the provisions of Section 11 and Section 12 exceeds fifty thousand rupees in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in 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.
Section 12AA which was inserted by the Finance Act, 1996 w.e.f. 1.4.1997 reads as under:
12AA. Procedure for registration.
(1) The Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) 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;
(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant:
Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.
(1A) All applications, pending before the Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.
(2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) or clause (aa) of sub-section (1) of Section 12A.
(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution:
Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.
Section 12A of the Act prescribes conditions for registration of the trust whereas Section 12AA of the Act prescribes the procedure for registration. A careful reading of the relevant provisions would reveal that application for registration u/s 12A has to be made in form No. 10A prescribed by Rule 17-A before the expiry of one year from the date of creation of the trust or establishment of the institution whichever is later. The application has to be made by a person in receipt of income of the trust. Thus, while dealing with the application for registration the Commissioner of Income Tax has to examine whether the application is made in accordance with Section 12A read with Rule 17-A and whether form No. 10A has been properly filled up. He may also examine whether objects of the trust are charitable or not. Section 12AA nowhere provides that Commissioner of Income Tax while considering the application for registration is also required to examine whether the income derived by the trust is being spent for charitable purposes or the trust is earning profit. The language employed by the Legislature in Section 12AA only requires that activities of the trust or institution must be genuine which should be in consonance with the object of the trust. At this stage, the Commissioner is not required to examine the application of income. All that he may examine is whether the application is made in accordance with the requirements of Section 12A read with rule 17A and whether Form No. 10A has been properly filled up. He has also to see whether the objects of the trust are charitable or not. Our view finds support from the Division Bench decision of the Allahabad High Court rendered in the case of Red Rose School (supra) and the decisions in the cases of New Life in Christ Evangelistic Association (supra), Fifth Generation Education Society (supra) and Shantagauri Ramniklal Trust (supra).
In the backdrop of aforesaid legal position, facts of the case may be seen. Admittedly, the application submitted by the respondent was in consonance with the procedural requirement prescribed in this regard. From the trust deed which was filed before the Commissioner of Income Tax, the objects of the trust could be ascertained. From perusal of clause 3 of the trust deed we find that the objects of the trust are charitable in nature and are in tune with Section 2(15) of the Act and, therefore, the tribunal rightly opined that the order of the Commissioner of Income Tax rejecting the application u/s 12A was unjustified. For the aforementioned reasons, the substantial question of law framed by this court vide order dated 10.8.2006 has to be answered in the affirmative i.e. in favour of the assessee and against the Revenue. In the result, the appeal fails and is hereby dismissed.