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ITAT cannot grant approval u/s 80G by assuming powers of appropriate authority vested with power to grant registration u/s 12A: HC

2019-TIOL-1766-HC-AHM-IT

IN THE HIGH COURT OF GUJARAT

AT AHMEDABAD

R/Tax Appeal No. 29 Of 2019

COMMISSIONER OF INCOME TAX
(EXCEMPTIONS)

Vs

SHREE TAPESHWAR HANUMAJI BAJRANG CHARITY TRUST

J B Pardiwala & A C Rao, JJ

Dated: July 22, 2019

Appellant Rep by: Mrs Mauna M Bhatt
Respondent Rep by: 
None

Income Tax – Writ – Sections 2(15), 11AA(2)(i), 12AA & 80G(5)

Keywords – Certificate of registration – Charitable purpose – Donations

THE main object of assessee trust was to promote education in the society without any kind of discrimination. The assessee applied for registration u/s 12A and during the pendency of the application, claimed the certificate u/s 80G in respect of donations in the return for the relevant AY. The AO, noted that the pre-requisite condition for claiming deduction u/s 80G was not fulfilled since at that time the assessee was not registered u/s 12A. The CIT(A) held the same view as that of the AO. The Tribunal, however, taking a different view, allowed the claim on the grounds that the objectives of the assessee were in alignment with the definition of charitable purpose in the Act and hence, the assessee was entitled for approval u/s 80G. The Revenue raised the issue before the High Court that in the absence of adequate certificate, the ITAT cannot straightway come to the conclusion that the activities of assessee was charitable and hence merits grant of approval bypassing the requirements of going through the process of registration u/s 12A.

Having heard the parties, the High Court held that,

Whether ITAT at the time of considering the denial of approval u/s 80G can put itself in the shoes of the Appropriate Authority vested to grant registration certificate u/s 12A to allow deemed approval of registration merely by looking at the charitable objectives of the trust – NO: HC

++ the inquiry for the purpose of grant of approval u/s 80G relates to – whether the trust is registered u/s 12A. Whether it is a trust wholly for charitable purpose or religious purpose. Whether the income received by it is liable to be considered u/s 11. In the case on hand, indisputably, the assessee has not produced any certificate of registration u/s 12A. In the absence of such a certificate, whether the Appellate Tribunal could have straightway come to the conclusion about the charitable activities of the trust and directed the Commissioner to grant the approval u/s 80G? The answer has to be in the negative;

++ even for the purpose of registration of charitable or religious trust, the application has to be accompanied by self-certified copy of the order granting registration u/s 12A or Section 12AA. At the same time, even if there is an order rejecting the application for grant of registration, same has to be annexed along with the application under Rule 17A of the Rules, 1962. The Appellate Tribunal, straightway looked into Section 2(15) which merely defines the term ‘charitable purpose’. The issue in the present case is with regard to the grant of approval under Section 80G of the Act in the absence of any valid registration certificate 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. Hence, the order passed by the Appellate Tribunal is not sustainable in law.

Revenue’s appeal allowed

Case followed:

CIT v. Surya Educational and Charitable Trust and another – 2011-TIOL-1062-HC-P&H-IT

JUDGEMENT

Per: J B Pardiwala:

1. The respondent – assessee, although served with the notice of admission of the present Tax Appeal, yet has chosen not to remain present either in person or through an advocate and oppose this Appeal.

2. This Tax Appeal under Section 260A of the Income Tax Act, 1961 (for short, ‘the Act’) is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Surat Bench, Surat, dated 31st July 2018 in the ITA No.3503/AHD/2014/SRT for the Assessment Year 2014-15.

3. This Tax Appeal came to be admitted vide order dated 11th June 2019 on the following two substantial questions of law :

“(A) Whether on the facts and in the circumstances 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.80G of the Income Tax Act, 1961 in the prescribed form No.10G on 27.03.2014.

As per provision of section 80G(5)(vi) of the Income Tax Act, 1961 read with Rule 11AA(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 Deed the objects of the Trust are charitable in nature. The Trust was registered with the Assistant Charity Commissioner, vide registration no.E-2584 dated 08.08.2011. It has applied for registration u/s.12A(a) of the IT Act. The Commissioner of Income Tax, Valsad pointed out that as per provision of section 80G(5)(vi) of the Income Tax Act, 1961 read with Rule 11AA(2)(i) of Income Tax Rule 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. The ld.CIT noticed from the records that the trust has not been able to obtain registration u/s.12A of the Income Tax Act. 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. Therefore, the ld.CIT held that issue of certificate u/s.80G of the I.T. Act, 1961 is not possible, hence rejected.

5. Being aggrieved and dissatisfied with the impugned order, the assessee has filed appeal before this Tribunal. The Id. Counsel for the assessee 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 the donation and other things from the society 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.

7. Per Contra, the Ld. Senior Departmental Representative (Sr.DR) relied on the orders of the CIT-II.

8. We have considered the facts and circumstances and perused the available material on record. It is seen that the main object of the Trust is to promote Education, to infuse inspiration, wishful though conception, piousness to religion into mass, to do welfare work in the society without any bar of any caste, community, colour or religion. We may also observe that the CIT, Valsad has denied the approval of Trust u/s.8OG of the Act by observing that as per provision of section 8OG(5)(vi) of the Income Tax Act, 1961 read with Rule 11AA(2)(i) of Income Tax Rule 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.

9. The Hon’ble Supreme Court in the case of M/s. Queen’s Educational Society vs. CIT (supra) discussing therein various decision of Supreme court’s as well as High Court’s has held that the concern was charitable purposes as defined u/s.2(15) of the Act. Similarly, the decision in the case of Director of Income Tax (Exe) vs. I.D.R.B.T (supra) of Hon‘ble Andhra Pradesh High Court observed 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 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 committed a serious error in passing the impugned order. According to Ms.Bhatt, the Appellate Tribunal misdirected itself by looking into Section 2(15) of the Act. Ms.Bhatt submitted that the decision of the Supreme Court in the case of M/s.Queen’s Educational Society v. CIT (supra), on which strong reliance has been placed by the Tribunal, has nothing to do with the matter on hand. According to Ms.Bhatt, the Commissioner rejected the application preferred by the assessee – Trust on the short ground that the same was not accompanied by a copy of the registration granted under Section 12A of the Act. Ms.Bhatt invited the attention of this Court to Rule 11AA of the Income Tax Rules, 1962. Rule 11AA lays down the requirements for approval of an institution or fund under Section 80G of the Act. Ms.Bhatt submitted that the Appellate Tribunal, without any inquiry as regards the objects and activities of the Trust, recorded a finding of fact that the Trust is involved in imparting education and also many other sociocultural activities. The Appellate Tribunal relied upon few documents in the form of a paper-book supplied by the assessee, and relying on the same, came to the conclusion that the Trust was eligible for approval under Section 80G of the Act. According to Ms.Bhatt, Section 12AA of the Act 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.

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 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 under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose;

(iii) the institution or fund is not expressed to be for the benefit of any particular religious community or caste;

(iv) the institution or fund maintains regular accounts of its receipts and expenditure;

(v) the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860, or under any law corresponding to that Act in force in any part of India or under section 25 of the Companies Act, 1956 (1 of 1956), or is a University established by law, or is any other educational institution recognised by the Government or by a University established by law, or affiliated to any University established by law, or is an institution financed wholly or in part by the Government or a local authority;

(vi) in relation to donations made after the 31st day of March, 1992, the institution or fund is for the time being approved by the Commissioner in accordance with the rules made in this behalf :

(vii) where any institution or fund had been approved under clause (vi) for the previous year beginning on the 1st day of April, 2007 and ending on the 31st day of 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 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;

(ii) from the first day of the financial year in which the application is made, if the Principal Commissioner or Commissioner is not so satisfied;

Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007;

(aa) the person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June, 2007 in the prescribed form and manner to the Principal Commissioner or Commissioner and such trust or institution is registered under section 12AA;

(ab) the person in receipt of the income has made an application for registration of the trust or institution, in a case where a trust or an institution has been granted registration under section 12AA 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 has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, in the prescribed form and manner, within a period of thirty days from the date of said adoption or modification, to the Principal Commissioner or Commissioner and such trust or institution is registered under section 12AA;

(b) 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 the maximum amount which is not chargeable to income-tax 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.

(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 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 Principal Chief Commissioner or 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 Principal Commissioner or Commissioner and the Principal Commissioner or 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) or clause (ab) 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) 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 the Principal Commissioner or 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.

(4) Without prejudice to the provisions of sub-section (3), where a trust or an institution 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-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 institution or fund since its inception or during the last three years, whichever is less;

(iii) Copies of accounts of the institution or fund since its inception or during the last three years, whichever is less.

(3) The Commissioner may call for such further documents or information from the institution or fund or cause such inquiries to be made as he may deem necessary in order to satisfy himself about the genuineness of the activities of such institution or fund.

(4) Where the Commissioner is satisfied that all the conditions laid down in clauses (i) to (v) of sub-section (5) of section 80G are fulfilled by the institution or fund, he shall record such satisfaction in writing and grant approval to the institution or fund specifying the assessment year or years for which the approval is valid.

(5) Where the Commissioner is satisfied that one or more of the conditions laid down in clauses (i) to (v) of sub-section (5) of section 80G are not fulfilled, he shall reject the application for approval, after recording the reasons for such rejection in writing :

Provided that no order of rejection of an application shall be passed without giving the institution or fund an opportunity of being heard.

(6) The time limit within which the Commissioner shall pass an order either granting the approval or rejecting the application shall not exceed six months from the [end of the month in] which such application was made :

Provided that in computing the period of six months, any time taken by the applicant in not complying with the directions of the Commissioner under sub-rule (3) shall be excluded.”

14. A reading of Section 12A shows that the registration under Section 12A is a pre-condition for availing of the benefit under Sections 11 and 12 of the Act. Section 11 provides for the exemption of income which is applied for the charitable purposes. Section 12 is in the nature of an Explanation to Section 11. Before a person can claim the benefit of Section 11 or Section 12, as the 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 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 by enacting sub-section (5) of Section 80G which helps identify the funds or institutions donation to which qualifies for deduction under Section 80G of the Act. It provides that the fund or institution referred to in sub-section (2)(iv) are such whose income would not be liable to be included in its total income under the provisions of Sections 11 and 12 or clause (22) or clause (22A) or clause (23) or clause (23AA) or clause (23C) of Section 10. Prior to the insertion of clause (vi), it being not a statutory requirement, even in the absence of a certificate under Section 80G, it was possible for a donor to satisfy an Income Tax Officer independently about the eligibility of the donations made by him for deduction. It was in order to keep a check on an inquiry into such details which may not be possible for every donor to harness and make good a claim which otherwise he is legitimately entitled to make, and also to relieve the Income Tax Officer to hold such enquiry in respect of the donations made to such institution at different levels and to avoid possibility of different conclusions reached by different officers in relation to donations made to the same fund or institution, to simplify the procedure, the provision was made for recognising, what was, a prevailing practice by making a statutory provision in that regard. It is also to be noticed that whether the income of an institution or fund would ultimately be liable to inclusion in its total income at the close of assessment year or not cannot be determined at the time of making of donation. The eligibility of the donation for deduction has to be considered with reference to the point of time at which donation is made and not with respect of the time in future depending on assessment of the donee. That is where the use of the verb in future tense ‘would’ has been used and not in present or past perfect tense so as to take into consideration the actual inclusion or exclusion or the extent of inclusion or exclusion. The direct nexus of clause (i) of subsection (5) of Section 80G, as appears to us, is to the eligibility of the institution or the fund to claim that its income is not liable to be included 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 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 for such eligibility and donations beyond such limit by a person may not get deduction, even if it is to an approved institution under Section 80G. Likewise, actual inclusion of any income in the assessment of the donee as taxable income, does not affect the entitlement of the donor to claim deduction under Section 80G, if on the date when he made the donation the conditions were fulfilled. That was the law before the insertion of clause (vi) and apart from the fact that by introducing clause (vi) with Rule 11AA a method of proving the eligibility to claim deduction has been provided by the statute, there has been no alternation in the substantive provision, that is to say, entitlement of the donor to claim deduction depends on the eligibility of the donee to claim exemption of its income on the date when donation is made. Examining from this angle, we find that for applicability of Sections 11 and 12, what is required is that such trust must have moved an application for registration under Section 12A and registered for that purpose. Once a trust is registered under Section 12A, its income from property, which includes donations whether covered under Section 11(1)(d) or under Section 12 such donations are deemed to be income from property, is not to be included in its total income under Section 11 or Section 12. (see N.N.Desai Charitable Trust v. Commissioner of Income Tax, (2000)246 ITR 452 (Gujarat)) = 2003-TIOL-1318-HC-AHM-IT

16. The inquiry for the purpose of grant of approval under Section 80G relates to, whether the trust is registered under Section 12A, whether it is a trust wholly for charitable purpose or religious purpose and whether the income received by it is liable to be considered under Section 11.

17. In the case on hand, indisputably, the assessee has not produced any certificate of registration under Section 12A of the Act. In the absence of such a certificate, whether the Appellate Tribunal could have straightway come to the conclusion about the charitable activities of the trust and directed the Commissioner to grant the approval under Section 80G ?

18. In our opinion, the answer has to be in the negative. At this stage, we deem it appropriate to refer to Rule 17A of the Rules, 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, self certified 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, self-certified copies of the annual accounts of the trust or institution relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up;

(f) note on the activities of the trust or institution;

(g) self-certified copy of existing order granting registration under section 12A or section 12AA, as the case may be; and

(h) self-certified copy of order of rejection of application for grant of registration under section 12A or section 12AA, as the case may be, if any.

(2) Form No. 10A shall be furnished electronically,–

(i) under digital signature, if the return of income is furnished under digital signature;

(ii) through electronic verification code in a case not covered under sub-clause (i).

(3) Form No. 10A shall be verified by the person who is authorised to verify the return of income under section 140, as applicable to the assessee.

(4) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall specify the data structure, standards and procedure of furnishing and verification of Form 10A and be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the said form so furnished.”

19. We take notice of the fact that even for the purpose of registration of charitable or religious trust, the application has to be accompanied by self-certified copy of the order granting registration under Section 12A or Section 12AA, as the case may be. At the same time, even if there is an order rejecting the application for grant of registration under Section 12A or Section 12AA, the same has to be annexed along with the application under Section 17A.

20. The Appellate Tribunal, instead of addressing itself on the aforesaid issue, straightway looked into Section 2(15) of the Act. 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 under Section 80G of the Act in the absence of any valid registration certificate 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) = 2011-TIOL-1062-HC-P&H-IT. 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 Section 12AA of the Act, empowers the Commissioner to cancel the registration of the Trust or Institution, if he is satisfied that the activities of such Trust or Institution are not genuine or are not carried out in accordance with the objects of the Trust or Institution.

Section 11 of the Act contemplates that the income as specified therein shall not be included in the total income of the previous year of the person in receipt of the income derived from the property held under the Trust wholly for charitable or religious purposes, whereas Section 12 of the Act, deals with the contributions received by the Trust or an Institution, established for charitable and religious purposes, receiving contribution, shall not be an income in terms of Section 11 of the Act. The benefit of Sections 11 and 12 of the Act, are available only if such Trust or Institution is registered under Section 12AA of the Act.

On the other hand, Section 10(23C) of the Act are the provisions of the Act in substitution of the earlier provisions of Section 10(22) of the Act as to which income shall not be included in computing the total income of any person. Therefore, the provisions of Sections 11, 12 or Section 10(23C) of the Act, deal with the income of a Trust or of the Institution and the circumstances as to when such income is to be excluded for computing the total income, but the basis of such benefit is the registration under Section 12AA of the Act. Unless a Trust or Institution is registered under Section 12AA of the Act, such Trust or Institution shall not be entitled to exclude from its total income, deductions or contributions or from other sources. Therefore, the principles laid down for excluding the income from consideration under Section 10(22) now 10(23)(C) or Sections 11 and 12 are not applicable while considering the application for registration under Section 12AA of the Act. The application for registration is required to be made within one year of the creation of the Trust. Section 12AA of the Act, requires satisfaction in respect of the genuineness of the activities of the Trust, which includes the activities which the Trust is undertaking at present and also which it may contemplate 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 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 is only after satisfying himself about the objects of the trust and the genuineness of its activities that he has to pass an order in writing registering the trust or institution. And if he is not satisfied, he can reject the same.”

23. In view of the aforesaid, we are convinced that 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.

24. Although the assessee has thought fit not to appear before this Court either in person or through an advocate and oppose this Appeal, yet we clarify that it shall be open for the assessee – Trust to apply for registration under Section 12AA of the Act and obtain appropriate certificate under Section 12A of the Act. If the Trust is in a position to obtain the certificate under Section 12A of the Act, then it shall be open for the Trust to once again apply for necessary approval under Section 80G of the Act in accordance with law.

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