C/TAXAP/29/2019 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 29 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALA Sd/- and HONOURABLE MR.JUSTICE A.C. RAO Sd/- 1 Whether Reporters of Local Papers may be allowed YES to see judgment ? 2 To be referred to Reporter or not ? YES 3 Whether their Lordships wish to see fair copy NO of judgment ? 4 Whether this case involves substantial question NO of law as to interpretation of Constitution of India or any order made thereunder COMMISSIONER OF INCOME TAX (EXCEMPTIONS) Versus SHREE TAPESHWAR HANUMAJI BAJRANG CHARITY TRUST Appearance: MRS MAUNA M BHATT for Appellant(s)No. 1 RULE SERVED for Opponent(s)No. 1 CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO Date: 22/07/2019 ORAL JUDGMENT (PER: HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. respondent assessee, although served with notice of admission of present Tax Appeal, yet has chosen not to Page 1 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT remain present either in person or through advocate and oppose this Appeal. 2. This Tax Appeal under Section 260A of Income Tax Act, 1961 (for short, 'the Act') is at instance of Revenue and is directed against order passed by Income Tax Appellate Tribunal, Surat Bench, Surat, dated 31st July 2018 in ITA No.3503/AHD/2014/SRT for Assessment Year 2014-15. 3. This Tax Appeal came to be admitted vide order dated 11th June 2019 on following two substantial questions of law : (A) Whether on facts and in circumstances of case and in law, Appellate Tribunal has erred in setting aside order of CIT and in directing to pass order granting approval u/s.80G to assessee without appreciating that assessee trust has not fulfilled condition laid down for approval u/s.80G(5) read with rule 11AA(2)(i) of Income Tax Rules, 1962 ? (B) Whether on facts and in circumstances of case and in law, Appellate Tribunal has erred in not appreciating that as assessee was not registered u/s.12AA of Act, which is pre-requisite for grant of approval u/s.80G, approval u/s.80G could not have been granted to assessee trust ? 4. It appears from materials on record that respondent assessee preferred application addressed to Commissioner of Income Tax, Valsad, seeking approval under Page 2 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT Section 80G(5) of Act. Commissioner of Income Tax, Valsad, rejected application observing as under : trust is constituted as public charitable trust and registered with ofice of Assistant Charity Commissioner VIDE Registration No.E-2584, Valsad on 08.08.2011. trust has filed application for issue of certificate u/s.80G of Income Tax Act, 1961 in prescribed form No.10G on 27.03.2014. As per provision of section 80G(5)(vi) of Income Tax Act, 1961 read with Rule 11AA(2)(i) of Income Tax Rules, 1962, for approval of institution or fund under section 80G, registration of trust under section 12A of I.T. Act is essential. However, it is noticed from records that trust has not been able to obtain registration u/s.12A of I.T. Act. Since, Trust has not fulfilled all conditions laid down under section 80G(5) of Income Tax Act and Rule 11AA(2)(i) of Income Tax Rules, 1962, application for issue of certificate u/s.80G of I.T. Act, 1961 is therefore rejected. 5. assessee, being dissatisfied with order passed by Commissioner of Income Tax, preferred appeal before Income Tax Appellate Tribunal, Surat Bench, Surat. Appellate Tribunal allowed appeal preferred by assessee holding that assessee is entitled for approval under Section 80G of Act. Commissioner of Income Tax, Valsad, was accordingly directed by Appellate Tribunal to pass Page 3 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT appropriate order granting approval to assessee Trust under Section 80G of Act. order passed by Appellate Tribunal is as follows : 4. As per Trust Deed objects of Trust are charitable in nature. Trust was registered with Assistant Charity Commissioner, vide registration no.E-2584 dated 08.08.2011. It has applied for registration u/s.12A(a) of IT Act. Commissioner of Income Tax, Valsad pointed out that as per provision of section 80G(5)(vi) of Income Tax Act, 1961 read with Rule 11AA(2)(i) of Income Tax Rule 1962, for approval of institution or fund under section 80G, registration of trust under section 12A of I.T. Act is essential. ld.CIT noticed from records that trust has not been able to obtain registration u/s.12A of Income Tax Act. trust has not fulfilled all conditions laid down under section 80G(5) of Income Tax Act and Rule 11AA(2)(i) of Income Tax Rules 1962. Therefore, ld.CIT held that issue of certificate u/s.80G of I.T. Act, 1961 is not possible, hence rejected. 5. Being aggrieved and dissatisfied with impugned order, assessee has filed appeal before this Tribunal. Id. Counsel for assessee took us through paper book, page nos. 18 to 19 wherein para 5 defines Trust works, according to which assessee Trust is to spread and promote religious scriptures reading, distribute consecrated food, running gymnasium, upliftment of economically poorer sections of society, doing socio- cultural activities in society without any bar of any caste, Page 4 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT filling devotions towards country for human well being and contribute in imperative services like students education books, scholarships, foods and clothes etc. According to which aims of 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 society. viii) To accept donation and other things from society as to maintain Trust. ix) This Trust shall do all 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 Page 5 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT 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 desirement devotion towards country xiii) To do welfare works for people. xiv) To provide aids to disables. xv) To provide help monetary for free, scholarship, prize, food, cloths, educational tools, books to student, pupil, who pursuit of learning at educational institution. above mentioned intentions has been constituted without parity of casteism. 6. Therefore, it was contended that assessee Trust is engaged in imparting education to all religions, hence, it is solely exist for purpose of education and human wellbeing, therefore, CIT, Valsad was not justified in not issuing certification u/s.80G of Act. 7. Per Contra, Ld. Senior Departmental Representative (Sr.DR) relied on orders of CIT-II. 8. We have considered facts and circumstances and perused available material on record. It is seen that main object of Trust is to promote Education, to infuse inspiration, wishful though conception, piousness to religion into mass, to do welfare work in society without any bar Page 6 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT of any caste, community, colour or religion. We may also observe that CIT, Valsad has denied approval of Trust u/s.8OG of Act by observing that as per provision of section 8OG(5)(vi) of Income Tax Act, 1961 read with Rule 11AA(2)(i) of Income Tax Rule 1962, for approval of institution or fund under section 80G, registration of trust under section 12A of I.T. Act is essential. 9. Hon'ble Supreme Court in 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 concern was charitable purposes as defined u/s.2(15) of Act. Similarly, decision in 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 Act, is defined to include education. order of D.I.T.(E) records that Society has been sponsoring diploma course in banking sections with Osmania University and full-fledged post-graduate course- M.Tech. (Information Technology) with specialization in banking technology and information security with costs with University of Hyderabad. Sponsoring educational courses would fall within ambit of education as defined under Section 2(15) of Act. Merely because education is provided at cost does not result in Society ceasing to carry on its activities for charitable purpose. There is no material on record, nor has any finding been recorded by D.I.T. (E) referring to particular instances, to hold that Page 7 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT respondent-assessee was carrying on its educational activities with profit motive or on commercial lines. Tribunal has rightly held that reasons assigned by D.I.T.(A) in cancelling registration of respondent-assessee, was vague and without reference to any particular instance. 10. Therefore, in circumstances, we are inclined to hold that when Trust mainly engaged in spreading and promoting religious scriptures reading, distribute consecrated food, running gymnasium, upliftment of economically poorer sections of society, doing socio cultural activities in society without any bar of any caste, filling devotions towards 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 assessee Trust has ceased to exist for purpose of charitable and education as provided u/s.2(15) of Act. Therefore, we are of considered opinion that assessee is entitled for approval u/s.80G of Act. Accordingly, order of CIT, Valsad set aside with direction to pass appropriate order granting approval u/s.80G to assessee Trust. 6. Revenue, being dissatisfied with order passed by Appellate Tribunal, has come up with present Tax Appeal. 7. Ms.Mauna Bhatt, learned senior standing counsel appearing for Revenue, vehemently submitted that Appellate Tribunal committed serious error in passing Page 8 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT impugned order. According to Ms.Bhatt, Appellate Tribunal misdirected itself by looking into Section 2(15) of Act. Ms.Bhatt submitted that decision of Supreme Court in case of M/s.Queen's Educational Society v. CIT (supra), on which strong reliance has been placed by Tribunal, has nothing to do with matter on hand. According to Ms.Bhatt, Commissioner rejected application preferred by assessee - Trust on short ground that same was not accompanied by copy of registration granted under Section 12A of Act. Ms.Bhatt invited attention of this Court to Rule 11AA of Income Tax Rules, 1962. Rule 11AA lays down requirements for approval of institution or fund under Section 80G of Act. Ms.Bhatt submitted that Appellate Tribunal, without any inquiry as regards objects and activities of Trust, recorded finding of fact that Trust is involved in imparting education and also many other socio- cultural activities. Appellate Tribunal relied upon few documents in form of paper-book supplied by assessee, and relying on same, came to conclusion that Trust was eligible for approval under Section 80G of Act. According to Ms.Bhatt, Section 12AA of Act requires satisfaction in respect of genuineness of objects of Trust. In absence of any inquiry and certificate under Section 12A of Act, no approval can be granted to any trust under Section 80G of Act. 8. In such circumstances referred to above, Ms.Bhatt prays that there being merit in present Tax Appeal, same be allowed and two questions formulated may be answered in favour of Revenue. Page 9 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT ANALYSIS : 9. Before adverting to submissions canvassed on behalf of Revenue, we must look into few relevant provisions of Act as well as Rules. 10. Section 80G of Act applies for deduction in respect of donations to certain funds, charitable institutions, etc. Section 80G(5) of 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 charitable purpose and if it fulfills following conditions, namely :- (i) where institution or fund derives any income, such income would not be liable to inclusion in its total income under provisions of sections 11 and 12 or clause (23AA) or clause (23C) of section 10: Provided that where institution or fund derives any income, being profits and gains of business, condition that such income would not be liable to inclusion in its total income under provisions of section 11 shall not apply in relation to such income if, - (a) institution or fund maintains separate books of account in respect of such business; (b) donations made to institution or fund are not used by it, directly or indirectly, for purposes of such business; and Page 10 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT (c) institution or fund issues to person making donation certificate to effect that it maintains separate books of account in respect of such business and that donations received by it will not be used, directly or indirectly, for purposes of such business; (ii) instrument under which institution or fund is constituted does not, or rules governing institution or fund do not, contain any provision for transfer or application at any time of whole or any part of income or assets of institution or fund for any purpose other than charitable purpose; (iii) institution or fund is not expressed to be for benefit of any particular religious community or caste; (iv) institution or fund maintains regular accounts of its receipts and expenditure; (v) institution or fund is either constituted as public charitable trust or is registered under Societies Registration Act, 1860, or under any law corresponding to that Act in force in any part of India or under section 25 of Companies Act, 1956 (1 of 1956), or is University established by law, or is any other educational institution recognised by Government or by University established by law, or affiliated to any University established by law, or is institution financed wholly or in part by Government or local authority; Page 11 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT (vi) in relation to donations made after 31st day of March, 1992, institution or fund is for time being approved by Commissioner in accordance with rules made in this behalf : (vii) where any institution or fund had been approved under clause (vi) for previous year beginning on 1st day of April, 2007 and ending on 31st day of March, 2008, such institution or fund shall, for purposes of this section and notwithstanding anything contained in proviso to clause (15) of section 2, be deemed to have been,- (a) established for charitable purposes for previous year beginning on 1st day of April, 2008 and ending on 31st day of March, 2009; and (b) approved under said clause (vi) for previous year beginning on 1st day of April, 2008 and ending on 31st day of March, 2009. 11. Section 12A is with respect to conditions for applicability of Sections 11 and 12 of Act. Section 12A reads as follows : 12A. Conditions for applicability of sections 11 and 12. - (1) provisions of section 11 and section 12 shall not apply in relation to income of any trust or institution unless following conditions are fulfilled, namely :- (a) person in receipt of income has made application for registration of trust or institution in Page 12 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT prescribed form and in prescribed manner to Principal Commissioner or Commissioner before 1st day of July, 1973, or before expiry of period of one year from date of creation of trust or establishment of institution, whichever is later and such trust or institution is registered under section 12AA: Provided that where application for registration of trust or institution is made after expiry of period aforesaid, provisions of sections 11 and 12 shall apply in relation to income of such trust or institution,- (i) from date of creation of trust or establishment of institution if Principal Commissioner or Commissioner is, for reasons to be recorded in writing, satisfied that person in receipt of income was prevented from making application before expiry of period aforesaid for sufficient reasons; (ii) from first day of financial year in which application is made, if Principal Commissioner or Commissioner is not so satisfied; Provided further that provisions of this clause shall not apply in relation to any application made on or after 1st day of June, 2007; (aa) person in receipt of income has made application for registration of trust or institution on or after 1st day of June, 2007 in prescribed form and Page 13 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT manner to Principal Commissioner or Commissioner and such trust or institution is registered under section 12AA; (ab) person in receipt of income has made application for registration of trust or institution, in case where trust or 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 Finance (No.2) Act, 1996 (33 of 1996)], and, subsequently, it has adopted or undertaken modifications of objects which do not conform to conditions of registration, in prescribed form and manner, within period of thirty days from date of said adoption or modification, to Principal Commissioner or Commissioner and such trust or institution is registered under section 12AA; (b) where total income of trust or institution as computed under this Act without giving effect to provisions of section 11 and section 12 exceeds maximum amount which is not chargeable to income-tax in any previous year, accounts of trust or institution for that year have been audited by accountant as defined in Explanation below sub-section (2) of section 288 and person in receipt of income furnishes along with return of income for relevant assessment year report of such audit in prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed. Page 14 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT (ba) person in receipt of income has furnished return of income for previous year in accordance with provisions of sub-section (4A) of section 139, within time allowed under that section. (c) xxx xxxx (2) Where application has been made on or after 1st day of June, 2007, provisions of sections 11 and 12 shall apply in relation to income of such trust or institution from assessment year immediately following financial year in which such application is made. 12. Section 12AA of Act provides for procedure for registration. same reads as under : 12AA. Procedure for registration.- (1) Principal Commissioner or Commissioner, on receipt of application for registration of 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 trust or institution as he thinks necessary in order to satisfy himself about genuineness of activities of trust or institution and may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about objects of trust or institution and genuineness of its activities, he - Page 15 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT (i) shall pass order in writing registering trust or institution; (ii) shall, if he is not so satisfied, pass order in writing refusing to register trust or institution, and copy of such order shall be sent to applicant: Provided that no order under sub-clause (ii) shall be passed unless applicant has been given reasonable opportunity of being heard. (1A) All applications, pending before Principal Chief Commissioner or Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before 1st day of June, 1999, shall stand transferred on that day to Principal Commissioner or Commissioner and Principal Commissioner or Commissioner may proceed with such applications under that sub-section from 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 expiry of six months from end of month in which application was received under clause (a) or clause (aa) or clause (ab) of sub-section (1) of section 12A. (3) Where trust or institution has been granted registration under clause (b) of sub-section (1) or has Page 16 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT obtained registration at any time under section 12A as it stood before its amendment by Finance (No. 2) Act, 1996 (33 of 1996) and subsequently Principal Commissioner or Commissioner is satisfied that activities of such trust or institution are not genuine or are not being carried out in accordance with objects of trust or institution, as case may be, he shall pass order in writing cancelling 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 reasonable opportunity of being heard. (4) Without prejudice to provisions of sub-section (3), where trust or 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 Finance (No. 2) Act, 1996 (33 of 1996) and subsequently it is noticed that activities of trust or institution are being carried out in manner that provisions of sections 11 and 12 do not apply to exclude either whole or any part of income of such trust or institution due to operation of sub-section (1) of section 13, then, Principal Commissioner or Commissioner may by order in writing cancel registration of such trust or institution: Provided that registration shall not be cancelled under this sub-section, if trust or institution proves that there was reasonable cause for activities to be carried out in said manner. Page 17 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT 13. Rule 11AA of Rules, 1962, stipulates for requirement for approval of institution or fund under Section 80G of Act. Rule 11AA reads as under : 11AA. Requirements for approval of institution or fund under Section 80G. (1) 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) application shall be accompanied by 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 last three years, whichever is less; (iii) Copies of accounts of institution or fund since its inception or during last three years, whichever is less. (3) Commissioner may call for such further documents or information from institution or fund or cause such inquiries to be made as he may deem necessary in order to satisfy himself about genuineness of activities of such institution or fund. (4) Where Commissioner is satisfied that all conditions laid down in clauses (i) to (v) of sub-section (5) of Page 18 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT section 80G are fulfilled by institution or fund, he shall record such satisfaction in writing and grant approval to institution or fund specifying assessment year or years for which approval is valid. (5) Where Commissioner is satisfied that one or more of conditions laid down in clauses (i) to (v) of sub-section (5) of section 80G are not fulfilled, he shall reject application for approval, after recording reasons for such rejection in writing : Provided that no order of rejection of application shall be passed without giving institution or fund opportunity of being heard. (6) time limit within which Commissioner shall pass order either granting approval or rejecting application shall not exceed six months from [end of month in] which such application was made : Provided that in computing period of six months, any time taken by applicant in not complying with directions of Commissioner under sub-rule (3) shall be excluded. 14. reading of Section 12A shows that registration under Section 12A is pre-condition for availing of benefit under Sections 11 and 12 of Act. Section 11 provides for exemption of income which is applied for charitable purposes. Section 12 is in nature of Explanation to Page 19 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT Section 11. Before person can claim benefit of Section 11 or Section 12, as case may be, he must obtain registration under Section 12A. application for registration under Section 12A has to be made in Form No. 10A prescribed by Rule 17A before expiry of one year from date of creation of trust or establishment of institution, whichever is later. It has to be made by person in receipt of income of trust. 15. Section 80G of Act does not relate to assessment of trust or institution whose income are not liable to be included in computation of taxable income under various provisions of Act referred therein. Primarily, Section 80G is related to giving deduction in respect of donations made by person who, but for this provision, would not be eligible for such deduction because donations are not ordinarily considered to be expenses incurred for purpose of earning income and liable to be deducted therefrom, since all donations generally are not treated as eligible for deduction, but only such donations as are made to funds or institutions named in sub-section (2) of Section 80G of Act are eligible for such deduction. It also includes general clause any fund or institution to which this section applies provision which was needed to identify trusts or funds or institution not specifically named in statute, but fell in that category. That object was achieved by enacting sub-section (5) of Section 80G which helps identify funds or institutions donation to which qualifies for deduction under Section 80G of Act. It provides that 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 Page 20 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT under 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 insertion of clause (vi), it being not statutory requirement, even in absence of certificate under Section 80G, it was possible for donor to satisfy Income Tax Officer independently about eligibility of donations made by him for deduction. It was in order to keep check on inquiry into such details which may not be possible for every donor to harness and make good claim which otherwise he is legitimately entitled to make, and also to relieve Income Tax Officer to hold such enquiry in respect of 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 same fund or institution, to simplify procedure, provision was made for recognising, what was, prevailing practice by making statutory provision in that regard. It is also to be noticed that whether income of institution or fund would ultimately be liable to inclusion in its total income at close of assessment year or not cannot be determined at time of making of donation. eligibility of donation for deduction has to be considered with reference to point of time at which donation is made and not with respect of time in future depending on assessment of donee. That is where use of verb in future tense 'would' has been used and not in present or past perfect tense so as to take into consideration actual inclusion or exclusion or extent of inclusion or exclusion. direct nexus of clause (i) of sub- section (5) of Section 80G, as appears to us, is to eligibility of institution or fund to claim that its income is not liable to be included in computation of total income. two are different Page 21 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT concepts. First, whether institution or fund is such whose income is not liable to be included in computation of total income it depends on its status or character. second is actual assessment of income, which necessarily takes place in future after donation is received by donee on fulfillment of other conditions about application of income by eligible trusts, which in very nature of things can operate only after receipt of income. actual extent of exclusion from or inclusion in computation of total income, receipts of such institution or fund, depends on fulfillment of further conditions which may or may not exist at close of year and has no direct relation to purpose with which provision is made. latter falls in realm of assessment of trust, institution or fund which derives income which is not ordinarily includible in its total income. 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 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 maximum limit also for such eligibility and donations beyond such limit by person may not get deduction, even if it is to approved institution under Section 80G. Likewise, actual inclusion of any income in assessment of donee as taxable income, does not affect entitlement of donor to claim deduction under Section 80G, if on date when he made donation conditions were fulfilled. That was law before insertion of clause (vi) and apart from fact that by introducing clause (vi) with Rule 11AA method of proving eligibility to claim deduction has Page 22 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT been provided by statute, there has been no alternation in substantive provision, that is to say, entitlement of donor to claim deduction depends on eligibility of donee to claim exemption of its income on 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 application for registration under Section 12A and registered for that purpose. Once 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)) 16. inquiry for purpose of grant of approval under Section 80G relates to, whether trust is registered under Section 12A, whether it is trust wholly for charitable purpose or religious purpose and whether income received by it is liable to be considered under Section 11. 17. In case on hand, indisputably, assessee has not produced any certificate of registration under Section 12A of Act. In absence of such certificate, whether Appellate Tribunal could have straightway come to conclusion about charitable activities of trust and directed Commissioner to grant approval under Section 80G ? 18. In our opinion, answer has to be in negative. At this stage, we deem it appropriate to refer to Rule 17A of Page 23 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT Rules, 1962. Rule 17A is with regard to application for registration of charitable or religious trusts, etc. same reads as follows : 17A (1). application under clause (aa) or clause (ab) of sub-section (1) of section 12A for registration of charitable or religious trust or institution shall be made in Form No. 10A and accompanied by following documents, namely :- (a) where trust is created, or institution is established, under instrument, self-certified copy of instrument creating trust or establishing institution; (b) where trust is created, or institution is established, otherwise than under instrument, self- certified copy of document evidencing creation of trust, or establishment of institution; (c) self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as case may be; (d) self-certified copy of documents evidencing adoption or modification of objects, if any; (e) where trust or institution has been in existence during any year or years prior to financial year in which application for registration is made, self-certified copies of annual accounts of trust or institution relating to such prior year or years (not being more than three years immediately preceding year in which said Page 24 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT application is made) for which such accounts have been made up; (f) note on activities of trust or institution; (g) self-certified copy of existing order granting registration under section 12A or section 12AA, as 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 case may be, if any. (2) Form No. 10A shall be furnished electronically,-- (i) under digital signature, if return of income is furnished under digital signature; (ii) through electronic verification code in case not covered under sub-clause (i). (3) Form No. 10A shall be verified by person who is authorised to verify return of income under section 140, as applicable to assessee. (4) Principal Director General of Income-tax (Systems) or Director General of Income-tax (Systems), as case may be, shall specify 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 said form so furnished. Page 25 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT 19. We take notice of fact that even for purpose of registration of charitable or religious trust, application has to be accompanied by self-certified copy of order granting registration under Section 12A or Section 12AA, as case may be. At same time, even if there is order rejecting application for grant of registration under Section 12A or Section 12AA, same has to be annexed along with application under Section 17A. 20. Appellate Tribunal, instead of addressing itself on aforesaid issue, straightway looked into Section 2(15) of Act. Section 2(15) of Act merely defines term 'charitable purpose'. issue in present case is with regard to grant of approval under Section 80G of Act in absence of any valid registration certificate under Section 12A of Act. Once charitable trust is registered under Section 12A, question whether assessee Trust is for charitable purpose need not be gone into. Indisputably, in case on hand, charitable trust is not registered under Section 12A of Act. 21. In aforesaid context, we may refer to decision of Punjab and Haryana High Court in 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 Bench, observed as under : We have heard learned counsel for appellant, but find no merit in present appeals. As per Section 12AA of Act, application for registration of Trust and Page 26 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT Institution is required to be made within one year from date of creation of Trust or Establishment of such Institution. procedure for registration of Trust or Institution is prescribed under Section 12AA of Act. In terms of Clause (a) of Section 12AA of Act, Commissioner is to satisfy himself about genuineness of activities of Trust on such inquiries as he may deem necessary. Sub-section (1A) and (2) of Section 12AA of Act, are procedural in nature, whereas Sub-section (3) of Section 12AA of Act, empowers Commissioner to cancel registration of Trust or Institution, if he is satisfied that activities of such Trust or Institution are not genuine or are not carried out in accordance with objects of Trust or Institution. Section 11 of Act contemplates that income as specified therein shall not be included in total income of previous year of person in receipt of income derived from property held under Trust wholly for charitable or religious purposes, whereas Section 12 of Act, deals with contributions received by Trust or Institution, established for charitable and religious purposes, receiving contribution, shall not be income in terms of Section 11 of Act. benefit of Sections 11 and 12 of Act, are available only if such Trust or Institution is registered under Section 12AA of Act. On other hand, Section 10(23C) of Act are provisions of Act in substitution of earlier provisions of Section 10(22) of Act as to which income shall not be Page 27 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT included in computing total income of any person. Therefore, provisions of Sections 11, 12 or Section 10(23C) of Act, deal with income of Trust or of Institution and circumstances as to when such income is to be excluded for computing total income, but basis of such benefit is registration under Section 12AA of Act. Unless Trust or Institution is registered under Section 12AA of Act, such Trust or Institution shall not be entitled to exclude from its total income, deductions or contributions or from other sources. Therefore, principles laid down for excluding income from consideration under Section 10(22) now 10(23)(C) or Sections 11 and 12 are not applicable while considering application for registration under Section 12AA of Act. application for registration is required to be made within one year of creation of Trust. Section 12AA of Act, requires satisfaction in respect of genuineness of activities of Trust, which includes activities which Trust is undertaking at present and also which it may contemplate to undertake. insertion of sub-section (3) to Section 12AA of Act, clarifies said fact, when it empowers Commissioner to cancel registration if activities of Trust are not carried out in accordance with such objects. Therefore, object of Section 12AA of Act, is to examine genuineness of objects of Trust, but not income of Trust for charitable or religious purposes. stage for application of income is yet to arrive i.e. when such Trust or Institution files its return. Therefore, we find Page 28 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT that judgments referred to by learned counsel for appellant are not applicable to facts of present case arising out of question of registration of Trust and not of assessment. 22. We may refer to and rely upon Division Bench decision of Delhi High Court in 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 procedure for registration. Reading section, it becomes clear that after application is made, officer has to call for documents or information from trust to satisfy himself about genuineness of activities of trust. He can make further enquiry as he may deem necessary. It is only after satisfying himself about objects of trust and genuineness of its activities that he has to pass order in writing registering trust or institution. And if he is not satisfied, he can reject same. 23. In view of aforesaid, we are convinced that order passed by Appellate Tribunal is not sustainable in law. This Tax Appeal succeeds and is hereby allowed. impugned order passed by Income Tax Appellate Tribunal is hereby quashed and set-aside. two substantial questions of law formulated in present Tax Appeal are answered in favour of Revenue and against assessee. Page 29 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 C/TAXAP/29/2019 JUDGMENT 24. Although assessee has thought fit not to appear before this Court either in person or through advocate and oppose this Appeal, yet we clarify that it shall be open for assessee Trust to apply for registration under Section 12AA of Act and obtain appropriate certificate under Section 12A of Act. If Trust is in position to obtain certificate under Section 12A of Act, then it shall be open for Trust to once again apply for necessary approval under Section 80G of Act in accordance with law. (J. B. PARDIWALA,J.) (A. C. RAO,J.) /MOINUDDIN Page 30 of 30 Downloaded on : Mon Mar 16 20:00:40 IST 2020 Commissioner of Income-tax (Excemptions) v. Shree Tapeshwar Hanumaji Bajrang Charity Trust