Case Law Details

Case Name : Commissioner of Income Tax- I Vs Saurashtra Kutch Stock Exchange Ltd. (Gujarat High Court)
Appeal Number : Tax Appeal No. 376 of 2010
Date of Judgement/Order : 08/08/2011
Related Assessment Year :
Courts : All High Courts (3707) Gujarat High Court (314)

CIT Vs Saurashtra Kutch Stock Exchange Ltd. (High Court of Gujarat at Ahmedabad ) -Section 11 of the Act envisages exemption of certain income of the trust registered under Section 12A of the Act. This itself may require certain scrutiny and applicability of the exemption at the hands of the Assessing Officer. Despite registration under Section 12A of the Act, it is not even the case of the assessee that without any application of mind, the Assessing Officer must grant exemption of whatever claim put forth by the assessee.

It is in this background that the condition would be read and understood. While granting exemption under Section 11 of the Act, the claim of the assessee shall have to be examined by the Assessing Officer irrespective of registration granted under Section 12A of the Act. This, however, would not mean that the Assessing Officer can re-examine the question of eligibility of the trust to seek exemption under Sections 11 and 12 of the Act.

Once the CIT grants approval for registration of the trust u/s 12A, the AO is not required to re-examine the entire question of the object and purpose of the trust even though the approval was given with the said condition as the CIT cannot keep the very foundation issue open to be judged by the AO.

 When there is no conclusion that any part of the funds were diverted or applied as not permitted under sub-section (3) of Section 13, the exemption cannot be denied only on the basis of some irregularities observed by SEBI in managing the funds of the trust. – Revenue’s appeal dismissed.

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

TAX APPEAL No. 376 of 2010
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COMMISSIONER OF INCOME TAX- I – Appellant(s)

Vs

SAURASHTRA KUTCH STOCK EXCHANGE LTD – Opponent(s)

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Date: 08/08/2011

ORAL ORDER

(Per : HONOURABLE MR.JUSTICE AKIL KURESHI)

1. This appeal is directed against the judgement of the Tribunal dated 26.6.2009 raising the following question for our consideration:-

Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by CIT (A) and thereby holding that the assessee is entitled to exemption u/s. 11 of the Act?”

2. By a separate order passed today in Tax Appeal No.367 of 2010, we have not entertained this question making the following observations:-

“14. Thus, while granting registration under Section 12A of the Act, the Commissioner has to make necessary inquiries and such registration would be granted only if necessary requirements are fulfilled. It was in this background that this Court in case of Hiralal Bhagwati (supra) held and observed that “It is also required to be noted that once the registration under Section 12A(a) of the Act is granted, the grant of benefit cannot be denied. The Income Tax Officer was not justified in refusing the benefits which would otherwise accrue under the registration. If there is no registration, as contemplated under Section 12A(a) read with Rule 17(A), the revenue would have been justified in making the submission that the benefit cannot be granted but where the application for registration is submitted and the registration having been granted, the benefit cannot be denied on the ground that the scheme is not for the benefit of the public at large.”

15. Looked from this angle, the condition contained in the registration which is at the center of the controversy, has to be read and appreciated. To recall the said condition permitted the Assessing Officer at the time of passing of assessment order for each year to examine the matter regarding exemption under Section 11. The condition further provided that registration under Section 12A of the Act by itself shall not confer any right on the applicant for grant of exemption under Section 11 of the Act for any assessment year.

16. Such condition cannot be read or understood as to giving powers to the Assessing Officer to re-examine the entire question of the object and purpose of the trust and to come to independent conclusion whether the same was for any charitable purpose. Such exercise was required to be and presumably done by the Commissioner at the time of granting registration under Section 12A of the Act. To read the condition noted above to permit the Assessing Officer to reopen the entire question at the time of framing of assessment for each year, would negate the purpose for granting registration. We cannot presume that the Commissioner while granting registration would have kept the very foundation issue open to be judged by the Assessing Officer while framing assessment for each year.

17. Undoubtedly the assessee accepted the registration with the above-mentioned condition. Undisputedly the assessee did not challenge this condition and accepted the registration order as a whole. Nevertheless this by itself would not permit the revenue to enforce this condition as to permit the Assessing Officer to reopen the entire question while considering the exemption under Section 11 of the Act in each subsequent assessment year. Section 11 of the Act envisages exemption of certain income of the trust registered under Section 12A of the Act. This itself may require certain scrutiny and applicability of the exemption at the hands of the Assessing Officer. Despite registration under Section 12A of the Act, it is not even the case of the assessee that without any application of mind, the Assessing Officer must grant exemption of whatever claim put forth by the assessee. It is in this background that the condition would be read and understood. While granting exemption under Section 11 of the Act, the claim of the assessee shall have to be examined by the Assessing Officer irrespective of registration granted under Section 12A of the Act. This, however, would not mean that the Assessing Officer can re-examine the question of eligibility of the trust to seek exemption under Sections 11 and 12 of the Act.

18. In view of the above discussion, we do not find that the view any different from the case of Hiralal Bhagwati (supra) could be taken in the present case also. In our view, therefore, the Assessing Officer was not justified in examining different clauses of the objects of the trust to reopen the question of eligibility of the trust for exemption under Sections 11 and 12 of the Act. In view of this discussion, we do not find it necessary to consider other contentions of the assessee in this regard.”

3. In the result, the appeal is dismissed.

[AKIL KURESHI, J.]

[MS. SONIA GOKANI, J.]

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