CIT Vs Sahasra Linga Yoga Anjaeya Saptharishi Peedam Seva Trust (Madras High Court)
Summary: The Madras High Court dismissed the Revenue’s Tax Case Appeal challenging the Tribunal’s decision granting registration to the assessee trust under Section 12AA of the Income Tax Act, 1961. The substantial question was whether the Tribunal was right in holding that the assessee trust was entitled to registration under Section 12AA. The Department relied upon the Court’s earlier decision in The Commissioner of Income Tax-I, Madurai vs. Arulmigu Sri Kamatchi Amman Trust, Karaikudi, TCA No.643 of 2011, which the High Court treated as covering the issue.
The Tribunal had accepted the assessee’s claim for registration on the basis that its trust deed contained a mixture of religious and charitable objects. Referring to the operative portion of the earlier decision, the High Court noted that Section 11(1)(a) applies to income derived from property held under trust wholly for charitable or religious purposes. The earlier ruling held that Section 12AA does not make a disqualifying distinction between trusts created for charitable purposes and those created for religious purposes, and that the existence of charitable as well as religious objects does not by itself prevent an application for registration. Applying that ruling, the High Court answered the substantial question in favour of the assessee and dismissed the Revenue’s appeal without costs.
Cases Discussed
- The Commissioner of Income Tax-I, Madurai vs. Arulmigu Sri Kamatchi Amman Trust, Karaikudi — The Court relied upon this earlier decision holding that Section 12AA does not disqualify a trust merely because its objects are charitable as well as religious; the precedent was treated as covering the issue in the present appeal.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
Mr.J.Narayanasamy, learned Senior Standing Counsel for the appellant/ Department, circulates a decision of this Court in The Commissioner of Income Tax-I, Madurai vs. Arulmigu Sri Kamatchi Amman Trust, Karaikudi in TCA.No.643 of 2011, which he says covers the issue.
2. The substantial question admitted in the present matter is as follows:-
“Whether on the facts and circumstances of the case, the Tribunal was right in holding that the assessee trust is entitled for registration under Section 12AA of the Act.”
3. The questions that arose in Shri Kamatchi Amman’s case are as follows:-
“1. Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the assessee trust in entitled to registration under Section 12AA of the Act, even though the trust not entitled to claim exemption since the trust has twin objectives which are both charitable and religious in nature?
2. Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in directing the Commissioner of Income-tax to grant registration under Section 12AA of the Act to the assessee trust, even though the assessee not established two parameters i.e., genuineness of the trust and charitable activities carried out in terms of the trust deed in terms of the provisions of Section 12AA[1][b][ii] of the Income Tax Act, 1961?”
4. The Tribunal, in accepting the case of the assessee that it is entitled to registration under Section 12AA, has proceeded on the basis that the deed of trust contained a mixture of both religious and charitable objections.
5. In light of the decision in Shri Kamatchi Amman’s case, the operative portion of which is extracted hereunder, the question is answered in favour of the assessee.
“5.We have carefully considered the above submission. For the purpose of making an application under Section 12AA, the applicant must apply in Form 10. The said Form prescribes the format of the notice of accumulation of income to be given by charitable and religious trusts under Section 11[2] of the Act. For the purpose of availing the benefit of Section 11, registration is required. Section 11[1][a] reads as under:-
“11[1]. Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income– [a] income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property;”
6. From a reading of the above, it is clear that the income derived from the property held under trust wholly for charitable or religious purposes, shall not be included in the total income of the Trust. Therefore, the said provision would be applicable to both the Trusts established with the object of charitable as well as religious purposes. Therefore, Section 12AA of the Act does not make any difference between the Trusts created with the object of charitable and religious purposes and, even if the Trust is not created with both the objects, law does not make any disqualification for the trust to make an application for registration. Therefore, the Tribunal has correctly applied the provision of law and allowed the appeal, which finding is based on valid material evidence. The finding of the Tribunal is not perverse and it is a question of fact. Therefore, we find no ground to cause our interference into the order passed by the Tribunal. Accordingly, the order passed by the Tribunal is confirmed and both the substantial questions of law raised herein are answered against the Revenue.
7. In the result, the appeal is devoid of merits and hence the same is dismissed.”
6. This Tax Case (Appeal) is dismissed in the above terms. No costs.
