Case Law Required
Manish
(Querist) 09 September 2008
This query is : Resolved
Can anyone provide details of case : Sanjeevamma Hanumanthe Gowda Charitable Trust v. Director of Income-tax
(Exemptions) (2006) 285 ITR 327 (Karn.)
H. S. Thukral
(Expert) 10 September 2008
[KARNATAKA HIGH COURT]
Sanjeevamma Hanumanthe Gowda Charitable Trust
v
D.I.T (Exemption)
N. KUMAR
13 Mar 2006
BENCH
P. VISHWANATHA SHETTY & N. KUMAR
COMPARATIVE CITATIONS
2006 (285) ITR 327, 2006 (203) CTR 533, 2006 INDLAW KAR 183
ACTS REFERRED
Income-tax Act, 1961[s. 12AA, s. 11, s. 13]
CASE NO
It Appeal No. 3248 of 2005
LAWYERS
S. Parthasarathi, M.V. Seshachala
.JUDGMENT TEXT
The Judgment was delivered by : N. KUMAR
The appeal is admitted to consider the following substantial question of law :
"Whether the authorities were justified' in denying registration to the petitioner under s. 12AA of the IT Act, 1961 on the ground that the activities of the assessee are purely commercial in nature ?"
Heard the learned counsel for the parties.
2. The appellant claims to be a charitable trust established by a deed of trust dt. 1st March, 1997. The said deed of trust sets out the purpose and object for which the trust was created. The appellant-trust constructed a building which was completed in the year 2001. Thereafter, it applied for registration under s. 12A of the IT Act, 1961 (for short hereinafter referred to as 'the Act') to the IT authorities for registration as charitable trust to enable it to claim exemptions under the Act.
2.1 In the impugned order dt. 24th June, 2002, the Director of IT (Exemption) rejected the readiest of the appellant on the ground that it is carrying on its activity by letting out the marriage hall on hire. Aggrieved by the said order the appellant preferred an appeal before the Tribunal. The Tribunal was also of the view that the hiring of the poultry was not for attainment of other objects, but seems to be the main object so far pursued by the appellant and therefore the assessee was not established wholly for charitable purposes, declined to entertain the appeal and dismissed the same by its order dt. 2nd Aug., 2005. Aggrieved by these two orders, the appellant is before us.
3. The learned counsel for the appellant contend that the mode of generating the income from the trust property is immaterial and it is the purpose of which the said income is utilised, should be the criteria to accord exemption on registration of the trust, and the authorities have completely misdirected their enquiry and therefore, the impugned orders are liable to be set aside.
4. Sec. 11 of the Act deal with exemptions available to income from property held for charitable or religious purposes. Exemption from tax will be allowed only in respect of the income actually applied to the purposes of the trust. Income derived for trust property must be determined on commercial principles. In order to be eligible for the aforesaid exemption the assessee has to get the trust registered under s. 12A of the Act. The assessee has to make an application in the prescribed form and comply with the other legal retirements mentioned in the aforesaid section. On receipt of such application for registration the CIT is under an obligation to follow the procedure prescribed under s. 12AA before he grants or refuses registration. What he is expected to do on receipt of such an application is, he shall call for such documents or information from the trust in order to satisfy himself about the genuineness of the activities of the trust or institution. In addition to securing information in the aforesaid manner, it is open to the CIT to make such enquiries as he deems necessary in this behalf. Having regard to the scheme of ss. 11, 12 and 13 ultimately what the CIT has to look into is not the source of income to the trust but whether such income is applied for charitable or religious purposes. The satisfaction of the CIT should be regarding the application of the income of the trust for the aforesaid purposes which only entitles the assessee to claim exemption. For arriving at such satisfaction primarily he has to look at the object of the trust, when the same is reduced into w
