Commissioner Of Income Tax Rajkot-Ii vs Surajben Harakhchand Mehta Public ... on 3 December, 2025

Author: A.S. Supehia

Bench: A.S. Supehia

                                                                                                                NEUTRAL CITATION




                               C/TAXAP/946/2011                                   ORDER DATED: 03/12/2025

                                                                                                                 undefined




                                       IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
                                                R/TAX APPEAL NO. 946 of 2011
                         ==========================================================
                                       COMMISSIONER OF INCOME TAX RAJKOT-II
                                                     Versus
                               SURAJBEN HARAKHCHAND MEHTA PUBLIC CHARITABLE TRUST
                         ==========================================================
                         Appearance:
                         MAUNIL G YAJNIK(9346) for the Appellant(s) No. 1
                         DARSHAN R PATEL(8486) for the Opponent(s) No. 1
                         ==========================================================
                              CORAM:HONOURABLE MR. JUSTICE A.S. SUPEHIA
                                    and
                                    HONOURABLE MR. JUSTICE PRANAV TRIVEDI

                                                Date : 03/12/2025
                                                 ORAL ORDER

(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)

1. At the outset learned advocates appearing for the respective parties have fairly submitted that the substantial question of law framed in the present tax appeal would get answered in view of the judgment passed by the Hon'ble Supreme Court in case of Ananda Social and Educational Trust Vs. Commissioner of Income Tax and Anr. Reported in (2020) 17 SCC 254 as well as the case of Commissioner of Income Tax (Exemptions) Vs. International Health Care Education and Research Institute reported in (2025) SCC Online SC 607.

2. In the present Tax Appeal, the appellant department has assailed the Judgment and Order dated 11.02.2011 passed by the Income Tax Appellate Tribunal, Rajkot in ITA No. 1333/2010.

3. Pursuant to the order dated 05.09.2012, the Division Bench of this Court framed the following substantial question of law :-

"We have heard Mr. Pranav Desai, learned Senior Counsel for the appellant.

ADMIT. We formulate the substantial question of law as under:-

"Whether the Appellate Tribunal is right in law and on facts in holding that the assessee trust was to be registered under Section 12A of the IT Act and the CIT was not empowered to make any enquiry for establishing the genuineness of the assessee trust?"

NEUTRAL CITATION

C/TAXAP/946/2011 ORDER DATED: 03/12/2025

undefined

Issue Notice to the respondents. Paper bok be submitted within three months."

4. The brief facts of the case are that Surajben Harkhchand Mehta Public Charitable Trust, Rajkot has come into existence on 01.11.2009 by executing a trust deed. The trust deed was registered with the Charity Commissioner on 15.04.2010. On 18.05.2010, the trust filed an application Form No. 10A for registration under Section 12AA of the Income Tax Act, 1961 (for short ' the Act').

5. At the time of filing the present Tax Appeal and framing of the substantial question of law, the appellant Department has placed reliance on the Judgment passed by the Kerala High Court in the case of Self Employers Service Society Vs. CIT reported in 247 ITR 18 (Kerala) and the Judgment passed by Karnataka High Court in the case of Sanjeevamma Hanumanthe Gowda Charitable Trust Vs. Director of Income Tax (Exemptions) in (2006) 155 Taxman 466 (Kar.) as well as the judgment passed by Punjab and Haryana High Court in the case of Aman Shiv Mandir Trust Vs. CIT in (2007) 162 Taxmann 412, and contended that tribunal has erroneously held that the Commissioner has to hold the inquiry and satisfy himself about the genuineness of the Trust and if it is found that the activities as referred while registration has not commenced, and not accepted to carry out any donation activities, and until the necessary enquiries get concluded and clarification is obtained from the office of the Commissioner, the Commissioner after holding such inquiry and after satisfying the genuineness of the activity of the Trust or the institution, may grant or reject the application for registration.

6. At this stage we may refer to the decision of the Supreme Court in the case of Ananda Social and Educational Trust (supra). The Supreme Court while examining the scope of the provision under Section

NEUTRAL CITATION

C/TAXAP/946/2011 ORDER DATED: 03/12/2025

undefined

12AA of the Income Tax Act, 1961 has held thus:-

"18. The Income Tax Appellate Tribunal reversed the decision of the Commissioner of Income Tax on the basis of the judgment of the Delhi High Court in matters referred to above.

19. For the reasons stated earlier, we are of the view that the object of the provision in question is to ensure that the activities undertaken by the rust are not contrary to its objects and that a Commissioner is entitled to refuse registration if the activities are found contarry to the objects of the rust.

20. In the present case, what has been found is that the trust has not spent any amount of its income for charitable purposes. This is a case of not carrying out the objects of the trust and not(sic the case of ) carrying on activities contrary to its object. These circumstances may arise for any reasons including not finding suitable circumstances for carrying on activities. Undoubtedly the inaction in carrying out charitable purposes might also become actionable depending on other circumstances, but we are not concerned with such a case here."

7. In the present case, it is not in dispute and has been precisely observed by the Tribunal that the Trust came into existence on 01.11.2009 by executing a Trust deed. The said Trust deed was registered with Charity Commissioner on 15.04.2010 and the Application Form no. 10A for registration under Section 12AA of the Act on 18.05.2010. However, the Commissioner did not grant registration under Section 12AA on the ground that he was not convinced with the genuineness of the activities of the Trust. Thus, the stage of carrying out or undertaking the activity was not in progress, however the Commissioner refused the registration. Ultimately, the Tribunal after considering the rival submissions has held thus :-

"The Commissioner could not point out any material in his order nor the same available on record based on which it can be said that the object of the trust was not charitable. Section 12AA does not speak anywhere that the Commissioner, while considering the application for registration shall see that the income derived by the Trust has not been spent for the charitable purpose or such institution is earning profit or misusing the income derived by such charitable institution from its charitable activities though may be a ground for refusing exemption only with respect to that part of the income but in my view,

NEUTRAL CITATION

C/TAXAP/946/2011 ORDER DATED: 03/12/2025

undefined

it cannot be considered to be synonym to the genuineness of the activities of the trust. On perusal of the order of the Commissioner I find that the Commissioner was of the view that since there were no activities, the assessee did not satisfy the condition about the genuineness of the activities, which in my view is nor correct. When there are no activities at all, then there is no question of holding that the activities were not genuine. The genuineness of the activities only can be verified when there is some activity. "

8. Reliance is placed on the Judgment passed by the Hon'ble Supreme Court in the case of International Health Care Education (supra), wherein it has been held thus,

"14. We may agree to a certain extent with the learned Additional Solicitor General that the very purpose for any assessee to seek registration under Section 12AA of the Act is to claim exemption under Sections 10 and 11, respectively, of the Act as the case may be. Therefore, before seeking registration, it is essential that the trust should adduce cogent material to the satisfaction of the Commissioner that the activities are genuinely charitable in nature.

15. To the aforesaid extent there is no problem. We may only say that mere registration under Section 12 AA of the Act 1961, automatically does not entitle any charitable trust to claim exemption under Sections 10 and 11, respectively, of the Act 1961. When a return is filed by any trust claiming exemption it is for the Assessing Officer to look into all the materials and satisfy itself whether the exemption has been claimed genuinely or not. If the Assessing Officer is not convinced it is always open for him to decline grant of exemption."

9. Thus, we find that the observations of the Tribunal reconcile with the Judgments passed by the Hon'ble Supreme Court and no illegality or infirmity is found in the order under challenge. Hence, the substantial question of law is answered in favour of the assessee, in light of the Judgments passed by the Hon'ble Supreme Court.

(A. S. SUPEHIA, J)

(PRANAV TRIVEDI,J) Radhika / 6