COMMISSIONER OF INCOME TAX I V. BABA KARTAR SINGH DUKKI ED TRUST

ITA/2/2013

AI Insights

The case revolves around the Commissioner of Income Tax-I, Ludhiana, challenging the decision of the Income Tax Appellate Tribunal, which had directed the registration of Baba Kartar Singh Dukki Educational Trust as a charitable entity. The Commissioner argued that the Trust's practices, such as payments to individual trustees and the lifelong membership of trustees, indicated that it was not operating solely for charitable purposes. However, the Tribunal and the High Court emphasized that these issues pertain more to the assessment of the Trust's activities post-registration rather than at the registration stage itself. The court referenced a similar case, ITA No.701 of 2010, to support its decision.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 734162 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 08-10-2013
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax-II, Chandigarh Versus M/s Surya Educational & Charitable Trust
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Respondent
• Court: HIGH COURT
• Department Lawyers: PANKAJ JAIN
• Assessee Lawyers: RAJESH KATOCH
• Keywords: Bank account transactions; Charitable Trust; Commissioner of Income Tax; Income tax appellate tribunal; Registration; Life long members
• Section: 12AA; 13

Judgement Text

"ITA No.2 of 2013 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. No.2 of 2013. Date of Decision:-08.10.2013. Commissioner of Income Tax-I, Ludhiana. .........Appellant. Versus Baba Kartar Singh Dukki Educational Trust, Village Latala, Ludhiana. .........Respondent. CORAM: Hon'ble Mr. Justice Rajive Bhalla Hon'ble Mr. Justice Dr. Bharat Bhushan Parsoon. ***** Present:- Mr. Rajesh Katoch, Advocate for the appellant. Mr. Pankaj Jain, Advocate for the respondent. Rajive Bhalla, J (Oral) The revenue challenges order dated 27.6.2012 passed by the Income Tax Appellate Tribunal, Chandigarh (hereinafter referred to as the Tribunal), setting aside order passed by the Commissioner of Income Tax and as a consequence, directing registration of the respondent as a charitable Trust. Counsel for the revenue submits that as members of the respondent-Trust are life long members and bank account of the respondent reveals that certain sums of money were paid to individual trustees, the Tribunal was not justified in reversing the order passed by the Yag Dutt 2013.10.22 10:38 I attest to the accuracy and integrity of this document ITA No.2 of 2013 -2- Commissioner of Income Tax. It is further contended by reference to Section 13 of the Income Tax Act, 1961 (for short, the Act) that money paid by a Trust to an individual trustee is to be excluded from the total income of a Trust and as account books presented by the respondent-Trust clearly reveal that certain amounts were paid to individual trustees, the order passed by the Commissioner of Income Tax should not have been reversed by the Tribunal. Counsel for the respondent submits that at the stage of considering registration of a Trust under Section 12AA of the Act, the only issue that arises is whether the Trust or Society is charitable in nature or not. The question whether income has been rightly or wrongly applied or has been paid to individual members of the Trust is a matter to be considered at the time of assessment of the return to be filed by the charitable institution. Counsel for the respondent also places reliance on a Division Bench judgment of this Court in ITA No.701 of 2010 titled “Commissioner of Income Tax-II, Chandigarh Versus M/s Surya Educational & Charitable Trust” decided on 5.10.2011. We have heard counsel for the parties, perused the impugned order as well as the order passed by the Commissioner of Income Tax and the substantial questions of law, but find no reason to hold that the impugned order suffers from any error or raises a substantial questions of law much less questions of law framed by the revenue. The object of Section 12AA of the Act is to examine the genuineness of the objects of the Trust and though Yag Dutt 2013.10.22 10:38 I attest to the accuracy and integrity of this document ITA No.2 of 2013 -3- while examining genuineness, the income as well as resources of the Trust may be taken into consideration but any suspicion as to these facts cannot be the sole criteria for rejecting an application under Section 12A of the Act. This apart, there appears to be a misconception amongst officers exercising power under Section 12AA of the Act that if a trustee is a life long member of a Trust, it automatically raises an inference that the Trust is not charitable. The fact that a trustee is a life member, may be relevant but cannot by itself lead to a finding that the Trust is not charitable. In view of what has been stated hereinbefore, in the absence of any legal infirmity, the order passed by the Tribunal is affirmed and the appeal is dismissed. (Rajive Bhalla) Judge (Dr. Bharat Bhushan Parsoon) Judge October 08, 2013 'Yag Dutt' Yag Dutt 2013.10.22 10:38 I attest to the accuracy and integrity of this document "