Rajasthan HC upholds Order granting Section 12AA Exemption to a Charitable Trust
The revenue has challenged the decision of the Income-Tax Appellate Tribunal by which the Tribunal has set aside the revisional order passed by the Commissioner of Income-Tax in the exercise of powers under Section 263 of the Income-Tax Act, 1961 denying the benefit of exemption in favor of respondent-assessee Trust on its income being charitable Trust.
The respondent Trust, Manna Trust is a registered charitable trust. The assessing officer for the assessment year 2016-17 accepted the return filed by the trust and granted exemption as applicable under law. The Commissioner, Income-Tax took the said order in revision under Section 263 of the Act and held that the activities of the trust were not charitable in nature but were commercial activities and therefore denied the exemption. This order was carried in appeal and Tribunal by the impugned judgment reversed the judgment of the Commissioner primarily on the ground that the registration of the Trust under Section 12AA of the Act still continues. Meaning thereby, that the revenue does not dispute the nature of the charitable activities. Secondly, commercial activities are not primary activities of the trust and the predominant activity of the trust is charitable. The generation of reasonable surplus would not indicate that the trust is not engaged in charitable activities. The Tribunal was also of the opinion that the assessing officer has made the proper inquiry and having taken a plausible view, the Commissioner in the exercise of revisional powers could not have reversed the assessment order.
The division bench of Chief Justice Akil Kureshi and Justice Rekha Borana held that power under Section 263 of the Act can be exercised only when twin conditions of the order of assessing officer are erroneous and prejudicial to the interest of revenue are satisfied. The Jurisdiction of the Commissioner under Section 263 of the Act is restricted and cannot be equated with the appellate jurisdiction. The Commissioner does not sit in appeal. The Tribunal also correctly noticed that the registration of the Trust under Section 12 AA of the Act has not been disturbed. We also notice that in the earlier order when the assessing officer had denied the benefit of exemption to the trust, the Commissioner (Appeals) had reversed the order of the assessment.
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