My trust already has registration under section 12A. Can the Assessing Officer go behind it and re-examine whether the objects are charitable?
The Supreme Court dismissed the Revenue's appeals against a Gujarat High Court order that answered no, but it did so on a narrow ground. The Tribunal had held that the club's objects fell within general public utility under section 2(15) and that registration under section 12A was a fait accompli preventing the Assessing Officer from probing the objects further. The High Court dismissed the Revenue's appeals in limine as covered by Hiralal Bhagwati v. CIT. The Supreme Court found that both questions were concluded by that decision, which the Revenue had never challenged and which had attained finality. The appeals were therefore dismissed with no costs.
Decided by the Supreme Court (Supreme Court of India - Ashok Bhan and Dalveer Bhandari, JJ.) on 2008-03-04, reported as (2008) 300 ITR 214; AIRONLINE 2008 SC 64; (2008) 14 SCC 169. It bears on section 12A, section 2(15), section 10(23) of the Income Tax Act 1961, in Charitable Trusts & Exemption and Capital Gains Exemptions matters.
This is the order practitioners cite as Supreme Court authority for the Hiralal Bhagwati proposition that once registration under section 12A is granted the Assessing Officer cannot reopen the question of the trust's objects at assessment. Its authority is real but its reasoning is not: the Court dismissed the appeals because the Revenue had allowed Hiralal Bhagwati to become final rather than because it examined the point. That matters when you cite it. What is genuinely useful is the procedural lesson it turns on - where the Revenue does not challenge a High Court decision on a point of law, it cannot then resist the same point in another case governed by it. Note too that leave had been granted only on the registration question, the Court having earlier refused leave on whether a members' club serves a section of the public.
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The assessee, a club, claimed exemption under section 10(23) for assessment years 1991-92 and 1992-93 on the footing that its objects were exclusively charitable. The Assessing Officer rejected the claim and the Commissioner (Appeals) dismissed its appeals. The Tribunal allowed them by order of 20 January 2001. The Revenue appealed to the Gujarat High Court, proposing two substantial questions: whether the Tribunal was justified in holding that objects restricting the benefit to members of the club fell within the advancement of an object of general public utility under section 2(15), constituting a section of the public and not a body of individuals; and whether it was justified in holding that registration under section 12A was a fait accompli holding the Assessing Officer back from further probing the objects of the trust. The High Court dismissed the appeals in limine as covered by its own decision in Hiralal Bhagwati v. CIT (2000) 246 ITR 188. The Revenue appealed to the Supreme Court, which on 22 July 2002 granted leave only on the second question, declining leave on the first because the Revenue had not challenged the correctness of Hiralal Bhagwati.
The appeals were dismissed with no costs. On examining Hiralal Bhagwati the Court found that the second question was also concluded by that judgment. Since the Revenue had not challenged that decision, it had attained finality, and the second question had to meet the same fate as the first, on which leave had already been refused for the same reason. The Court observed that the fact that the second question was likewise covered by Hiralal Bhagwati appeared not to have been brought to the notice of the Bench which granted leave.
The order rests entirely on the finality of an unchallenged decision. Leave had been declined on the first question because the Revenue had not questioned the correctness of Hiralal Bhagwati, which governed it. On reading that judgment the Court found the second question - whether registration under section 12A precludes the Assessing Officer from reopening the objects - was decided there as well. The Revenue could not therefore be permitted to contest in this appeal a proposition it had allowed to become final in the same High Court. Leave on the second question had been granted only because that fact had not been placed before the Court at the time. No independent view was expressed on whether a members' club can be an institution for the advancement of an object of general public utility, or on the effect of registration under section 12A on the assessment.
Since the Revenue did not challenge the decision in the said case, the same has attained finality.
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Handle my notice → Ask a CA on WhatsAppThe Supreme Court dismissed the Revenue's appeals against a Gujarat High Court order that answered no, but it did so on a narrow ground. The Tribunal had held that the club's objects fell within general public utility under section 2(15) and that registration under section 12A was a fait accompli preventing the Assessing Officer from probing the objects further. The High Court dismissed the Revenue's appeals in limine as covered by Hiralal Bhagwati v. CIT. The Supreme Court found that both questions were concluded by that decision, which the Revenue had never challenged and which had attained finality. The appeals were therefore dismissed with no costs. This was decided by the Supreme Court (Supreme Court of India - Ashok Bhan and Dalveer Bhandari, JJ.) and bears on section 12A, section 2(15), section 10(23) of the Income Tax Act 1961. It is reported as (2008) 300 ITR 214; AIRONLINE 2008 SC 64; (2008) 14 SCC 169. This is the order practitioners cite as Supreme Court authority for the Hiralal Bhagwati proposition that once registration under section 12A is granted the Assessing Officer cannot reopen the question of the trust's objects at assessment. Its authority is real but its reasoning is not: the Court dismissed the appeals because the Revenue had allowed Hiralal Bhagwati to become final rather than because it examined the point. That matters when you cite it. What is genuinely useful is the procedural lesson it turns on - where the Revenue does not challenge a High Court decision on a point of law, it cannot then resist the same point in another case governed by it. Note too that leave had been granted only on the registration question, the Court having earlier refused leave on whether a members' club serves a section of the public. If it applies to you, the first step is this: Produce the section 12A registration and put the burden on the Assessing Officer to say under what power he is reopening the question of objects.
The assessee, a club, claimed exemption under section 10(23) for assessment years 1991-92 and 1992-93 on the footing that its objects were exclusively charitable. The Assessing Officer rejected the claim and the Commissioner (Appeals) dismissed its appeals. The Tribunal allowed them by order of 20 January 2001. The Revenue appealed to the Gujarat High Court, proposing two substantial questions: whether the Tribunal was justified in holding that objects restricting the benefit to members of the club fell within the advancement of an object of general public utility under section 2(15), constituting a section of the public and not a body of individuals; and whether it was justified in holding that registration under section 12A was a fait accompli holding the Assessing Officer back from further probing the objects of the trust. The High Court dismissed the appeals in limine as covered by its own decision in Hiralal Bhagwati v. CIT (2000) 246 ITR 188. The Revenue appealed to the Supreme Court, which on 22 July 2002 granted leave only on the second question, declining leave on the first because the Revenue had not challenged the correctness of Hiralal Bhagwati. The matter was decided on 2008-03-04 by the Supreme Court (Supreme Court of India - Ashok Bhan and Dalveer Bhandari, JJ.). On those facts the Supreme Court held as follows. The appeals were dismissed with no costs. On examining Hiralal Bhagwati the Court found that the second question was also concluded by that judgment. Since the Revenue had not challenged that decision, it had attained finality, and the second question had to meet the same fate as the first, on which leave had already been refused for the same reason. The Court observed that the fact that the second question was likewise covered by Hiralal Bhagwati appeared not to have been brought to the notice of the Bench which granted leave.
The order rests entirely on the finality of an unchallenged decision. Leave had been declined on the first question because the Revenue had not questioned the correctness of Hiralal Bhagwati, which governed it. On reading that judgment the Court found the second question - whether registration under section 12A precludes the Assessing Officer from reopening the objects - was decided there as well. The Revenue could not therefore be permitted to contest in this appeal a proposition it had allowed to become final in the same High Court. Leave on the second question had been granted only because that fact had not been placed before the Court at the time. No independent view was expressed on whether a members' club can be an institution for the advancement of an object of general public utility, or on the effect of registration under section 12A on the assessment. In the words reproduced by the source cited on this page: "Since the Revenue did not challenge the decision in the said case, the same has attained finality."
It was decided by the Supreme Court on 2008-03-04 and is reported as (2008) 300 ITR 214; AIRONLINE 2008 SC 64; (2008) 14 SCC 169. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 12A, section 2(15), section 10(23), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeals were dismissed with no costs. On examining Hiralal Bhagwati the Court found that the second question was also concluded by that judgment. Since the Revenue had not challenged that decision, it had attained finality, and the second question had to meet the same fate as the first, on which leave had already been refused for the same reason. The Court observed that the fact that the second question was likewise covered by Hiralal Bhagwati appeared not to have been brought to the notice of the Bench which granted leave. It arises in Charitable Trusts & Exemption and Capital Gains Exemptions matters, on section 12A, section 2(15), section 10(23) of the Income Tax Act 1961, and was decided by Supreme Court of India - Ashok Bhan and Dalveer Bhandari, JJ.. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Find out whether the Revenue accepted the governing High Court decision in your jurisdiction; an unchallenged decision that has attained finality is a strong answer. Cite this order for its outcome, but rely on Hiralal Bhagwati for the reasoning, since the Supreme Court gave none of its own. Keep the two questions separate - whether the objects qualify under section 2(15) and whether registration forecloses the enquiry - because they were treated separately here.
Still good law. The full order was read; it is short and complete. What stands is the dismissal, not a reasoned holding: the Court decided nothing about section 12A registration or section 2(15) on the merits, and gave its dismissal on the ground that Hiralal Bhagwati had attained finality against the Revenue. I have not read Hiralal Bhagwati itself, and section 2(15) has since been amended in ways this order does not consider, so this should not be treated as settling the substantive questions. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order gives no reasons of its own on either substantive question, so anything said here about the effect of section 12A registration reflects only what the Tribunal and the Gujarat High Court held, as recorded in the order. Hiralal Bhagwati v. CIT, on which everything turns, was not read. The batch line lists section 11, which the order does not mention; section 10(23), under which the exemption was actually claimed, is added. The reporter list supplied with the batch line mixes in citations from other years and other subjects, including Madhya Pradesh and criminal law reports; only those that appear sound are given. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeals were dismissed with no costs. On examining Hiralal Bhagwati the Court found that the second question was also concluded by that judgment. Since the Revenue had not challenged that decision, it had attained finality, and the second question had to meet the same fate as the first, on which leave had already been refused for the same reason. The Court observed that the fact that the second question was likewise covered by Hiralal Bhagwati appeared not to have been brought to the notice of the Bench which granted leave.
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