Income Tax Act | Supreme Court To Examine If S.12AA Registration Alone Entitles Trusts To 80G Benefits To Donors

The Supreme Court is set to examine whether the registration of a trust under Section 12AA of the Income Tax Act, 1961, which recognizes it as a charitable institution for income tax exemption purposes, is sufficient to entitle its donors to claim tax deduction benefits under Section 80G of the Act.

A bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan has issued notice on a petition filed by the Income Tax Department challenging the Chhattisgarh High Court's ruling that once a charitable organization is registered under Section 12AA of the Income Tax Act, 1961, it cannot be denied approval under Section 80G(5) for providing tax deduction benefits to its donors, merely on the ground that it also undertakes religious activities.

The respondent society, Shri Sadhumargi Shantkranti Jain CG Orissa, sought Section 80G(5) approval to enable donors to claim tax deductions. The CIT (Exemption) rejected the request, citing the society's partly religious character. On appeal, the ITAT, Raipur allowed the claim, holding that its Section 12AA registration already recognized its charitable status. The Revenue then challenged this before the High Court under Section 260A, arguing that 12AA registration alone does not guarantee 80G approval.

Aggrieved by the High Court's decision to uphold the ITAT's view, the revenue appealed to the Supreme Court

In reaching this conclusion, the High Court relied on the Gujarat High Court's ruling in Hiralal Bhagwati v. CIT (2000), which, according to the High Court, was subsequently affirmed by the Supreme Court in ACIT v. Surat City Gymkhana (2008) 14 SCC 169.

Before the Supreme Court, Revenue argued that a mere issuance of a certificate under Section 12-AA of the IT Act would not entitle the Trust to claim the benefit under Section 80-G of the IT Act. The revenue emphasized that each claim under Section 80G requires a fresh examination of the trust's activities and objectives to ensure they are genuinely charitable and not religious or sectarian in nature. Further, it asserted that, since the trust's activities were predominantly religious, and therefore, it did not qualify for 80G benefits intended for charitable institutions.

Upon hearing the revenue, the Court deemed it appropriate to issue notice returnable within four weeks, noting that the nature of the trust's work, whether charitable or religious, is a relevant factor for deciding eligibility under Section 80G.

Cause Title: THE COMMISSIONER OF INCOME TAX, EXEMPTION, BHOPAL VERSUS SADHUMARGI SHANTKRANTI JAIN

Click Here To Read/Download Order