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Issues involved: Refusal of registration under section 12A of the Income-tax Act to an assessee-trust by the Commissioner of Income-tax, Meerut.
The trust, established by Shri Hari Om Anand, filed an application for registration under section 12A of the Act, but faced refusal by the Commissioner due to certain observations regarding the charitable activities and financial dealings of the trust. The original trust deed included a clause regarding the succession of the President position, which was later amended. The trust was set up with various charitable objects related to rural development, education, healthcare, public welfare, and relief activities. The trust engaged in providing free cleft lip and palate surgeries to the poor in collaboration with Smile Train Inc., a not-for-profit corporation. The Commissioner's refusal was based on the perception that the charity was primarily funded by Smile Train Inc., the trust charged fees from patients, and there was lack of disclosure regarding the trustees' interests in the trust's activities. The counsel for the assessee argued that the observations made by the Commissioner were incorrect. They clarified that the trust provided services to patients during and after surgeries without charging any fees. The counsel contended that the trust had complied with the necessary statutory requirements and that any fees charged by trustees would not violate relevant sections of the Act. They emphasized that the focus of registration under section 12A should be on the genuineness and charitable nature of the trust's objects, as established in previous legal precedents. On the other hand, the Departmental Representative supported the Commissioner's observations and cited a decision of the Kerala High Court in a similar context. Upon considering the facts and arguments presented, the Appellate Tribunal found that the trust's objects aligned with charitable purposes as defined in the Act. The Tribunal highlighted that the registration process under section 12A requires verification of the trust's activities' genuineness, rather than delving into income-related violations. The Tribunal noted that the trust's sole income source was a grant from Smile Train Inc., contradicting the Commissioner's assertion of fee charging. The Tribunal referenced legal precedents, including decisions by the Allahabad High Court and the Gujarat High Court, to support the conclusion that registration should not be denied based on income utilization or profit-making considerations. Consequently, the Tribunal directed the Commissioner to grant the trust appropriate registration, emphasizing the ongoing charitable activities as a crucial factor in the decision-making process. The Tribunal distinguished the Kerala High Court case cited by the Departmental Representative, as it did not align with the circumstances of the present case where charitable activities were already in progress. In conclusion, the appeal by the assessee was allowed, and the Tribunal directed the Commissioner to proceed with granting the trust registration under section 12A of the Income-tax Act.
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