2010 (3) TMI 887 - AT - Income Tax

Summary

Issues Involved:
1. Rejection of registration application u/s 12AA.
2. Perpetual succession and control of trustees.
3. Charitable nature of the trust's objects.

Summary:

1. Rejection of Registration Application u/s 12AA:
The appeal was filed by the assessee against the order of the CIT, Meerut, dated 20-2-2009, which rejected the registration application of the appellant Trust u/s 12AA(1)(b)(ii). The CIT's order was challenged as arbitrary, unlawful, and unjustified, with a prayer for directions to grant registration u/s 12AA.

2. Perpetual Succession and Control of Trustees:
The CIT observed that the trust deed implied perpetual succession, with the settler and his relatives exercising full control over the trust. The CIT concluded that this perpetual control converted the public charitable trust into a private trust, thus refusing the registration. The assessee contended that the clauses did not imply perpetual succession and that the trustees could be replaced by a 3/4th majority of the Board of Trustees, arguing that the refusal was unjustified.

3. Charitable Nature of the Trust's Objects:
The CIT did not dispute the charitable nature of the trust's objects or the genuineness of its activities. The Tribunal noted that the trust deed contained a prohibition clause preventing trustees from deriving any pecuniary advantage from the trust properties or income. The Tribunal emphasized that the mere fact of perpetual succession in trustee appointments does not disqualify the trust from registration if the objects are charitable and there is no contravention of the trust deed.

Conclusion:
The Tribunal concluded that the CIT's reason for rejecting the registration was not in accordance with the law. Since the CIT did not doubt the charitable nature of the trust's objects, the Tribunal directed the CIT to grant registration u/s 12A. The Tribunal also noted that the CIT could later utilize his powers u/s 12AA(3) if the activities of the trust were found to be non-charitable. The appeal filed by the assessee was allowed.