2014 (4) TMI 1046 - AT - Income Tax

Refusal of registration under section 12AA - Held that - The reasons for which registration under section 12A was refused appear to be not good reasons. At the time of registration, one has to look into the objects of the trust which the Commissioner of Income-tax has completely omitted to do so. The reasons given by the Commissioner of Income-tax are only apprehensions that the assessee is not carrying out any charitable activities and he was of the view that it is premature to register the trust. - commencement of activity is not a precondition for grant of registration under section 12AA of the Act, once the objects of the trust and genuineness of the activities of the trust are not questioned. In any event, the Commissioner of Income-tax has not examined the objects for which trust has been formed and whether objects are genuine and the activities of the trust are charitable or not. In the circumstances, we are of the view that this matter has to be re-examined by the Commissioner of Income-tax-I, Coimbatore afresh. Therefore, we remand the matter back to the file of the Commissioner of Income-tax - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Refusal of registration under section 12AA of the Income Tax Act by the Commissioner of Income-tax-I, Coimbatore based on trust activities, genuineness of objects, charitable nature, and donor transactions.

Analysis:
The appeal was filed against the Commissioner's order refusing registration under section 12AA of the Act, citing concerns about the trust's activities and charitable nature. The Counsel for the assessee argued that the Commissioner did not assess the genuineness of the trust's objects or charitable activities, wrongly focusing on advertisement expenses and donor transactions. The Departmental representative supported the Commissioner's decision. The Tribunal noted that the Commissioner failed to examine the trust's objects, solely relying on apprehensions about charitable activities and prematurity for registration.

The Tribunal referenced a Madras High Court case, emphasizing that commencement of activities is not a prerequisite for registration under section 12AA if the trust's objects and activities' genuineness are not in question. The Court stressed that the Commissioner must satisfy himself about the trust's objects and conduct necessary inquiries. As the Commissioner did not scrutinize the trust's purpose or charitable nature, the Tribunal remanded the matter for re-examination, directing the Commissioner to assess the application afresh considering the trust's objectives and activities. The Tribunal allowed the appeal for statistical purposes, highlighting the need for a thorough reassessment by the tax authority.

In conclusion, the Tribunal's decision highlights the importance of examining a trust's objects and activities for registration under section 12AA, emphasizing that commencement of activities is not a decisive factor. The judgment underscores the need for a comprehensive assessment by tax authorities to ensure the genuineness of charitable trusts and their adherence to stated objectives.