2014 (3) TMI 976 - AT - Income Tax

Registration under section 12AA denied - Held that - The learned Director of Income-tax (Exemptions) has not examined the objects of the trust for granting registration under section 12AA of the Act, but went on the wrong premises that the assessee-trust has not started its activities and the objects are mixed. Therefore, we hereby set aside the order of the learned Director of Income-tax (Exemptions) and remit back the matter to his file in order to examine the objects of the trust and decide the matter in the light of the decisions rendered by various hon ble High Courts Hardayal Charitable and Educational Trust v. CIT 2013 (3) TMI 377 - ALLAHABAD HIGH COURT , DIT (Exemptions) v. Meenakshi Amma Endowment Trust 2010 (11) TMI 853 - KARNATAKA HIGH COURT and Sanjeevamma Hanumanthe Gowda Charitable Trust v. DIT (Exemptions) 2006 (3) TMI 91 - KARNATAKA High Court in accordance with the facts of the case and law. Needless to mention that in the process the learned Director of Income-tax (Exemptions) shall analyse the objects of the assessee-trust and determine whether the object would fall within the preview of section 2(15) of the Act and if so under which limp of the provision, i.e., relief to the poor, education, medical relief, preservation of environment (including watersheds, forest and wildlife), preservation of monuments or places or objects of artistic or historical interest, or advancement of any other object of general public utility - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Denial of registration under section 12AA of the Income Tax Act to an assessee-trust by the Director of Income-tax (Exemptions) based on the grounds that the trust had not started its activities and had mixed charitable and religious objects.

Analysis:

Issue 1: Denial of Registration under Section 12AA
The appeal was filed by the assessee-trust against the order of the Director of Income-tax (Exemptions) denying registration under section 12AA of the Act. The Director based the denial on the grounds that the trust had not commenced its activities and had mixed charitable and religious objects. The authorized representative of the trust argued that the trust was established by ICICI Bank to promote financial literacy among farmers and provide counseling services without any religious activities. The representative contended that the trust was a public charitable trust and should be granted registration under section 12AA. The Departmental representative opposed, stating that the trust had not started its activities and had mixed objectives.

Issue 2: Examination of Objects of the Trust
The Tribunal examined the objects of the trust as outlined in the trust deed. The objects included providing credit counseling services, setting up centers, investing surplus funds, and reporting to the settlor. The Tribunal referred to legal precedents, including cases such as Hardayal Charitable and Educational Trust v. CIT and DIT (Exemptions) v. Meenakshi Amma Endowment Trust, emphasizing that at the registration stage, the focus should be on the genuineness of the trust's objects, not the activities that have not yet commenced. The Tribunal found that the Director had erred in not examining the trust's objects for registration under section 12AA and instead focused on the trust not starting its activities and having mixed objectives. The Tribunal set aside the Director's order and remitted the matter back to re-examine the trust's objects in light of legal decisions and the provisions of the Income Tax Act.

Conclusion:
The Tribunal allowed the appeal of the assessee for statistical purposes, emphasizing the need for the Director of Income-tax (Exemptions) to analyze the trust's objects and determine their alignment with the provisions of section 2(15) of the Act. The Tribunal directed a re-examination of the matter based on legal precedents and the facts of the case to decide on the registration of the trust under section 12AA.