2014 (1) TMI 1666 - AT - Income Tax

Rejection of application under section 12AA - Held that - In the present case it is noticed that the main objects of the assessee were to run medical and educational institutions provide education medicine food clothing etc. Those objects are charitable in nature and the Ld. CIT(A) did not doubt those objects he simply doubted the ancillary objects which were relating to the purchase acquire the land and building. The said objects are correlated with the main objects and it is difficult to carryon with the main activities without constructing/ purchasing building. Therefore Ld. CIT(A) was not justified in rejecting the application moved by the assessee for registration under section 12AA of the Act.See Jasoda Devi Charitable Trust Vs. CIT 2010 (4) TMI 789 - ITAT JAIPUR . - Decided in favour of assessee.

Summary

Issues:
1. Rejection of application under section 12AA for none for the faults of assessee applicant.
2. Failure to appreciate the first year of trust and philanthropic purpose.
3. Failure to consider submitted details with no defects.
4. Application of irrelevant ratio regarding profit purpose.
5. Illegality and factual inconsistency in rejection of application.
6. Lack of appreciation for beneficiaries clause in trust deed.

Analysis:
1. The appeal concerns the rejection of the application under section 12AA of the Income Tax Act 1961. The main contention raised by the assessee is that the rejection was based on non-appearance of counsel, violating principles of natural justice. The rejection was deemed unjust as it was ex-parte and did not consider the faults of the applicant.

2. The Commissioner failed to acknowledge that the year under consideration was the first year of the trust's existence, created for philanthropic purposes, not profit. The rejection was based on misinterpretation of the trust's objectives and the Commissioner's failure to appreciate the charitable nature of the trust.

3. The Commissioner overlooked the details submitted by the assessee, which contained no defects. The rejection was unjustified as all necessary information had been provided, and no discrepancies were highlighted by the authorities.

4. The application was rejected based on an irrelevant ratio applied by the Commissioner, comparing the trust to a society involved in financial transactions with its members. This comparison was deemed inapplicable as the trust was established for philanthropic purposes, not financial gain.

5. The rejection of the application was considered illegal and contradictory to the facts of the case. The grounds for rejection lacked substantial evidence and were not in line with the trust's actual objectives, warranting annulment or setting aside of the rejection order.

6. The Commissioner failed to recognize the beneficiaries clause in the trust deed, emphasizing that all mankind without discrimination would benefit from the trust's philanthropic activities. The rejection based on assumptions about the trust's beneficiaries without evidence was deemed unfounded and deserving of dismissal.

Overall, the rejection of the application under section 12AA was found to be unjust and lacking proper consideration of the trust's charitable nature and objectives. The appeal was allowed, directing the Commissioner to grant registration to the assessee-trust as per their request.