2011 (9) TMI 1071 - AT - Income Tax

Registration u/s 12A and sought exemption u/s 80G - Held that - The aims and objects of the trust are charitable. From details, we find that the assessee is constructing toilets for public which is also a charitable work. These public toilets are made out of the grants from Government of Uttar Pradesh and also some petty contribution from the beneficiaries. The contribution from beneficiaries cannot be said a commercial activity. After close perusal of these facts and taking the pleadings into consideration, we hold that the assessee trust is a genuine trust registered for charitable purpose, hence deserves registration u/s 12A of the Income-tax Act and the exemption u/s 80G. Therefore, we set aside the order of the DIT (Exemptions) and direct to grant the registration u/s 12A and also to grant exemption u/s 80G. - Decided in favour of assessee.

Issues Involved:
1. Rejection of registration under Section 12A of the Income-tax Act.
2. Rejection of exemption under Section 80G of the Income-tax Act.
3. Genuineness of the trust's charitable activities.
4. Verification of activities carried out by the trust.
5. Consideration of contributions and agreements with donors.

Issue-wise Detailed Analysis:

1. Rejection of registration under Section 12A of the Income-tax Act:
The Director of Income-tax (Exemptions) rejected the application for registration under Section 12A on the grounds that the trust did not furnish full details with evidence in the form of bills, vouchers, or other evidence supporting the total expenses incurred. The Director noted that the trust received funds from government organizations as grants for specific purposes and was rendering services to other organizations without having any charitable activity of its own. The Director concluded that the trust's activities were not charitable as defined under Section 2(15) of the Income-tax Act, and the trust failed to furnish complete and concrete evidence regarding expenses incurred on different activities.

2. Rejection of exemption under Section 80G of the Income-tax Act:
The Director also rejected the application for exemption under Section 80G because the trust was not registered under Section 12A(a) of the Income-tax Act. The rejection of the 12A registration directly impacted the eligibility for 80G exemption.

3. Genuineness of the trust's charitable activities:
The Director questioned the genuineness of the trust's claim to be a charitable organization, stating that the activities were hit by the proviso to Section 2(15) and thus not charitable as per law. The Director's assessment was based on the trust's financial transactions, which included receiving advances from government bodies and showing these as current liabilities in the balance sheet.

4. Verification of activities carried out by the trust:
The appellant argued that the Director did not properly verify the activities carried out by the trust. The appellant emphasized that the trust was engaged in constructing public toilets, which is a charitable activity, funded by grants from the Government of Uttar Pradesh and contributions from beneficiaries. The appellant contended that these contributions should not be considered commercial activities.

5. Consideration of contributions and agreements with donors:
The appellant claimed that the Director did not appreciate the involvement of many donors, including government agencies, in the trust's development and charitable works. The appellant argued that the Director should have verified the agreements made with the donors and government agencies, which would have demonstrated the charitable nature of the trust's activities.

Judgment:
After hearing both sides and reviewing the documents, including the trust deed, balance sheet, and income & expenditure account, the Tribunal found that the aims and objects of the trust were indeed charitable. The Tribunal noted that constructing public toilets funded by government grants and beneficiary contributions is a charitable activity. The Tribunal concluded that the trust is a genuine charitable organization deserving of registration under Section 12A and exemption under Section 80G of the Income-tax Act. Consequently, the Tribunal set aside the order of the Director of Income-tax (Exemptions) and directed the grant of registration under Section 12A and exemption under Section 80G.

Conclusion:
The appeal of the assessee was allowed, and the Tribunal directed the grant of registration under Section 12A and exemption under Section 80G, recognizing the trust as a genuine charitable organization.

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