2016 (8) TMI 1220 - AT - Income Tax

Application u/s 12A rejected - Procedure for registration - Held that - The funds of the trust shall always be invested in various securities which are permitted by law. Apparently the provision of section 11(5) specifies the permissible investment. At present trust has admittedly not invested in non specified investments. In case if subsequently any violation of those sections is found the provision of section 11 12 and 13 may accordingly apply to the trust. Further provision of section 11(4) gives ample power to the ld CIT (A) to withdraw the registration to the trust if any time it is found that there is violation of the objects of the trust or there is violation of the Income tax Act. Undisputedly the activities of the assessee trust are eligible for registration. In our opinion rejection order passed by the Ld CIT (A) does not contain the reasons which can justify the rejection of the application of assessee trust u/s 12 AA of the Act. In view of this we direct the ld CIT (A) to examine the objects and genuineness of activities of the trust and after proper enquiry may grant registration.

Summary

Issues:
- Rejection of registration application of the trust u/s 12A
- Rejection of application for recognition u/s 80G(5) of the act

Analysis:

Issue 1: Rejection of registration application of the trust u/s 12A
The appeals were filed by the assessee against the rejection of the registration application of the trust by the ld CIT(Exemptions), Chandigarh for the Assessment year 2015-16 under section 12A of the Income Tax Act. The rejection was based on specific grounds related to the powers of the Governing body and the Chairman of the trust as outlined in the memorandum of the society. The ld AR argued that the provisions misread by the ld CIT(A) did not violate the Income Tax Act and were for the safety and better administration of the trust. The trust's compliance with the charitable nature of its activities and the genuineness of its operations were emphasized. The Tribunal found that the rejection order lacked justifiable reasons and directed the ld CIT(A) to re-examine the trust's objects and activities for proper registration under section 12AA of the Act.

Issue 2: Rejection of application for recognition u/s 80G(5) of the act
The second appeal was against the rejection of the application for granting recognition u/s 80G(5) of the act due to the absence of registration u/s 12AA. Since the application for registration u/s 12AA was restored for fresh consideration, the fate of the recognition application u/s 80G(5) depended on the outcome of the former. The Tribunal set aside the appeal to allow the ld CIT to reconsider the recognition application after providing the trust with a proper hearing. Ultimately, both appeals of the appellant were allowed for statistical purposes.

In conclusion, the Tribunal's judgment focused on the proper interpretation of legal provisions governing the registration and recognition of charitable trusts under the Income Tax Act. The importance of compliance with the Act's requirements, the charitable nature of trust activities, and the genuineness of operations were highlighted in both issues addressed in the judgment. The Tribunal emphasized the need for a thorough examination of trust activities and proper consideration of applications for registration and recognition to ensure compliance with the law.