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2015 (1) TMI 1368 - AT - Income TaxRegistration u/s 12AA(e)(iv) r.w.s 12A rejected - absence of dissolution clause in trust deed - Held that - We find the judgment of the Hon ble Kerala High Court in the case of Self Employers Service Society (2000 (9) TMI 47 - KERALA High Court) is decided on the facts of the said trust generating the income and not undertaking any charitable work. Thus the same is distinguishable. In the present case assessee is yet to commence its activities and therefore the assessee cannot be described as undertaking the activities for generating income only. Regarding the dissolution clause noting is brought on record even before us that the Bombay Public Trusts Act 1950 mandates for incorporation of mandatory clause of dissolution of any irrevocable trust. Therefore in our opinion the decision of the DIT (E) rejecting the registration u/s 12A is required to be reversed. Accordingly grounds raised by the assessee are allowed.
Issues:
1. Rejection of registration to appellant Trust under section 12AA(1)(b)(ii) read with section 12A of the Act. 2. Absence of dissolution clause in the Trust Deed. 3. Lack of charitable activities by the Trust. 4. Interpretation of legal requirements for registration of a charitable trust. 5. Applicability of relevant case laws in denying registration. 6. Examination of genuineness of trust objects at the registration stage. Detailed Analysis: Issue 1: Rejection of registration to appellant Trust under section 12AA(1)(b)(ii) read with section 12A of the Act: The appeal was filed against the order of the DIT (E), Mumbai, rejecting registration for the AY 2013-2014. The grounds for appeal included challenging the rejection as bad in law and arguing that the Trust deed did not need a dissolution clause and lack of activities did not affect registration eligibility. The Tribunal found that the Trust was yet to commence activities and reversed the decision to reject registration. Issue 2: Absence of dissolution clause in the Trust Deed: The DIT (E) rejected registration due to the absence of a dissolution clause in the Trust Deed, as required by Rule 17A of the Act. The assessee argued that being an irrevocable trust, a dissolution clause was not mandatory. The Tribunal agreed with the assessee, noting that the Trust being irrevocable did not necessitate a dissolution clause, and reversed the rejection of registration. Issue 3: Lack of charitable activities by the Trust: The DIT (E) also raised concerns about the Trust not carrying out any activities. The assessee explained that as a recently registered trust, charitable activities had not commenced. The Tribunal held that the absence of activities at that stage did not disqualify the Trust from registration, emphasizing the importance of examining the genuineness of activities at the registration stage. Issue 4: Interpretation of legal requirements for registration of a charitable trust: The Tribunal emphasized that the Director of Income Tax is required to examine the genuineness of the trust's objects at the registration stage, not the application of income for charitable purposes. The Charity Commissioner's registration of the Trust was also noted as satisfying the conditions of charity, supporting the registration application. Issue 5: Applicability of relevant case laws in denying registration: The case laws cited by the DIT (E) to deny registration were found to be irrelevant to the present case, as the facts and circumstances differed significantly. The Tribunal distinguished the cited cases and focused on the specific situation of the appellant Trust in deciding on registration. Issue 6: Examination of genuineness of trust objects at the registration stage: The Tribunal considered the arguments presented by both parties, reviewed the orders of the Revenue Authorities, and analyzed the relevant legal precedents. It concluded that the rejection of registration by the DIT (E) was not justified, as the Trust had not yet begun its activities, and there was no legal mandate for a dissolution clause in the Trust Deed. Therefore, the grounds raised by the assessee were allowed, and the appeal was granted in favor of the appellant Trust. In conclusion, the Tribunal reversed the decision of the DIT (E) and allowed the appeal of the assessee, emphasizing the importance of examining the genuineness of trust objects at the registration stage and considering the specific circumstances of the Trust in question.
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