2009 (7) TMI 832 - HC - Income Tax

Charitable trust - It is not the finding of the Commissioner that the applicant-assessee had not complied with any of the procedural requirements. The Tribunal is fully justified in observing that the manner of application of funds and as to whether the applicant-assessee can claim the benefit of exemption in terms of sections 11 and 12 is a question which has to be examined by the Assessing Officer at the stage when it is urged and not by the Commissioner when such question is not before the Commissioner. It is hereby clarified and emphasized that while registration in accordance with the provisions of section 12A of the Act is a condition precedent for claiming the benefits under sections 11 and 12 of the Act, a registration as per section 12A by itself, will not automatically confer the benefits of sections 11 and 12 on a trust, but the trust will get the benefit only on complying with the requirements of sections 11 and 12 of the Act, which compliance can be examined by the assessing authority, while processing the return filed by the trust.

Summary

Issues:
1. Interpretation of provisions under section 12A of the Income-tax Act, 1961 regarding registration of a trust for claiming exemptions.
2. Examination of whether a trust engaging in educational activities qualifies for charitable purpose under section 2(15) of the Act.
3. Determination of the role of the Commissioner of Income-tax in assessing the charitable purpose of a trust for registration under section 12A.

Analysis:
1. The case involved an appeal by the Revenue against the order rejecting the application for registration under section 12A of the Income-tax Act. The core issue was whether the trust, primarily involved in imparting education, qualified for registration and exemptions under sections 11 and 12 of the Act.
2. The trust, established in 1992 with educational objectives, sought registration under section 12A post the amendment removing specific exemptions. The Commissioner rejected the application citing commercial activities and remuneration provisions in the trust deed. The Tribunal, however, allowed the appeal, emphasizing the charitable nature of educational activities.
3. The Tribunal's decision was challenged on the grounds that the Commissioner's detailed scrutiny indicated a lack of charitable purpose in the trust's activities. The Revenue argued that the Tribunal erred in not considering the rejection reasons and the grant date of registration. The trust contended that the Commissioner's role was limited to assessing the trust's charitable objectives, not fund generation.
4. The High Court upheld the Tribunal's decision, emphasizing that as long as the trust's main object was education, a charitable purpose under section 2(15), it qualified for exemptions subject to compliance with sections 11 and 12 conditions. The Court clarified that the assessing authority, not the Commissioner, would review fund application during assessment.
5. The Court dismissed the appeal, stating that registration under section 12A was a prerequisite for exemptions but did not automatically confer benefits. The Court also noted that the second question raised was academic and not relevant to the appeal, leaving it open for future consideration by the Revenue.

This detailed analysis highlights the legal interpretation of provisions under the Income-tax Act regarding trust registration, charitable purpose assessment, and the respective roles of the Commissioner and the assessing authority in granting exemptions.