2012 (3) TMI 129 - AT - Income Tax

Registration as Trust - Land leased from Trustee CIT rejected registration - Held That - Assessee running school with 900 student no finding could be brought to show leased land is for benefit of Trustee. Order of CIT quashed and assessee eligible for registration.

Summary

Issues:
Denial of registration under Section 12A of the Income-tax Act, 1961 based on the intention of deriving benefit to the trustees, the genuineness of charitable activities, and the late filing of the application for registration.

Analysis:

1. The appellant, a Trust established in 2003, sought registration under Section 12A of the Act. The Commissioner of Income Tax-I denied registration, citing concerns that the Trust was created for the benefit of the trustees and that the objects did not meet the charity requirements under Section 2(15) of the Act. The Commissioner also raised issues regarding a piece of land leased by a trustee to the Trust and the late filing of a CODICIL to the Trust deed.

2. The appellant argued that its objects were charitable, including running a school for 900 students and that the Trust was irrevocable. The appellant contended that the lease of land at a nominal rent did not imply any undue benefit to the trustees. The appellant also challenged the denial of registration based on the delay in filing the application, suggesting that registration should have been granted from the year of application.

3. The Departmental Representative supported the Commissioner's decision, claiming that running a school alone did not constitute charity and that the Trust failed to demonstrate genuine charitable activities. The Commissioner's denial of registration was justified based on the lack of genuine activities and objects.

4. The Appellate Tribunal found that the Trust was indeed running a school since 2003, providing education to the poor, which falls under charitable purposes as defined in Section 2(15) of the Act. The Tribunal disagreed with the Commissioner's findings, noting that the lease of land at a nominal rent did not provide undue benefit to the trustees. The Tribunal also clarified that the non-registration of the CODICIL and the delay in filing the application were not sufficient reasons to deny registration. The Tribunal directed the Commissioner to grant the appellant the registration sought for under Section 12A of the Act.

5. The Tribunal allowed the appeal, emphasizing that the Trust was eligible for registration under Section 12A of the Act. The Commissioner's order was quashed, and the Tribunal instructed the Commissioner to grant the registration to the appellant.