2012 (8) TMI 704 - AT - Income Tax

Registration u/s 12AA - denial on ground of it being non-charitable - assessee trust created for health and medical education - assessee contended that the scope of inquiry by CIT is only to examine the genuineness of the objects of the trust and not application of income for charitable purpose, which can be examined at the stage when the trust files its return - Held that - Tests for registration which have to be applied are (i) whether the activities of the society are genuine, and (ii) whether the purpose of the society is charitable. Therefore, assessee had satisfied the conditions for registration u/s 12AA because the activities of the assessee-trust are genuine and purpose of the assessee-trust is charitable. CIT-II directed to grant registration to the assessee-trust - Decided in favor of appellant

Summary

Issues:
1. Registration under section 12AA of the Income-tax Act, 1961.

Analysis:
The appellant filed an appeal against the order of the Ld. Commissioner of Income Tax-II, Amritsar, rejecting the application for registration under section 12AA. The Ld. CIT-II found that the trust, formed by two medical professionals, aimed to run a professional institution of health and medical education under the guise of charity. The CIT-II concluded that the trust failed to demonstrate its charitable nature, leading to the rejection of the registration application.

The appellant contended that the CIT-II had overstepped his jurisdiction by assessing the charitable purpose of income at the registration stage. The appellant argued that the trust had provided all necessary documentary evidence, including income tax returns, rent deeds, and statements of accounts, to support its charitable objectives. The appellant cited various case laws to support their claim for registration under section 12AA.

The respondent supported the CIT-II's decision, stating that the trust's activities were not genuine, justifying the rejection of the registration application. After hearing both parties, the Tribunal observed that the CIT's role in granting registration was to assess the genuineness of the trust's objects, not the application of income for charitable purposes, which could be reviewed at a later stage. Citing legal precedents, the Tribunal emphasized that the trust had met the conditions for registration as its activities were genuine and charitable in nature.

Based on the evidence presented, including audited accounts, trust activities, and supporting documents, the Tribunal concluded that the trust was entitled to registration under section 12AA. Consequently, the Tribunal set aside the CIT-II's order and directed the grant of registration to the trust without delay. The appeal filed by the assessee was allowed, and the order was pronounced on June 7, 2012.