2012 (9) TMI 319 - AT - Income Tax

Registration u/s 12AA - rejected on invocation of Section 13(1)(ii) and lifelong membership of the trustees and assessee being both society and Trust - assessee Trust running a school - Held that - CIT while granting registration U/S 12AA has to look into the objects of the Trust and whether the Trust is carrying on the said objects of the Trust. See Surya Educational & Charitable Trust(2011 (10) TMI 47 - PUNJAB AND HARYANA HIGH COURT). Objects of the present assessee Trust were in the line of Education and the assessee was running both school and college. Once a Trust is engaged in the activities of providing Education by way of setting up school and college, which is one of the recognized object of charitable activity and no evidence having being brought on record, that the said activities of the Trust were not genuine, the said Trust is entitled to Registration u/s 12AA. The satisfaction of conditions of Sec. 11 to 13 is to be gone into by AO, while determining the income of Trust at the time of assessment and not to be gone into by CIT, while granting registration U/s 12AA. On objection that assessee is both Trust and society is recognized system and once it is registered as Trust, provision of election are not applicable to Trusts. The next objection that Trustee and their successor were lifelong member and hence activities of trust being not genuine are not correct, it is held that Rule against perpetuity is not applicable in case of Public charitable Trust, as per section 18 of Transfer of Property Act. CIT directed to grant Registration U/S 12AA - Decided in favor of assessee

Summary

Issues:
Appeal against denial of Registration under Section 12AA of the Act.

Analysis:
1. The appeal was against the order of the Commissioner of Income Tax -I, Ludhiana denying Registration under Section 12AA of the Act.
2. The CIT observed issues related to withdrawals by a trustee, life-long membership provision for trustees, and the ambiguous status of the assessee being both a Trust and a Society.
3. The assessee explained the purpose of the withdrawal, the tenure of trustees as per the Trust Deed, and clarified its registration under both the Societies Act and the Trust Act.
4. The CIT found discrepancies in the withdrawal amount, questioned the lack of election provision for a Trust under the Societies Registration Act, and raised concerns about the trust's status and practices.
5. The CIT concluded that the trust's constitution and practices were not in line with Indian laws, leading to a refusal to register the trust under Section 12AA of the Act.
6. The ITAT considered the issue of registration under Section 12AA, emphasizing the importance of trust activities being charitable and genuine for registration eligibility.
7. Referring to a previous judgment, the ITAT highlighted that the focus for registration should be on the trust's objects and activities, not income assessment conditions under Sections 11 to 13 of the Act.
8. The ITAT found the trust's educational activities valid and genuine, dismissing CIT's objections regarding trust being both a Trust and a Society, and trustees having lifelong membership.
9. Consequently, the ITAT directed the CIT to grant Registration under Section 12AA of the Act, allowing the appeal raised by the assessee.

This detailed analysis of the judgment highlights the issues raised, arguments presented, and the final decision rendered by the ITAT, Chandigarh regarding the denial of Registration under Section 12AA of the Act.