2013 (2) TMI 605 - AT - Income Tax

Benefit of registration u/s 12AA (1)(b)(ii) disallowed - certificate of exemption under section 80G(5) was also denied - Held that - It can be construed that the case of the assessee trust is squarely covered by the law laid down by Foundation of Ophthalmic & Optometry Research Education Centre 2012 (8) TMI 777 - DELHI HIGH COURT as perusal of the order passed under section 12AA shows that CIT has not commented on the objects of the Trust. The CIT after examining the statement of accounts formed an opinion that since no expenditure towards any charitable activity is shown in the statement of accounts, therefore carrying out of genuine charitable activities is absent in this case. It would be relevant to mention here that the trust was formed on 11.1.2012, the application for registration under section 12AA was submitted by the appellant on 27.3.2012 i.e. within a period of three months of its creation. The school activities started in June, 2012, the appellant submitted its books of accounts upto September, 2012 before CIT. The CIT after examining the statement of accounts for such a short period, formed its opinion that the activities of trust are not charitable in nature. The CIT has not raised any objection on the objects of the trust. In our considered opinion, it was premature for CIT to judge the activities of the Trust by just glancing through the statement of accounts of the trust of such a short period. Therefore, set aside the order of the CIT and direct the CIT to grant registration to the assessee trust under section 12AA. Consequent to the registration under section 12AA also direct the CIT to consider the application of the assessee for grant of initial certificate of exemption under section 80G(5) - in favour of assessee.

Summary

Issues:
- Registration under section 12AA and 80G(5) of the Income Tax Act, 1961
- Genuineness of charitable activities of the trust
- Activities carried out in accordance with trust deed without documentary evidence

Analysis:

1. Registration under section 12AA and 80G(5) of the Income Tax Act, 1961:
The appeals were filed by the assessee challenging the Commissioner of Income Tax's order rejecting the registration under sections 12AA and 80G(5) of the Income Tax Act, 1961. The assessee, a trust created in January 2012, applied for registration under section 12AA in March 2012. Despite providing necessary details and documents, the Commissioner rejected the application primarily on grounds related to the genuineness of charitable activities and lack of documentary evidence supporting activities as per the trust deed.

2. Genuineness of charitable activities of the trust:
The Commissioner's rejection was based on the absence of expenditure towards charitable activities in the income and expenditure statement of the trust. The Commissioner referred to a Board's Circular and held that the benefit of registration cannot be allowed to the trust as per the provisions of section 12AA. The assessee argued that the Commissioner pre-judged the trust's activities and school without considering the short period since the trust's formation and commencement of school activities. The trust's objects primarily focused on spreading education and establishing educational institutions, which align with the definition of charitable purpose under the Income Tax Act.

3. Activities carried out in accordance with trust deed without documentary evidence:
The Commissioner's decision to reject the registration under section 12AA and subsequent denial of exemption under section 80G(5) were challenged by the assessee. The trust's objects clearly aimed at educational advancement, which falls under charitable purposes as defined in the Income Tax Act. The High Court judgments cited by the assessee emphasized the importance of examining the trust's objects and genuineness rather than premature judgment based on a short period of activity. The Tribunal set aside the Commissioner's order and directed the grant of registration under section 12AA, followed by consideration for the initial certificate of exemption under section 80G(5) for the assessee trust.

In conclusion, the Tribunal allowed the appeals, emphasizing the need for a thorough examination of the trust's objects and activities before rejecting registration under section 12AA. The judgment highlighted the importance of assessing genuineness and charitable nature of activities rather than solely relying on a brief period of operation.