2013 (8) TMI 407 - AT - Income Tax

Cancellation of registration of Trust granted under section 12AA of the Income Tax Act, 1961 - The assessee had given donations to other charitable institutions in line with one of its objects Held that - It is not the case of the revenue that the trust was not carrying on its activities in accordance with its objects - Assessee had followed the procedure of law and registered itself with the Registrar of Societies before moving the application for registration under section 12A of the Act. In the totality of the facts and circumstances of the case, the supplementary Trust Deed executed by the assessee on 25.05.2007 is nothing but the combination of the all clauses of the earlier two Trust Deeds and the aims and objects in all the deeds remain the same. In the absence of the Commissioner of Income-tax bringing on record any evidence to establish that the assessee was not carrying on its activities in accordance with its objects, we find no merit in the order passed by the Commissioner of Income-tax in withdrawing the registration granted to the Trust. Merely because the Settler of the trust has claimed deduction under section 80G of the Act on the donations made to the assessee Trust, does not merit the cancellation of registration granted to the Trust - No merit in the objections raised by the Assessing Officer that the trust was running its activities from where another trust was also being run under the name and style of M/s Durga Mani Foundation, which is the second assessee before us and also another concern was operating from the said address. In the totality of the facts and circumstances of the case, we reverse the order of Commissioner of Income-tax passed under section 12AA(3) of the Act and hold that the assessee is entitled to the registration already granted to it under section 12AA of the Act - Grounds of appeal raised by the assessee are allowed Decided in favor of Assessee.

Summary

Issues Involved:
1. Cancellation of Registration under Section 12AA(3) of the Income Tax Act, 1961.
2. Reliance on the report of the Assessing Authority without verification.
3. Genuineness of donations given for charitable activities.

Detailed Analysis:

1. Cancellation of Registration under Section 12AA(3) of the Income Tax Act, 1961:
The appeals were filed against the orders of the Commissioner of Income-tax-I, Chandigarh, which canceled the registration of the trusts under Section 12AA(3) of the Income Tax Act, 1961. The trusts were originally registered with the Sub Registrar, Chandigarh, and had their registration under Section 12AA(1)(b)(i) of the Act. The Commissioner noted that the trust deeds were modified without prior approval, which raised doubts about the irrevocability of the trust, a condition for exemption. However, the Tribunal found that the supplementary Trust Deed was merely a combination of the earlier deeds and did not alter the charitable nature of the trust. The Tribunal held that the Commissioner did not provide evidence that the trust's activities were not genuine or not in accordance with its objects, thus reversing the cancellation of registration.

2. Reliance on the report of the Assessing Authority without verification:
The Commissioner relied on the report from the Assessing Officer, which claimed that the trust's activities were not genuinely charitable and suggested that the trust was used to evade tax liability. The Tribunal observed that the Commissioner did not independently verify the facts presented in the report. The Tribunal emphasized that the trust had followed legal procedures and registered itself with the Registrar of Societies before applying for registration under Section 12A. The Tribunal found no merit in the Commissioner's reliance on the unverified report to cancel the registration.

3. Genuineness of donations given for charitable activities:
The Commissioner questioned the genuineness of the donations made by the trust, suggesting that the activities were general in nature and aimed at evading tax liability. The Tribunal reviewed the details of the donations and found that they were in line with the trust's charitable objects. The donations were made to various institutions and individuals for educational and medical assistance, which were supported by receipts. The Tribunal concluded that the donations were genuine and aligned with the trust's objectives, thereby rejecting the Commissioner's claim.

Conclusion:
The Tribunal allowed the appeals, reversing the orders of the Commissioner of Income-tax, and reinstated the registration of the trusts under Section 12AA of the Income Tax Act, 1961. The Tribunal found that the Commissioner did not provide sufficient evidence to prove that the trust's activities were not genuine or not in accordance with its objects. The Tribunal also noted that the trust had followed legal procedures and that the donations made were genuine and aligned with the trust's charitable objectives.