2013 (12) TMI 639 - AT - Income Tax

Rejection of application for registration u/s 12AA The assessee is a public charitable trust having objects Providing of medical relief to poor; to provide food free of cost to poor people and to carry on such philanthropic activities for the benefit of the downtrodden Held that - The charity should come after some reasonable time The concept of gestation period for any institution to start functioning, is applicable to a charitable institution as well - . The assessee trust is in infancy - The objectives declared by the assessee in its trust deed are charitable in nature Decided in favour of assessee.

Summary

Issues:
1. Registration under sec.12AA of the Income-tax Act, 1961.
2. Approval under sec. 80G(vi) of the Act.

Analysis:
Issue 1: Registration under sec.12AA:
The appellant, a public charitable trust, filed an appeal against the rejection of its registration application under sec.12AA by the Commissioner of Income-tax. The Commissioner held that the trust failed to prove the charitable nature of its objects and the genuineness of its activities. The trust deed outlined charitable objectives, but the Commissioner deemed the lack of charitable activities within a short period as a reason for rejection. The Appellate Tribunal disagreed, stating that a reasonable gestation period is necessary for charitable institutions to start functioning. Rushing to conclusions, the Commissioner's rejection was deemed premature and arbitrary. The Tribunal found the trust entitled to registration under sec.12AA, directing the Commissioner to grant registration, treating the trust as a recognized charitable institution from its inception.

Issue 2: Approval under sec. 80G(vi) of the Act:
The second appeal was against the rejection of the appellant's application for approval under sec. 80G(vi) by the Commissioner. Since registration under sec.12AA was granted, the Tribunal directed the Commissioner to grant approval under sec. 80G as well. The Tribunal allowed the appeals filed by the appellant, emphasizing the charitable nature of the trust's objectives and the need for a reasonable time for charitable activities to commence. The Tribunal's decision overturned the premature rejection by the Commissioner, ensuring the trust's recognition and approval under the relevant sections of the Income-tax Act, 1961.