2014 (1) TMI 1032 - AT - Income Tax

Rejection of Registration u/s 12AA - Held that - the assessee is having mixed objectives of both charitable and religious nature - There is no restriction in the statutory provision which says that a trust having both religious and charitable objects would not be eligible for registration under section 12AA of the Act - Section 11 of the Act provides for exemption to both charitable and religious trusts. Only restriction being put by the statute is exemption under section 11 is subject to fulfilment of conditions laid down in sections 11, 12 and 13 of the Act. At the time of registration under section 12AA of the Act, the only requirement is the DIT(E) has to satisfy himself about the genuineness of the activities of the trust and whether it comes within the purview of the charitable purpose as defined under section 2(15) of the Act - Even though the assessee has placed all facts on record in course of proceeding before the DIT(E) with regard to its activities by submitting explanatory note and account copies, the DIT(E) has not made any comments either with regard to the genuineness or the nature of activities of the trust - In such circumstances, it has to be presumed that DIT(E) has no doubt either with regard to the genuineness or nature of the activities of the trust - The denial of registration under section 12AA on the reasons mentioned by the DIT(E) are neither well founded nor justified in the given circumstances of the case - Decided in favour of assessee.

Summary

Issues:
- Refusal of registration under section 12AA and approval under section 80G(5)(vi) by DIT(E).

Detailed Analysis:
1. The assessee, a charitable trust, sought registration under section 12AA and approval under section 80G(5)(vi) of the Act. However, the DIT(E) rejected both applications citing lack of tangible charitable activity, global operations, absence of maintained accounts, and mixed charitable and religious objectives.

2. The assessee appealed to the ITAT, which directed the DIT(E) to assess the genuineness of the trust's activities and their alignment with section 2(15) of the Act. The ITAT also clarified the conditions for granting approval under section 80G(5)(vi) and disagreed with the grounds for denial by the DIT(E).

3. Upon reevaluation, the DIT(E) requested details of activities and financial statements. The DIT(E) raised concerns about operations outside India and mixed charitable-religious objectives, referencing the trust deed. The DIT(E) relied on certain precedents and found the decisions cited by the assessee inapplicable.

4. The ITAT, in its analysis, found the DIT(E)'s reasoning flawed regarding activities outside India and mixed objectives. It highlighted that the trust's deed clarified that foreign activities wouldn't be funded by Indian resources. The ITAT emphasized that having both charitable and religious aims doesn't preclude registration under section 12AA, as long as activities align with charitable purposes defined in the Act.

5. The ITAT criticized the DIT(E) for lacking valid reasons for denial, noting the absence of doubts about the trust's activities' genuineness. The ITAT directed the DIT(E) to grant registration under section 12AA and approval under section 80G(5)(vi) based on the trust's compliance with statutory conditions.

6. Ultimately, the ITAT allowed the assessee's appeals, emphasizing the DIT(E)'s incorrect observations and the need for a valid assessment of the trust's activities for registration and approval under the relevant sections of the Act.