2014 (1) TMI 1033 - AT - Income Tax

Registration u/s 12AA - Held that - The registration was refused to the appellant, because clause 10 of the trust deed allowed the author to take decision with regard to its continuity which made the trust revocable - A perusal of the draft trust deed does reveal that there is amendment to the trust deed - The unsigned draft trust deed was submitted before the DIT(E) only for the purpose of knowing whether the amendment carried out was to his satisfaction or not - There is certainly a genuine apprehension in the mind of the assessee as to whether the amendment carried out would be to the satisfaction of the DIT(E) - Without doing so it was inappropriate on the part of the DIT(E) to have refused to grant registration alleging non-furnishing of amended trust deed - The issuer has been restored for fresh adjudication with a direction to DIT(E) to go through the draft trust deed and inform the assessee as to whether the proposed amendment carried out by the assessee with regard to irrevocability of the trust is to his satisfaction or not.

Summary

Issues Involved:
1. Denial of registration under section 12AA of the Act by the DIT(E) based on the revocable nature of the trust.
2. Appeal before the ITAT challenging the denial of registration.
3. Direction by ITAT for necessary amendment to the trust deed for registration.
4. Refusal of registration by DIT(E) despite submission of draft amended trust deed.
5. Disagreement between the parties regarding the sufficiency of the draft trust deed.
6. Consideration of the case by ITAT and setting aside the DIT(E)'s order.

Analysis:

1. The initial issue revolved around the denial of registration under section 12AA of the Act by the DIT(E) due to the revocable nature of the trust as per clause 10 of the trust deed. The DIT(E) held that the trust cannot be considered wholly public charitable due to its revocable nature.

2. The assessee appealed before the ITAT challenging the denial of registration. The ITAT, in its order, directed the assessee to make necessary amendments to the trust deed to ensure irrevocability, stating that registration would be granted upon such amendments.

3. Despite the direction from ITAT, the DIT(E) refused registration again upon the submission of a draft amended trust deed by the appellant. The DIT(E) considered the draft trust deed as vague and unsigned, leading to the refusal of registration under section 12AA.

4. The appellant argued that the submission of the draft trust deed was for the DIT(E) to assess if the amendments were satisfactory, as per the direction of the ITAT. The appellant contended that once the DIT(E) approved the draft, a final deed would be prepared and submitted for registration.

5. Upon considering the arguments from both parties, the ITAT found that the approach of the assessee in submitting the draft trust deed for approval was appropriate given the circumstances. The ITAT set aside the DIT(E)'s order and directed the DIT(E) to review the draft trust deed for approval.

6. The ITAT remitted the matter back to the DIT(E) with clear directions for the approval of the amended trust deed upon satisfaction. The ITAT emphasized the need for the DIT(E) to confirm the acceptability of the amendments before granting registration under section 12AA of the Act.

This detailed analysis of the legal judgment highlights the progression of the case, the issues involved, the arguments presented by both parties, and the final decision and directions provided by the ITAT.