2014 (3) TMI 64 - AT - Income Tax

Rejection of application for registration of charitable institution u/s 12(a) of the Act Held that - The adverse inference has been drawn on possible intention, activities i.e. the issues, which, in our view are not germane at the time of grant of registration of trust u/s 12A more so when the assessee's objects are not held to be non-charitable - The non-contribution of membership fee by general members and life members may be paid later inasmuch unless the members makes the necessary contribution rights of membership cannot dwell on them. Genuineness of the activities of the Trust - Income and expenditure Held that - The adverse inference nothing to reflect on this aspect with regard to, time to raise the funds and donations it is the discretion of the society that can be undertaken in due course, may be the issue of 80G registration which is consequent to 12A registration may be important Thus, mere non-carrying on of the vigorous activities of trust at the time of registration per se cannot be detrimental for registration of the trust u/s 12A when the objects are charitable and there is no adverse comment about them Relying upon Director of Income-tax Vs. Foundation of Ophthalmic and Optometry Research Education Centre 2012 (8) TMI 777 - DELHI HIGH COURT - the assessee is eligible for grant of registration u/s 12A thus, the order of DIT(E) is reversed and the assessee is held to be eligible for registration u/s 12A of the I.T. Act Decided in favour of Assessee.

Summary

Issues:
1. Rejection of registration of a Charitable Institution under sections 12AA(1)(b) and 12A of the Income-tax Act, 1961 without allowing an opportunity of being heard.
2. Dispute regarding the genuineness of the activities of the Trust and the rejection of the application based on lack of evidence.

Analysis:

Issue 1:
The Appellate Tribunal ITAT DELHI heard an appeal against the rejection of registration of a Charitable Institution under sections 12AA(1)(b) and 12A of the Income-tax Act, 1961. The rejection was based on the Director of Income-tax (Exemptions) not allowing an opportunity of being heard to the appellant. The Tribunal found that the rejection without providing such an opportunity was against the law. The grounds raised by the appellant highlighted this procedural flaw, leading to the reversal of the decision.

Issue 2:
The dispute regarding the genuineness of the activities of the Trust was a crucial aspect of the case. The Director of Income-tax (Exemptions) rejected the application citing the Trust's failure to prove the genuineness of its charitable activities. The Tribunal analyzed the facts, noting that the Trust had not engaged in substantial activities due to being in its initial year. However, the Tribunal emphasized that the non-engagement in charitable activities at the initial stage should not be a sole ground for rejection. The Tribunal referred to various judicial decisions supporting the view that registration should not be denied solely based on the absence of activities at the initial stage.

The Tribunal highlighted that the charitable nature of the Trust's objectives was not in dispute. It noted that the Trust had taken steps like creating a website and initiating activities, which indicated a genuine effort towards its charitable goals. The Tribunal disagreed with the Director's inference that lack of funds or immediate activities undermined the Trust's eligibility for registration. Relying on legal precedents, the Tribunal held that as long as the Trust's objectives were charitable, registration should not be denied based on the absence of immediate activities. Consequently, the Tribunal allowed the appeal and directed the grant of registration under section 12A of the Income-tax Act, 1961.

In conclusion, the Tribunal's judgment emphasized procedural fairness in registration processes and underscored that the genuineness of charitable activities should be evaluated in light of the Trust's objectives and efforts, especially in the initial stages.