2014 (7) TMI 472 - AT - Income Tax

Refusal of registration u/s 12A of the Act Exemption u/s 80G of the Act Held that - The DIT(E) has not pointed out any defect or doubt about the charitable objects of the assessee trust - the DIT(E) has rejected the application of the assessee trust for grant of registration u/s 12A of the Act by holding that in absence of any genuine charitable activity, the genuineness of the charitable activities cannot be held to be established Relying upon DIT vs Foundation of Ophthalmic Optometry Research Education Centre 2012 (8) TMI 777 - DELHI HIGH COURT - registration u/s 12A is not dependent on commencement of charitable activity - The registration granting authority is not required to examine the question whether the trust has actually commenced and carried on its charitable activities - at the time of registration only genuineness of the objects was to be tested, not the activities which were not commenced by that time. The DIT(E) rejected the application of the assessee for registration u/s 12A of the Act on wrong premise and unjustified grounds - while the DIT(E) has not raised any doubt or objection about the charitable objects of the assessee trust, registration u/s 12A cannot be denied on the ground that the genuineness of the charitable activities cannot be held to be established in absence of any genuine charitable activity DIT(E) is directed to grant registration u/s 12A of the Act for the assessee trust - the application for registration u/s 80G of the Act was rejected Decided in favour of Assessee.

Summary

Issues involved:
Appeal against denial of registration under sections 12A and 80G of the Income Tax Act.

Analysis:
The appeal was filed against the order of the DIT(E), Delhi denying registration under sections 12A and 80G of the Income Tax Act. The main ground of appeal was that the DIT(E) erred in refusing registration under section 12A and consequential exemption under section 80G. The appellant trust was created with charitable objectives and applied for registration under the mentioned sections. The DIT(E) denied registration stating that the activities did not match the donations received, questioning the genuineness of the activities. The Tribunal considered the arguments of both parties and reviewed the records.

The appellant's representative argued that the DIT(E) failed to prove that the trust's activities were not genuine. They contended that the DIT(E) wrongly considered the ratio of expenditure to donations as a basis for denying registration. The appellant relied on previous court decisions to support their case, emphasizing that registration under section 12A is not dependent on the commencement of charitable activities. They argued that only the genuineness of the objects, not the activities, should be considered during registration.

In response, the Departmental Representative supported the DIT(E)'s decision, highlighting that the trust had not carried out significant charitable activities despite having charitable objectives. They argued that the trust's minimal spending on education support did not qualify as genuine charity. However, the Tribunal observed that the DIT(E) did not question the trust's charitable objectives but denied registration based on the absence of significant charitable activities. Referring to court decisions, the Tribunal concluded that registration under section 12A should focus on the genuineness of the objects, not the commencement of activities.

Consequently, the Tribunal held that the DIT(E) had wrongly rejected the registration application based on unjustified grounds. The sole ground of the appellant trust was allowed, and the DIT(E) was directed to grant registration under section 12A. Additionally, the rejection of registration under section 80G was set aside, instructing the DIT(E) to reconsider the application with a fair hearing for the appellant. Ultimately, the appeal of the appellant was allowed based on the above considerations.