2015 (4) TMI 263 - HC - Income Tax

Registration certificate under Section 12AA - whether on the ground that the trust deed does not provide for dissolution clause , whether the Commissioner can deny the registration under Section 12AA? - Held that - As respondent-trust has stated that as such the respondent-trust had already applied for amendment in the trust deed providing dissolution clause and the same is pending before the learned Charity Commissioner. The impugned judgment and order passed by the learned tribunal is hereby quashed and set aside and the original order passed by the Commissioner refusing to grant the registration sought by the respondenttrust under Section 12AA of the Act are hereby quashed and set aside and the matter is remitted to the file of the Commissioner of Income Tax (Exemptions),to consider the application of the respondent-trust afresh in accordance with law and on its own merits and to consider the request made by the respondent-trust to grant the registration certificate under Section 12AA of the Act on the same terms and conditions on which the registration certificate has been granted in the case of Shree Bai Education and Charitable Trust, Manavadar - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Denial of registration certificate under Section 12AA of the Income Tax Act due to the absence of a dissolution clause in the trust deed.

Analysis:
1. The appellant challenged the tribunal's decision allowing the respondent-trust's appeal for registration certificate under Section 12AA of the Act. The rejection was based on the absence of a dissolution clause in the trust deed. The tribunal directed the Commissioner to grant the certificate, citing the trust's registration with the subregistrar as a reason. The pivotal issue was whether denial of registration solely based on the lack of a dissolution clause was valid.

2. During the final hearing, the respondent-trust informed the court about an amendment application pending with the Charity Commissioner to include a dissolution clause in the trust deed. The court noted a recent order granting registration to another trust under specific conditions, including irrevocability and property transfer guidelines in case of dissolution. The respondent-trust expressed readiness to accept similar conditions for registration.

3. The court, with the consent of both parties, set aside the tribunal's decision and the Commissioner's original refusal to grant registration. The matter was remitted to the Commissioner to reconsider the application in light of the pending amendment for a dissolution clause. The court directed the Commissioner to evaluate the request for registration based on the terms applied to another trust, ensuring completion within three months from the order's receipt.

4. Consequently, the court disposed of the Tax Appeal, emphasizing the need for the Commissioner to review the registration application afresh, considering the impending inclusion of a dissolution clause in the trust deed and aligning the decision with the conditions set in a recent registration order for a similar trust.