2015 (6) TMI 922 - AT - Income Tax

Registration under 12AA rejected - the objectives of the Trust are not charitable in nature, merely because the objectives included the words consultancy, investment advisory and an investment agency - Held that - Remit the issue back to the file of the DIT (E) to consider de novo and give an opportunity to the assessee who shall amend the present objects of the Trust with specific objects towards Research and Development and also DIT (E) shall verify whether assessee has deleted the clause which enable the assessee to carry on activities outside India. The DIT (E) shall decide the issue after perusing the amended objects of the Trust Deed in accordance with law. - Decided in favour of assessee for statistical purposes.

Summary

Issues: Registration under section 12AA of the Income Tax Act, 1961

Analysis:
1. Issue 1: Charitable vs. Non-charitable Objectives
- The appeal challenged the rejection of registration under section 12AA based on the trust's objectives. The Director of Income Tax (Exemptions) found that the trust's objectives, including consultancy and investment activities, were non-charitable. This led to the denial of registration as the trust was not formed entirely for charitable purposes. Reference was made to legal precedents emphasizing the need for all trust objectives to be charitable for tax exemption.

2. Issue 2: Activities Undertaken by the Trust
- The Director observed discrepancies in the activities claimed by the trust, particularly regarding the establishment of a marine study center in Goa. The trust failed to provide verifiable evidence of its activities, leading to doubts about the actual operations conducted. Printed brochures submitted by the trust did not sufficiently clarify its role in various institutes, raising concerns about the trust's transparency and credibility.

3. Issue 3: Amendments to Trust Deed
- During the appeal, the trust proposed amending its objectives to focus solely on charitable activities, specifically aiding the underprivileged in academic research and development. The trust aimed to remove non-charitable elements from its objectives to align with the requirements for registration under section 12AA. The counsel assured the intention behind forming the trust was charitable, emphasizing the need for clear and charitable objectives in the trust deed.

4. Final Decision and Remittance
- The Tribunal directed the matter back to the Director of Income Tax (Exemptions) for reconsideration. The trust was given an opportunity to amend its objectives to reflect charitable activities exclusively. The Director was instructed to verify the removal of clauses allowing activities outside India. The decision to grant registration under section 12AA was to be based on the revised trust deed, ensuring compliance with legal provisions.

In conclusion, the appeal was allowed for statistical purposes, highlighting the importance of aligning trust objectives with charitable activities for tax exemption eligibility under section 12AA. The case underscores the significance of transparency and verifiability in trust operations to ensure compliance with legal requirements.