2015 (7) TMI 105 - AT - Income Tax

Registration u/s.12AA and 80G(5) refused - There is no dissolution clause in the trust-deed and trust does not have any clause that the trust will not be dissolved and it is a perpetual trust - Held that - This issue of refusing registration in the absence of dissolution clause in the trust-deed is covered in favour of the assessee with the decision of Co-ordinate Bench of Delhi Tribunal in the case of Shri Sai Samarpan Trust Co.(2007 (6) TMI 507 - ITAT DELHI), wherein held that when the assessee- trust is registered with the sub-registrar as a charitable trust, in the event of failure of the trust the net assets/income would obviously be taken over by the Charity Commissioner and the rejection of registration on this ground was held not on a sound footing and the orders of the DIT(Exemptions) were reversed. We find that the case of the assessee is on more sound footing since it has already applied to the Charity Commissioner for amendment of the trust-deed vide application submitted on 26/02/2013, whereby inserting the dissolution clause providing that the trust shall be irrevocable and in the most unlikely situation, if trust practically stops functioning, it can only be merged/amalgamated with other one or more public charitable trusts or bodies having similar objects subject to the approval of the Office of the Public Charity Commissioner, etc. No other material has been produced on behalf of the Revenue before us to suggest that the aims and objects of the trust are not charitable in nature. Thus there is no justification for refusing the registration u/s.12AA and 80G(5) to the assessee - Decided in favour of assessee.

Summary

Issues involved:
Appeal against refusal of registration u/s.12AA and 80G(5) of the Income Tax Act, 1961 due to the absence of a dissolution clause in the trust-deed.

Detailed Analysis:

1. Refusal of Registration u/s.12AA and 80G(5):
- The appeals were filed against the orders of the Director of Income Tax (Exemptions), Ahmedabad, refusing registration u/s.12AA and 80G(5) to the assessee-trust.
- The primary reason for refusal was the absence of a dissolution clause in the trust-deed, indicating that the trust would not be dissolved and is perpetual.
- The assessee submitted an amendment to the trust-deed to the Charity Commissioner, specifying that the trust shall be irrevocable and can only be merged or amalgamated with other charitable trusts with similar objects.
- The assessee relied on a decision by ITAT Delhi in a similar case, where the Tribunal held that registration could not be rejected solely based on the absence of a dissolution clause.
- The Departmental Representative (DR) opposed the submission, relying on the orders of the DIT(Exemptions).

2. Decision of the Appellate Tribunal:
- The Appellate Tribunal considered the submissions and the Delhi Tribunal's decision in the similar case.
- It was noted that the rejection of registration solely based on the absence of a dissolution clause was not justified.
- The assessee's application to amend the trust-deed to include a dissolution clause was taken into account.
- The Tribunal found that no material was presented to suggest that the trust's aims and objects were not charitable in nature.
- Consequently, the Appellate Tribunal allowed the appeals, reversed the orders of the DIT(Exemptions), and directed the grant of registration u/s.12AA and 80G(5) to the assessee.

3. Conclusion:
- In conclusion, both appeals were allowed by the Appellate Tribunal, overturning the refusal of registration by the DIT(Exemptions).
- The Tribunal directed the DIT(Exemptions) to grant registration u/s.12AA and 80G(5) to the assessee-trust based on the amended trust-deed and the charitable nature of the trust's objectives.