2015 (7) TMI 143 - AT - Income Tax

Registration under section 12AA denied - DIT(E) refused the registration to the trust for the reason that there was no clause with respect to transferring the assets - Held that - As decided case of Shri Chargam Dasha Porwad Mahamandal 2015 (7) TMI 105 - ITAT AHMEDABAD 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: Registration of trust under Section 12A of the Act

Analysis:
The appeal was filed by the Assessee against the order of D.I.T(E), Ahmedabad regarding the registration of the trust under Section 12A of the Act. The DIT(E) denied the registration under section 12AA of the Act due to concerns regarding the dissolution clause in the trust deed and the absence of a clause for transferring assets. The Assessee argued that the trust deed did contain a clause for transferring the property to another institution with similar objects upon closure of the trust. The Assessee relied on a previous decision in a similar case to support their argument. The Tribunal noted that in a previous case, registration was allowed even in the absence of a dissolution clause in the trust deed, as long as the trust was registered with the sub-registrar as a charitable trust. The Tribunal found that the Assessee's case was on a sound footing as they had applied to the Charity Commissioner for amending the trust deed to include a dissolution clause. The Tribunal held that there was no justification for refusing registration to the Assessee and directed the DIT(E) to grant registration under Section 12AA of the Act. The appeal of the Assessee was allowed based on the similar reasons given in the previous case.

In conclusion, the Tribunal directed the DIT(E) to grant registration under Section 12AA to the Assessee, as the case was found to be similar to a previous case where registration was allowed even in the absence of a dissolution clause in the trust deed. The Tribunal emphasized the importance of the trust being registered as a charitable trust and the willingness of the Assessee to amend the trust deed to include a dissolution clause, which ultimately led to the decision in favor of the Assessee.