2015 (7) TMI 145 - AT - Income Tax

Registration sought by the assessee-trust u/s 12AA refused - Held that - Going through the orders of the authorities below as well as the Order of the Co-ordinate Bench in the case of Shree Chargam Dasha Porwad Mahamandal v. DIT (Exemption) 2015 (7) TMI 105 - ITAT AHMEDABAD wherein it was 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. The books of accounts can be examined at the time of assessment. Therefore allow the appeal of the assessee and direct the ld. Commissioner of Income-tax, Rajkot-III, Rajkot to grant the registration u/s 12AA of the Income-tax Act, 1961. - Decided in favour of assessee.

Summary

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

Analysis:
The appeal was filed by the assessee-trust against the order of the Commissioner of Income-tax, Rajkot, refusing to grant registration under section 12AA of the Income-tax Act, 1961. The Commissioner observed that the trust deed lacked clauses related to revocability/irrevocability of trust and dissolution/winding up, and the trust failed to produce essential financial documents. The Commissioner, therefore, rejected the registration application citing incomplete trust deed and lack of financial records as reasons.

At the hearing, the assessee-trust relied on a Co-ordinate Bench decision where refusal of registration due to absence of a dissolution clause in the trust deed was deemed unsound. The Bench held that in case of trust failure, assets would be taken over by the Charity Commissioner, and the rejection on this ground was not justified. The assessee had applied for an amendment to include a dissolution clause, making the trust irrevocable with provisions for amalgamation in certain situations. The Revenue did not provide any material to challenge the charitable nature of the trust's objects. Following the precedent, the Tribunal allowed the appeal and directed the Commissioner to grant registration under section 12AA of the Income-tax Act, 1961.

The Tribunal's decision was based on the principle that the absence of a dissolution clause in the trust deed should not be a sole reason for rejecting registration. The trust's charitable nature and the provision for handling assets in case of trust failure were considered sufficient grounds for granting registration. The Tribunal emphasized that financial scrutiny could be done during assessment, and the lack of certain clauses in the trust deed should not impede the registration process. Ultimately, the Tribunal allowed the appeal, instructing the Commissioner to register the assessee-trust under section 12AA of the Income-tax Act, 1961.