2015 (12) TMI 693 - AT - Income Tax

Registration u/s 12AA cancelled - applicant trust undertook only one activity out of 21 objects - Held that - CIT has considered irrelevant factors in rejecting the application of the appellant trust. The objects of the applicant trust as mentioned in Trust deed are charitable in nature and the application for registration cannot be rejected merely because applicant trust undertook only one activity out of 21 objects and activities proposed in the trust deed. So far as the allegation of the CIT that the income derived by the trust either by way of donation or by way of fees from the students is concerned, there is no allegation that the receipts from fees were applied or used by the assessee trust for the purpose other than the aims and objects of the trust. From the impugned order, we further note that it is not the allegation of the CIT that the fees charged from the institutions or donations received have been used for the purposes other than running the institution managed by the assessee trust. Admittedly and undisputedly, this fact has been noted by the CIT that the appellant trust is running a school as per its charitable objects and it is not the allegation of the CIT that the activities carried on by the assessee trust are not in consonance with its objects as per trust deed. We are of the view that the CIT rejected an application for registration u/s 12AA of the Income Tax Act, 1961 without any justified reason and basis despite the fact that the objects of the applicant trust are charitable and no allegation has been brought out on record by the CIT that the assessee is conducting activities beyond its object as per trust deed or fees and donations are being used for the activities which are not charitable and beyond the ambit of the objects of the assessee applicant trust, hence, we direct the CIT that the applicant trust should be granted registration u/s 12A - Decided in favour of assessee.

Issues Involved:
1. Rejection of application for registration under section 12AA of the Income Tax Act, 1961.
2. Evaluation of charitable nature and genuineness of the Trust's activities.
3. Consideration of objections raised by the Commissioner of Income Tax (CIT).
4. Legal precedents and guidelines for granting registration under section 12AA.

Detailed Analysis:

1. Rejection of Application for Registration under Section 12AA:
The appellant trust, established on 2.8.11 and registered under the Public Trust Act, applied for registration under section 12AA on 19.3.14. The CIT, Faridabad, rejected the application, citing the trust's failure to substantiate the charitable nature of its aims and objects and the lack of conclusive evidence of the genuineness of its activities.

2. Evaluation of Charitable Nature and Genuineness of the Trust's Activities:
The appellant argued that all objects of the trust were charitable, as per clause (iii) of the Trust deed, and that the trust was created wholly for charitable purposes without benefiting any particular religion, caste, or individual. The appellant's counsel emphasized that the trust's income was not for the benefit of any individual and that the application was filed with all relevant documents demonstrating charitable purposes. The counsel referenced several judgments to support the proposition that the CIT's inquiry should focus on the charitable nature and genuineness of the trust's activities.

3. Consideration of Objections Raised by the CIT:
The CIT's objections included:
- The trust had undertaken only one object (running a school) out of 21.
- All trustees appeared to be from one family.
- The trust could be dissolved by a 3/4 majority of trustees, questioning its irrevocability.
- The trust deed allowed for amendments, contrary to a Supreme Court judgment.
- The trust had not maintained proper minutes books.

The appellant's counsel contended that these objections were baseless. He argued that there was no statutory requirement for the trust to undertake all objects from the beginning, and trustees could belong to the same family. He clarified that the trust deed mandated that upon dissolution, assets would be handed over to a similar registered trust or the government. The counsel also pointed out that the trust had maintained minutes books in the form of computer printouts, which were sanctioned by the Board of Trustees.

4. Legal Precedents and Guidelines for Granting Registration under Section 12AA:
The Tribunal noted that section 12AA provides the procedure for registration, requiring the CIT to call for documents, conduct inquiries, and satisfy himself about the charitable or religious nature and genuineness of the trust's activities. The Tribunal referenced the Karnataka High Court's guidelines, emphasizing that the inquiry should focus on the charitable nature and application of income for charitable purposes.

The Tribunal found that the CIT had considered irrelevant factors in rejecting the application. The trust's objects were charitable, and the application could not be rejected merely because only one activity was undertaken. The Tribunal noted that there was no allegation that the trust's income was used for non-charitable purposes. The Tribunal also distinguished the present case from the Punjab & Haryana High Court's decision in Guru Gorakh Nath Charitable Educational Society, where the applicant failed to submit relevant material.

The Tribunal concluded that the CIT was not justified in rejecting the application, as the trust's activities were in line with its charitable objects. The Tribunal directed the CIT to grant registration under section 12AA, emphasizing that the CIT should not act as an assessing authority at the registration stage.

Conclusion:
The Tribunal allowed the appeal, directing the CIT to grant registration to the appellant trust under section 12AA of the Income Tax Act, 1961. The order was pronounced in the open court on 30.11.15.

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