2015 (12) TMI 887 - AT - Income Tax

Registration u/s 12A denied - Held that - Undisputedly, the assessee was created by registered trust deed dated 5.10.2012 and it applied for registration on 25.4.2013. Therefore, it is not unusual that it could not commence any activities within such a short period. Further, admittedly when it has not received any funds nor commenced its activities, there is no need to maintain books of accounts. In the aforesaid circumstances, it cannot be held that as the assessee has not maintained books of accounts or commenced its activities, the activities are not genuine, hence, registration cannot be granted u/s 12A of the Act. So far as objects of the assessee as mentioned in the trust deed are concerned, a perusal of the same would clearly show that they come within the meaning of charitable purpose as defined u/s 2(15) of the Act. It is well settled principle of law that at the time of grant of registration, the CIT is only required to look into the object of the trust and genuineness of its activities. So far as the object of the trust is concerned, there is no adverse comment by the CIT that they are not charitable in nature. That being the case, only because it has not commenced its activities within such a short period of time, there is no justification in rejecting the application for grant of registration u/s 12A of the Act. Commencement of activity cannot be the sole criteria for not granting registration u/s 12A of the Act. We direct the CIT to grant registration to the assessee u/s 12A of the Act. - Decided in favour of assessee

Summary

Issues:
1. Rejection of application for registration u/s 12A of the Income-tax Act based on lack of maintained books of accounts and activities by the assessee trust.
2. Interpretation of the genuineness of activities and charitable purpose as per the trust deed.
3. Examination of the justification for rejecting the application for registration u/s 12A solely based on the commencement of activities.

Analysis:
Issue 1: The appeal was against the CIT's order rejecting the assessee trust's application for registration u/s 12A due to the absence of maintained books of accounts and lack of conducted activities in line with the trust deed. The CIT noted the trust's admission of insufficient funds to carry out all activities specified in the deed, leading to doubts about the genuineness of the trust's activities.

Issue 2: The assessee argued that the trust was newly created and had applied for registration promptly after its creation, making it unreasonable to expect immediate activity commencement. The trust contended that its objects aligned with charitable purposes under section 2(15) of the Act, despite not receiving donations hindering extensive activities. Citing judicial precedents, the assessee emphasized the charitable nature of its objects.

Issue 3: The Tribunal found that the trust's short existence and lack of funds justified the absence of activities and maintained accounts. It emphasized that registration under section 12A required scrutiny of the trust's objects and activity genuineness, rather than solely focusing on activity commencement. Referring to a similar case, the Tribunal held that rejection based solely on non-commencement of activities was unjustified. Accordingly, the Tribunal directed the CIT to grant registration under section 12A, with a cautionary note on potential cancellation if trust activities were found non-genuine in the future.

In conclusion, the Tribunal allowed the assessee's appeal, highlighting the importance of assessing trust objects and genuineness of activities for registration under section 12A, rather than emphasizing immediate activity commencement. The decision underscored the need for a balanced approach in evaluating trust applications for registration.