2016 (2) TMI 746 - AT - Income Tax

Grant of registration u/s 12A and recognition u/s 80G denied - CIT(E) denied the registration only on the ground that the appellant-trust had not furnished the clarification as to receipt of rental income for conducting tuitions and the appellant-trust was not serious in prosecuting the applications - Held that - The contentions of the ld.CIT(E) are not tenable in the facts of the present case as the appellant-trust had duly complied with all the letters issued by him and therefore the ld.CIT(E) should not have held that the appellant-trust was not serious in prosecuting the applications. The receipt of rental income by the appellant-trust can be examined only during the course of assessment proceedings by the Assessing Officer after grant of registration. It was so held by the Hon ble jurisdictional High Court in the cases of Sri Gururaja Seva Samithi 2015 (7) TMI 954 - KARNATAKA HIGH COURT . The Hon ble jurisdictional High Court in this case had clearly held that the question of verifying the activities of the trust can be considered only after it is registered and carries on activities subsequently. Thus genuineness of the activities of the trust and nature of receipt of any sum of money cannot be gone into at the time of registration of the trust. It is only after the activities of the trust are commenced the genuineness of the objects can be examined during the course of assessment proceedings after the grant of registration by the IT Authorities. Respectfully following the ratio laid down in the cases cited supra we direct the ld.CIT(E) to grant registration u/s 12A of the IT Act. Thus the appeal filed by the trust is allowed. Also we direct the ld.CIT(E) to grant approval u/s 80G of the IT Act. - Decided in favour of assessee

Summary

Issues:
Denial of registration u/s 12A of the IT Act and recognition u/s 80G of the IT Act.

Analysis:
The appellant-trust appealed against the order denying registration u/s 12A and approval u/s 80G of the IT Act, 1961. The trust was formed to advance education and diffusion of knowledge. The CIT(E) denied registration citing lack of clarification on rental income receipt for conducting tuitions and alleged lack of seriousness in prosecuting the applications. The appellant complied with all queries and submitted necessary details. The CIT(E) dismissed the applications based on the rental income issue. The Tribunal held that the CIT(E)'s contentions were untenable as the trust had complied with all requirements. The Hon'ble jurisdictional High Court precedent stated that verification of trust activities can only occur after registration and commencement of activities. The Co-ordinate Bench of the Delhi Tribunal further emphasized that the Commissioner can only examine if trust objects are charitable for registration. The Tribunal directed the CIT(E) to grant registration u/s 12A. Consequently, approval u/s 80G was also directed to be granted as a consequential issue. The appeals by the trust were allowed.

Conclusion:
The judgment focused on the denial of registration u/s 12A and approval u/s 80G of the IT Act to the appellant-trust. It highlighted the importance of complying with queries and the timing of verifying trust activities. The Tribunal emphasized that the genuineness of trust activities and income receipts should be assessed post-registration during assessment proceedings. The judgment underscored that the Commissioner's role is limited to examining the charitable nature of trust objects for registration. Ultimately, the Tribunal directed the CIT(E) to grant registration and approval to the trust, allowing the appeals filed by the trust.