2018 (7) TMI 2053 - HC - Income Tax

Exemption u/s 11 - Absence of Dissolution Clause in the Trust Deed - net assets of the Trust on its dissolution would be transferred to any entity / distributed among the trustees thus defeating the very purpose of Registration u/s 12AA - HELD THAT - Issue raised herein stands concluded against the Revenue and in favour of the respondent assessee by the decisions of this Court in CIT (Exemptions) Vs. Tara Educational Charitable Trust 2017 (8) TMI 377 - BOMBAY HIGH COURT Appeal admitted on substantial question (ii) - Whether Tribunal was right in holding that the assessee is entitled to Registration u/s 12A ignoring the fact that as per Section 12AA(b) of the I.T. Act, 1961, registration is to be granted only where the CIT is satisfied about the genuineness of the activities of the Trust and the genuineness of the activities can be judged only when some activities are actually under taken in pursuance of its objects ?

Issues involved:
1. Challenge to the order of the Income Tax Appellate Tribunal for Assessment Year 2013-14 under Section 260A of the Income Tax Act, 1961.
2. Substantial questions of law raised by the Revenue regarding the Registration under sections 12AA and 12A of the Income Tax Act, 1961.

Analysis:

1. Challenge to the Tribunal's Order:
The appeal challenges the order dated 2nd January, 2015 passed by the Income Tax Appellate Tribunal (the Tribunal) for Assessment Year 2013-14 under Section 260A of the Income Tax Act, 1961.

2. Substantial Questions of Law:
a. Question (i):
The first substantial question of law raised by the Revenue questions the Tribunal's decision regarding the absence of a "Dissolution Clause" in the Trust Deed and the implications on the transfer of net assets upon dissolution. The Counsel for the Revenue acknowledged that similar issues were addressed in previous decisions of the Court, namely CIT (Exemptions) Vs. Tara Educational & Charitable Trust and CIT (Exemptions) Vs. Kallianji Chaturbhuj & Vijay Cantol Charitable Trust. The Court, based on these precedents, concluded that this question does not give rise to any substantial question of law and hence, not entertained.

b. Question (ii):
The second substantial question raised by the Revenue concerns the entitlement of the assessee to Registration under Section 12A, emphasizing the requirement of the CIT's satisfaction regarding the genuineness of the Trust's activities. The Tribunal's decision was challenged based on the interpretation of Section 12AA(b) of the Income Tax Act, 1961. The Court admitted the appeal on this substantial question of law for further consideration.

3. Admission of the Appeal:
The appeal was admitted on the substantial question of law raised under question (ii) regarding the assessee's entitlement to Registration under Section 12A of the Income Tax Act, 1961.

4. Direction to Registry:
The Registry was directed to communicate a copy of the order to the Tribunal to ensure the availability of papers and proceedings related to the appeal when required by the Court for further proceedings.

This detailed analysis of the judgment highlights the issues involved, the substantial questions of law raised by the Revenue, and the Court's decisions based on precedents and legal interpretations.

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