2018 (3) TMI 1860 - HC - Income Tax

Exemption u/s 11 - approval sought under Section 80G - application filed u/s 12AA was declined by the C.I.T. (E) inspite of granting sufficient opportunity, the assessee failed to produce details and documents in support of its claim for registration - I.T.A.T. while considering the objects (Annex.6) of the charitable Trust, held that as per Section 12A and 12AA what is intended thereby is only a registration simplicitor of the entity of a Trust, which is condition precedent for claiming of benefits under the other provisions of the Act regarding exemption of income, contribution etc. - HELD THAT - No examination of the modus of the application of the funds of the Trust or an examination of the ethical background of its settlers is called for while considering an application for registration. The I.T.A.T. further held that stage for consideration of relevance of the object of the Trust and application of its fund arise at the time of assessment, when benefits are claimed by assessee in terms of Sections 11 and 12, the question as to the nature of such contribution and income can be looked into. At the time of registration of the Trust, going by the binding judgments of the Apex Court, what is to be looked into is whether the Trust is a genuine one and whether is a sham institution floated only to avail the benefits of exemption under the Act, therefore, the learned I.T.A.T. allowed the appeal filed by the respondent/assessee and passed order to grant registration under Section 12AA and 80G of the Act to the assessee with effect from filing of application. Relevant provisions of law and the object of the Trust reproduced in paragraph 8 of the order, we are of the opinion that no substantial question of law arises for consideration.

Summary

Issues:
- Appeal against rejection of registration under Section 12AA of the Income Tax Act
- Compliance with Rule 17A of the Income Tax Rules, 1962
- Consideration of genuineness of activities by the assessee
- Interpretation of Section 12A and 12AA of the Act for registration of Trust
- Examination of Trust's objects and application of funds at the time of assessment

Analysis:
The appellant, C.I.T. (Exemption), Jaipur, filed an appeal under Section 260A of the Income Tax Act against the judgment of the Income Tax Appellate Tribunal (I.T.A.T.) regarding the rejection of registration under Section 12AA of the Act. The appellant argued that the I.T.A.T. decision was not in line with the law as the respondent failed to comply with Rule 17A of the Income Tax Rules, 1962. The C.I.T. (E) rejected the registration application citing the need to examine the genuineness of the activities undertaken by the assessee, which the assessee allegedly failed to provide despite opportunities. The I.T.A.T. allowed the appeal, emphasizing that registration under Section 12AA is a mere formality for claiming benefits under the Act, and detailed examination is reserved for the assessment stage.

The main contention revolved around whether the I.T.A.T. was correct in granting registration under Section 12AA despite the alleged non-compliance with Rule 17A and the failure to produce supporting documents by the assessee. The I.T.A.T. held that examining the Trust's objects and fund application is more relevant during assessment for benefits under Sections 11 and 12, rather than during registration. The I.T.A.T. stressed the importance of ensuring the Trust's genuineness during registration, as per Supreme Court precedents, to prevent misuse of exemptions under the Act.

The High Court, after reviewing the facts, legal provisions, and Trust's objects, concluded that no substantial legal question arose for consideration. The court upheld the I.T.A.T.'s decision to grant registration under Section 12AA and 80G of the Act to the assessee from the date of application filing. Ultimately, the appeal was dismissed as lacking merit, affirming the I.T.A.T.'s judgment on the interpretation of registration requirements under the Income Tax Act.