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2019 (8) TMI 1497 - HC - Income TaxExemption u/s 11 - registration u/s 12AA denied - Whether Tribunal was right in overlooking the fact that in the absence of Dissolution Clause in the Trust Deed the net assets of the Trust on its dissolution would be transferred to any entity / distributed among the trustees? - HELD THAT - Impugned order allowed the respondent s appeal by placing reliance upon the decision of its coordinate bench in the case of Geeta Lalwani Foundation Vs. Commissioner of Income Tax (Exemption) 2015 (1) TMI 1368 - ITAT MUMBAI . Mr. Kotangle fairly states that the Revenue being aggrieved by the above order of the Tribunal had preferred an appeal to this Court being 2018 (7) TMI 2053 - BOMBAY HIGH COURT wherein this Court dismissed the above Appeal on the identical question as framed herein. (b) Thus for the reasons indicated above question no.(i) as proposed herein does not give rise to any substantial question of law. Thus not entertained. Whether tribunal was right in law by overlooking the facts that the assessee had incurred 29% out of its gross receipt towards religious activities which substantially higher than allowable i.e. 5% as per I.T. Act for religious purpose? - HELD THAT - We note that undisputedly 71% of the receipts of the Trust are being spent in accordance with its objects. Therefore this itself would establish that the Trust is in existence. A partial expenditure which is not authorized by the Trust would not be itself lead to the Trust becoming nongenuine. The consequence would be that the benefit of Section 11 of the Act will not be available to that extent. At the stage of registration this issue is premature. No substantial question of law.
Issues:
1. Challenge to the order granting Registration under Section 12A of the Income Tax Act. 2. Questions of law raised by the Revenue regarding the Trust Deed and expenditure for religious activities. Analysis: Issue 1: Challenge to the order granting Registration under Section 12A The appeal challenges the order of the Income Tax Appellate Tribunal (Tribunal) dated 22nd August, 2016, which reversed the Director of Income Tax (Exemption)'s decision and granted Registration under Section 12A of the Act. The Revenue raised the issue of a "Dissolution Clause" in the Trust Deed and the potential transfer of net assets upon dissolution. However, the Court noted that a similar case had been dismissed previously, indicating that the absence of a Dissolution Clause does not invalidate the registration under Section 12AA of the Act. Therefore, this issue was not entertained. Issue 2: Questions of law regarding expenditure for religious activities The Director of Income Tax (Exemption) rejected the registration application due to 29% of gross receipts being spent on donations for religious purposes, which was deemed excessive. The Tribunal, in its order, highlighted that the application of income is a matter for assessment proceedings under Section 11 of the Act and not for registration. The Tribunal found that 71% of the Trust's receipts were spent in accordance with its objects, indicating the Trust's genuineness. The Court emphasized that unauthorized partial expenditure does not render the Trust non-genuine, but may affect the availability of benefits under Section 11. As this issue was premature for registration, the Court did not entertain the questions raised regarding the expenditure for religious activities. In conclusion, the appeal was dismissed based on the Court's analysis of the issues raised by the Revenue.
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