2019 (7) TMI 1722 - AT - Income Tax

Registration u/s 12AA denied - Proof of charitable activities u/s 2(15) - scope of inquiry by CIT(A) for the registration u/s 12A and 12AA - HELD THAT - Sec.12AA(1) requires the Commissioner to whom an application is made for the registration of a Trust or Institution to satisfy himself about the genuineness of the activities of the Trust or the Institution as well as the objects of the Trust or Institution and for that purpose Commissioner is vested with power to call for documents or information and is also empowered to make such inquiries as he may deem necessary in that behalf. The Commissioner is thereupon empowered to pass an order in writing either registering an Institution or if he is not satisfied about the objects of the Trust or Institution and of the genuineness of its activities to pass an order in writing refusing to register the Trust or Institution. Thus it can be seen that at the time of grant of registration the Commissioner is not empowered to examine the application of income. The stage for consideration of the relevance of the object of the Trust and the application of its funds arises at the time of assessment. There is no finding of CIT(E) on the objects of Trust as mandated by the provisions of the Act as noted above. Further it is also not in dispute that assessee had made an application for registration in 2014 which was not been acted upon and therefore assessee filed 2nd application in 2018. Considering all we restore the issue back to CIT(E) Pune to decide the issue of registration u/s 12AA of the Act in accordance with law and after granting reasonable opportunity of hearing to the assessee. We also direct the CIT(E) to dispose of the application within three months of the receipt of the present order. Appeal of the assessee are allowed for statistical purposes.

Summary

Issues:
Denial of claim of registration u/s 12A of the Act.

Analysis:
The judgment pertains to an appeal filed by the assessee against the order of the Commissioner of Income Tax (Exemptions) – Pune, rejecting the application for registration u/s 12AA of the Income Tax Act. The assessee, a Trust registered under the Bombay Public Trusts Act, had applied for registration in 2014 and again in 2018. The key contention was the refusal of granting registration u/s 12AA. The assessee argued that the Trust's objects were charitable, and the Commissioner was only required to assess the charitable nature of the Trust's objects during registration, not the application of income. The Department supported the lower authorities' decision.

The Tribunal analyzed the provisions of the Act concerning registration of Trusts or Institutions under Sec. 12A and 12AA. It highlighted that the Commissioner's role during registration is to verify the genuineness of the activities and the charitable nature of the Trust's objects. The Tribunal cited a judgment emphasizing that the examination of the Trust's fund application is reserved for assessment, not registration. In this case, the Tribunal noted the absence of a finding by the CIT(E) on the Trust's objects as required by law. It also acknowledged the delay in processing the initial application. Consequently, the Tribunal remanded the issue back to the CIT(E), Pune, directing a fresh decision on registration within three months while providing a reasonable opportunity of hearing to the assessee. The Tribunal allowed the assessee's grounds for statistical purposes, ultimately allowing the appeal.

In conclusion, the judgment addresses the denial of registration u/s 12AA of the Act to a Trust, emphasizing the Commissioner's role in assessing the charitable nature of Trust objects during registration. The Tribunal's decision to remand the issue back to the CIT(E) for a fresh decision underscores the importance of procedural compliance and providing a fair opportunity for the assessee in such matters.