2017 (8) TMI 1689 - AT - Income Tax

Exemption u/s 11 - rejection of application u/s 12AA - no activity was carried out by a trust or institution - proof of charitable activity u/s 2(15) - HELD THAT - The reasons given by the Ld. CIT(E ) does not sound good because one side reasoned that no activity has been carried out by the Assesse Trust on the other hand has doubted the intents of the objects and further observation that initially the Assessee wanted to construct school meditation hall at Asar Doda but later purchased land for school at Niabhat Nagrota in our view the trust that time was undoubtly at nascent stage and has not carried out any activity except to make efforts for procuring land for school however later on purchased the land for school at Niabhat Nagrota which clearly shows the intention of the trust as the main object of the trust is to establish schools etc. and to provide education therefore one can expect from the trust to do activity of the charity immediately and in that situation the authority cannot come to the conclusion that the intent contained in the objects of the trust do not find corroboration in the shape of any positive action taken towards either education or any of the other objects enunciated in the trust deed as observed by the ld.CIT (E ) . Third reason that the activities of assessee trust are controlled by one family is only an apprehension of the Ld. CIT (E ) which according to our mind can not base rejection of the registration because the Revenue Authority is at liberty to withdraw and/or to cancel the Registration an any time on the specified reasons enumerated in the Act. As from the documents filed before us it reflects that the assessee trust has already purchased the land which is 9 kanals 19 marlas situated at Village Balian Teshil Udhampur and further also got approved sanctioned plan for construction of school from the concerned Executive Engineer of the area no objection for construction from the concerned Panchayat and construction of School is at advance stage and also executed Memorandum of Understanding with the Bhartiya Shiksha Samiti which is involved in the field of imparting formal education having established a number of Primary and Secondary level Schools in different part of Jammu Kashmir as submitted. Even otherwise if no activity was carried out by a trust or institution still registration can be granted by the CIT(E) and even otherwise it is not the case of the Revenue that at the time of consideration of application of the Assessee the assessee has carried out many activities and their genuineness were in doubt but in the instant case grievance of the CIT(E) is only that there was no activity carried out by the assessee. As at the time of disposal of application the Ld. CIT(E) in order to satisfy himself about the genuineness of the activities of the trust or institution can call for such documents or information from the trust or institution as he thinks necessary and also empowered to make such enquiry as he may deem fit necessary in this behalf secondly that after satisfying himself about the object of the trust or institution and the genuineness of the activities he shall pass order in writing either register or refusing to register the trust or institutions. In the instant case no activity was carried out therefore question of genuineness did not arise. Hence we direct the Ld. CIT(E) to grant the registration u/s 12A of the Act to the assessee and it is clarified in case the assessee does not qualify/satisfy the objects of the trust and/or not involved in genuine activities then the concerned authority shall be at liberty to withdraw or to cancel the registration u/s 12A of the Act. Appeal filed by the assessee is allowed.

Summary

Issues Involved:
1. Rejection of registration under Section 12AA of the Income Tax Act, 1961.
2. Denial of registration on the grounds of non-activity.
3. Denial of registration due to change in the location of the proposed school.
4. Denial of registration due to control of the trust by one family.

Issue-wise Detailed Analysis:

1. Rejection of Registration under Section 12AA:
The appellant trust’s application for registration under Section 12AA was rejected by the CIT (Exemption), Chandigarh. The trust, founded on 12.03.2015, applied for registration on 15.05.2015. The CIT(E) rejected the application on the grounds that the trust had not carried out any charitable activities, had only entered into an agreement to purchase land, and had restrictive clauses in its trust deed indicating control by a single family.

2. Denial of Registration on the Grounds of Non-activity:
The CIT(E) observed that the trust had not carried out any charitable activities and had only received a donation of Rs. 20 lakhs, which was converted into an FDR. The tribunal noted that the trust was established and registered only on 12th March 2015, and the application for registration was filed on 29.04.2015. The tribunal referred to judicial precedents, including the Delhi High Court in the case of DIT Vs. Foundation of Ophthalmic & Optometry Research Education Center, and the Gujarat High Court in the case of CIT -1, vs. Kutchi Dasa Oswal Moto Pariwar Ambama Trust, which held that the CIT is not required to examine whether the trust has commenced charitable activities at the time of registration.

3. Denial of Registration Due to Change in Location of the Proposed School:
The CIT(E) also denied registration on the grounds that the trust initially decided to construct a school and meditation hall at Asar Doda but later purchased land for the school at Niabhat, Nagrota. The tribunal found this reasoning unsound, noting that the trust was at a nascent stage and had made efforts to procure land for the school, which aligns with its main objective of establishing educational institutions.

4. Denial of Registration Due to Control by One Family:
The CIT(E) expressed apprehension that the trust's activities were controlled by one family. The tribunal dismissed this concern, stating that such apprehension cannot be the basis for rejecting registration. The Revenue Authority has the liberty to withdraw or cancel the registration if it later finds that the trust's activities are not genuine.

Conclusion:
The tribunal concluded that the CIT(E) should have considered the objects of the trust as stated in the trust deed and noted that the Revenue Authority could withdraw the registration if the trust failed to conduct charitable activities. The tribunal directed the CIT(E) to grant registration under Section 12A of the Act to the assessee, with the clarification that the registration could be withdrawn if the trust does not satisfy its objectives or engage in genuine activities. Consequently, the appeals filed by the assessee were allowed.