2007 (3) TMI 188 - HC - Income Tax

Charitable trust Assessee applied for registration u/s 12A of the ITA, 1961 but rejected by the CIT(A) on the ground of that there is no expenditure for charitable purpose and also no charitable activities undertaken by assessee for the past three years Order of CIT(A) upheld.

Summary

Issues:
1. Denial of registration under section 12A and exemption under section 80G to the appellant-trust.
2. Commissioner of Income-tax's alleged error in denying registration and exemption under section 80G to the appellant-trust.
3. Perversity in the findings of the Commissioner of Income-tax in denying registration and exemption to the appellant trust.

Analysis:

Issue 1: Denial of registration under section 12A and exemption under section 80G to the appellant-trust:
The appellant trust applied for registration under section 12A and exemption under section 80G of the Income-tax Act, 1961. However, the authorities found discrepancies in the trust's activities. The trust claimed to have carried out charitable activities but failed to provide evidence of actual expenses towards these activities. The trust's entire receipts were kept in fixed deposits, with no expenditure on charitable objects for the past three years. The source of funds was claimed to be deductions from employees' wages, but no evidence supported this claim. The trust's collection of funds was found not to be voluntary. The authorities also noted that the trust applied for registration only after inquiries were initiated, and significant deposits were found in the trustee's name. The tribunal upheld the denial of registration based on these factors, deeming the trust's claim not genuine.

Issue 2: Commissioner of Income-tax's alleged error in denying registration and exemption under section 80G to the appellant-trust:
The Commissioner of Income-tax denied registration and exemption under section 80G to the appellant-trust based on various grounds, including the late filing of the registration application, lack of evidence of charitable activities, no expenditure on trust objects, false declarations to avoid tax deductions, non-utilization of income for charitable purposes, and lack of proof of voluntary contributions. The tribunal concurred with these findings, highlighting the trust's failure to substantiate its claims during the hearing. The trust's argument that keeping funds in fixed deposits did not change its charitable nature was dismissed, emphasizing the lack of expenditure on charitable purposes over the past five years and the trustee's involvement in settlement proceedings after significant deposits were detected.

Issue 3: Perversity in the findings of the Commissioner of Income-tax in denying registration and exemption to the appellant trust:
The appellant trust contended that the authorities wrongly rejected its claim based on the nature of fund utilization and the delay in application filing. However, the court found no merit in the appeal, agreeing with the authorities' reasoning and dismissing the appeal. The court emphasized the lack of substantiation of the trust's pleas during the hearing, concluding that the findings were not perverse and that the trust's conduct did not support a different view from that taken by the tribunal.

In conclusion, the court upheld the denial of registration and exemption to the appellant trust, citing various discrepancies in the trust's activities, lack of evidence of charitable expenditure, and questionable fund sources, leading to the dismissal of the appeal.