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2016 (4) TMI 166 - AT - Income TaxRegistration u/s 12A and approval u/s 80G denied - appellant trust has carried out one time activity of the distribution of sums - Held that - From the impugned order of the ld. CIT we note that in the ground taken for rejection he observed that the appellant trust has carried out one time activity of the distribution of sums and the applicant society has not carried out any activity in the field of formal education. He further alleged that the distribution of ht sums of money cannot be described as charitable activity in view of section 2(15) of the Act. On these observations and basis we are of the view that at the time of grant of registration u/s 12A of the Act, the ld. CIT has to record his satisfaction about the charitable objects and genuineness of the proposed activities of the applicant. The clause 10 and 12 clearly mandates the charitable activities of the trust. It is not pre-requirement for seeking registration u/s 12A of the Act that the applicant must show and establish having undertaken charitable activities before filing such application for registration u/s 12A of the Act. The ld. CIT(A) has not brought out any allegation or fact on record to establish and allege that the receipts of application trust were not used for charitable purposes and nor it has been shown that receipts were misappropriated or misused by the trustees or office bearers of the trust. Hence this allegation has no legs to stand. No clause or provision in the trust deed which shows that the control of properties and finance is safely given to members to enjoy the fruits of the properties and financial resources and receipts of the trust. The trust is running on deed which was made on 27.12.2010 and the trust is an educational and charitable trust with the object to help in spreading of education in its widest connotation with special focus on education of poor and needy without any preference on the basis of religion, race, caste, sex or place of birth and operation of the trust shall be carried in accordance with the intention of earning profits will perform with service motive only. In such situation the basis and allegations labelled by the ACIT are not found to be sustainable. registration u/s 12AA to be allowed - Decided in favour of assessee
Issues Involved:
1. Registration under Section 12A of the Income-tax Act, 1961. 2. Approval under Section 80G(5) of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Registration under Section 12A of the Income-tax Act, 1961: The applicant-trust, registered under the Indian Trusts Act with the objective of spreading education and providing medical and social relief to the poor, initially applied for registration under Section 12A of the Income-tax Act in the prescribed format on 09.03.2011. The application was previously refused, and the ITAT directed the CIT to re-adjudicate the matter. During the second round of proceedings, the CIT, Rohtak, called for a remand report from the AO, which did not clearly recommend the case for registration. The CIT then rejected the application, leading to the present appeal. The main contention of the applicant was that the CIT dismissed the application without giving an appropriate opportunity to be heard and ignored the merits of the case. The CIT based the rejection on the remand report without independently considering the merits or providing a hearing. The applicant argued that the trust exists solely for charitable purposes, as evidenced by its aims and objects, and that the CIT failed to follow the prescribed procedure under Section 12A by not passing the order within six months from the date of receipt of the Tribunal order. The CIT’s rejection was based on several allegations: - The trust had only carried out one-time activities of distributing sums, which the CIT did not consider charitable under Section 2(15) of the Act. - The trust was controlled by family members, raising concerns about it being a private discretionary society. - The trust amended its constitution without following due procedure. - The JCIT and AO did not recommend registration and left the decision to the CIT. - The properties and financial control were allegedly in the hands of the members, with the power to transfer assets to any member. The Tribunal found that these allegations did not hold. It noted that the CIT must record satisfaction about the charitable objects and genuineness of the activities of the trust at the time of granting registration under Section 12A. The Tribunal emphasized that the trust deed clearly mandated charitable activities, and there was no requirement for the trust to have undertaken charitable activities before applying for registration. The Tribunal also highlighted that the CIT did not bring any facts on record to show misuse of funds or that the trust was not operating for charitable purposes. The Tribunal referenced the judgment of the Karnataka High Court in Sanjeevamma Hanumath Gowda Charitable Trust vs DIT(E) and the Punjab & Haryana High Court in CIT-I vs Baba Kartar Singh Dukki Educational Trust, which clarified that the genuineness of the trust’s activities and the application of income for charitable purposes are the primary considerations for granting registration under Section 12A. The Tribunal concluded that the CIT rejected the application without justified reasons and directed the CIT to grant registration under Section 12A of the Act. 2. Approval under Section 80G(5) of the Income-tax Act, 1961: Since the Tribunal allowed the issue of grant of registration under Section 12A, it consequently allowed the grant of approval under Section 80G(5) of the Act. The CIT, Rohtak, was directed to grant approval under Section 80G to the applicant trust. Conclusion: Both appeals of the applicant were allowed, with the Tribunal directing the CIT to grant registration under Section 12A and approval under Section 80G of the Income-tax Act, 1961. The order was pronounced in the open court on 31.03.2016.
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