2016 (5) TMI 817 - AT - Income Tax

Registration under section 12AA rejected - CIT(A) is of the view that the trust is not engaged in any form of charitable activities as is envisaged in section 2(15) of the Act and this view was formed considering the specific religious purposes of the objects mentioned in the trust deed of the assessee - Held that - On going through the said objects of the trust, we see that these relate to imparting free Gurmat Sangeet, holding Kirtan Darbar, organizing Gurmat camps and to construct buildings, etc. The purpose of the trust is to run institution to spread teachings of Holy Guru Granth Sahib. At first, we observe that these objects nowhere point to the propagation of religious teachings and singing. Even if singing or teachings of specific kind are promoted through these objects, nowhere from other objects of the trust it is coming out that these teachings are to be given to a particular community only. The teachings of the Guru Granth Sahib are meant for each and every community and cannot be said to be for the propagation of a particular religious tenet. After observing such, we also emphasize that for granting registration under section 12AA of the Act, there is no bar on any trust which as per the Commissioner of Income Tax (Exemptions) cannot be given registration because of its being religious in nature. The only condition at the time of granting registration by the Commissioner of Income Tax (Exemptions) is to see whether the objects are of charitable in nature and the activities are genuine in nature. By holding that some of the objects of the trust are religious in nature, it cannot be inferred that these are not charitable in nature. Commissioner of Income Tax (Exemptions) concluded that these objects tend to point out that it is a closely held private trust whose purpose is to propagate religious tenets of Gurbani through music or singing. This is not a right reason for denying registration under section 12AA of the Act. There is no bar under section 12A not to give registration to a religious trust. Even a religious trust having charitable objects can be given registration under section 12AA of the Act. As regards the activities being for furtherance of the cause for a particular community, proper care has been taken by the Income Tax Act in its provisions of sections 11 and 13 of the Income Tax Act. However, at a time of giving registration under section 12AA of the Act, these are not the relevant things to be seen. These matters are to be looked after by the Assessing Officer during the assessment proceedings on yearly basis while granting exemptions to the assessee under section 11 of the Act. In order to arrive at the true purpose of a trust, the objectives are to be considered as a whole. Nowhere from any of the objects of the assessee, it appears that it aims to provide any benefit to a specific person or persons. We are in agreement with the submissions made by the learned counsel for the assessee that at the time of granting of registration, the only two factors, which are to be taken into consideration by the Commissioner of Income Tax (Exemptions) are charitable character of the objects of the trust and genuineness of the activities. Nowhere in his whole order, the Commissioner of Income Tax (Exemptions) has brought on record any evidence or material to show that the objects of the assessee trust are not charitable or the activities of the assessee trust are not genuine. In view of this, we direct the Commissioner of Income Tax (Exemptions) to grant registration under section 12AA of the Act to the assessee. - Decided in favour of assessee

Summary

Issues:
1. Denial of registration under section 12AA of the Income Tax Act, 1961 based on the nature of activities of the trust.
2. Interpretation of the objects of the trust and their charitable nature.
3. Consideration of the Trust Deed clause regarding dissolution and transfer of assets to another society.
4. Receiving donations for corpus funds and utilization of donations for purchase of assets.

Analysis:
1. The appeal challenged the denial of registration under section 12AA by the Commissioner of Income Tax (Exemptions) based on the perceived religious nature of the trust's activities. The appellant argued that the trust engaged in various charitable activities such as organizing mass marriages for the poor, conducting eye camps, providing monetary aid to the needy, and distributing free ration to the underprivileged. The appellant contended that the Commissioner's decision was erroneous as it focused solely on the religious aspects of the trust's objectives, contrary to the requirement of assessing the charitable nature of the objects.

2. The Commissioner's denial of registration primarily relied on the trust's objects related to Gurmat Sangeet, Kirtan Darbar, and Gurmat camps, which were deemed religious in nature. However, the Appellate Tribunal noted that these activities did not exclusively cater to a specific religious community and were intended to spread teachings from the Guru Granth Sahib for the benefit of all. The Tribunal emphasized that the charitable nature of the trust's objects should be the key consideration for registration under section 12AA, irrespective of any religious connotations associated with the activities.

3. Another issue raised by the Commissioner was regarding a clause in the Trust Deed allowing for dissolution and transfer of assets to another society in case of non-compliance with the trust's objectives. The Tribunal found this clause to be in line with the trust's charitable nature, as it ensured that assets would be redirected to a similar charitable institution, thereby upholding the charitable purpose even in the event of dissolution.

4. The Commissioner also questioned the absence of donations for corpus funds and the utilization of received donations for asset purchases. However, the Tribunal clarified that the absence of corpus funds did not negate the charitable essence of the trust's activities, as donations were utilized for genuine charitable purposes, including day-to-day operations. The Tribunal emphasized that the utilization of donations for asset acquisition did not detract from the trust's charitable character.

In conclusion, the Appellate Tribunal directed the Commissioner to grant registration under section 12AA to the appellant, highlighting the importance of assessing the charitable character of the trust's objects and the genuineness of its activities as the primary criteria for registration.