2016 (6) TMI 121 - AT - Income Tax

Denial of registration under section 12AA - charitable activity - Held that - In view of finding of the Commissioner that the objects of present trust are charitable i.e. relief of the poor and further the genuineness of activities having been accepted that the assessee was running old age home, then on other surmises that the assessee has claimed exemption under sections 11 and 12 of the Act without the trust being registered under section 12A of the Act, does not stand. Further, the assessee was a public trust registered under the provisions of BPT Act, 1950 and where such recognition has been given to the trust, then it is established that the assessee is carrying on its charitable activities. The assessment proceedings or determination of income in the hands of assessee stands on a different footing and for that, provisions of the Act are there. Merely because the assessee had filed its return of income and claimed certain exemptions will not jeopardize the case of assessee as far as the grant of registration under section 12AA of the Act. The assessee having moved an application for registration, which was found to be in order and where the objects of the trust are charitable and activities of the trust are genuine, for the reason that surplus has been generated by the said trust does not merit its rejection. Further, we find no merit in the order of Commissioner in denying registration under section 12AA of the Act on the ground that there was delay in filing of initial application for registration under section 12A of the Act. The perusal of objects of the trust, clearly establish that the trust was established for carrying on charitable activities and as per clauses 5 and 6 of the Trust Deed, it was provided that the income of the trust fund or any part or parts of the trust fund or residue of the income would be applied for the benefit of all the persons irrespective of caste, creed, nationality or religion. Even if the said activity takes the colour of religious activity, the registration under section 12AA of the Act cannot be denied, where the assessee is engaged in both charitable and religious activities - Decided in favour of assessee.

Summary

Issues Involved:
1. Denial of registration under section 12AA of the Income-tax Act, 1961.
2. Rejection of application due to religious expenses, Chapel expenses, delay in filing the initial application, and tax payable by the appellant.
3. The validity and legality of the order passed by the CIT under section 12AA.

Issue-wise Detailed Analysis:

1. Denial of Registration under Section 12AA:
The appellant trust filed an appeal against the order of the CIT-I, Pune, dated 30.05.2013, which denied registration under section 12AA(1)(b)(ii) of the Income-tax Act, 1961. The trust had been set up via a Trust Deed dated 20.10.2010 and registered under the Bombay Public Trust Act, 1950 on 01.04.2011. The trust applied for registration under section 12A on 12.11.2013. The Commissioner noted that this application was filed much after the creation of the trust and its registration under the BPT Act. The earlier application for similar registration was rejected due to surplus income in assessment years 2011-12 and 2012-13, on which no taxes were paid after erroneously claiming exemption under section 11 without obtaining registration under section 12AA(1). The Commissioner required the trust to furnish details of charitable activities, which the trust failed to substantiate with proper evidence, leading to the rejection of the application.

2. Rejection of Application Due to Religious Expenses, Chapel Expenses, Delay in Filing Initial Application, and Tax Payable:
The Commissioner also raised the issue that the trust should have applied for registration under section 12A within one year of its creation. The application was made belatedly on 31.10.2012 and was rejected on 30.04.2013. The Commissioner noted that the trust had surpluses for assessment years 2011-12 and 2012-13 and had not declared approximately ?5 crores as corpus receipts. The Commissioner held that the trust had not complied with the law and could not be considered for registration, especially when it sought total exemption from tax under sections 11 and 12. The Commissioner also took note of Chapel expenses, which were not mandated by the trust deed.

3. Validity and Legality of the Order Passed by the CIT under Section 12AA:
The learned Authorized Representative for the assessee argued that the trust was carrying out the activity of running a home for senior citizens and that there was no finding that the activities were not genuine. The trust was a public trust registered under the BPT Act, and its activities were charitable in nature. The Commissioner should have granted registration based on the objects and genuineness of the activities. The learned Departmental Representative for the Revenue relied on the order of the Commissioner.

The Tribunal noted that the Commissioner must be satisfied about the objects of the trust and the genuineness of its activities. The trust's objects were charitable, falling under education, health, and relief of the poor. The Commissioner had found the objects charitable but questioned the genuineness of the activities due to insufficient evidence. The Tribunal held that running an old age home falls under the category of relief of the poor and is a charitable activity. The Commissioner should have granted registration if the objects and activities were genuine.

The Tribunal also addressed the issue of the delay in filing the application and noted that the Commissioner had previously allowed the trust to make a fresh application after clearing tax dues. The Tribunal found no merit in the order passed by the Commissioner and directed the Commissioner to pass an order in writing registering the trust as a charitable trust.

Conclusion:
The appeal of the assessee was allowed, and the Tribunal directed the Commissioner to grant registration under section 12AA of the Income-tax Act, 1961. The grounds of appeal raised by the assessee were thus allowed.