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2017 (1) TMI 1099 - HC - Income TaxGrant of registration under section 12AA - main objects as well as the activities of the trust were construction and maintenance of temple - Held that - We have no difficulty in answering the questions in favour of the assessee. The assessee had filed an application for registration under Section 12AA of the Act. The question of granting of exemption under Sections 11 and 12 to a trust would only arise when a claim was made by the assessee for the same. The stage in the present case had not yet arrived. No finding has been recorded at any stage of the proceeding that the assessee had made any claim for exemptions. It had simply applied for registration under the provisions of Section 12AA of the Act. The application of section 13(1)(b) would only arrive at a stage when an application for exemption is made. At the time of registration of the trust all that is required to be seen is whether the object and purpose of the formation of the trust, is for a charitable purpose. In view of the above, we are of the opinion that the tribunal rightly came to the conclusion that at the stage of grant of the registration under Sections 12A and 12AA, the provisions of Section 13(1)(b) would not apply. The questions are, therefore, answered in favour of the assessee and against the department.
Issues:
1. Interpretation of provisions under Sections 12, 13, and 12AA of the Income Tax Act, 1961 in the context of granting registration to a charitable trust. 2. Whether the tribunal was justified in directing the Commissioner of Income Tax to grant registration under Section 12AA despite the trust's main objects being construction and maintenance of a temple, potentially conflicting with Section 13(1)(b) provisions. Analysis: Issue 1: The case involved an appeal under Section 260A of the Income Tax Act, 1961, regarding the grant of registration to a charitable trust. The tribunal directed the Commissioner of Income Tax to grant registration under Section 12AA to the trust, which had applied for registration under Section 12A. The tribunal's decision was based on the premise that the issues covered under Section 13 were not relevant at the registration stage. The tribunal cited various precedents to support its decision, emphasizing that the examination of exemption under Sections 11 and 13 would occur at a later stage when a claim for exemption is made. The High Court upheld the tribunal's decision, highlighting that at the registration stage, the focus should be on whether the trust's formation was for a charitable purpose, not on potential exemptions. Issue 2: The primary contention in the case was whether the trust's activities, centered on temple construction and maintenance, conflicted with Section 13(1)(b) provisions, which could impact the grant of registration under Section 12AA. The Commissioner of Income Tax had rejected the trust's application for registration under Section 12A, citing that the trust's activities were not in line with the provisions of Section 13(1)(b). However, the tribunal disagreed with this assessment, emphasizing that the examination of exemption under Section 13 should not influence the grant of registration under Sections 12A and 12AA. The tribunal's decision was based on the understanding that the trust's eligibility for exemption under Section 11 should be tested concerning Section 13 only when a claim for exemption is made. The High Court concurred with the tribunal's reasoning, concluding that the provisions of Section 13(1)(b) were not applicable at the registration stage and, therefore, upheld the tribunal's direction to grant registration to the trust under Section 12AA. In conclusion, the High Court dismissed the appeal, ruling in favor of the assessee and against the department, emphasizing that the provisions of Section 13(1)(b) should not impact the grant of registration under Sections 12A and 12AA. The judgment clarified that the focus at the registration stage should be on the charitable nature of the trust's formation, with considerations of exemptions under Sections 11 and 13 reserved for later stages when exemption claims are made.
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