2017 (6) TMI 580 - AT - Income Tax

Denial of request for registration of the Trust u/s 12A - assessee had not incurred any expenditure on the objects of the Trust - invoking the provisions of Sec.13(1)(b) - Held that - Sec.12AA(1) requires the Commissioner to whom an application is made for the registration of a Trust or Institution to satisfy himself about the genuineness of the activities of the Trust or the Institution as well as the objects of the Trust or Institution and for that purpose Commissioner is vested with power to call for documents or information and is also empowered to make such inquiries as he may deem necessary in that behalf. Commissioner is thereupon empowered to pass an order in writing either registering an Institution or if he is not satisfied about the objects of the Trust or Institution and of the genuineness of its activities, to pass an order in writing refusing to register the Trust or Institution. Thus it can be seen that at the time of grant of registration, the Commissioner is not empowered to examine the application of income. The stage for consideration of the relevance of the object of the Trust and the application of its funds arises at the time of assessment. See Shri Anjaneya Medical Trust Vs. CIT 2016 (3) TMI 30 - KERALA HIGH COURT In order to ascertain the true nature and purpose of the Trust, the objectives are to be considered as a whole and not in isolation. In the present case, since the assessee Trust has been created in the year 1916, i.e., before the commencement of the Income-Tax Act, 1961, we are of the view that the provisions of Sec.13 of the Act are not applicable. The rejection of approval for registration u/s 12A was not warranted in present case - Decided in favour of assessee.

Summary

Issues:
Denial of registration under section 12A of the Income Tax Act due to lack of expenditure on trust objects and invocation of section 13(1)(b) of the Act.

Analysis:
The case involved an appeal by a Trust against the Commissioner of Income Tax's order rejecting its application for registration under section 12A of the Income Tax Act. The Trust, established in 1916, aimed to provide material for cremation ceremonies at moderate or no cost to the poor Hindu community in Poona City. The Commissioner denied registration, citing that the Trust's objects were religious and not charitable, and no activities were carried out in the last three years. The Trust contended that the Commissioner misinterpreted its objects and wrongly applied section 13(1)(b) as the Trust was not restricted to a particular community. The Trust argued that examination of income was not within the Commissioner's purview during registration and that section 13(1)(b) did not apply at the registration stage.

During the hearing, the Authorized Representative reiterated the Trust's stance, emphasizing that the Trust's objects were not limited to a specific community and that the Commissioner had erred in his interpretation. The Departmental Representative supported the Commissioner's decision. The Tribunal analyzed the issue of registration under section 12A, emphasizing that the Commissioner's role was to verify the genuineness of the Trust's activities and objects during registration, not its income application. Referring to a Kerala High Court judgment, the Tribunal highlighted that the examination of the Trust's purpose and fund application occurs during assessment, not registration. The Tribunal also noted that section 13 of the Act did not apply to the Trust established before the Income Tax Act's commencement in 1961.

Based on the Kerala High Court's decision and considering the Trust's establishment pre-1961, the Tribunal found the Commissioner's rejection of registration unwarranted. The Tribunal set aside the Commissioner's order and directed the registration of the Trust under section 12A of the Act. The Tribunal emphasized that the Trust's objectives should be viewed holistically, and registration should not be denied based on isolated factors. Consequently, the Tribunal allowed the Trust's appeal, granting registration under section 12A of the Income Tax Act.

In conclusion, the Tribunal allowed the appeal, overturning the Commissioner's decision and directing the registration of the Trust under section 12A of the Income Tax Act. The Tribunal's detailed analysis clarified the registration process, the Commissioner's role, and the application of relevant sections, ensuring a fair assessment of the Trust's eligibility for registration.