2018 (2) TMI 874 - AT - Income Tax

Eligibility to registration of the trust u/s 12AA - denial of claim stating that the trust is formed merely for complying the CSR requirements of the settler - proof of charitable activity - Held that - A profit making Company can grant certain donation to the charitable trust, how can the activities of the trust become not charitable with this act. The fact that the CSR expenditure are not allowable expenditure under section 37 of the Act is relevant only for the taxability of the company incurring such expenditure. From the perception of the assessee trust the amount received as donation whether will be eligible for exemption under section 11 depends on the application of such fund for the charitable activities by the trust only. CIT is empowered to satisfy himself only about two factors i.e. the objects of the trust and the genuineness of the activities of the trust or institution and such powers does not extend to the eligibility of the trust/ institution for exemption u/s 11 r.w.s 13 which falls in the domain of the AO. Once the CIT has not doubted about the genuineness of the activities of the assessee nor doubted its charitable object, his powers under section 12AA end. We direct the CIT to grant the registration u/s 12AA and also the approval u/s 80G(5)(vi) - Decided in favour of assessee.

Summary

Issues:
- Delay in filing appeal condonation
- Rejection of registration under Section 12AA
- Rejection of application under Section 80G(5)(vi)

Delay in Filing Appeal Condonation:
The appellant filed an appeal against orders dated 27/9/2016 under Section 12AA and 28/9/2016 under Section 80G(5)(vi) of the Income Tax Act, 1961. The appellant requested condonation of a 21-day delay, supported by reasons deemed genuine by the Ld. AR. The delay was condoned, allowing the appeal to proceed.

Rejection of Registration under Section 12AA:
The appellant, a trust formed by a company for CSR activities, applied for registration under Section 12AA. The application was rejected by the Commissioner, citing reasons related to the trust's formation, composition, activities, and compliance with Companies Act provisions. The Ld. AR argued that the trust's objects were charitable, and registration should not have been denied. Case laws were cited to support this argument. The Tribunal held that forming a trust for CSR activities does not warrant denial of registration under Section 12AA, emphasizing the charitable nature of the trust's objects and activities.

Rejection of Application under Section 80G(5)(vi):
The Commissioner also rejected the application under Section 80G(5)(vi), deeming it void ab initio. The Tribunal, after hearing both parties, concluded that the rejection of registration under Section 12AA was unfounded. It highlighted that the Commissioner's concerns regarding the trust's activities beyond charitable purposes were not relevant for Section 12AA registration. The Tribunal set aside the orders under Section 12AA and Section 80G(5)(vi), directing the Commissioner to grant registration and approval to the appellant.

In conclusion, the Tribunal allowed both appeals of the appellant, emphasizing that the Commissioner's rejection of registration under Section 12AA was unjustified. The judgment underscored the importance of assessing only the charitable nature and genuineness of activities when granting registration under Section 12AA, leaving other considerations for assessment proceedings under Section 11 of the Act.