2018 (3) TMI 1408 - AT - Income Tax

Exemption u/s 11 - Rejection of Application to grant registration of Trust u/s 12AA - genuineness of the huge cash donation made by the Trustee - Held that - We are of the considered view that certainly this is a subjective opinion of the ld. CIT because when cash donation by the Trustee has reached into the kitty of assessee Trust, its application for charitable purposes is to be examined at the time of assessment. So far as question of apprehensions raised by ld. CIT that under the garb of charitable activities, the Trustee are indulging into money laundering is concerned, this question can be taken care of by the appropriate forum as the person who is donating huge cash must be an incometax assessee, if not he or she can be brought to tax by the tax authorities. The object of the assessee Trust to be charitable and genuineness of the charitable activities are concerned, again when the assessee Trust has proved to have purchased the land to establish the educational institution and brought on record the sale deeds and also brought on record the complete detail of the construction work-in-progress being carried out by the assessee Trust and also brought on record copies of the bank ledger of the assessee Trust showing its complete income and expenditure, there is no material on record to dispute the same at the juncture of according registration u/s 12A rather all these apprehensions raised by CIT can be taken care of by the AO at the time of assessment and as such are beyond the purview of CIT (Exemptions). When the assessee Trust has brought on record all the necessary documents to achieve the aims and objects of the assessee Trust enshrined in its memorandum of articles and undisputedly is into charitable activities by establishing educational institutions, merely denying the registration on the basis of apprehensions, conjectures and surmises that since trustees of the assessee have donated huge cash amount to assessee Trust, there appears to be money laundering, is not sustainable in the eyes of law - Decided in favour of assessee

Summary

Issues Involved:
1. Rejection of registration under section 12A (1) of the Income-tax Act, 1961 by the Ld. CIT (Exemptions).
2. Allegations of money laundering activities by the assessee Trust.
3. Failure to prove charitable objectives and activities by the assessee Trust.
4. Examination of aims and objects of the assessee Trust.
5. Interpretation of powers of the Commissioner while granting registration under section 12A.

Issue 1: Rejection of Registration under Section 12A (1):
The Appellate Tribunal ITAT DELHI addressed the appeal filed by Ch. Naresh Yadav Charitable Trust against the order of Ld. CIT (Exemptions) rejecting registration under section 12A (1) of the Income-tax Act, 1961. The Tribunal noted that the Trust failed to prove the genuineness of significant cash donations received and the charitable nature of its activities. The Trust's registration was declined based on suspicions of money laundering and lack of evidence regarding charitable objectives and activities.

Issue 2: Allegations of Money Laundering:
The Tribunal considered the allegations of money laundering activities against the Trust due to the substantial cash donations received. It was highlighted that the assessment of the Trust's charitable application of funds should be done during the assessment process. The Tribunal emphasized that the concerns of money laundering should be addressed by tax authorities if necessary, as donors of significant cash amounts should be tax assesses.

Issue 3: Failure to Prove Charitable Objectives and Activities:
The Tribunal analyzed the Trust's aims and objects, primarily focusing on educational development, scholarships for the poor, and relief during calamities. It concluded that the Trust's activities aligned with charitable purposes, as evidenced by land purchases for educational institutions and financial support to similar organizations. The Tribunal dismissed the CIT's doubts regarding the Trust's charitable nature.

Issue 4: Examination of Aims and Objects of the Assessee Trust:
The Tribunal thoroughly examined the aims and objects of the assessee Trust, emphasizing its focus on education, poverty alleviation, environmental awareness, and disaster relief. It highlighted the Trust's efforts to establish educational institutions and provide support to the needy, demonstrating a genuine commitment to charitable causes.

Issue 5: Interpretation of Commissioner's Powers under Section 12A:
The Tribunal referred to a previous case to clarify the Commissioner's role in granting registration under section 12A. It emphasized that the Commissioner must assess the trust's objects and activities' genuineness, not the application of income. The Tribunal underscored that the Commissioner's focus should be on the trust's objectives, leaving the income application scrutiny for the Assessing Officer during annual assessments.

In conclusion, the Tribunal set aside the CIT's order and directed the grant of registration under section 12A of the Act to the assessee Trust, emphasizing the Trust's genuine charitable intentions and activities as evidenced by the provided documents and activities.