2018 (5) TMI 38 - AT - Income Tax

Denial of registration u/s 12AA(1) (b) (ii) and U/s 80G(5) (vi) - corpus donation receipt - proof of charitable activities - CIT(Exemption) s jurisdiction in cancelling registration - Held that - The question whether the activities of the trust which was formed with the specific intention to carry on certain charitable activities, are actually charitable in nature or not, would not arise for consideration at the stage of grant of registration to the trust u/s 12AA of the Act. Going by the specific words in section 12AA of the Act, what is germane to the issue is only as to the genuineness of the Trust and its activities. We note that there is no such finding in the impugned order of the ld. CIT(Exemption) that activities of the trust were not genuine. Going by the provisions of section 12A and 12AA of the Act, we hold that the grounds raised by the ld. CIT(E) (Registering Authority), explained in para 4 of our order, for rejecting of registration to the assessee trust cannot be sustained and ld. CIT(Exemption) ought to have examined whether activities of the trust are charitable in nature or not. Therefore, we direct the ld. CIT(Exemption) to examine the genuineness of the Trust and its activities and objectives and adjudicate the issue in accordance with law. - Decided in favour of assessee for statistical purpose.

Summary

Issues involved:
Challenging rejection of registration under section 12AA(1)(b)(ii) and denial of approval under section 80G(5)(vi) of the Income Tax Act, 1961.

Detailed Analysis:

1. Rejection of Registration under Section 12AA:
The appeals challenged the rejection of registration under section 12AA of the Income Tax Act. The Commissioner of Income Tax (Exemption) refused registration citing reasons such as the trust receiving a donation without proper registration, violation of declared objectives by returning part of the donation, and involvement of a specified person under section 13(1)(c) of the Act. The appellant argued that the trust conducted genuine activities as per its object clause, and the transaction with the donor was in line with the trust's objectives. The Tribunal emphasized that the CIT(Exemption) should only verify the charitable nature of the trust's objectives and the genuineness of its activities for registration under section 12AA. The Tribunal clarified that the violation of section 13 of the Act should not be a reason for refusal of registration. Referring to relevant case law, the Tribunal directed the CIT(Exemption) to examine the genuineness of the trust's activities and objectives to decide on registration under section 12AA.

2. Denial of Approval under Section 80G:
The denial of approval under section 80G was linked to the rejection of registration under section 12AA. The Tribunal's decision to allow the appeal for statistical purposes in terms of the discussion made regarding the registration issue also indirectly impacted the denial of approval under section 80G. By directing the CIT(Exemption) to reexamine the genuineness of the trust's activities and objectives, the Tribunal's decision implied a potential reconsideration of the denial of approval under section 80G as well.

3. Judicial Interpretation and Precedents:
The Tribunal's analysis included a detailed interpretation of sections 12A and 12AA of the Income Tax Act, emphasizing the importance of genuine charitable activities for registration. Referring to a judgment of the Hon'ble High Court of Kerala, the Tribunal highlighted that the focus during registration should be on the genuineness of the trust and its activities, rather than the nature of the charitable activities themselves. This approach aligns with the legal framework and precedents, indicating that the assessment of the trust's charitable nature should occur at a later stage, not during the registration process.

In conclusion, the Tribunal allowed both appeals for statistical purposes, directing the CIT(Exemption) to reevaluate the genuineness of the trust's activities and objectives for registration under section 12AA. The detailed analysis provided clarity on the legal principles governing registration of charitable trusts under the Income Tax Act, emphasizing the distinction between assessing genuineness and assessing the nature of charitable activities at different stages of the process.