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2018 (5) TMI 1690 - AT - Income TaxRejecting the registration u/s 12AA - charitable activities are yet to commence - Held that - The application is made in accordance with the requirements of s. 12A r.w.r. 17A - from the trust deed we find that the objects of the trust are charitable in nature u/s 2(15) - This is not a case where exemption was denied for not complying with the conditions contained under section 12A - thus the order of the CIT rejecting the application was unjustified - in view of the case of Self Employers Service Society vs. CIT (2000 (9) TMI 47 - KERALA HIGH COURT) - Decided in favor of assessee.
Issues Involved:
1. Rejection of registration under Section 12AA of the Income Tax Act, 1961. 2. Examination of books of account and genuineness of activities by the Commissioner. 3. Interpretation of "charitable activities" and the scope of the Commissioner's powers during registration. Detailed Analysis: 1. Rejection of Registration under Section 12AA: The primary issue in this case is the rejection of the assessee's application for registration under Section 12AA of the Income Tax Act, 1961 by the Commissioner of Income Tax (Exemption), Kolkata (CIT(E)). The CIT(E) rejected the application on the ground that the charitable activities of the trust had not yet commenced. The assessee, established as a trust on 28.07.2016, filed for registration on 07.11.2016. The CIT(E) relied on the Kerala High Court’s decision in Self Employers Service Society vs. CIT (2001) 247 ITR 18 (Ker), which upheld the rejection of registration for a trust that had not started its charitable activities. 2. Examination of Books of Account and Genuineness of Activities: During the hearing, the Departmental Representative supported the CIT(E)'s decision, arguing that the CIT has ample power under Section 12AA to examine the books of account to verify the genuineness of the activities. However, the tribunal found no merit in this argument. It referred to the decision in Vidyadayani Shiksha Samiti vs. CIT(Exemption) ITA No.309/Del/2016, which stated that the CIT should only examine the objects of the trust and not delve into the application of income at the stage of granting registration. The tribunal emphasized that the CIT's role is to ensure that the trust's objects are charitable and that the activities are genuine, not to scrutinize the financial records in detail. 3. Interpretation of "Charitable Activities" and Scope of Commissioner's Powers: The tribunal discussed various precedents to clarify the scope of the CIT's powers and the definition of charitable activities. It cited the case of Shavak Shiksha Samiti, where it was held that education per se is a charitable purpose, and the CIT should focus on the trust's objectives rather than its financial activities. The tribunal also referred to the case of Bhartiya Kisan Sangh Sewa Niketan, where it was established that the CIT should not examine the application of income during registration but should ensure that the trust's objects are charitable. The tribunal further referenced decisions from higher courts, including the Hon’ble Allahabad High Court in Fifth Generation Education Society, the Hon’ble Karnataka High Court in A.S. Kupparaji Brothers Charitable Foundation Trust, and the Hon’ble Madhya Pradesh High Court in D.P.R. Charitable Trust. These cases consistently held that the CIT's examination should be limited to verifying the trust's charitable objects and the genuineness of its activities, without delving into the financial application of income at the registration stage. Conclusion: The tribunal concluded that the CIT(E)'s reason for rejecting the registration, based on the non-commencement of charitable activities, was not valid. It directed the CIT(E) to grant the registration under Section 12AA, as the trust's objects were charitable, and the activities, though not yet commenced, were genuine and aligned with the trust's objectives. Order: The assessee’s appeal was allowed, and the CIT(E) was directed to grant the registration as requested. The order was pronounced in the open court on 24/05/2018.
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