2019 (7) TMI 421 - AT - Income Tax

Exemption u/s 11 - grant of registration u/s 12AA rejected - formed for the purposes of religious activities - whether activities falls in the categories of Charitable Purpose as envisaged in section 2(15) ? - HELD THAT - As observed by CIT(E) that the assessee trust has been formed for the purposes of religious activities i.e., Dhian, Sadhana, Prayer, Bhajan Sandhya and Preachings and at present temple has been constructed. Further as claimed by the assessee, the funds have been utilized for construction of Aradhana Bhawan/Prayer center cum temple for the use of public for prayer, pravachan, bhajan kirtan and discussion of spiritual and religious subjects, which goes to show that the assessee is carrying out certain activities which can be termed as religious activities but in our considered opinion can also be construed as a charitable activities. As there is no bar in granting a registration u/s 12AA of the Act to the Application trust for religious purposes , therefore, we are not in agreement with the observations of the impugned order as mentioned by us in para not 7(i) and 7(ii). Objection with regard to the name of the trust whereby CIT(A) has held that from the very name of the trust, it appears to be family trust pursuing religious activities of a private nature. This observation is against the aims and objects of the assessee trust. In our considered view, the aims and objects cannot be determined on the basis of name of the trust, until and unless there must be some restrictions, in ensuing the aims and objects and trust's activities are of private in nature which we realized from activities and the aims and objects of the assessee trust do not appears so, as held by the Ld. CIT(A), hence, the said ground of rejection is also not sustainable. Absence of dissolution clause in the trust deed , our attention was drawn by Assessee to the Memorandum of Association and Rules and Regulation of Trust, wherein so from the clause No.45 of the trust deed, the dissolution clause is exists hence the instant ground of rejection is also not sustainable. CIT(E) in the concluding part of its order also observed that no evidence has been adduced in favour of the entity existing for the benefit of the general public. From the aims and objects, it clearly reflects that there is no restriction for any caste, colour, creed, sector, sex, age and/or other natural or man-made differences and further the aims and objects of the trust is beneficial to the public at large, hence this ground of rejection is also not sustainable. - Decided in favour of assessee.

Summary

Issues:
1. Rejection of application for grant of registration u/s 12AA of the Income Tax Act, 1961.
2. Grounds raised by the Appellant against the order of the Ld. CIT (Exemptions).
3. Additional grounds raised by the Appellant.
4. Lack of dissolution clause in the Trust Deed.

Analysis:
1. The appeal was filed by the Assessee/Trust against the order rejecting the application for registration u/s 12AA of the Income Tax Act. The Ld. CIT(E) rejected the application citing reasons related to the nature of activities, lack of charitable purpose, and absence of a dissolution clause in the Trust Deed.

2. The Appellant raised grounds challenging the penalty imposed under section 271AA of the Income Tax Act as arbitrary and unjustified. The appeal was also based on the timeliness of the appeal and reserving the right to add any ground during the hearing.

3. Additional grounds were raised by the Appellant, arguing that the rejection of the registration application was erroneous in law and facts. The Appellant contended that the Trust's activities were charitable and religious in nature, and the lack of a dissolution clause did not affect the Trust's eligibility for registration.

4. The issue of the lack of a dissolution clause in the Trust Deed was a crucial point of contention. The Ld. CIT(E) highlighted the importance of this clause under section 13(1)(c) of the IT Act, which impacts the distribution of assets and liabilities in case of closure or disbandment of the Trust. The absence of this clause raised concerns about the Trust's charitable character and its benefit to the general public.

5. The Tribunal analyzed the grounds raised by the parties, including the nature of the Trust's activities, utilization of funds, and the presence of a dissolution clause. The Tribunal disagreed with the Ld. CIT(E)'s observations regarding the charitable nature of the Trust's activities and the Trust being a family trust. The Tribunal also found that the dissolution clause indirectly existed in the Trust Deed, contrary to the Ld. CIT(E)'s assessment.

6. Ultimately, the Tribunal set aside the Ld. CIT(E)'s order and directed the grant of exemption u/s 12AA of the Act to the Appellant Trust. The Tribunal emphasized that the Trust's activities were beneficial to the public at large and did not exhibit any restrictions that would hinder its charitable status. The Ld. CIT(E) was given the discretion to impose suitable conditions based on the specific circumstances of the case.