2020 (2) TMI 581 - HC - Income Tax

Exemption u/s 11 - grant of registration u/s 12AA - ITAT directed the CIT(E) to grant registration - income derived from the property held by the trust for charitable and religious purposes - HELD THAT - Subject to the provisions of sections 60 to 63 of the Act, the income mentioned in it shall not be included in the total income of previous year. The section nowhere provides that the property should be owned by the trust. The requirement is held for charitable purpose . In the present case, the land though belonged to the government but the construction made on it was held under the trust and it is for the income from such property that application for registration under Section 12AA of the Act was moved. Section 12 of the Act gives a deeming fiction that voluntary contribution received by the trust created for charitable or religious purposes shall be deemed for the purpose of Section 11 of the Act to be income derived from the property held by the trust for charitable and religious purposes. In view of the above discussion, the objection that the property was not owned by the society cannot be sustained. In the present case, there is no dispute raised that the work of the society was for general public and the work done by it, including raising of the construction on the land that belonged to the Government was for community at large, for charitable and religious purposes. Further that from the record it is established that various functions were being organised by social organisations for blood donation, 'Akandh Path', conference, function for welfare of differently-abled persons and that use of community hall in the temple complex was not limited to any particular limb of the society but was utilised for social, charitable and religious organisations. The explanation of the society to the effect that the liability shown as on 31.3.2013 was discharged in the subsequent year was accepted. Needless to add at this stage that the said aspect can be looked into by the Assessing Officer at the time of framing of assessment and allowing exemption under Section 11 of the Act. No substantial question of law arises

Issues:
1. Appeal against the order of the Income Tax Appellate Tribunal directing registration under Section 12AA of the Income Tax Act.
2. Direction to grant registration without re-examination in light of a judgment.
3. Lack of evidence regarding government's rights over the land used by the society.
4. Ownership of property not held by the trust but considered as such.
5. Lack of evidence on activities carried out by the society.
6. Design of the society's memorandum lacking certain clauses.
7. Contradiction of the Tribunal's order with the evidence on record.

Analysis:
1. The appeal was filed against the Tribunal's order directing registration under Section 12AA of the Income Tax Act. The Tribunal concluded that ownership of the property by the society was not a prerequisite for registration. It noted that the property developed by the society was held under the trust, benefiting the public at large through various activities. The Tribunal emphasized that discrepancies in accounts should be addressed during assessment for exemption under Section 11 of the Act.

2. The Tribunal's decision to grant registration without re-examination in light of a specific judgment was challenged. The Tribunal justified its decision based on the society's activities benefiting the public, irrespective of ownership of the property. The Tribunal highlighted that the focus should be on the genuineness of the trust's activities for registration under Section 12AA.

3. Concerns were raised about the lack of evidence regarding the government's rights over the land used by the society. The Tribunal accepted the society's explanation that though the land belonged to the government, the property developed was held under the trust, serving charitable and religious purposes for the community.

4. The issue of property ownership not being held by the trust but still considered as such was addressed. The Tribunal clarified that the focus should be on the property being held for charitable purposes, rather than ownership. The society's work for the public, including construction on government land, was deemed charitable and religious in nature.

5. Lack of evidence on activities carried out by the society was raised as a concern. The Tribunal accepted explanations regarding liabilities and activities, emphasizing that assessment for exemption under Section 11 would address any discrepancies in the future.

6. The design of the society's memorandum lacking dissolution, beneficiary, and utilization clauses was highlighted. The Tribunal found the society's activities aligned with charitable purposes, despite the memorandum's shortcomings. The focus remained on the societal benefits provided.

7. The Tribunal's order was challenged for being contrary to the evidence on record. However, the Tribunal's decision was upheld, emphasizing that the society's activities were for charitable and religious purposes, benefiting the community at large. Any further concerns could be addressed during assessment for exemption under the Act.

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