2020 (3) TMI 629 - AT - Income Tax

Exemption u/s 11 - charitable activity or not - running a crime investigating agency parallel to the investigative agencies of the state and central government. - rejecting the registration of the assessee trust under section 12AA - HELD THAT - We find from the pages 3 to 24 of the paper book, which is a copy of the trust deed of the assessee trust, that it s objects have been bifurcated in the nature of the education, relief to poors, medical relief, and object of general public utility. We are agreed with the finding of the Learned CIT(E) that above object cannot be called as charitable in nature. From other objects and activities, it appears that the assessee is running a crime investigating agency parallel to the investigative agencies of the state and central government. The Learned CIT(E) has also pointed out following inconsistencies or discrepancies in the accounts and the activities of the assessee - we do not find any merit in the grounds raised by the assessee and accordingly we uphold the rejection of applications under section 12AA and 80G of the Act. - Decided against assessee.

Issues Involved:
1. Existence of the trust in Delhi.
2. Ignoring of submissions by CIT(E).
3. Charitable nature of the trust's objects.
4. Disclosure of expenses by the trust.
5. Validity of payments made to Ms. Nirmala Kumari.
6. Reference to FCRA Act in grounds of rejection.
7. Eligibility for registration under section 12AA and 80G.

Detailed Analysis:

1. Existence of the Trust in Delhi:
The assessee argued that the trust's existence at the given address was established as all letters from the CIT(E) were duly delivered there. They contended that procedural lapses in shifting the registered office should not cast doubt on the trust's genuineness. The tribunal noted that the CIT(E) found inconsistencies in the trust's address and activities, which contributed to the rejection of the registration.

2. Ignoring of Submissions by CIT(E):
The assessee claimed that the CIT(E) ignored their submissions and based the rejection on assumptions and opinions. They argued that the CIT(E) did not provide any instances of inappropriate activities and overlooked the proofs submitted, such as photographs with officials, appreciation letters, and newspaper articles. The tribunal upheld the CIT(E)'s decision, noting that the trust failed to substantiate its charitable activities convincingly.

3. Charitable Nature of the Trust's Objects:
The CIT(E) held that the trust's objects, particularly crime investigation, could not be categorized as charitable under the nature of General Public Utility. The assessee argued that their activities included blood donation camps, food distribution, and raising awareness about rights and duties, which benefit society. The tribunal agreed with the CIT(E) that the trust's primary object of crime investigation resembled activities of government agencies and could not be deemed charitable.

4. Disclosure of Expenses by the Trust:
The CIT(E) found that the trust did not fully disclose its expenses, particularly those incurred in cash, which did not inspire confidence. The assessee contended that all expenses were accounted for, and the nature of their activities required cash payments. The tribunal found merit in the CIT(E)'s observations about the lack of transparency in the trust's financial records, contributing to the rejection.

5. Validity of Payments Made to Ms. Nirmala Kumari:
The CIT(E) noted that Ms. Nirmala Kumari, a volunteer paid by the trust, was a director in another company, which raised doubts about the genuineness of the payment. The assessee argued that the payment was reasonable and no contradictory evidence was provided. The tribunal upheld the CIT(E)'s finding, emphasizing the lack of clarity and opportunity for the assessee to clarify the issue.

6. Reference to FCRA Act in Grounds of Rejection:
The CIT(E) mentioned the trust's lack of FCRA registration as a ground for rejection. The assessee argued that obtaining foreign currency was impossible under the current provisions. The tribunal did not find this argument sufficient to overturn the CIT(E)'s decision, given the other substantial issues raised.

7. Eligibility for Registration under Section 12AA and 80G:
The assessee claimed that their activities were within the inclusive definition of "Charitable Purpose" under section 2(15) and that they fulfilled all requirements for registration under sections 12AA and 80G. The tribunal, agreeing with the CIT(E), found that the trust's objects and activities did not meet the criteria for charitable status, leading to the rejection of the applications.

Conclusion:
The tribunal dismissed both appeals, upholding the CIT(E)'s decision to reject the applications for registration under sections 12AA and 80G of the Income Tax Act, 1961. The order was pronounced in the open court on 27th February 2020.

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