2020 (4) TMI 539 - AT - Income Tax

Exemption u/s 11 - denial of registration u/s 12AA - it is not possible to ascertain the nature of objects for which the trust has been created and whether the same are charitable u/s. 2(15) or not and also its genuineness - HELD THAT - As relying on BABU RAM EDUCATION SOCIETY 2017 (12) TMI 867 - ALLAHABAD HIGH COURT we are inclined to remit this issue back to the file of CIT(E) to consider the information available on record to conclude whether the trust s objectives and activities are genuine and falling within the ambit of charitable with the information available on record. CIT(E) has to verify the trust deed and the objects vis- -vis the genuineness of the activities by enquiring about the facilities, if required verify the financials only to establish whether the activities are genuine. He is not expected to wear the shoes of AO. Therefore, in case of necessity, further relevant information may be called from the assessee and proper opportunity of being heard to the assessee may be granted. Accordingly, grounds raised by the assessee are allowed for statistical purposes.

Issues:
1. Rejection of application for registration u/s 12AA by Ld. CIT(E).
2. Sufficiency of information submitted by the assessee.
3. Interpretation of requirements for registration under section 12AA.
4. Legal precedents regarding registration of charitable trusts.
5. Decision to remit the issue back to Ld. CIT(E) for further consideration.

Issue 1: Rejection of application for registration u/s 12AA by Ld. CIT(E)

The appeal was filed against the order of Ld. Commissioner of Income Tax (Exemp.) rejecting the application for registration u/s 12AA for AY 2019-20. The Ld. CIT(E) observed that the material submitted by the assessee was insufficient to determine the genuineness of the trust's objects and activities, essential for registration. The onus was on the assessee to provide all relevant documents for the Commissioner's satisfaction, which was not met despite multiple opportunities. Consequently, the registration u/s 12AA was denied.

Issue 2: Sufficiency of information submitted by the assessee

The assessee had submitted various documents, including the trust deed, note on activities, audited financial statements, and other relevant details. However, Ld. CIT(E) found these submissions inadequate to establish the charitable nature and genuineness of the trust's activities. The appellant argued that all necessary information had been provided, emphasizing the trust deed and activities note. The Ld. CIT(E) was expected to verify the charitable nature of the trust's objects and activities based on the submitted information.

Issue 3: Interpretation of requirements for registration under section 12AA

The Ld. CIT(E) contended that both the objects and activities of the trust must be charitable for registration under section 12AA. The appellant highlighted legal precedents, such as Vidyadayani Shiksha Samiti v. CIT and CIT v. Babu Ram Education Society, to support the argument that the Commissioner's focus should be on the trust's genuineness at the registration stage, with detailed examination reserved for assessment.

Issue 4: Legal precedents regarding registration of charitable trusts

The Tribunal referred to judgments like CIT(E) v. Dali Bai Sewa Sansthan, CIT v. Babu Ram Education Society, and Vidyadayani Shiksha Samiti v. CIT(E) to emphasize that the registration process under section 12AA primarily aims to verify the trust's genuineness. The Tribunal echoed the view that detailed scrutiny of activities and fund utilization should occur during assessment, not at the registration stage.

Issue 5: Decision to remit the issue back to Ld. CIT(E) for further consideration

In line with the legal precedents and the essence of registration under section 12AA, the Tribunal decided to remit the issue back to Ld. CIT(E) for reevaluation. The Ld. CIT(E) was directed to assess the trust's objectives and activities based on the available information, ensuring a thorough examination of the trust deed and activities' genuineness. The Tribunal stressed that the Ld. CIT(E) should not assume the role of an Assessing Officer and may request additional relevant information from the assessee if necessary.

This comprehensive analysis of the legal judgment highlights the key issues, arguments presented, legal interpretations, and the Tribunal's decision to remit the matter for further consideration.

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