2020 (12) TMI 118 - AT - Income Tax

Exemption u/s 11 - denying the grant of registration u/s 12AA - appellant trust had received corpus donations in F.Y. 2018 - 19, the appellant was indulging in profit making activities and the charitable objects were not proved - CIT-E re-characterizing the donations received towards Corpus Fund of the trust as a voluntary donations falling within the ambit of provisions of Sec.2(24)(iia) - HELD THAT - This is an item for examination during the course of assessment proceedings of the trust and no re-characterization of any receipt is permissible during the course of proceedings for grant of the registration under Sec.12AA of the Act. It is a trite law that when the CIT (Exemptions) found that the objects of the trust are charitable in nature, the denial of registration under Sec.12AA of the Act is improper. There is no material brought on record by CIT (E) which suggests that genuineness of activities are in doubt. The finding of the ld. CIT (Exemptions) that the genuineness of the activities is not established is mere bald finding without any material on record - findings of CIT (Exemptions) cannot be sustained under law. Therefore, we direct ld. Commissioner of Income Tax (Exemptions), Pune to grant the registration from the date of the application i.e., 23.05.2019. Benefit of retrospective registration - HELD That -. The grounds of appeal raised by the appellant seeking grant of registration earlier to date of application cannot be allowed for the reason that w.e.f 1st day of June, 2007, it is clearly provided vide sub-section (2) of Sec.12A of the Income Tax Act that the provisions of Sec.11 and 12 shall apply in relation to income of the trust from the assessment year immediately following the Financial Year in which the application for grant of registration is made. Impliedly, the ld. Commissioner of Income Tax (Exemptions) is not empowered to grant the registration with retrospective effect, there are no provisions providing exceptions to the sub-section (2) of Sec.12A under the statute. In the light of this discussion, these grounds of appeal are dismissed.

Summary

Issues:
1. Denial of registration under Sec.12AA of the Income Tax Act by the Commissioner of Income Tax (Exemption), Pune.
2. Re-characterization of donations received by the trust as voluntary donations.
3. Lack of appearance by the appellant trust during the proceedings.
4. Interpretation of provisions regarding the grant of registration under Sec.12AA with retrospective effect.

Issue 1: Denial of registration under Sec.12AA:
The appeal was filed by the assessee trust against the order of the Commissioner of Income Tax (Exemption), Pune, denying registration under Sec.12AA of the Income Tax Act. The Commissioner concluded that the trust's receipt of a specific amount towards "Trust Funds or Corpus Fund" was considered a voluntary donation, leading to a denial of registration. However, the Tribunal noted that the denial was based on re-characterizing the donations as voluntary, which should be examined during assessment proceedings rather than registration. The Tribunal found that the trust's objects were charitable, and the denial of registration was improper without concrete evidence questioning the genuineness of the trust's activities.

Issue 2: Re-characterization of donations:
The Commissioner's denial of registration was primarily due to re-characterizing the trust's receipt of funds as voluntary donations under Sec.2(24)(iia) of the Act. The Tribunal emphasized that such re-characterization should be addressed during assessment proceedings, not during the registration process under Sec.12AA. The Tribunal highlighted that the Commissioner's findings lacked substantial evidence to question the charitable nature of the trust's activities, rendering the denial unjustified.

Issue 3: Lack of appearance by the appellant trust:
During the proceedings, no representative appeared on behalf of the appellant trust. Despite the absence of the trust's representation, the Tribunal considered the arguments presented by the Commissioner of Income Tax (Exemptions) and evaluated the material on record to reach a decision on the denial of registration under Sec.12AA.

Issue 4: Interpretation of provisions for retrospective registration:
The Tribunal dismissed the appellant's grounds seeking registration with retrospective effect, citing the provisions of Sec.12A(2) of the Income Tax Act. The Tribunal clarified that the Commissioner was not empowered to grant registration retrospectively, as per the statutory provisions. Therefore, the Tribunal partially allowed the appeal, directing the Commissioner to grant registration from the date of the trust's application, i.e., 23.05.2019.

In conclusion, the Tribunal found the denial of registration under Sec.12AA by the Commissioner to be unjustified, emphasizing the need for concrete evidence to question the charitable nature of the trust's activities. The Tribunal also clarified the limitations on granting registration retrospectively as per the Income Tax Act provisions.