2021 (3) TMI 83 - HC - Income Tax

Exemption u/s 11 - registration filed under Section 12 AA and approval under Section 80G(5) denied - as per CIT-A Trust is not genuine and they are not engaged in any charitable activities - Tribunal setting aside the order of the Commissioner of Income Tax and direct the Commissioner of Income Tax to grant registration under Section 12AA - HELD THAT - It is not in dispute that the Trust was constituted on 09.02.2009 whereas they sought for registration and approval on 09.06.2009 under Section 12AA and 80G(5) of the Income Tax Act respectively. The CIT, while rejecting the registration and approval, found that it was too early to give a finding with regard to the genuineness of the objects of the Trust for the reason that the activities were not commenced on the date of application. When the genuineness of the objects of the Trust were not questioned by the CIT and when the Trust was yet to commence its operation and when a subject matter of scrutiny by the CIT as contemplated under section 12 AA(3) of the Income Tax Act, the Revenue would not be justified in refusing the registration at the threshold. The said ratio was laid down in a judgment reported in CIT Vs. Arulmighu Sri Kamatchi Amman Trust 2012 (2) TMI 159 - MADRAS HIGH COURT Following the ratio laid down in the judgment, the Hon'ble Division Bench of this Court directed the CIT to register the Trust. The ratio laid down by the Hon'ble Division Bench of this Court squarely applies to the facts of the present case. We do not find any error or irregularity in the order passed by the Income Tax Appellate Tribunal - approval under Section 80G(5) also to be granted - Decided against revenue.

Summary

Issues:
1. Challenge to order rejecting registration and approval under Income Tax Act.
2. Interpretation of Section 12AA and Section 80G(5) of the Income Tax Act.
3. Consideration of genuineness of Trust activities and commencement of operations.

Analysis:

Issue 1: Challenge to order rejecting registration and approval under Income Tax Act
The High Court considered the appeal challenging the order rejecting registration and approval under the Income Tax Act. The Trust in question was created with specific charitable objectives, including educational and healthcare activities. The Commissioner of Income Tax rejected the registration and approval applications, citing lack of evidence of charitable activities. However, the Income Tax Appellate Tribunal directed the Commissioner to register the Trust under Section 12AA of the Income Tax Act. The Court analyzed the grounds of rejection and the Tribunal's decision, ultimately dismissing the appeal against the Tribunal's order.

Issue 2: Interpretation of Section 12AA and Section 80G(5) of the Income Tax Act
The Court delved into the interpretation of Section 12AA and Section 80G(5) of the Income Tax Act. It highlighted the requirement for the Commissioner to satisfy the genuineness of Trust activities and conduct necessary inquiries before granting registration. The Court referenced previous judgments emphasizing the Commissioner's power to cancel registration if Trust activities are not genuine. The judgment underscored the importance of not denying registration solely based on the timing of the application, especially when the Trust had not yet commenced operations but had genuine charitable objectives.

Issue 3: Consideration of genuineness of Trust activities and commencement of operations
The Court examined the genuineness of Trust activities and the timing of commencement of operations. It referred to a previous judgment where the Revenue's refusal to grant registration at the threshold was deemed unjustified when the Trust had legitimate objectives and was yet to start operations. The Court reiterated that the Commissioner's scrutiny under Section 12AA(3) is crucial for assessing Trust activities' genuineness. Applying this reasoning to the present case, the Court upheld the Tribunal's decision to direct registration of the Trust. Similarly, regarding approval under Section 80G(5) of the Income Tax Act, the Court found the Tribunal's decision appropriate, leading to the dismissal of the appeal.

In conclusion, the High Court dismissed both Tax Case Appeals, emphasizing the importance of assessing Trust activities' genuineness and not denying registration solely based on the timing of the application. The judgment provided a comprehensive analysis of the legal provisions and previous precedents, ensuring a fair and just decision in the matter.