2021 (3) TMI 807 - AT - Income Tax

Rejection the Application for Registration u/s. 12AA - nature of contributions made by the pharmaceuticals companies terming the same as sponsorship and also holding that such contributing companies also deducting TDS on their such sponsorship contributions and therefore same being largely driven by their object of maximizing the profits of the sponsors/sponsoring entities and any activities so conducted with such sponsorships cannot be termed as charitable activities - HELD THAT - Since, Section 12AA of the Act pertains to registration of the trust and not to assess of what a trust has actually done, we are of the view that the term activities in the provision includes proposed activities . That is to say, a Commissioner is bound to consider whether the object of the Trust is genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of Section 12AA. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust. As far as the facts of the present case are concerned, the objects of the Trust were not considered by the ld. CIT(E), therefore, we are of the view that overall scheme and theme of the activities which are undertaken by the appellant is to make people at large aware of Cancer diseases, its dangers and what preventive care against the same was possible. Therefore, at the time of issue of granting registration, the only basis which is required to be considered is the overall objects of the Trust and its overall intent and not the basis of resources to carry out such activities or an outcome of any such activities of charitable nature undertaken without any intent or purpose of profit. Therefore, keeping in view our above discussion, we set aside the order passed by the ld. CIT(E) and direct him to grant registration u/s 12AA of the Act to the appellant. However, in case at a later stage, after granting registration, if it is found that the activities of the appellant actually carried out by the Trust are not genuine, being not in accordance with the objects of the Trust, then in that eventuality, the ld. CIT(E) is at liberty to invoke the provisions of sub-section (3) of Section 12AA of the Act independently - Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Rejection of Application for Registration u/s 12AA of the Income Tax Act, 1961.
2. Nature of activities and contributions being charitable or commercial.
3. Delay in filing the appeal and condonation of delay.

Detailed Analysis:

1. Rejection of Application for Registration u/s 12AA of the Income Tax Act, 1961:
The assessee appealed against the CIT(E)'s order dated 27/06/2019, which rejected the application for registration under Section 12AA of the Income Tax Act, 1961. The CIT(E) held that the activities of the Foundation were not charitable but predominantly commercial, driven by sponsorships from multinational pharma companies. The CIT(E) emphasized that the nature of contributions made by these companies, termed as "sponsorships," and the deduction of TDS on these contributions indicated a profit motive for the sponsors, thus disqualifying the activities as charitable under Section 2(15) of the Act.

2. Nature of Activities and Contributions Being Charitable or Commercial:
The assessee contended that the CIT(E) did not consider the charitable objects of the Trust, which focused on cancer awareness and preventive care. The Trust's activities were aimed at educating the public about cancer, its dangers, and preventive measures, without any profit motive. The assessee argued that the commencement of activities is not a pre-condition for granting registration under Section 12AA, as supported by various judicial precedents, including the Supreme Court's decision in Ananda Social & Education Trust [2020] 114 taxmann.com 693 (SC). The Tribunal concurred, stating that the CIT(E) failed to consider the Trust's objects and overall intent, which were charitable in nature.

3. Delay in Filing the Appeal and Condonation of Delay:
The assessee filed the appeal with a delay of 9 days, attributing the delay to the preoccupation of their tax consultant with filing ITRs. The Tribunal considered the rival submissions and relevant material on record, applying the principle that courts should take a liberal approach in interpreting "sufficient cause" for condonation of delay. Citing the Supreme Court's decision in Collector, Land Acquisition Vs. Mst. Katiji (1987) 167 ITR 471, the Tribunal condoned the delay, emphasizing that the explanation provided was bona fide and not an attempt to cover up any ulterior purpose.

Judgment:
The Tribunal found that the CIT(E) did not consider the charitable objects of the Trust and the overall scheme and theme of its activities. The Tribunal emphasized that the term "activities" in Section 12AA includes "proposed activities," and the Commissioner should consider whether the Trust's objects are genuinely charitable and whether the proposed activities align with these objects. The Tribunal held that the Trust's activities, aimed at cancer awareness and preventive care, were charitable in nature. The Tribunal set aside the CIT(E)'s order and directed the CIT(E) to grant registration under Section 12AA of the Act to the appellant. However, the Tribunal noted that if it is later found that the Trust's activities are not genuine or not in accordance with its objects, the CIT(E) can invoke the provisions of sub-section (3) of Section 12AA independently.

Conclusion:
The appeal was allowed, and the Tribunal directed the CIT(E) to grant registration under Section 12AA of the Income Tax Act, 1961, to the appellant Trust. The Tribunal emphasized the importance of considering the Trust's objects and overall intent, rather than the nature of contributions or the commencement of activities, in determining eligibility for registration.