2021 (3) TMI 1062 - AT - Income Tax

Exemption u/s 11 - registration u/s 12AA denied - as per CIT-E since the objects of the assessee include both religious and charitable objects registration u/sec. 12A cannot be granted to the assessee - HELD THAT - As decided in Social Service Centre 2001 (2) TMI 69 - ANDHRA PRADESH HIGH COURT if the primary or dominant purpose of an institution is charitable than any other object which by itself might not be charitable but just merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or institution from being a valid charity. While coming to the instant appeal the observations and conclusion of the ld.CIT(E) having no strength of law. There is no bar for grant of registration to the Trust/Institution which is having mixed activities i.e. charitable and religious in nature as held by the ITAT Hyderabad Bench in the case of Rehoboth Mission case 2010 (5) TMI 669 - ITAT HYDERABAD and though we did not find any fault in the objects of the Assessee however the Ld. CIT(E) is empowered and at liberty to restrict the activities of the trust in consonance with the objects only hence on the aforesaid analyzations and respectfully following the judgment of the Hon ble Jurisdictional High Court and Co-ordinate bench of the Tribunal we are unable to substantiate the 1st ground for rejection of registration by the ld.CIT(E). Assessee trust has been formed in the year 2015 and as seen from the Income Expenditure account of the assessee filed for various years the charitable activities carried out are either meagre or nil. Hence it is premature to grant registration u/sec. 12A of the Act to the assessee - The Apex Court in the case of M/s. Ananda Social and Educational Trust 2020 (2) TMI 1293 - SUPREME COURT reminded that carrying out of any activities is not a stipulation for grant of registration u/s 12A of the Act and even section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done and the term activities in the provision includes proposed activities . There is no such bar as held and observed by the ld.CIT(E) that the charitable activities carried out by the Assessee are either meagre or nil hence it is premature to grant registration u/sec. 12A to the Assessee. In our considered view 2nd ground of rejection is also contrary to the law as the law has not specified any earmark as such observed by the Ld.CIT(E) for grant of registration u/sec. 12A of the Act. Registration can be sought at the nascent stage and/or after carrying out any activities. Hence we are unable to sustain the 2nd ground of rejection as well. The order of the ld. CIT(A) is set aside and the Ld. CIT(E) is directed to grant the registration to the Assessee forthwith - Decided against revenue.

Summary

Issues Involved:
1. Whether the inclusion of both religious and charitable objects disqualifies a trust from registration under Section 12A of the Income Tax Act, 1961.
2. Whether the meager or nil charitable activities carried out by the trust since its formation disqualify it from registration under Section 12A.

Issue-wise Detailed Analysis:

1. Inclusion of Both Religious and Charitable Objects:
The primary ground for rejection by the CIT(E) was that the trust had mixed objects, including both religious and charitable purposes, which purportedly disqualified it from registration under Section 12A. The CIT(E) emphasized the first page of the trust deed, which mentioned activities such as bible training classes alongside other charitable activities. The CIT(E) concluded that registration under Section 12A is permissible only if the trust is created wholly for charitable or wholly for religious purposes, but not for both.

However, the Tribunal observed that the objects of the trust were not purely religious but mixed, and cited precedents to support the eligibility of such trusts for registration. The Tribunal referenced the case of Rehoboth Mission Vs. Director of Income Tax (Exemption), where it was held that a trust could be for both religious and charitable purposes and still qualify for registration. The Tribunal also cited the Hon'ble Jurisdictional High Court's judgment in CIT Vs. Social Service Centre, which stated that if the primary purpose of an institution is charitable, ancillary religious activities do not disqualify it from being a valid charity.

The Tribunal concluded that the CIT(E)'s observations lacked legal strength and that there is no bar for granting registration to a trust with mixed activities. Consequently, the Tribunal directed the CIT(E) to grant registration to the trust, subject to any conditions deemed necessary.

2. Meager or Nil Charitable Activities:
The second ground for rejection was that the charitable activities carried out by the trust since its formation in 2015 were either meager or nil, making it premature to grant registration under Section 12A. The Tribunal analyzed the provisions of Sections 12A and 12AA, which focus on the genuineness of the trust's objects rather than the extent of its activities.

The Tribunal referenced the Supreme Court's decision in M/s. Ananda Social and Educational Trust Versus The Commissioner Of Income Tax & Anr., which clarified that registration under Section 12A can be sought by a trust regardless of whether it has already undertaken activities. The term "activities" in Section 12AA includes proposed activities, and the Commissioner must consider whether the trust's objects are genuinely charitable and whether its proposed activities align with those objects.

The Tribunal concluded that the CIT(E)'s rejection on the basis of meager or nil activities was contrary to law, as there is no requirement for a trust to have carried out significant activities before seeking registration. The Tribunal set aside the CIT(E)'s order and directed the CIT(E) to grant registration to the trust, with the liberty to impose any conditions as per law.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, setting aside the CIT(E)'s order and directing the CIT(E) to grant registration under Section 12A, subject to any conditions deemed fit. The Tribunal emphasized that mixed objects, including both charitable and religious purposes, do not disqualify a trust from registration, and that the extent of activities carried out by the trust is not a criterion for registration under Section 12A.