2021 (4) TMI 102 - AT - Income Tax

Exemption u/s 11 - entitled to registration under section 12A - Charitable activity u/s 2(15) - whether the application is made in accordance with the requirements of section 12A of the Act and whether form No.10A has been proper or not? - HELD THAT - Admittedly, at the time of grant of registration the Commissioner is not empowered to examine the application of income but he has to examine whether the application is made in accordance with the requirements of section 12A of the Act and whether form No.10A has been proper or not. The Commissioner is further to examine whether the objects of the trust are charitable or not and also to satisfy himself about the genuineness of the activities of the trust or the institution. Commissioner is not to examine the application of income at this juncture. The Hon'ble Supreme Court in CIT v. U.P. Forest Corpn. 1998 (3) TMI 5 - SUPREME COURT held that in order to take advantage of the provisions of section 11 of the Act, the trust or the institution has to get itself registered. Whether the income of the institution can be regarded as being held for charitable purposes and whether the institution is entitled to registration under section 12A of the Act, requires investigation of facts. In view thereof, section 12AA of the Act recognizes the principle laid down by the Hon'ble Supreme Court and Commissioner under section 12AA of the Act is empowered to call for such documents or information from the trust or the institution in order to satisfy himself that the objects of trust are charitable and also about the genuineness of the activities of the trust or the institution and is also empowered to make such enquiries as he deem necessary in this regard. From the enquiries conducted by the ld. CIT (E), we find that ld. CIT (E) has not brought anything on record to prove that the objects of the trust or institution are not charitable in nature. Reliance is being placed on the judgment in the case of Ananda Social and Education Trust 2020 (2) TMI 1293 - SUPREME COURT . Hence, we set aside the order of the ld. CIT (E) declining the registration u/s 12AA.- Appeal of the assessee is allowed.

Summary

Issues:
1. Jurisdiction of the CIT (E) under Section 12AA of the Income Tax Act.
2. Denial of registration under Section 12A based on various grounds.
3. Examination of genuineness of trust activities and objects by the Commissioner.
4. Requirement of registration for availing exemptions under sections 11 and 12 of the Act.

Analysis:
1. The appeal challenged the order of the CIT (E) dated 29.12.2018, contending that it was beyond jurisdiction and violated principles of natural justice. The appellant argued that the CIT (E) failed to provide a fair hearing, made baseless allegations, and relied on extraneous documents without confrontation. The CIT (E) was accused of exceeding jurisdiction under Section 12AA by considering factors that should be assessed by the Assessing Officer post-registration. The appellant also disputed allegations regarding land transfer, lease rent payments, and fund transfers to an individual. The appellant further contended that the CIT (E) wrongly criticized the appellant for not submitting approved fee structures and complete books of accounts.

2. The CIT (E) refused registration citing reasons such as lack of property vested in the University, absence of formal terms for land usage, lease rent payments, excessive salary to a staff member, missing fee structure approval, and non-submission of books of accounts. However, the ITAT Delhi observed that the CIT (E) failed to demonstrate that the trust's objects were not charitable. Citing relevant case laws, the ITAT set aside the CIT (E)'s decision, emphasizing the need for the Commissioner to ensure the charitable nature of trust objects and genuineness of activities during registration under Section 12AA.

3. The ITAT highlighted that the Commissioner's role during registration is to assess the trust's charitable objects and activities' genuineness, not the application of income. The ITAT referenced legal precedents to underscore the importance of registration for availing exemptions under sections 11 and 12 of the Act. The Commissioner's power to request documents and conduct inquiries aims to verify the charitable nature of trust objects. In this case, the ITAT found that the CIT (E) did not disprove the trust's charitable nature, leading to the decision to overturn the denial of registration under Section 12AA.

4. Ultimately, the ITAT allowed the appellant's appeal, emphasizing the requirement for the Commissioner to ensure the charitable nature of trust objects and genuineness of activities during registration under Section 12AA. The decision highlighted the significance of registration for claiming exemptions under sections 11 and 12 of the Income Tax Act. The ITAT's ruling set aside the CIT (E)'s denial of registration, underscoring the need for a thorough examination of trust activities and objects to determine eligibility for tax exemptions.