2021 (9) TMI 749 - AT - Income Tax

Exemption u/s 11 - rejection of application for granting registration u/s.12AA - satisfaction of ob j ect of the trust are genuine and charitable u/s 2(15) - HELD THAT - Commissioner is bound to consider whether the objects of the trust are 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 charitable objects of the Trust. Requirements of Section 12AA of the Act are categorically clear and it is in that respect, the Hon ble Apex Court M/S. ANANDA SOCIAL AND EDUCATIONAL TRUST VERSUS THE COMMISSIONER OF INCOME TAX ANOTHER 2020 (2) TMI 1293 - SUPREME COURT had held that at the time of granting registration u/s.12AA, the Commissioner is supposed to look into the objects of the trust whether they are charitable or not or whether the activities of the trust are genuine and such activities may also include proposed activities of the assessee trust and it should be in line with the charitable objects of the assessee trust. The satisfaction regarding objects and the activities performed or proposed to be performed could not be arrived at by the Ld. CIT(Exemption) since requisite details/evidences were not filed by the assessee. We are of the considered view, in the interest of justice, the matter may be remanded back to the file of the CIT(E) to adjudicate as per law considering the details/ evidences/documents to be filed before him or which may have been filed before him by the assessee while complying with the principles of natural justice. In view thereof, we set aside the order of the CIT(E) and remand the matter back to his file as indicated hereinabove. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
Application for registration u/s.12AA of the Income Tax Act - Rejection by Ld. CIT (Exemption) - Genuine charitable activities of the trust questioned - Compliance with principles of natural justice - Remand for re-adjudication.

Detailed Analysis:

1. Rejection of Registration Application: The appeal stemmed from the rejection of the application for registration u/s.12AA of the Income Tax Act by the Ld. CIT (Exemption) based on the genuineness of the charitable activities of the trust. The grounds of appeal raised by the assessee primarily focused on the denial of registration and the perceived lack of appreciation by the Ld. CIT (Exemption) regarding the nature of the trust's activities.

2. Assessee's Charitable Activities: The Ld. CIT (Exemption) highlighted the need for the trust to demonstrate genuine charitable activities in line with its objects. Despite repeated requests for details of actual activities carried out since inception, the trust failed to provide substantial evidence to support its claims. The only transaction identified was a donation received and utilized for purchasing used sewing machines, raising doubts about the charitable nature of the trust's operations.

3. Judicial Intervention: The Tribunal considered the contentions of both parties, with the Ld. DR suggesting a remand of the matter to the Ld. CIT (Exemption) for a detailed examination based on the evidences filed. The Tribunal referred to a previous decision where a similar situation warranted a re-examination of the trust's activities to ensure compliance with the principles of natural justice.

4. Legal Principles and Guidelines: The Tribunal emphasized the legal principles outlined by the Hon'ble Apex Court regarding the registration of trusts under section 12AA of the Act. The Court's directives highlighted the importance of assessing the genuineness of a trust's objects and activities, including proposed activities, to determine eligibility for registration. The Tribunal stressed the need for the Ld. CIT (Exemption) to follow these guidelines during the re-adjudication process.

5. Remand for Re-Adjudication: In light of the circumstances and the absence of crucial details/evidences from the trust, the Tribunal decided to set aside the order of the Ld. CIT (Exemption) and remand the matter for re-adjudication. This decision aimed to provide the trust with another opportunity to substantiate its charitable activities and ensure a fair assessment in accordance with the principles of natural justice.

6. Final Decision: The Tribunal allowed the appeal of the assessee for statistical purposes, indicating a procedural victory rather than a substantive one. The order for remand signified a chance for the trust to rectify the deficiencies in its application and present a more comprehensive case regarding the genuineness of its charitable activities.

7. Conclusion: The judgment underscored the critical importance of transparency and substantiation in demonstrating the charitable nature of trust activities for registration purposes. By remanding the matter for re-adjudication, the Tribunal sought to uphold the principles of natural justice and provide the trust with an opportunity to meet the necessary criteria for registration under section 12AA of the Income Tax Act.