2022 (2) TMI 1083 - AT - Income Tax

Exemption u/s 11 - denying registration u/s 12AA - CIT(E) concluded that the sole objective of the Trust was the construction of a Temple and so he rejected the prayer for registration - HELD THAT - CIT(E) could not realize that the Trust was in dire needs of funds for pursuing its activities. The funds could be generated by the Trust after it was registered for tax exemption.Accounts of the assessee along-with the details submitted to the Ld. CIT(E) during the course of its registration proceedings indicate the activities. The Ld. CIT(E)'s concept of the manner of expending the corpus donations is neither in consonance with facts is misplaced. Section 12 of the Act does not prescribe any mode or manner in which any corpus donation has to be retained or expended. As to the transfer of the corpus of this Trust, in the event of its dissolution or discontinuation the sole condition is that the balance funds at the time of closure should be transferred to a like charity. In resolving to transfer the corpus in such an eventuality to M/s Thakur Shree Hari Das Ji Maharaj Trust no aberration of any sort can be conceived as having been committed by the Trust. Use of corpus donations and funds for charity was definitely in terms of the provisions of law and societal practice. The purchase of land and the construction of a building thereon were integral to the establishment and existence of the Trust and thus were entirely in consonance with the pursuit of charitable objectives. They were not in any way derogatory for any part of Section 2(15) of the Act as the Ld. CIT (E) erroneously seems to think. Focus should be on charity was in pursuit of charitable objects alone. Thus the trust is eligible for registration u/s 12AA of the Act. In case, the activities of the trust are found to be not in the nature of charitable activities in the wider public interest, subsequently the department would be at liberty to invoke the relevant provisions of the Act to tax the surplus amount and also to revoke the registration granted. - Decided in favour of assessee.

Summary

Issues:
- Denial of registration u/s 12AA of the Income-tax Act, 1961 based on charitable activities and objectives of the Trust.

Analysis:
The appeal was filed by the assessee against the order of the ld. CIT(E), Chandigarh, denying registration u/s 12AA of the Income-tax Act, 1961. The Trust in question, incorporated in August 2010 and registered in August 2017, had been engaging in charitable activities, including providing food to the poor through Bhandaras, with audited accounts for the years ended 31.03.2013 to 31.03.2015. The Trust submitted an application for registration on 13.10.2015, detailing its objectives, which encompassed a wide range of charitable activities such as supporting cows and animals, education, medical relief, construction of Temples, organizing cultural events, etc., as outlined in the Trust Deed.

The Ld. CIT(E) scrutinized the application and related material submitted by the Trust, noting a lack of evidence regarding the actual charitable activities carried out by the Trust. Concerns were raised about the focus on land purchase and Temple construction, funded mainly by corpus donations lacking specific directions, which were deemed not charitable acts. The Ld. CIT(E) concluded that the Trust's primary objective was Temple construction, rejecting the registration application on the grounds that the claimed charitable activities were not substantiated.

In response, the Trust argued that its objectives were indeed charitable, emphasizing that the Ld. CIT(E) had overlooked the comprehensive nature of its objectives and focused only on specific aspects. The Trust contended that activities like Temple construction should be considered charitable, highlighting the inclusive nature of Section 2(15) of the Act and citing relevant legal precedents supporting charitable status for religious entities. The Trust also defended the use of corpus donations for charitable purposes and asserted that land purchase and building construction were integral to its charitable objectives.

Ultimately, the ITAT Delhi, comprising SHRI KUL BHARAT, JUDICIAL MEMBER and DR. B.R.R. KUMAR, ACCOUNTANT MEMBER, ruled in favor of the Trust. Citing legal precedents, the tribunal held that the Trust was eligible for registration u/s 12AA of the Act. However, it cautioned that if the Trust's activities were found to deviate from charitable purposes, the department could take appropriate action. The judgment underscored the importance of charitable intent and activities in determining eligibility for registration under the Income-tax Act, 1961.