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2022 (3) TMI 920 - AT - Income TaxExemption u/s 11 - rejecting application made u/s 12AA - Charitable activities u/s 2(15) - CIT(E) rejected the application on a ground that the genuineness of the charitable trust is under question - HELD THAT - CIT(E) has not pointed out on what material it came to a conclusion that genuineness of the charitable trust is in question. Section 12AA of the Act mostly focused on the two issues (i) the genuinity of the trust (ii) the activity of the trust is similar with the main object of the trust as discussed above. Assessee in its paper book has annexed the approval of Tamil Nadu School Education under Govt of Tamil Nadu which was granted by the Additional Directorate (Higher Secondary Tamil Nadu School Education). The Nursery, Primary and Higher Secondary schools are running under the Trust. Mere, application was made after survey or earlier the fees were collected by the secretary of the trust should not be the reason for rejecting application made U/s 12AA - CIT(E) correctly pointed out that the assessee had the lack of genuinity. But it was before the application of registration. But after the application made u/s 12AA of the Act, no such irregularities were found out by the revenue authority. Different financial statements are filed with the paper book and the trust invested in fixed assets for running the institutions. The Income Tax assessments of the assessee were made by the revenue in different years. The copies of the orders are annexed in Paper Book-5 of assessee in page no 1-236. It is very clear from the assessment orders that the existence, activity genuinity are not in question. Application filed by the assessee Trust for grant of registration under Sec. 12AA of the IT Act is restored to the file of the CIT(E) for fresh adjudication - Appeal of the assessee is allowed under statistical purpose.
Issues Involved:
1. Application for registration under Section 12AA of the Income Tax Act, 1961. 2. Genuineness of the Trust and its activities. 3. Financial irregularities and handling of Trust funds. 4. Compliance with procedural requirements for registration. 5. Legal precedents and their applicability. Comprehensive, Issue-wise Detailed Analysis: 1. Application for registration under Section 12AA of the Income Tax Act, 1961: The assessee, a trust running schools under the Tamil Nadu State Board Educational Trust, filed an application in Form No. 10A for registration under Section 12AA of the Income Tax Act on 26.12.2017. The application was rejected by the Commissioner of Income Tax (Exemptions) [CIT(E)] on grounds including the timing of the application post-survey and doubts about the genuineness of the Trust. 2. Genuineness of the Trust and its activities: The CIT(E) rejected the application, citing the Trust's lack of activities related to its objects and the collection of school fees by a trustee personally. The Tribunal, however, noted that the Trust was running schools and that all necessary approvals and infrastructure investments were in place. The Tribunal emphasized that the genuineness of the Trust should be evaluated based on its activities aligning with its stated objectives, as per legal precedents. 3. Financial irregularities and handling of Trust funds: The CIT(E) raised concerns about financial irregularities, including the use of personal bank accounts by a trustee due to frozen Trust accounts. The Tribunal found that these actions were necessitated by internal disputes and were not indicative of personal gain. The Tribunal referenced assessment orders that verified the Trust's financial transactions and investments in school infrastructure, concluding that there was no misuse of funds. 4. Compliance with procedural requirements for registration: The CIT(E) argued that the Trust had not maintained proper books of accounts and had not filed returns until the assessment year 2016-17. The Tribunal found that the Trust had submitted annual accounts for the relevant years and that procedural lapses prior to the application for registration should not affect the assessment of the Trust's genuineness post-application. 5. Legal precedents and their applicability: The Tribunal referenced several judgments to support its decision, including: - *CIT vs A.S. Kupparaju Brothers Charitable Foundation Trust*: Highlighted that misapplication of funds does not render a Trust non-genuine if its activities align with its objectives. - *Sree Anjaneya Medical Trust vs CIT*: Emphasized that the genuineness of a Trust's activities should be the focus during registration, not its financial performance. - *CIT(Exemptions) vs Shri Sai Darbar Charitable Trust*: Clarified that Sections 13 and 11 of the Act come into play during exemption assessments, not during registration. - *CIT vs Chaudhary Son Pal Singh*: Stressed that the activities of a Trust must be in consonance with its objects and not merely a facade. Conclusion: The Tribunal concluded that the Trust's activities were genuine and aligned with its objectives. It directed the CIT(E) to re-evaluate the application for registration under Section 12AA, considering the Tribunal's observations and the legal precedents cited. The appeal was allowed for statistical purposes, and the case was remanded for fresh adjudication. Order Pronouncement: The order was pronounced in the court on 16th March 2022 at Chennai.
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