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2023 (3) TMI 471 - AT - Income TaxExemption u/s 11 - application for registration u/s. 12A rejected - CIT(E) rejected the application on the ground that for corpus funds received before the exemption and there is absence of FCRA Certificate which is clear violation of FCRA norms related to foreign donation - HELD THAT - The assessee is a charitable trust and applied for registration u/s 12AA. The ld. CIT(E) had not pointed out any lacuna related to the main object of the trust and activity related main object. The genuineness of the assessee also is not in question. The two issues must be settled during registration U/s 12AA which are genuinity of trust activities are related to main object of trust. The two limbs must be considered during registration. Only mere receiving of the corpus fund and rejection of application of FCRA should not be the ground for rejecting the registration u/s 12AA. We respectfully relied on the order of jurisdictional High Court in case of Shanti Devi Educational Trust 2017 (4) TMI 1065 - PUNJAB HARYANA HIGH COURT T.R. Gupta Public Charitable Trust 2022 (9) TMI 1086 - ITAT AMRITSAR We set aside the order of the ld. CIT(E) and directed the authority to allow the registration of the assessee as per Act. - Appeal of assessee allowed.
Issues:
1. Rejection of registration u/s 12A for exemption by ld. CIT(E) based on corpus funds and FCRA norms. 2. Allegations of corpus fund mismanagement and foreign donations without FCRA certificate. 3. Legal grounds for rejecting registration application. 4. Appeal against the rejection of registration and arguments presented by the assessee. 5. Comparison with previous judgments by jurisdictional High Court and ITAT-Amritsar Bench. Issue 1: Rejection of registration u/s 12A: The appeal challenges the rejection of registration for exemption u/s 12A by the ld. CIT(E) based on corpus funds received before exemption and absence of FCRA Certificate, deemed a violation of FCRA norms. The ld. CIT(E) alleged mismanagement of corpus funds totaling Rs. 57,74,845/- in the Balance Sheet for F.Y. 2018-19, which should have been treated as income. The rejection was also due to foreign donations of Rs. 58,22,742/- without an FCRA Certificate, leading to a violation of FCRA norms. Issue 2: Corpus Fund Mismanagement and FCRA Norms: The rejection was primarily based on the mismanagement of corpus funds and the violation of FCRA norms regarding foreign donations. The ld. CIT(E) emphasized that corpus donations should be treated as income unless exempt under Section 11(1)(d) and registered u/s 12A or 12AA, citing legal precedents. The failure to pay tax on the corpus donations and the absence of FCRA approval led to the rejection of the registration application. Issue 3: Legal Grounds for Rejection: The rejection was grounded in the non-compliance with tax laws and FCRA regulations. The ld. CIT(E) concluded that the trust was not eligible for registration u/s 12AA due to the corpus fund treatment as income and receipt of foreign donations without FCRA approval, deeming it an attempt to evade tax obligations. Issue 4: Appeal and Arguments: The assessee contended that the rejection did not consider the trust's main object and activities, which were not in question. The rejection based on FCRA issues related to foreign donations was deemed unjustified for withholding registration u/s 12AA. The assessee relied on previous judgments by the jurisdictional High Court and ITAT-Amritsar Bench to support their case. Issue 5: Comparison with Previous Judgments: The decision to allow the appeal and grant registration was influenced by previous judgments, including the Shanti Devi Educational Trust case and T.R. Gupta Public Charitable Trust case. These cases emphasized the importance of trust genuineness and activities related to the main object during registration u/s 12AA, suggesting that mere corpus fund receipt and FCRA rejection should not be sole grounds for rejection. This detailed analysis of the legal judgment highlights the rejection of registration u/s 12A, the grounds for rejection, the appeal arguments, and the influence of previous judgments in deciding the outcome of the case.
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