2023 (9) TMI 1511 - AT - Income Tax

Denying/rejecting registration to the assessee u/s 12AB - no expenditure has been incurred on charitable activities as per the objects mentioned in the said trust deed - HELD THAT - We do not find as to which expenditure incurred are not for charitable activities and whole of the expenditure, as has been classified has been held to be not related to charitable objects. The expenditures are clearly related to medical aid, providing various help to the poor, doing charity to sadhus and public, including administrative work for carrying out the activities of the trust and building repairs, etc. The major expenditure relates to charitable activities. Even the expenditure under the head administrative expenses, nowhere it has been pointed out that there is any violation of the provisions of section 13(1)(c) of the Act. Thus, the administrative expenditure cannot be said to be outside the ambit of charitable activities, because these are expenditures incurred for carrying out the activities of the trust, for which registration was granted earlier. Once the similar nature of activities have been accepted in the past and also exactly similar nature of expenditures have been held to be incurred for carrying out the charitable activities, then how these expenditures can be held to be not for charitable purpose or carrying out charitable activities. CIT (Exemptions) has not considered the details which were filed along with replies to various show cause notices, in which all these aspects have duly been explained. Thus, the finding and observation of the ld. CIT (Exemptions) is set aside. Accordingly, we direct the ld. CIT (Exemptions) to grant registration to the assessee-trust under section 12AB of the Act. As decided in Dawoodi Bohara Jamat 2014 (3) TMI 652 - SUPREME COURT if the assessee-trust is formed with both religious and charitable objects, the claim for registration under section 12AA of the Act cannot be denied and only in cases where the objects are carried out purely for the benefit of a particular religious community or caste, it can be denied. Here in this case, there is no finding that the activities of the trust have been carried out for a particular religious community or caste. Thus, this judgment relied upon by the ld. CIT is wholly out of context. Accordingly, the appeal of the assessee is allowed and the ld. CIT (Exemptions) is directed to grant registration to the assessee-trust under section 12AB of the Act. Decided in favour of assessee.

Summary

Issues involved:
1. Denial of registration under section 12AB of the Income Tax Act, 1961 by the ld. CIT (Exemption) to the assessee-trust.
2. Allegation of not granting a reasonable opportunity of hearing and violation of natural justice.
3. Reliance on distinguishable case laws by the ld. CIT.
4. Incorrect observation regarding charitable activities not being incurred as per the trust deed.
5. Assertion of non-genuine activities and lack of documentary evidence for charitable activities by the assessee.
6. Request for amendment or withdrawal of grounds outlined before or at the time of hearing.

Analysis:

Issue 1: Denial of registration under section 12AB:
The assessee, a charitable trust, applied for registration under section 12AB. The ld. CIT (Exemption) rejected the application citing that expenses were not related to charitable objects as per the trust deed. The CIT emphasized the need for genuine activities in line with the trust's objects, referencing a Supreme Court judgment. The assessee contended that all expenditures were for charitable purposes, providing detailed submissions and evidence. The Tribunal found the denial unjustified, noting the trust's long history of genuine charitable activities and directed the CIT to grant registration.

Issue 2: Violation of natural justice:
The assessee argued that the ld. CIT did not provide a reasonable opportunity of hearing, violating natural justice. However, the Tribunal did not find substantial evidence supporting this claim in the case records.

Issue 3: Reliance on case laws:
The ld. CIT was criticized for relying on case laws that were deemed distinguishable and irrelevant to the facts of the present case. The Tribunal acknowledged this discrepancy and emphasized the need for decisions based on the specific circumstances of the trust.

Issue 4: Incorrect observation on charitable activities:
The ld. CIT's observation that no expenditure was incurred on charitable activities as per the trust deed was challenged by the assessee. The Tribunal found this observation to be inaccurate, considering the detailed submissions and evidence provided by the trust.

Issue 5: Lack of documentary evidence for charitable activities:
The ld. CIT raised concerns about the genuineness of the trust's activities and the lack of supporting documentary evidence. The Tribunal disagreed, highlighting the extensive documentation submitted by the assessee, which demonstrated the charitable nature of the trust's expenditures.

Issue 6: Grounds for amendment or withdrawal:
The appellant sought the flexibility to add, amend, modify, or withdraw the outlined grounds before or during the appeal hearing. The Tribunal acknowledged this request for procedural fairness.

In conclusion, the Tribunal allowed the appeal, directing the ld. CIT to grant registration to the assessee-trust under section 12AB of the Income Tax Act, 1961, based on the genuine charitable activities carried out by the trust.