2006 (11) TMI 249 - AT - Income Tax

Denial to Grant registration u/s 12AA(1)(b)(ii) - Charitable Trust - Objects and activities not genuine - CIT was of the view, that since the amount of Rs. 500 which was the initial contribution of the founder of the trust was too small and illusory, the necessary ingredient of the trust property was missing and the objects of the trust cannot be achieved with this paltry amount - HELD THAT - The objects of the trust as declared in the trust deed, which we have extracted, are all charitable objects and there is no finding recorded by the CIT to the contrary. Be that as it may, the real objection of the CIT seems to be that the initial contribution of Rs. 500 made by the founder of the trust and dedicated to the objects of the trust is hardly sufficient to carry out the charitable activities of the trust. The sufficiency or otherwise, as rightly pointed out on behalf of the assessee, is not a relevant factor while dealing with an application for registration u/s 12AA. The section in terms does not make it a consideration for the grant of registration. The trustees have collected a sum of Rs. 5,71,927 towards contribution to the trust which has been deposited with the Punjab National Bank. The statement of account issued by the bank and which was placed before the CIT shows this figure as on 17th Sept., 2004. Therefore, there are sufficient funds available with the trust from which the charitable activities can be carried out. In our opinion, the CIT was not justified in refusing to grant registration to the assessee trust. The reasons given by him for such refusal are extraneous to s. 12AA. We may add that the CIT has not doubted the genuineness of the activities of the trust. Thus, CIT, in our opinion, was not justified in relying on this decision for refusing registration to the trust. Hence, we allow registration of the assessee trust, set aside the order passed by the CIT u/s 12AA and allow the appeal.

Summary

Issues:
1. Refusal of registration to a public charitable trust by the CIT under s. 12AA(1)(b)(ii) of the IT Act.
2. Consideration of the sufficiency of the initial contribution made to the trust fund by the founder in granting registration.
3. Examination of the charitable nature of the trust's activities and objects by the CIT.

Analysis:
1. The appeal was against the CIT's refusal to grant registration to a public charitable trust based on the amount of Rs. 500 contributed by the founder. The trust deed outlined charitable objects, and the CIT's primary objection was the perceived insufficiency of the initial contribution to fulfill the trust's objectives. The Tribunal noted that the CIT's focus should have been on the trust's objects and activities' genuineness, rather than the amount of the founder's contribution. The Tribunal found the CIT's reasoning flawed as the trust had substantial public contributions, demonstrating the ability to carry out charitable activities.

2. The Tribunal emphasized that under s. 12AA, the CIT's role is to ensure the trust's objects are charitable and activities genuine. The Tribunal highlighted the charitable nature of the trust's objects listed in the deed and criticized the CIT's vague assertion of the absence of charitable activities. The Tribunal deemed the CIT's concern over the initial contribution's sufficiency irrelevant for registration purposes, especially considering the trust's ability to collect significant funds from the public and manage them through a corpus fund.

3. The Tribunal disagreed with the CIT's reliance on a previous judgment where the property did not exist for a donation, unlike the present case where an actual contribution was made. The Tribunal found the CIT's reasoning unjustified and allowed the appeal, granting registration to the trust. The Tribunal concluded that the CIT's objections were extraneous to s. 12AA, emphasizing the trust's genuine activities and the availability of funds for charitable purposes. The judgment set aside the CIT's order and approved the registration of the trust without imposing any costs.