2024 (7) TMI 220 - AT - Income Tax

Denial of registration u/s 12A(1)(ac)(ii) and u/s 80G(5) - as alleged not carrying out any charitable activity as per section 2(15) - THAT - It is crystal clear that the applications dated 28.03.2023 in Form No. 10AB seeking registration u/s. 12A(1)(ac(ii) u/s 80G(5) were filed. The documents submitted by appellant showed that no charitable activity was initiated. As per income and expenditure account no expense has been incurred on any charitable activity as detailed in section 2(15). So application was rejected on 26.09.2023. However, letter dated 21.09.2023 at page 51 of paper book show purchased of land. Letter dated 17.7.2023 at page 68 to 70 mentions the trust has given financial assistance/donation to improve the healthcare education and services and to uplift the standard of living at Tribals. As per ratio of judgment in Ananda Social Educational Trust 2020 (2) TMI 1293 - SUPREME COURT it is well settled that a Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In view of above material facts and well settled principle of law passing of impugned order has led to miscarriage of justice which is required to be remedied. Accordingly impugned order is not just, fair and legal. Appeals of the assessee are allowed.

Summary

Issues:
Appeals against rejection of registration under section 12A(1)(ac)(ii) and Section 80G(5) of the Income Tax Act, 1971.

Analysis:
The appeals were filed by the assessee against the rejection of applications for registration under Section 12A(1)(ac)(ii) and Section 80G(5) of the Income Tax Act, 1971 by the Learned Commissioner of Income Tax (Exemption). The appellant had filed the applications seeking registration, but the documents submitted showed no charitable activity had been initiated, as per the income and expenditure account. The rejection was based on the lack of expenses incurred on charitable activities, as required by section 2(15) of the Income Tax Act, 1961.

The authorized representative for the appellant argued that the rejection was erroneous, highlighting that the Trust had purchased land for charitable purposes, as mentioned in the submitted documents. The representative also pointed out financial assistance provided to other trusts for healthcare and education services. Referring to specific documents and receipts, it was emphasized that the Trust was actively involved in charitable endeavors, contrary to the rejection based on lack of charitable activities.

In support of the appellant's case, reference was made to a judgment by the Hon'ble Supreme Court of India in the case of Ananda Social & Educational Trust. The judgment clarified that the term "activities" in the context of registration of a trust includes proposed activities, and the Commissioner must assess if the proposed activities align with the charitable objects of the Trust. This legal principle was cited to argue that the rejection was unjust and not in accordance with the law.

Considering the arguments and the evidence presented, the Tribunal found that the rejection of the applications had led to a miscarriage of justice. The Tribunal held that the Commissioner should have considered whether the Trust's objects were genuinely charitable and if the proposed activities were in line with those objects. Therefore, the impugned order was set aside, and the Commissioner was directed to reevaluate the issue in accordance with the law.

In conclusion, the appeals of the assessee were allowed, and the order for rejection of registration under Section 12A(1)(ac)(ii) and Section 80G(5) was overturned. The case was remanded back to the Commissioner for fresh consideration in light of the Trust's charitable objectives and activities.