2024 (10) TMI 414 - AT - Income Tax

Registration of the assessee trust u/s 12A(a) cancelled - activities of the trust are not as per the objects of the trust deed and therefore, are not genuine - property and income of the Trust have been used for the personal benefit of the trustee. HELD THAT - There is receipts from the hospital activities although less but it cannot be said that the activities of the trust are not genuine and the objects of the trust are not being carried out as per objects of the trust. As noted that the letting out of shops is an activity permitted under clause 7(xii) of the Trust deed and such income has been used for the main objects of the Trust and it cannot be said that the trust has violated the provisions of Sec 12AA(3). It is also noteworthy to mention that the trustees who are residing in small quarters of the trust property are rendering full service to the Trust and they are not getting salary against such service and in spite of this they are bearing electricity, water bills and maintenance charges of the trust building and in order to meet the requirement of capital expenditure such persons also provided interest free deposit which does not show that there is misuse of the trust property. These comments of the ld. CIT(E) did not doubt the activities of the trust, the receipt of income from rent is as per object of the trust and the benefit that the trustees are getting cannot be a sole reason to reject the registration of the trust. Thus activities of the trust are charitable in nature and the registration was incorrectly denied to the assessee trust. Appeal of the assessee is allowed.

Summary

Issues:
Cancellation of registration of trust under sections 12AA(3) and 12AA(4) of the Income Tax Act, 1961.

Detailed Analysis:

1. Grounds of Appeal by Assessee:
The appeal filed by the assessee challenges the cancellation of registration of the trust by the Commissioner of Income Tax (Exemptions). The assessee raised various grounds, including lack of justification for cancellation, absence of adequate opportunity to explain, and the trust's activities being in accordance with its objects.

2. Reasoning of the Commissioner (Exemption):
The Commissioner held that the trust's activities were not genuine and not aligned with its objects. The trust's property and income were allegedly used for personal benefit, leading to the cancellation of registration under sections 12AA(3) and 12AA(4) of the Act.

3. Arguments by Assessee's Representative:
The representative of the assessee argued against the cancellation, citing that the trust's activities were genuine, and income from hospital activities and shop rentals were used for charitable purposes. The trustees' services to the trust were highlighted to refute any misuse of trust property.

4. Documents Submitted by Assessee:
The assessee submitted various documents to support their case, including submissions to the ITAT, copies of orders, trust deed, registration certificate, audit reports, and decisions.

5. Decision of the Tribunal:
After considering both parties' arguments and the documents, the Tribunal found that the trust's activities were charitable in nature and aligned with its objects. The Tribunal disagreed with the Commissioner's findings and quashed the cancellation of the trust's registration.

6. Legal Precedent Considered:
The Tribunal referenced a judgment of the apex court regarding the registration of trusts, emphasizing the need for genuine charitable activities in line with the trust's objects. The Tribunal applied this precedent to conclude in favor of the assessee.

7. Conclusion:
The Tribunal allowed the appeal of the assessee, ruling that the cancellation of the trust's registration was incorrect. The decision was pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963.

This detailed analysis covers the grounds of appeal, the Commissioner's reasoning, arguments presented, documents submitted, the Tribunal's decision, legal precedent considered, and the final conclusion of the judgment.