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2024 (11) TMI 274 - AT - Income TaxCancellation of registration granted to the assessee u/s 12AB r.w.s. 12A(1)(ac)(i) - change in the objects of the trust - V alidity of the earlier 12AB registration received as a religious trust - assessee trust has not undertaken any charitable activity as per changed objects of the trust as envisaged in the new trust deed - HELD THAT - Unless and until any adverse material is brought on record which has not been done, the Ld. CIT(E) is not justified in withdrawing the registration granted to the trust u/s 12AB of the Act. Non-compliance of any other law/furnishing of incomplete or false or incorrect information has also not been noticed by the Ld. CIT(E). The issues raised by the Ld. CIT(E) in para 5 of his order are not at all relevant for the purpose of withdrawal of registration granted to the assessee trust u/s 12AB of the Act which is valid till AY 2026-27. Moreover, it is revealed from the records that the registration already granted to the assessee u/s. 12AB of the Act has been cancelled without following the due process of the principles of natural justice. We are therefore of the view that the cancellation of registration already granted to the assessee trust as a religious trust which subsists till AY 2026-27 is not justified at all. We, therefore vacate this part of the Ld. CIT(E) s order. Assessee s application in Form 10AB u/s 12A(1)(ac)(v) of the Act filed before the Ld. CIT(E) on 15.04.2023 - Copy of new trust deed dated 31.03.2023 was submitted by the assessee which formed part of its reply filed on 12.09.2023 and 10.10.2023 before the Ld. CIT(E). Application for modification to enlarge the objects of the trust was also submitted to the Charity Commissioner u/s 50(A)(1) of Maharashtra Public Trust Act, 1950. The Charity Commissioner has granted permission to the modification/change in the objects of the trust vide his order dated 19.04.2023. The contention of the assessee is that the assessee filed application before the Ld. CIT(E) for change in the object clause as per the new trust deed in compliance to the requisite condition of sub-clause (a) of clause 10 of Form 10AC within the prescribed time limit of 30 days. Therefore, the application for change in the object clause has been filed in time. It has also been asserted that the assessee trust till date has not effected any change in its objects, pending permission from the Income Tax Authorities. The proposed modified object, namely the educational activities have not yet been taken up. The argument of the Ld. CIT-DR is therefore not relevant. In our view, the aforesaid legal and factual matrix of the assessee s case has not been considered/appreciated by the Ld. CIT(E) in right perspective. We, therefore, direct the Ld. CIT(E) to consider the assessee s application u/s 12A(1)(ac)(v) in Form 10AB seeking approval for change in the objects/rules/regulations of the assessee trust as per the new trust deed and pass order afresh in accordance with law after allowing reasonable opportunity of hearing to the assessee trust. Appeal of the assessee is allowed for statistical purposes.
Issues Involved:
1. Timeliness and compliance with the procedure for changing the object clause of the trust. 2. Validity of the earlier 12AB registration received as a religious trust. 3. Change in the object clause to include educational activities. 4. Genuineness of the trust's activities. 5. Relevance of the CIT(E)'s comments on loans taken by the trust. 6. Denial of natural justice in the cancellation of registration and rejection of the application. Detailed Analysis: 1. Timeliness and Compliance with the Procedure for Changing the Object Clause: The assessee argued that it complied with the conditions set forth in the Income Tax Act by submitting an application for a change in the object clause within the prescribed timeframe. The trust applied to the Charity Commissioner on 31.03.2023 and subsequently to the Income Tax Department on 15.04.2023. The Tribunal noted that the application was made in accordance with the mandatory provisions of sub-clause (a) of clause 10 of Form 10AC, which requires prior approval from the Commissioner of Income Tax for any amendments to the trust's objects. The Tribunal found that the Ld. CIT(E) failed to appreciate this compliance properly. 2. Validity of the Earlier 12AB Registration: The trust was initially registered under section 12AB as a religious trust, valid until the Assessment Year 2026-27. The Tribunal observed that the trust was entitled to income tax exemption under section 11 of the Act as a religious trust. The Ld. CIT(E) did not provide any evidence of violations that would justify the withdrawal of this registration, such as the trust applying income for non-religious purposes or engaging in non-incidental business activities. The Tribunal concluded that the cancellation of the registration was unjustified and vacated this part of the Ld. CIT(E)'s order. 3. Change in the Object Clause to Include Educational Activities: The trust sought to modify its objects to include educational activities, pending approval from the Income Tax Authorities. The Tribunal noted that the Charity Commissioner had already granted permission for this change. The trust had not yet commenced educational activities, awaiting the necessary approval. The Tribunal directed the Ld. CIT(E) to reconsider the application for change in the object clause, emphasizing that the application was timely and in compliance with the law. 4. Genuineness of the Trust's Activities: The Ld. CIT(E) questioned the genuineness of the trust's activities, alleging that they were not genuine. However, the Tribunal found no basis for this conclusion, as the trust had been carrying out religious activities genuinely and had not yet started educational activities. The Tribunal emphasized that the genuineness of the religious activities was previously established when the registration was granted. 5. Relevance of the CIT(E)'s Comments on Loans Taken by the Trust: The Ld. CIT(E) commented on loans taken by the trust from the trustees, which were initially recorded as loans but later corrected to be shown as donations. The Tribunal found this issue irrelevant to the application for a change in the object clause and noted that the Ld. CIT(E) did not address the proposed change in objects. 6. Denial of Natural Justice: The Tribunal highlighted that the principles of natural justice were not followed, as the trust was not given an adequate opportunity to be heard regarding the genuineness of its activities. The Ld. CIT(E) did not consider the trust's submissions and supporting documents properly. The Tribunal directed the Ld. CIT(E) to provide a reasonable opportunity for the trust to present its case before making a decision. Conclusion: The Tribunal allowed the appeal for statistical purposes, directing the Ld. CIT(E) to reconsider the application for a change in the object clause and to pass a fresh order in accordance with the law, ensuring the trust is given a fair hearing. The decision emphasized adherence to procedural requirements and the principles of natural justice.
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