2025 (3) TMI 22 - AT - Income Tax

Denial of registration u/s.12AB - lack of registration under the Rajasthan Public Trust Act 1959 (RPT Act) - HELD THAT - There is no law which is required to be complied with for achieving the objects of the assessee trust. Section 17 of the RPT Act 1959 requires that trustees of the trust has to apply for registration of a public trust however there is no section in the RPT Act 1959 which prohibits a trust to carry out its objects if it is not registered under the RPT Act 1959. Both the statutes have their own provisions and implications and none of them have overriding effect. Even if the assessee trust is not registered with the RPT Act 1959 and the concerned officials under the RPT Act 1959 deems it necessary to get the entity registered u/s 17 of the RPT Act 1959 appropriate action can be taken and against the trustees of the trust. But this issue can t be a hurdle in getting registration before the Income Tax Department u/s. 12AB of the Act. No force in the findings of the Ld. CIT (E) Jaipur while holding registration application untenable in the absence of registration under the RPT Act 1959. Violation of Foreign Contribution Regulation Act 2010 (FCRA) - Considering the provisions of relevant statute we restore the matter back to the file of the Ld. CIT (E) Jaipur and simultaneously directed the assessee trust to incorporate the relevant amendment in the trust deed mentioning that prior to receiving any foreign remittance whatever may be the form or nomenclature prior approval will be taken from the Ministry of Home Affairs Govt. of India and produce the same for verification (In original) before the Ld. CIT (E) Jaipur. On this issue ground raised by the assessee is allowed for statistical purposes. Question on genuineness of activities of the assessee trust - as submitted that other than purchase of land for hostel building construction no other activity was carried out - Its beyond our understanding what else a newly established society/trust can furnish in response to the letter of Ld. CIT (E) Jaipur. Rather observations on genuineness of the trust observations made by the Ld. CIT (E) Jaipur are either wrong or self-contradictory in nature. On the one hand the Ld. CIT (E) Jaipur is claiming that no I/E accounts for the F.Y. 2023-24 furnished by the assessee on the other hand he is commenting on various aspects which can be fetched only from the financials of the assessee. The copy of the financials were produced before us also vide page nos. 31-35 of the paper book and the same was placed before the Ld. CIT (E) Jaipur also. As per case of Rural Education and Women Welfare Society Sas Nagar 2019 (11) TMI 1148 - SC ORDER we are of the opinion that the observations of the Ld. CIT (E) Jaipur are baseless and can t be used against the assessee to refuse registration u/s. 12AA - it is found that the observations of the CIT (E) Jaipur has no legs to stand and the activities of the assessee are not under any challenge which warrants rejection of registration.

Summary

ISSUES PRESENTED and CONSIDERED

The legal judgment addresses the following core issues:

1. Whether the denial of registration under section 12AA of the Income Tax Act, 1961, due to the lack of registration under the Rajasthan Public Trust Act, 1959 (RPT Act), is justified.

2. Whether the denial of registration under section 12AA based on alleged violations of the Foreign Contribution Regulation Act, 2010 (FCRA), is legally sound.

3. Whether the genuineness of the trust's activities was adequately established to warrant registration under section 12AA.

ISSUE-WISE DETAILED ANALYSIS

1. Denial of Registration Due to Lack of RPT Act Registration

- Relevant Legal Framework and Precedents: Section 12AB(1)(b)(ii)(B) of the Income Tax Act requires compliance with other laws if necessary for achieving the trust's objectives. The CIT (Exemption) relied on precedents involving educational institutions, suggesting similar compliance requirements.

- Court's Interpretation and Reasoning: The Tribunal noted that the RPT Act, 1959, does not prohibit a trust from carrying out its objectives without registration. It emphasized that compliance with the RPT Act is not material for achieving the trust's objectives under the Income Tax Act.

- Application of Law to Facts: The Tribunal found no legal basis for denying registration solely due to the absence of RPT Act registration, as the trust's objectives could be achieved without it.

- Treatment of Competing Arguments: The Tribunal dismissed the CIT's reliance on educational institution precedents, noting they were not applicable to the trust's circumstances.

- Conclusions: The Tribunal concluded that the CIT (Exemption) erred in denying registration based on the lack of RPT Act registration.

2. Alleged Violations of the Foreign Contribution Regulation Act (FCRA)

- Relevant Legal Framework and Precedents: The FCRA requires registration for accepting foreign contributions. The trust deed allowed for foreign donations, but the trust had not yet received any.

- Court's Interpretation and Reasoning: The Tribunal noted that the trust had not accepted foreign contributions and had committed to obtaining necessary approvals before doing so. The absence of a specific clause in the trust deed was not deemed sufficient grounds for denial.

- Application of Law to Facts: The Tribunal directed the trust to amend its deed to explicitly require prior approval for foreign contributions, thus addressing the CIT's concerns.

- Treatment of Competing Arguments: The Tribunal balanced the CIT's concerns with the trust's assurance of compliance, opting for a remedial approach.

- Conclusions: The Tribunal allowed the trust to amend its deed and directed the CIT to reconsider the registration application post-amendment.

3. Genuineness of Trust Activities

- Relevant Legal Framework and Precedents: Section 12AA requires the Commissioner to verify the genuineness of the trust's activities. The CIT questioned the lack of financial documentation and clarity on the trust's operations.

- Court's Interpretation and Reasoning: The Tribunal found that the trust had provided sufficient documentation, including financials and activity descriptions, which the CIT either overlooked or misinterpreted.

- Application of Law to Facts: The Tribunal determined that the trust's activities aligned with its objectives and that the CIT's objections were unfounded.

- Treatment of Competing Arguments: The Tribunal highlighted inconsistencies in the CIT's reasoning, noting that the CIT's objections were either incorrect or contradictory.

- Conclusions: The Tribunal concluded that the trust's activities were genuine and warranted registration under section 12AA.

SIGNIFICANT HOLDINGS

- The Tribunal emphasized that compliance with the RPT Act is not a prerequisite for registration under the Income Tax Act if it does not materially affect the trust's objectives.

- It held that the trust's commitment to amending its deed to ensure FCRA compliance sufficed to address the CIT's concerns.

- The Tribunal found that the trust adequately demonstrated the genuineness of its activities, warranting registration under section 12AA.

- The Tribunal directed the CIT (Exemption) to grant registration post-amendment of the trust deed and to accept the trust's explanations regarding its activities.