2025 (3) TMI 1264 - AT - Income Tax

Rejection of Application u/s. 80G - since the assessee is not registered u/s 12AB benefit cannot be given to the assessee - HELD THAT - Since the assessee has already applied for registration under RPT Act and thereby the reasons advance for rejecting the registration of the applicant-assessee trust are curable in nature. Bench feels that the issue of registration u/s 12AB of the be decided a fresh based on the registration under RPT Act to be produced by the assessee. Therefore we restore the matter of the registration u/s 12AB to the file of the CIT(E) be decided afresh. The Bench also noted that recognition u/s 80G was denied because the applicant-assessee trust was not registered u/s 12AB of the Act. Since we have restored the matter of registration u/s 12AB of the Act to the file of the CIT(E) and therefore we also deem it a fit case to restore the matter of recognition u/s 80G of the Act to the file of the ld. CIT(E). Appeals of the assessee Allowed for statistical purposes.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the rejection of the assessee's application for registration under section 12AB of the Income Tax Act, 1961, by the Commissioner of Income Tax (Exemption) [CIT(E)] was justified.
Whether the denial of recognition under section 80G of the Income Tax Act, 1961, was warranted based on the non-registration under section 12AB.
Whether the CIT(E)'s findings regarding the assessee's activities being non-genuine and beyond the scope of charitable activities were valid.
Whether the procedural aspects, including the lack of registration under the Rajasthan Public Trust Act, 1959, at the time of application, affected the legality of the CIT(E)'s decision.

ISSUE-WISE DETAILED ANALYSIS

1. Rejection of Registration under Section 12AB

Relevant Legal Framework and Precedents: Section 12AB of the Income Tax Act, 1961, pertains to the registration of trusts or institutions for income tax exemption purposes. The CIT(E) is responsible for ensuring that the applicant meets the criteria for charitable activities.
Court's Interpretation and Reasoning: The Tribunal noted that the primary reason for the rejection was the absence of registration under the Rajasthan Public Trust Act, 1959, at the time of application. The Tribunal considered this a procedural issue that could be rectified.
Key Evidence and Findings: The Tribunal acknowledged that the assessee had applied for registration under the Rajasthan Public Trust Act and deemed the lack of registration at the application time as a curable defect.
Application of Law to Facts: The Tribunal found that the procedural defect did not substantiate the rejection of the application under section 12AB. The matter was considered suitable for reconsideration once the procedural requirements were met.
Treatment of Competing Arguments: The assessee argued that the activities were charitable and that any discrepancies were curable. The CIT(E) maintained that the lack of registration under the Rajasthan Public Trust Act justified the rejection. The Tribunal sided with the assessee, considering the defect curable.
Conclusions: The Tribunal restored the matter to the CIT(E) for fresh consideration, contingent upon the assessee's registration under the Rajasthan Public Trust Act.

2. Denial of Recognition under Section 80G

Relevant Legal Framework and Precedents: Section 80G of the Income Tax Act provides deductions for donations to certain funds, charitable institutions, etc., contingent upon the institution's registration under section 12AB.
Court's Interpretation and Reasoning: The Tribunal noted that the denial of recognition under section 80G was directly linked to the non-registration under section 12AB.
Key Evidence and Findings: The Tribunal found that since the matter of section 12AB registration was to be reconsidered, the denial under section 80G also required reassessment.
Application of Law to Facts: The Tribunal determined that the denial of section 80G recognition was premature, given the procedural nature of the section 12AB issue.
Treatment of Competing Arguments: The Tribunal did not find any substantive arguments against the linkage between sections 12AB and 80G, focusing instead on the procedural aspect.
Conclusions: The Tribunal restored the matter of section 80G recognition to the CIT(E) for reconsideration alongside the section 12AB registration.

3. Allegations of Non-Genuine Activities

Relevant Legal Framework and Precedents: The genuineness of activities is a criterion for registration under sections 12AB and 80G. The CIT(E) alleged that the assessee's activities were business-oriented rather than charitable.
Court's Interpretation and Reasoning: The Tribunal noted the CIT(E)'s concerns but emphasized that the procedural defect was the primary reason for rejection. The Tribunal did not delve deeply into the merits of the genuineness allegations, leaving them for reconsideration upon procedural compliance.
Key Evidence and Findings: The Tribunal acknowledged the CIT(E)'s observations but focused on the procedural defect as the primary issue.
Application of Law to Facts: The Tribunal decided that allegations of non-genuine activities should be reconsidered in light of the procedural compliance.
Treatment of Competing Arguments: The Tribunal did not make a determination on the genuineness of activities, leaving it to the CIT(E) to reassess after procedural issues were addressed.
Conclusions: The Tribunal restored the matter for fresh consideration, including the genuineness of activities, once procedural compliance was achieved.

SIGNIFICANT HOLDINGS

Core Principles Established: The Tribunal emphasized that procedural defects, such as non-registration under a relevant state act, are curable and should not be the sole basis for rejecting applications under sections 12AB and 80G.
Final Determinations on Each Issue: The Tribunal restored both matters to the CIT(E) for fresh consideration, contingent upon the assessee's compliance with procedural requirements, specifically registration under the Rajasthan Public Trust Act.
Verbatim Quotes of Crucial Legal Reasoning: "The reasons advance for rejecting the registration of the applicant-assessee trust are curable in nature. Considering that aspect of the matter, the Bench feels that the issue of registration u/s 12AB of the be decided afresh, based on the registration under RPT Act to be produced by the assessee."

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