2025 (4) TMI 98 - AT - Income Tax

Rejecting the registration u/s 12AB and recognition u/s. 80G - HELD THAT - There is a force in the arguments of the assessee that the CIT(E) has taken a view that where the assessee is a charitable entity registered under Companies Act ld. CIT(E) has already taken a view that RPT Act registration cannot be enforced once assessee registered with the registrar of companies as charitable and non-profit undertaking. Considering that aspect of the matter and as argued by the assessee that the assessee is ready to furnish all the details before the Ld. CIT(E). Considering that fact of the case that CIT(E) has to see the object of the trust and future activities to be done. Even the Hon ble Supreme Court upheld the Delhi High Court s decision affirming that a in a case of newly registered trust registration can be granted under Section 12AA based on its stated objectives and proposed activities even in the absence of any prior activities. See M/S. ANANDA SOCIAL AND EDUCATIONAL TRUST VERSUS THE COMMISSIONER OF INCOME TAX ANOTHER 2020 (2) TMI 1293 - SUPREME COURT . In the light of the above discussion we direct the ld. CIT(E to decide the issue a fresh considering over all aspect as argued before the Bench and decide the issue to registration of the Trust u/s 12AB of the Act. Recognition u/s. 80G - Since we have restored the matter of registration u/s 12AB of the Act to the file of the Ld. CIT(E) and considering that aspect of the matter since the registration u/s. 12AB is set aside the issue of recognition u/s. 80G being consequential to that is also set aside to the file of the ld. CIT(E). Appeals of the assessee are allowed for statistical purpose.

Summary

ISSUES PRESENTED and CONSIDERED

The primary issues considered in this judgment revolve around the rejection of the assessee's applications for registration under Section 12AB and recognition under Section 80G of the Income Tax Act, 1961. The specific legal questions addressed include:

1. Whether the Commissioner of Income Tax (Exemption) [CIT(E)] erred in rejecting the application for registration under Section 12AB of the Income Tax Act, 1961, due to alleged discrepancies and non-genuineness of activities.

2. Whether the CIT(E) erred in rejecting the recognition under Section 80G of the Income Tax Act, 1961, based on the denial of registration under Section 12AB.

3. Whether the CIT(E) failed to provide a proper opportunity for the assessee to present evidence and arguments, including the issuance of a Show Cause Notice and a separate Document Identification Number (DIN) for the rejection orders.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Rejection of Registration under Section 12AB

- Relevant Legal Framework and Precedents: Section 12AB of the Income Tax Act pertains to the registration of charitable trusts and institutions. The provision aims to ensure that the activities of the trust align with its stated objectives and are genuine. The Supreme Court's decision in the case of Ananda Social and Education Trust was referenced, which allows for registration based on stated objectives and proposed activities, even in the absence of prior activities.

- Court's Interpretation and Reasoning: The Tribunal noted that the CIT(E) had previously taken a view that registration under the Rajasthan Public Trust Act (RPT Act) is not mandatory for entities registered under Section 8 of the Companies Act as charitable entities. The Tribunal found merit in the assessee's argument that the CIT(E) should have considered the objectives and proposed activities of the trust.

- Key Evidence and Findings: The assessee argued that it provided all required details but was unable to submit certain crucial information due to the misconception about the necessity of RPT Act registration. The Tribunal acknowledged this oversight and emphasized the need for a fair opportunity to present evidence.

- Application of Law to Facts: The Tribunal applied the principle established by the Supreme Court, stating that registration can be granted based on the trust's stated objectives and proposed activities. The Tribunal directed the CIT(E) to reassess the application, considering the overall aspects and arguments presented.

- Treatment of Competing Arguments: The Tribunal considered the arguments of both the assessee and the Department. While the Department emphasized non-compliance, the Tribunal found the assessee's request for a fair opportunity compelling.

- Conclusions: The Tribunal directed the CIT(E) to reassess the application for registration under Section 12AB, considering the objectives and proposed activities of the trust.

Issue 2: Rejection of Recognition under Section 80G

- Relevant Legal Framework and Precedents: Section 80G of the Income Tax Act provides tax benefits for donations to certain charitable institutions. Recognition under this section is contingent upon registration under Section 12AB.

- Court's Interpretation and Reasoning: The Tribunal noted that the rejection of recognition under Section 80G was consequential to the denial of registration under Section 12AB. Since the matter of Section 12AB registration was remanded, the Tribunal found it appropriate to also remand the Section 80G recognition issue.

- Key Evidence and Findings: The Tribunal did not find specific evidence regarding Section 80G but focused on the procedural aspect, given its dependency on Section 12AB registration.

- Application of Law to Facts: The Tribunal applied the principle that recognition under Section 80G is dependent on the registration under Section 12AB and directed a reassessment.

- Treatment of Competing Arguments: The Tribunal acknowledged the procedural linkage between the two sections and the necessity of reassessment in light of the remand of the Section 12AB issue.

- Conclusions: The Tribunal directed the CIT(E) to reassess the recognition under Section 80G, contingent upon the outcome of the Section 12AB registration reassessment.

SIGNIFICANT HOLDINGS

- Core Principles Established: The Tribunal reinforced the principle that registration under Section 12AB can be granted based on the stated objectives and proposed activities of a trust, even without prior activities, aligning with the Supreme Court's precedent.

- Final Determinations on Each Issue: The Tribunal remanded both the issues of registration under Section 12AB and recognition under Section 80G back to the CIT(E) for fresh consideration, emphasizing the need for a fair opportunity for the assessee to present its case.

The Tribunal's decision to remand the matters underscores the importance of procedural fairness and the consideration of all relevant aspects before making determinations on registration and recognition under the Income Tax Act.