2012 (2) TMI 190 - AT - Income Tax

Registration under 12AA - Object Develop automobile design, Architectural design - Held That - Possibility of a future contingency with a remote probability will cannot make the Trust itself a commercial venture.The clause of levying fees from apprentices will not per se convert the assessee-Trust to a commercial establishment.

Summary

Issues:
Denial of registration under Section 12AA of the Income-tax Act, 1961 to the assessee due to the nature of its object clauses and the authorization of collecting fees from apprentices or beneficiaries.

Analysis:

1. Nature of Object Clauses:
The assessee applied for registration under Section 12AA, but the ld. DIT(E) denied it citing two main reasons. Firstly, the development of new automobile and architectural designs based on specific systems was deemed non-charitable by the ld. DIT(E). The Tribunal disagreed, stating that these activities were not inherently religious and did not automatically disqualify the Trust from registration. The Tribunal emphasized that the interpretation of sacred rules and geometry did not necessarily imply a religious nature, especially if it was in harmony with nature and not tied to a specific religious belief.

2. Authorization to Collect Fees:
The second reason for denial was the authorization in the Trust deed to levy fees from apprentices or beneficiaries. The Tribunal noted that this clause was not part of the object clauses but an enabling provision. It clarified that the trustees' activities were limited to those incidental to the Trust's objectives. The Tribunal highlighted that collecting fees would not automatically render the Trust commercial unless it generated substantial surplus, which could jeopardize its charitable status. The Tribunal concluded that the possibility of future commercial activities should be assessed during regular assessment proceedings and did not warrant denial of registration under Section 12AA.

3. Judgment and Decision:
The Tribunal found both reasons provided by the ld. DIT(E) for denying registration to be unjustified and not legally sound. Consequently, the Tribunal overturned the decision and directed the ld. DIT(E) to grant the assessee-Trust registration under Section 12AA. The Tribunal also addressed the issue of the order being passed after the limitation period, but since the decision favored the assessee on merit, this aspect was not considered. Ultimately, the Tribunal allowed the appeal filed by the assessee, and the order was pronounced on 6th January 2012.