2013 (6) TMI 495 - AT - Income Tax

Grant registration under S.12AA denied - Held that - Unable to accept the reasoning given by the Director of Income-tax(Exemption) while refusing to register the assessee trust. Obviously as stated by the assessee, the Trust was created only on 17th May, 2012 and immediately thereafter, it filed application for registration. Instead of examining the objects of the trust for registration, the Director of Income-tax(Exemption) rejected the registration. See Director of Income- tax(Exemption) V/s. Foundation of Opthalmic & Optometry Research Education Centre 2012 (8) TMI 777 - DELHI HIGH COURT the statute does not prohibit or enjoin the Commissioner from registering Trust solely based on its objects, without any activity, in the case of a newly registered Trust. The statute does not prescribe a waiting period, for a trust to qualify itself for registration. Appeal of the assessee is consequently allowed, with a direction to the Director of Income-tax(Exemption) to examine the aims and objects of the assessee- trust and grant registration under S.12AA of the Act, since he has not examined the objects, which prima-facie indicate that they are charitable in nature - appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
Appeal against refusal of registration under S.12AA of the Act by the Director of Income-tax (Exemption) for a newly incorporated trust.

Analysis:
1. The trust applied for registration under S.12AA of the Act shortly after its incorporation. The Director of Income-tax (Exemption) refused registration citing lack of activity by the trust, which is a prerequisite for registration under the Act.
2. The assessee contested the decision, providing relevant documents to support its application for registration, including trust deed, details of trustees, donor information, and fund allocation details up to the date of the hearing.
3. The Appellate Tribunal found the Director's reasoning flawed, as the trust was newly formed and had not yet commenced activities. Referring to legal precedents, the Tribunal emphasized that the law does not mandate a waiting period for a trust to engage in charitable activities before seeking registration.
4. The Tribunal highlighted judgments from various High Courts, including Delhi, Punjab and Haryana, and Karnataka, emphasizing the importance of examining the trust's objectives for registration under S.12AA, especially for newly formed trusts.
5. In light of the above, the Tribunal set aside the Director's decision and directed a reevaluation of the trust's aims and objects for registration under S.12AA, ensuring the trust is given a fair opportunity to present its case before a fresh order is issued.

This detailed analysis of the judgment showcases the legal intricacies involved in the registration of trusts under the Income Tax Act and the significance of considering the trust's objectives for granting registration, especially for newly formed entities.