2015 (6) TMI 411 - AT - Income Tax

Application for registration u/s.12AA rejected - Held that - No dissatisfaction with regard to the objects of the trust, which represents the other limb or aspect on which the ld. DIT(E)) is required to satisfy himself, has been expressed by him, nor any such reservation stands brought out before us during hearing. Under the circumstances, we, in view of the foregoing, are of the clear view that the denial of registration by the ld. DIT(E) is not sustainable both in law and in the facts and circumstances of the case. We, accordingly, set aside the impugned order, and direct acceptance of the assessee s application. - Decided in favour of assessee.

Summary

Issues:
Validity of rejection of assessee's application for registration u/s.12AA of the Income Tax Act.

Analysis:

Issue 1: Validity of rejection of registration application
The primary issue in this appeal is the legality of rejecting the assessee's application for registration under section 12AA of the Income Tax Act. The appellant-trust applied for registration in 2010, but the application was denied by the Director of Income Tax (Exemption) on the grounds of lack of activity by the trust since its formation. The key contention was whether the absence of activity could lead to a denial of registration based on the genuineness of the trust's activities. The legal requirement under section 12AA(1)(b) mandates the competent authority to be satisfied about the genuineness of the trust's activities. The crux of the issue revolved around whether non-commencement of activities could automatically lead to a lack of satisfaction regarding the genuineness of the trust's activities.

Analysis for Issue 1:
The Tribunal analyzed the provisions of section 12AA and emphasized that the competent authority must ascertain the genuineness of the trust's activities before granting registration. Merely the absence of activity should not be the sole basis for denying registration. The Tribunal highlighted that the law does not prescribe a specific timeline for commencing activities post-formation, as various factors such as resource availability and project nature influence activity initiation. The Tribunal referred to previous judgments supporting the view that the competent authority should consider all circumstances to determine the genuineness of activities, with non-commencement not being conclusive evidence of lack of genuineness. The Tribunal differentiated the present case from precedents where lack of activity was indicative of ulterior motives, emphasizing that each case must be assessed based on its unique facts and circumstances.

Decision:
The Tribunal found no dissatisfaction regarding the trust's objects and concluded that the denial of registration by the Director of Income Tax (Exemption) was legally unsustainable. Consequently, the Tribunal set aside the impugned order and directed the acceptance of the assessee's application for registration. The appeal was allowed in favor of the assessee.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved and the Tribunal's reasoning behind its decision to allow the appeal.