2015 (7) TMI 773 - AT - Income Tax

Registration u/s 12AA rejected - some of the object of the trust mentioned in sub-clauses-(i),(j),(k),and (l)of clause-4 of the trust deed are not charitable in nature - Held that - Sec.11(1A) permits the income from voluntary contribution made with a specific direction that this shall form part of corpus. Similarly, sec.12(1) permit any voluntary contribution received by the trust created solely for charitable or religious purpose. Thus, receiving the contribution, donation or gift which is to be used for the stated purpose cannot be termed as a non-charitable object of the assessee. Sec.11(1A)(a) further, provides that for the purpose of sub-sec.1 a capital asset being property held under the trust wholly for charitable or religious purpose is transferred and whole or any part of consideration is utilized in acquiring the new capital asset than such capital gain is eligible for exemption. Section 11(5) permits the deposit in any account with a schedule bank or co-operative society engaged in carrying on the business of banking as well as deposit in any account with the post office savings bank. Apart from the other investments as prescribed there under. Thus, we find that the objects under sub-clause-i to l are charitable in nature and cannot be termed as non-charitable The assessee is not found to be involved in the activity of profit and the objects of the assessee are all only to achieve the main objects to provide education, learning, training facilities to the students of all branches of education. Therefore, all these ancillary objects included in the object clause of the assessee are found to be for the purpose of achieving and furtherance of the main objects than, these ancillary objects and acts to attain the main object cannot be held as non-charitable in nature The impugned order rejecting the registration u/s 12AA of the IT Act on the ground that the objects mentioned in the sub-clauses i to l of clause-4 of the trust deed are not charitable in nature is not sustainable and accordingly, the same is set aside. However, the assessee has not filed the relevant record, as required u/s 12AA of the Act to satisfy the authority concerned about the genuineness of the activity. We accordingly, direct the CIT to re-consider the application of the assessee for registration u/s 12AA of the IT Act, in the light of the above observation. - Decided in favour of assessee for statistical purposes.

Issues Involved:
1. Whether the CIT erred in rejecting the application for registration under Section 12AA of the IT Act.
2. Whether the objects mentioned in sub-clauses (i), (j), (k), and (l) of clause 4 of the Trust Deed are non-charitable in nature.
3. Whether the CIT failed to consider the subsequent clauses of the Trust Deed that clarify the charitable nature of the trust's objects.
4. Whether the CIT's order was contrary to the provisions of the IT Act and law.

Detailed Analysis:

Issue 1: Rejection of Application for Registration under Section 12AA of the IT Act
The appeal was directed against the order dated 30-04-2014 of CIT, Mangalore, which rejected the application for registration under Section 12AA of the IT Act. The assessee, a trust created by a deed on 22-02-2013, applied for registration on 30-01-2014. The CIT rejected the application on the grounds that some objects of the trust, specifically sub-clauses (i), (j), (k), and (l) of clause 4, were not charitable in nature.

Issue 2: Nature of Objects in Sub-clauses (i), (j), (k), and (l) of Clause 4
The CIT's primary objection was that the objects mentioned in sub-clauses (i), (j), (k), and (l) of clause 4 pertained to the acquisition of property, acceptance of gifts, alienation of property by sale, and investment of money in banks, which were deemed non-charitable. The learned AR argued that these sub-clauses were ancillary and necessary for achieving the main charitable object of providing education and training facilities. The Tribunal noted that these sub-clauses were not the main objects but were supportive of the main charitable purpose of the trust.

Issue 3: Consideration of Subsequent Clauses of the Trust Deed
The assessee contended that the CIT failed to consider clauses subsequent to clause 4, particularly clauses 5(v) and 7, which clarified that the sub-clauses (i), (j), (k), and (l) were incorporated to aid and achieve the charitable objects. The Tribunal observed that the CIT's order did not take a holistic view of the Trust Deed and failed to appreciate that these ancillary objects were in furtherance of the main charitable purpose.

Issue 4: Compliance with Provisions of the IT Act
The Tribunal noted that the objects under sub-clauses (i) to (l) were permissible under Sections 11 and 12 of the IT Act, as they were for achieving the main object of the trust. The Tribunal referred to the Supreme Court's decisions in Addl. CIT vs. Surat Art Silk Cloth Manufacturers Association and Dharmadeepti vs. CIT, which supported the view that ancillary activities necessary for achieving the main charitable purpose do not disqualify the trust from registration. The Tribunal found that the CIT's rejection of the application was not in accordance with the law and directed the CIT to reconsider the application, taking into account the genuineness of the trust's activities.

Conclusion:
The Tribunal set aside the CIT's order rejecting the registration under Section 12AA of the IT Act and directed the CIT to reconsider the application in light of the Tribunal's observations. The appeal filed by the assessee was allowed for statistical purposes.

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