2016 (10) TMI 419 - AT - Income Tax

Grant of exemption u/s 80G denied - denial of claim for want of registration under section 12AA - Held that - We find merit in the submission of the ld. Counsel for the assessee that the objects of the assessee of clause (a) and (d) are for establishment of hospitals and colleges. We also find that as per clause 16 of the Trust Deed, no income or part of income or assets of the Trust Fund can be applied or transferred for any purposes other than charitable purposes. Keeping this clause in view, we hereby set aside the order of ld. CIT and direct him to consider the application of the assessee for registration u/s 12AA of the Act. The application for granting exemption under section 80G of the Act was denied for want of registration under section 12AA. Since we have restored the issue of registration for consideration afresh, the issue of exemption is also restored the file of the ld. CIT for decision afresh.

Summary

Issues:
1. Denial of exemption under section 80G of the Income Tax Act, 1961.
2. Refusal to grant registration under section 12AA of the Income Tax Act, 1961.

Denial of Exemption under Section 80G:
The judgment involves appeals against orders of the ld. CIT (Exemptions), Jaipur denying exemption under section 80G of the Income Tax Act, 1961. The assessee trust filed an application for registration under section 12AA, which was rejected by the ld. CIT due to discrepancies in the trust's activities and accounts. The denial of exemption under section 80G was based on the lack of registration under section 12AA. The Tribunal directed the ld. CIT to reconsider the exemption issue in light of the restored registration application under section 12AA.

Refusal to Grant Registration under Section 12AA:
The main issue in the judgment revolves around the refusal to grant registration under section 12AA of the Income Tax Act, 1961. The ld. CIT raised concerns regarding the trust's activities, particularly the revaluation of land without government permission and the alleged deviation from the trust's objects by planning to establish a medical college and hospital. The ld. CIT contended that revaluation of assets benefited the trustees and was not in line with the Rajasthan Public Trust Act. The Tribunal, after considering the trust's objects and provisions of the Trust Deed, found merit in the submission that the trust was authorized to establish hospitals and colleges. The Tribunal set aside the ld. CIT's order, directing a fresh consideration of the registration application under section 12AA.

Conclusion:
The judgment addresses the denial of exemption under section 80G and the refusal to grant registration under section 12AA. It highlights the importance of aligning trust activities with statutory requirements and ensuring compliance with the trust's objects. The Tribunal's decision to set aside the ld. CIT's order emphasizes the need for a thorough review of trust applications and adherence to legal provisions governing charitable trusts.