2016 (11) TMI 1161 - AT - Income Tax

Grant of registration under Section 12AA - charitable activity at the stage of commencement of institution - Held that - The law is now well-settled that while granting the registration to the charitable institution or trust, if it is at the commencement stage, the powers of CIT, with whom the application is filed by such trust/institution, are limited to the aspect of examining that whether or not the objects of trust are charitable in nature and this well established law is supported by the decisions relied upon the learned Authorised Representative and referred to in the earlier part of the order. It has already been observed that objects of trust, which are religious, are charitable in nature. Thus, assessee also fulfils such condition. The carrying of charitable activity at the stage of commencement of institution is not relevant to decide that whether such trust/ institution is entitled for registration. So long the objects of the trust are charitable in nature, registration cannot be refused, if the trust is genuine. Therefore, we find no material on record to justify the action of the CIT vide which the assessee trust has been refused for grant of registration. - Decided in favour of assessee.

Summary

Issues:
1. Rejection of registration under Section 12AA of the Income Tax Act, 1961.
2. Denial of approval under section 80G(5)(vi) due to rejection of the application in Form No. 10A.

Issue 1: Rejection of registration under Section 12AA:
The appeal arose from the rejection of registration under Section 12AA of the Income Tax Act, 1961 by the Commissioner of Income Tax (Exemptions), Kolkata. The appellant, a Charitable Trust, sought registration under Section 12A(1)(aa) and approval under section 80G(5)(vi) but was denied by the CIT based on the perceived minimal charitable activities of the Trust. The appellant contended that the Trust was engaged in charitable activities and legally entitled to registration. The argument presented was that at the commencement stage, the CIT's powers were limited to examining the charitable nature of the trust's objects, not the quantitative aspect of its activities. The Tribunal referred to precedents emphasizing that as long as the trust's objects were charitable and genuine, registration could not be refused. The Tribunal directed the CIT to grant registration to the Trust under section 12AA of the Act.

Issue 2: Denial of approval under section 80G(5)(vi):
The denial of approval under section 80G(5)(vi) was challenged by the appellant as a consequence of the rejection of the application in Form No. 10A. The grounds for appeal mirrored those related to the rejection of registration under Section 12AA. The Tribunal, in line with its decision on the registration issue, directed the CIT to grant exemption certified under section 80G of the Act. The Tribunal relied on previous decisions by Coordinate Benches to support its conclusion that at the commencement stage, the focus should be on the charitable nature of the trust's objects rather than the scale of its activities. The Tribunal found no justification for the CIT's refusal and allowed both appeals of the assessee.

In conclusion, the Tribunal allowed both appeals of the assessee, directing the Commissioner of Income Tax to grant registration to the Trust under section 12AA of the Act and exemption certified under section 80G. The Tribunal's decision was based on the premise that at the commencement stage, the focus should primarily be on the charitable nature of the trust's objects, and as long as the trust was genuine and its objects were charitable, registration and approval should not be denied. The Tribunal's decision was in line with established legal principles and precedents, ensuring that genuine charitable trusts are not unfairly hindered in obtaining registration and approval under the Income Tax Act.