2017 (10) TMI 524 - AT - Income Tax

Registration u/s 12AA denied - no activity was carried out by a trust - Held that - Even otherwise if no activity was carried out by a trust or institution, still registration can be granted by the CIT(E) and even otherwise it is not the case of the Revenue that at the time of consideration of application of the Assessee, the assessee has carried out many activities and their genuineness were in doubt but in the instant case grievance of the CIT(E) is only that there was no activity carried out by the assessee. Although form the documents submitted before us positively reflects that the Assessee trust has carried out many activities in furtherance of objects of the trust, however because the same activities have not been carried out and documents were also not submitted before the LD. CIT (E ) till the date of adjudication of Application, hence we are not taking into consideration the said documents and facts, however in overall consideration of the judicial interpretation, peculiar facts and circumstances and situation, in our considered opinion the Ld. CIT(A) was under obligation to consider the objects of the trust which are available in the trust deed itself. Even otherwise, the concerned Revenue Authority was empowered to withdraw the registration already granted or cancel the said registration if he came across that factually trust has not conducted any charitable activities. Hence, we direct the Ld. CIT(E) to grant the registration u/s 12A of the Act to the assessee and it is clarified in case, the assessee does not qualify/satisfy the objects of the trust and/or not involved in genuine activities, then the concerned authority shall be at liberty to withdraw or to cancel the registration u/s 12A of the Act.

Issues Involved:
1. Rejection of registration under Section 12AA of the Income Tax Act, 1961.
2. Denial of registration on the ground of not carrying out any activity.
3. Denial of registration due to a change in the location of the proposed school.
4. Denial of registration based on control by a single family.

Detailed Analysis:

1. Rejection of Registration under Section 12AA:
The appeal arises from the rejection of the application for registration under Section 12AA by the CIT (Exemption), Chandigarh, dated 31.11.2015, for the Assessment Year 2015-16. The trust was established on 12.03.2015 and applied for registration on 15.05.2015. The CIT(E) rejected the registration based on three main reasons: lack of charitable activity, change in the location of the proposed school, and control by a single family.

2. Denial of Registration on the Ground of Not Carrying Out Any Activity:
The CIT(E) observed that the trust had only received a donation of ?20 lakhs, which was converted into an FDR, and had not carried out any charitable activity. The tribunal noted that the trust was at a nascent stage and had not yet commenced its activities. Citing judicial precedents, the tribunal emphasized that the CIT is not required to examine whether the trust has actually commenced charitable activities at the time of registration. The Delhi High Court in DIT Vs. Foundation of Ophthalmic & Optometry Research Education Center and the Gujarat High Court in CIT -1, vs. Kutchi Dasa Oswal Moto Pariwar Ambama Trust supported this view, stating that the Commissioner should focus on the objectives and genuineness of the trust's activities, not the commencement of activities.

3. Denial of Registration Due to Change in the Location of the Proposed School:
The CIT(E) also denied registration because the trust initially decided to construct a school and meditation hall at Asar Doda but later purchased land for the school at Niabhat, Nagrota. The tribunal found this reasoning unsound, noting that the trust was still in its initial stages and had shown intent by purchasing land for the school. The tribunal held that the change in location did not undermine the trust's objectives, which included establishing educational institutions.

4. Denial of Registration Based on Control by a Single Family:
The CIT(E) expressed concerns that the trust's activities were controlled by one family. The tribunal dismissed this apprehension, stating that such concerns could not be the basis for rejecting registration. The tribunal pointed out that the Revenue Authority has the power to withdraw or cancel the registration if it later finds that the trust is not conducting genuine charitable activities.

Conclusion:
The tribunal concluded that the CIT(E) was obligated to consider the trust's objectives, which were clearly stated in the trust deed, and not to focus solely on the lack of activities at the nascent stage. The tribunal directed the CIT(E) to grant registration under Section 12A of the Act, with the clarification that the registration could be withdrawn or canceled if the trust fails to conduct genuine charitable activities in the future. Consequently, the appeals filed by the assessee were allowed.

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