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2020 (3) TMI 464 - AT - Income TaxExemption u/s 11 - rejecting the application made for registration u/s 12AA - rejecting application of Form No.10G made for grant of approval u/s 80G(5)(vi) - whether a trust or a charitable organization is mandatorily required to perform charitable activities as per trust deed before proceeding to file an application for registration u/s 12AA or u/s 80G(5)(vi)? - HELD THAT - We observe that in the impugned order Ld. CIT(E) has not questioned the genuineness of the objects mentioned in the trust deed. Therefore, so far as the objects of the assessee trust mentioned in the trust deed page placed at 5 6 of the paper book have been considered to be charitable in nature. As relying on D.P.R. Charitable Trust 2011 (8) TMI 1136 - MADHYA PRADESH HIGH COURT it can safely conclude that carrying out of actual charitable activity cannot be a pre-condition for granting registration u/s 12AA of the Act. What needs to be done on the part of the assessee is to fulfill the requirements as provided in Rule 17A and also guidelines provided in Form No.10A/10G in the Income Tax Rules 1962 and if Ld. CIT(E) founds that the application has been properly made and the objects of the Trust are charitable in nature as per the provisions of Income Tax Act then the assessee should not be denied the registration u/s 12AA of the Act. However, in case the activities of the trust or the institution are being carried out in a manner that the provision of section 11 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13, then the Pr. Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution, as provided in sub-section (4) of section 12AA of the Act unless it is proved that there was a reasonable cause for the activities to be carried out in the said manner. We direct the Ld. CIT(E) to grant registration u/s 12AA of the Act to the assessee. As regards granting of approval u/s 80G(5)(vi) of the Act, the issue is restored to the file of Ld. CIT(E) for reconsideration - Decided in favour of assessee.
Issues Involved:
1. Rejection of the application for registration under Section 12AA of the Income Tax Act. 2. Rejection of the application for exemption under Section 80G of the Income Tax Act. Issue-wise Detailed Analysis: 1. Rejection of the application for registration under Section 12AA: The assessee, a trust established on 31.07.2017, applied for registration under Section 12AA on 11.09.2017. The Ld. Commissioner of Income Tax (Exemption) [CIT(E)] rejected the application citing two primary reasons: the trust was newly created and registered, and no charitable activity had been carried out so far. The tribunal examined whether a trust is mandatorily required to perform charitable activities before applying for registration under Section 12AA. Citing several precedents, including the Delhi High Court's decision in DIT vs. Foundation of Ophthalmic & Optometry Research Education Centre, the tribunal noted that the statute does not require the Commissioner to examine whether the trust has commenced charitable activities. The focus should be on the genuineness of the activities and the charitable nature of the trust's objectives as stated in the trust deed. The tribunal observed that the CIT(E) had not questioned the genuineness of the objects mentioned in the trust deed, which were considered charitable in nature. The tribunal referenced the jurisdictional High Court's decision in D.P.R. Charitable Trust, which held that the CIT should not deny registration solely because no charitable activities had been carried out at the time of application. The tribunal concluded that carrying out actual charitable activity is not a pre-condition for granting registration under Section 12AA. Therefore, the tribunal directed the CIT(E) to grant registration under Section 12AA to the assessee, following the guidelines provided in Rule 17A and Form No.10A of the Income Tax Rules 1962. 2. Rejection of the application for exemption under Section 80G: The assessee also applied for exemption under Section 80G(5)(vi) of the Act, which was similarly rejected by the CIT(E). The tribunal noted that the issue of granting approval under Section 80G(5)(vi) required reconsideration by the CIT(E) after examining the facts of the case and the provisions of the law. The tribunal restored the issue to the file of the CIT(E) for reconsideration, emphasizing that the application should be evaluated based on whether it meets the statutory requirements and guidelines. Conclusion: The tribunal allowed the appeal of the assessee regarding the registration under Section 12AA and directed the CIT(E) to grant the registration. For the exemption under Section 80G(5)(vi), the tribunal restored the issue to the CIT(E) for further consideration, allowing the appeal for statistical purposes. The judgment was pronounced in the open court on 23.01.2020.
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