2021 (2) TMI 989 - HC - Income Tax

Exemption u/s 11 - registration u/s 12AA denied - ITAT allowed the appeal and directed the Commissioner of Income Tax to allow registration of the Trust under Section 12AA - HELD THAT - On a perusal of the order passed by the Tribunal, it is clear that the Tribunal has not gone into the issues that were decided by the Commissioner of Income Tax. While reversing the order passed by the Commissioner of Income Tax, the Tribunal should have considered the findings given by the Commissioner of Income Tax in detail. However, the Tribunal observed that the substitution or change of Trustees subsequent to the Trust Deed would not effect the original object unless the object itself is changed by the subsequent supplementary deed. When the Commissioner of Income Tax had given findings with regard to the induction of a minor as a Trustee and that the main object of the Trust would be lost by the subsequent supplementary deed, the Tribunal should have considered those aspects and given findings with regard to the same. Since the Tribunal has not considered those issues, we are of the considered view that the order passed by the Tribunal should be set aside and the matter be remitted back to the Tribunal for fresh consideration. - Appeal of revenue allowed for statistical purposes.

Summary

Issues:
Challenge to the order of the Income Tax Appellate Tribunal regarding the registration of a Trust under Section 12AA of the Income Tax Act, 1961.

Analysis:
The appeal was filed by the Revenue against the order passed by the Income Tax Appellate Tribunal, Chennai Bench "C," regarding the registration of a Trust created by a Trust Deed dated 24.05.2001. The Trust aimed at promoting education, culture, and ethics among the public without discrimination. The Trust applied for registration under Section 12-AA of the Income Tax Act, 1961. The Commissioner of Income Tax found that the Trust Deed was signed by 30 persons, with 13 identified as Executive Committee members. However, amendments in a supplementary deed changed the object clause to establish an agricultural farm, deviating from the original purpose.

The Revenue contended that these amendments were against the original Trust Deed's object, leading the Commissioner of Income Tax to refuse registration under Section 12AA. The Commissioner noted the inclusion of a minor as a Trustee and the dilution of the main object in the supplementary deed. The Income Tax Appellate Tribunal allowed the Trust's appeal and directed registration under Section 12AA, prompting the Revenue to challenge this decision.

The High Court observed that the Tribunal failed to address the issues considered by the Commissioner of Income Tax, especially regarding the induction of a minor Trustee and the change in the Trust's main object. As a result, the Court set aside the Tribunal's order and remitted the matter for fresh consideration. The Tribunal was directed to review the Commissioner's findings and assess the Trust's compliance with Section 12AA before making a new decision, providing both parties with an opportunity to present their arguments.

In conclusion, the Tax Case Appeal was allowed, emphasizing the need for a detailed reevaluation by the Tribunal based on the Commissioner's initial findings and the Trust's adherence to statutory requirements under Section 12AA of the Act.