2021 (7) TMI 10 - AT - Income Tax

Registration u/s 12AA denied - CIT(E) rejected the application on the ground that, assessee had received voluntary contributions which ultimately have become part of the corpus fund and hence, being the income of the assessee trust / institution, the assessee was liable to pay tax and without the payment of the tax, registration u/s 12AA of the Act cannot be granted - HELD THAT - We were faced with identical issue on similar facts and circumstances while deciding the case of Shree Lakdipool Vitthal Mandir 2021 (5) TMI 801 - ITAT PUNE wherein held the objects of the trust are not doubted by the Department and they have also not disputed the charitable nature of the activities conducted by the assessee trust. Meaning thereby, all the relevant records were submitted before the Ld. CIT(Exemption) and he had verified the same and was satisfied on this aspect fulfilling the requirement of Section 12AA of the Act. There is no finding on facts that the activities carried out by the assessee are not genuine - CIT(Exemption) has not mentioned in his finding that the objects of the trust were not in order or that the application made for registration was also not in accordance with law. In absence of these findings, just because, the taxes were not paid on the donations/voluntary contributions received cannot be the ground for rejection of application u/s.12AA of the Act. These things can be examined by the Department and scrutinized at the assessment stage. When all the requirements of registration u/s.12AA of the Act have been satisfied by the assessee trust, registration therein should be granted. In view thereof, we set aside the order of the Ld. CIT(Exemption) and direct the Department to grant registration u/s. 12AA - Decided in favour of assessee.

Summary

Issues:
Rejection of application for registration under Sec. 12AA of the Income Tax Act by the Commissioner of Income Tax (Exemption) based on tax liability on voluntary contributions forming corpus fund of the trust.

Analysis:
The appeal concerns the rejection of the assessee's application for registration under Sec. 12AA of the Income Tax Act by the Commissioner of Income Tax (Exemption) due to tax liability on voluntary contributions forming the corpus fund of the trust. The rejection was solely based on the non-payment of taxes on these contributions at the time of application. The Commissioner did not question the genuineness of the trust's activities or the charitable nature of its objects. The rejection was solely due to the tax liability issue.

The assessee argued that the tax payment issue should be addressed during assessment proceedings, not at the registration stage. Citing legal precedents, the assessee emphasized that the Commissioner's focus should be on the trust's objects and the genuineness of its activities during registration. The Pune Tribunal's decision in a similar case was referenced to support the argument that tax payment should not be a ground for denying registration.

The Tribunal, after considering the arguments and legal precedents, found that the rejection based solely on tax liability was not justified. It emphasized that the Commissioner's role at the registration stage is to assess the trust's objects and activities, not tax liabilities. Since the trust's objects were not in question and all registration requirements were met, the rejection was deemed inappropriate. The Tribunal directed the Department to grant registration to the assessee under Sec. 12AA of the Act.

The Tribunal also highlighted that the Department could address any tax liabilities during assessment proceedings as per the law. The decision was based on the principle that tax issues should be dealt with separately from the registration process. Ultimately, the appeal of the assessee was allowed, and the order of the Commissioner was set aside.

In conclusion, the judgment underscores the importance of focusing on the trust's objects and activities during the registration process, separate from tax-related matters which can be addressed during assessment proceedings. The decision provides clarity on the criteria for granting registration under Sec. 12AA of the Income Tax Act and emphasizes the need for a thorough assessment of the trust's charitable nature and activities during the registration process.