2021 (7) TMI 1129 - AT - Income Tax

Exemption u/s 11 - rejecting the application u/s 12AA - HELD THAT - In the case of Commissioner of income tax versus Baba Kartar Singh Dukki Education Trust 2013 (10) TMI 1175 - PUNJAB HARYANA HIGH COURT as held that the object of section 12AA of the Act is to examine the genuineness of the objects of the Trust and though while examining genuineness, the income as well as resources of the Trust may be taken into consideration but any suspicion cannot be the sole criteria for rejecting an application for registration u/s 12 AA of the Act. In the case of Saint Kabir Educational Trust 2010 (3) TMI 1093 - ITAT AMRITSAR as held that the scope and nature of enquiries at the stage of grant of registration are prescribed under section 12AA of the Act, therefore the CIT has no jurisdiction to conduct inquiries which falls beyond the scope of the statutory provisions. While granting registration to a charitable Trust or institution, the CIT is supposed to examine whether or not the objects of the Trust are charitable. When genuineness of the activities is not in doubt, the CIT has no jurisdiction to refuse registration u/s 12AA of the Act on any irrelevant ground. As pointed out by the Ld. counsel, in the present case, after examining the issue as per the order of the ITAT, the Ld. CIT(E) has not recorded any adverse observations in the impugned order in respect of the charitable activities carried out by the appellant Trust. So far as the Tax liability in respect of the corpus donation is concerned the same was not the issue for determination before the Ld. CIT(E) as the same has already been dealt with by the coordinate Bench in the first round of appeal and no direction was issued to look into the said issue. Hence, we find merit in the contention of the Ld. counsel that that since the Ld. CIT(E) has not given any adverse finding in respect of the charitable activities carried out by the assessee Trust, the Ld. CIT(E) ought to have granted registration to the appellant Trust. Hence, in our considered view, the impugned order is erroneous and therefore liable to be set aside. We therefore, respectfully following the ratio laid down in the cases discussed above, allow the appeal of the assessee and set aside the impugned order dated 12.03. 2020 and direct the CIT(E) to grant registration under section 12AA of the Act to the appellant Trust. - Decided in favour of assessee.

Summary

Issues:
- Denial of registration under section 12AA(1)(b)(i) of the Income Tax Act, 1961 by CIT(E)
- Rejection of application based on charitable activities and corpus donation
- Failure to consider directions of ITAT
- Jurisdiction of CIT to refuse registration under section 12AA

Analysis:
1. The appellant Trust filed an appeal against the order denying registration under section 12AA(1)(b)(i) of the Income Tax Act, 1961. The initial application was rejected by CIT(E) due to alleged failure to establish charitable activities and receipt of a substantial donation from another Trust. The ITAT partially allowed the appeal in the first round, remanding the issue of charitable activities back to CIT(E for reconsideration. However, registration was again denied in the second round by CIT(E, prompting the present appeal.

2. The appellant challenged the CIT(E)'s decision on various grounds, including failure to consider ITAT's directions from a previous case involving the appellant Trust. The refusal was primarily based on corpus donation issues, which the ITAT had already addressed in the first round of appeal. The appellant argued that the CIT(E) went beyond the Tribunal's limited directions, emphasizing that registration should not be denied without defects in the Trust's charitable activities.

3. During the proceedings, the appellant Trust provided detailed explanations and documents regarding its charitable activities, with no adverse remarks from CIT(E) on the activities. The appellant's counsel cited precedents emphasizing that CIT should focus on the genuineness of Trust objects and not reject registration based on irrelevant grounds. The Tribunal noted that CIT(E) did not find any faults in the Trust's charitable activities, as required by the ITAT's previous order.

4. The Tribunal highlighted judgments stating that CIT's jurisdiction is limited to examining the charitable nature of Trust objects and should not refuse registration on irrelevant suspicions. Since CIT(E) did not raise concerns about the Trust's activities and the tax liability issue was not part of the current determination, the Tribunal found the denial of registration erroneous. Consequently, the Tribunal set aside CIT(E)'s order and directed the grant of registration under section 12AA of the Act to the appellant Trust.

This detailed analysis covers the issues raised in the judgment, the arguments presented by both parties, and the Tribunal's decision based on legal precedents and the specific circumstances of the case.