2021 (8) TMI 209 - AT - Income Tax

Exemption u/s 11 - registration u/s. 12AA denied - objects of religious-cum-charitable trust - voluntarily contributions/donations received and credited to the corpus accounts during the financial years 2017-18 and 2018-19 were not offered to tax and paid the taxes thereon - HELD THAT - Grant of registration and assessment are two separate and distinct procedures prescribed under the Income Tax Act. The issues of assessment cannot be considered at the time of grant of registration. CIT (Exemption) had denied the grant of registration by taking into consideration that the corpus donations collected during the financial years 2017-18 and 2018-19 had escaped assessment to tax which clearly falls under the realm of the assessment . In view of the settled position of law discussed above, we are of the considered opinion that the grounds on which the ld. CIT (Exemption) had rejected the grant of registration are untenable in law. Accordingly, we direct the ld. CIT (Exemption) to grant the registration u/s. 12AA of the Act. - Decided in favour of assessee.

Summary

Issues:
Appeal against denial of registration u/s. 12AA of the Income Tax Act, 1961.

Analysis:
The appellant, a trust formed for religious-cum-charitable purposes, filed for registration u/s. 12AA. The CIT (Exemption) denied registration citing non-payment of taxes on corpus donations. The appellant challenged this denial on various grounds. Despite the appellant's absence during the hearing, the Tribunal proceeded with the case. The Tribunal highlighted the distinction between registration and assessment proceedings, emphasizing that tax payment on income assessed is not a prerequisite for registration. The Tribunal referred to legal precedents and established that the grant of registration and exemption are separate processes. The Tribunal concluded that the denial of registration based on tax issues was unjustified. Therefore, the Tribunal directed the CIT (Exemption) to grant registration u/s. 12AA to the appellant trust. Ultimately, the appeal was allowed in favor of the assessee.

This judgment clarifies the legal position that tax assessment issues should not influence the grant of registration u/s. 12AA. The Tribunal emphasized that the CIT (Exemption) should focus on the charitable nature of the trust's objects and the genuineness of its activities, rather than tax matters, during the registration process. The decision reiterates the principle that registration and assessment are distinct procedures under the Income Tax Act, supported by various judicial precedents. By upholding this distinction, the Tribunal ensured that the denial of registration based solely on tax assessment grounds was deemed legally untenable. The judgment serves as a significant reminder of the procedural boundaries between registration and assessment proceedings in matters concerning charitable trusts.