2021 (8) TMI 1083 - AT - Income Tax

Exemption u/s 11 - registration u/s 12AA - HELD THAT - Under section 12A, the provisions of sections 11 and 12 shall not apply in relation to the income of any trust or institution unless various conditions are fulfilled. Section 2(15) defines charitable purpose and the same includes relief in education and advancement of any other object of general public utility. In case the utility is carried out in the nature of trade, commerce, business, the proviso provides that the same will not be a charitable purpose. We are of the considered opinion, that the power of the Commissioner is to look into the objects of the Society and the genuineness of the same cannot be doubted when the basis is of non-supply of information. In such circumstances, it would be appropriate that the Commissioner undertakes the exercise afresh, on the basis of the application which has already been filed, keeping in view the material which can be produced by the assessee. The impugned order is set aside with a direction to the file of the CIT(E) to decide the application, filed under section 12AA, afresh with the following directions Consider the veracity of evidence claimed to be submitted before the then CIT. Verify the genuineness of the objectives of the assessee trust in the light of evidences prima facie relevant, for the year under consideration for the purpose of grant of registration u/s. 12AA of the Act. Assessee shall cooperate in the proceedings, before the CIT. All pleas available under the law shall remain so available to the assessee in the fresh proceedings before the Ld. CIT. Appeal is treated allowed for statistical purposes in the terms indicated as above.

Summary

Issues:
1. Denial of registration under section 12AA of the Income Tax Act, 1961 to the appellant trust.
2. Verification of the genuineness of the activities of the society by the CIT(E).

Issue 1: Denial of Registration under Section 12AA:
The appeal was against the order of the CIT(E) denying registration to the appellant trust under section 12AA of the Income Tax Act, 1961. The CIT(E) rejected the registration based on the lack of evidence regarding the charitable nature of the trust's activities. The trust claimed to start educational activities for the poor and run a creche but failed to provide concrete evidence or demonstrate progress in these endeavors. The CIT(E) emphasized the importance of verifying the genuineness of activities before granting registration, particularly for trusts existing for a significant period. The trust's responses were deemed perfunctory and lacking substance, leading to the rejection of registration.

Issue 2: Verification of Genuineness of Activities:
The CIT(E) highlighted the absence of tangible actions by the trust in pursuing its stated objectives over the years. Despite being in operation for a decade, the trust failed to provide evidence of engaging in charitable activities as outlined in its trust deed. The CIT(E) emphasized the need for concrete evidence to support claims of future charitable activities, such as providing education to the needy and establishing a creche. The lack of evidence and unsatisfactory responses to queries raised during examination made it impossible to verify the genuineness of the trust's activities, leading to the denial of registration under section 12AA.

Judicial Analysis and Conclusion:
The Tribunal analyzed the provisions of section 12AA, emphasizing the Commissioner's role in verifying the trust's objectives and the genuineness of its activities before granting registration. Refusal to register a trust is permissible if the Commissioner is not satisfied with these aspects. The Tribunal referred to relevant legal definitions of charitable purposes and the necessity of fulfilling specific conditions for income tax exemptions. In light of the case law cited, the Tribunal set aside the impugned order and directed the CIT(E) to reevaluate the trust's application for registration under section 12AA. The directions included considering evidence submitted, verifying the trust's objectives, and ensuring the trust's cooperation in the proceedings. The appeal was treated as allowed for statistical purposes, and the order was pronounced accordingly on 16.08.2021.