2022 (4) TMI 550 - AT - Income Tax

Exemption u/s 11 - grant of Registration U/s. 12A denied as the objects of the Trust were not charitable in nature - HELD THAT - It is noted that the main aim of forming the Trust is for complying with the CSR requirements. Accordingly, if a Trust is formed for the purposes of carrying out the CSR activities, the registration U/s 12AA cannot be denied. The Ministry of Corporate Affairs in the Rules framed for the purpose of CSR has implicitly provided for forming the dedicated Trust under sub-rule 2 to Rule 4. Just because the Trust has been formed for complying CSR requirements, it cannot per se be the reason for denying registration U/s. 12AA of the Act. At the same time, on examining the aims and objects of the assessee s Trust which was created in order to eradicate extreme hunger and poverty, infrastructure development, ensuring environmental sustainability, drinking water facility, healthcare, community development, skill development etc., in India and abroad which certainly falls under charitable activity under section 2 clause (15). The Ld. CIT(E) was only required to firstly find out whether the Trust has been established for charitable activities and whether its activities are genuine for grant of registration u/s. 12AA. In the present case on hand, the Ld. CIT(E) has rejected registration U/s. 12AA of the Act on the ground that the assessee has claimed exemption U/s. 11 for the AYs 2018-19 and 2019-20 without having registration U/s. 12AA of the Act. The Ld. CIT(E) also observed that w.e.f 1/9/2019, compliance of law for the time being in force by the Trust is mandatory. In our opinion, the Ld. CIT(E) has not looked into the objectives of the society but relied on the wrong claim made in earlier years by the assessee. It is clear from the plain reading of section 12A and section 12AA of the Act is only registration simpliciter of the entity of a Trust / Society. The rest of factors like suspicion and apprehension raised by the Revenue can be taken by the Ld. Revenue Authorities at the time of framing the assessment. We find that the assessee s objects are charitable in nature and fall within the definition of section 2(15) of the Act thereby entitling the assessee Trust for registration U/s. 12AA of the Act. Therefore, we hereby direct the Ld. CIT(Exemptions) to provide registration U/s. 12AA of the Act to the assessee Trust. - Assessee appeal allowed.

Summary

Issues:
- Rejection of registration under section 12AA of the Income Tax Act, 1961 by the Ld. CIT(Exemptions), Hyderabad.
- Whether the Trust formed for Corporate Social Responsibility (CSR) activities is eligible for registration under section 12AA.
- Interpretation of the objects of the Trust and their alignment with charitable activities.
- Consideration of case laws supporting registration of Trusts formed for CSR obligations.

Analysis:
1. The appeal was filed against the rejection of registration under section 12AA by the Ld. CIT(Exemptions), Hyderabad. The Ld. CIT(E) observed that the Trust, formed by a company for CSR activities, lacked independent existence and was not eligible for registration, citing concerns about tax liability reduction through such structures.

2. The main contention revolved around whether a Trust formed for CSR activities could be denied registration under section 12AA. The Ld. AR argued that as per the Companies Act, 2013 and the Income Tax Act, the Trust's objects were for public charity, fulfilling the requirements for registration. Case laws were cited to support this argument.

3. The Trust's objects, as outlined in the Trust Deed, included eradicating hunger, infrastructure development, environmental sustainability, healthcare, education, and skill development, falling under charitable activities. The Ld. CIT(E) rejected registration based on past tax exemptions claimed without registration, overlooking the genuine charitable nature of the Trust's activities.

4. The procedure for registration under section 12AA emphasizes verifying the genuineness of activities and compliance with relevant laws. The Tribunal noted that the Trust's formation for CSR compliance did not automatically disqualify it from registration, especially when the activities aligned with charitable purposes.

5. Relying on precedent cases where registration was granted to Trusts formed for CSR obligations, the Tribunal held that the Trust's charitable nature and alignment with section 2(15) of the Act warranted registration under section 12AA. Accordingly, the appeal was allowed, directing the Ld. CIT(Exemptions) to provide registration to the Trust.