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2023 (8) TMI 455 - HC - Income TaxRejection of Grant of registration u/s 12(A)(a) - genuineness of the objects of assessee-Trust - assessee not filing the application for the same within one year from the prescribed date nor had taken permission under Rule 14 of the Madhya Pradesh Lok Nyas Adhiniyam, 1951 for selling the property - HELD THAT - ITAT was right in holding that at the time of granting registration, the Commissioner is not required to examine whether income derived by Trust spend for charitable purposes or the Trust is earning profit. ITAT has rightly come to the conclusion that the genuineness of the objects of assessee-Trust could not be doubted and the same shall be seen at the time of assessment and not at the time of grant of registration. For this contention, appellant's counsel has placed reliance on the judgment of Division Bench in the case of Commissioner of Income Tax Vs. Divine Shiksha Samiti 2020 (2) TMI 726 - MADHYA PRADESH HIGH COURT . Tribunal has rightly come to the conclusion that while considering the application for registration, CIT was supposed to enquire into the nature of the Trust and since there was nothing substantive or serious to doubt the nature of the Trust being charitable, the learned CIT was not justified in rejecting the application for registration on the aforesaid basis. Thus, no substantial question of law arises for consideration in this appeal.
Issues:
1. Registration under Section 12A of the Income Tax Act 2. Interpretation of provisions of Section 13(1)(c) 3. Scope of CIT's authority in assessing charitable Trusts 4. Requirement of examining audited accounts for registration under Section 12A/12AA 5. Authority of Trustees to amend Trust deed 6. Granting registration under Section 12A from a specific date Issue 1 - Registration under Section 12A of the Income Tax Act: The appeal was filed challenging the Tribunal's order granting registration under Section 12A to a Trust. The Trust was established in 1840 with a temple property and underwent amendments in 1989. The CIT rejected registration citing deviations from the original Trust deed, improper property transactions, and lack of proper income reporting. The appellant argued that the Trust was registered before the amendments, and being a public Trust, amendments were permissible. The High Court upheld the Tribunal's decision, emphasizing the CIT's duty to assess Trust nature, finding no substantial reason to doubt the Trust's charitable nature. Issue 2 - Interpretation of provisions of Section 13(1)(c): The ITAT was questioned for not considering whether Section 13(1)(c) was applicable due to property transactions benefiting Trustees. The appellant contended that illegal profits violated this provision. However, the High Court found no substantial question of law as the Trust's charitable nature was not in doubt, dismissing the appeal. Issue 3 - Scope of CIT's authority in assessing charitable Trusts: The CIT rejected the registration application based on Trust amendments and improper property transactions. The appellant argued that the CIT should not have considered these factors at the registration stage. The High Court supported the ITAT's decision, stating that the CIT's assessment should focus on Trust nature, with detailed examination reserved for the assessment stage. Issue 4 - Requirement of examining audited accounts for registration under Section 12A/12AA: The ITAT was criticized for not considering audited accounts before granting registration. The High Court clarified that the CIT's focus should be on Trust nature, not financial details, at the registration stage, aligning with the ITAT's decision. Issue 5 - Authority of Trustees to amend Trust deed: The ITAT was questioned for allowing Trustees to amend the Trust deed. The High Court upheld the decision, emphasizing that amendments within public policy framework were permissible for Trust progress. Issue 6 - Granting registration under Section 12A from a specific date: The ITAT's decision to grant registration from 1998 was challenged. The High Court found no substantial question of law, supporting the ITAT's conclusion that no doubts existed regarding the Trust's charitable nature, dismissing the appeal. In conclusion, the High Court dismissed the appeal, upholding the ITAT's decision to grant registration under Section 12A to the Trust, emphasizing the CIT's role in assessing Trust nature and charitable activities, rather than financial details, during the registration process.
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