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2023 (11) TMI 1098 - AT - Income TaxExemption u/s 11 - rejection of registration u/s 12AA as applicant trust has been formed to implement the CSR activities and not amenable to public charit y - charitable activity u/s 2(15) or not? - HELD THAT - Main aim and object was of course to implement the CSR activities of the Financing/ parental company, but surely per se to the benefit of general public at large. The observations given by Worthy CIT(E) are vague in the view of the judgment of Nanak Chand Jain Charitable Trust ( 2018 (2) TMI 874 - ITAT DELHI ) that at the time of granting the registration u/s 12AA CIT (exemption) need not go beyond two parameters that the object being charitable in nature and activities being genuine. All other activities are the matters to be taken care of by the Assessing Officer at the time of assessment for granted exemption under section 11 r.w.s 13 of the Act. Social enterprises cannot be a direct recipients of money from corporate as it is a profit making Company - This reason by the CIT (E) is not in conformity with any of the provisions of the Income Tax Act. A profit-making Company can grant certain donation to the charitable trust, how can the activities of the trust become not charitable with this act. In our view, the fact that the CSR expenditure are not allowable expenditure under section 37 of the Act is relevant only for the taxability of the company incurring such expenditure. From the perception of the assessee trust the amount received as donation whether will be eligible for exemption under section 11 depends on the application of such fund for the charitable activities by the trust only. CIT(E) is empowered to satisfy himself only about two factors i.e. the objects of the trust and the genuineness of the activities of the trust or institution and such powers does not extend to the eligibility of the trust/institution for exemption u/s 11 r.w.s 13 of the Income Tax Act, 1961 which falls in the domain of the AO. In our view, in the present case the Ld. CIT(E) has neither pointed out any defect in the objects of the trust nor doubted the activities carried out to achieve these objects, and therefore, the application for registration cannot be rejected. Our view gets support from the decision in the cases of CIT vs. IILM Foundation Academy 2016 (9) TMI 920 - PUNJAB AND HARYANA HIGH COURT and Cyberstar Educational Society vs. CIT (Exemptions) . 2019 (6) TMI 1628 - ITAT AMRITSAR CIT(E) is directed to grant registration to the appellant Trust u/s 12AA of the Act from the date of application. Appeal of the assessee is allowed.
Issues Involved:
1. Rejection of application for registration under section 12AA of the Income Tax Act. 2. Whether the trust was formed to implement CSR activities and not for public charity. 3. The genuineness of the trust's activities and objects. Summary: Issue 1: Rejection of application for registration under section 12AA of the Income Tax Act: The assessee filed an appeal against the order of the Commissioner of Income Tax (Exemptions), Chandigarh, which rejected its application for registration under section 12AA of the Income Tax Act. The application was initially filed on 17.10.2016, and the trust claimed to be operational since 14.10.2015. The CIT (Exemptions) rejected the application, stating that the trust was formed to implement the CSR activities of the parent company, Stelco Ltd., and not for public charity. Issue 2: Whether the trust was formed to implement CSR activities and not for public charity: The CIT (Exemptions) observed that the trust's financial statements did not reflect activities aligned with its stated charitable objects. Instead, the trust was seen as a captive entity created to fulfill the CSR obligations of Stelco Ltd. The CIT (Exemptions) noted that the trust's composition was restrictive, being controlled by the directors of Stelco Ltd. and their family members, which undermined its claim of being a public charitable entity. Issue 3: The genuineness of the trust's activities and objects: The appellant argued that the CIT (Exemptions) erred in law and on facts by not granting registration under section 12AA, despite the trust fulfilling all necessary conditions. They contended that the trust's aims and objectives were charitable and that it was entitled to registration. The appellant cited various judgments to support their claim that the CIT (Exemptions) should only consider the charitable nature of the trust's objects and its intention to carry out charitable activities, not the actual activities at the time of application. Tribunal's Findings: The Tribunal noted that the CIT (Exemptions) should only satisfy itself about the objects of the trust and the genuineness of its activities. In this case, the CIT (Exemptions) did not point out any defects in the trust's objects or doubt the activities carried out to achieve these objects. The Tribunal found the CIT (Exemptions)'s reasons for rejection to be vague and not in conformity with the provisions of the Income Tax Act. The Tribunal distinguished this case from the Goenka Charitable Trust case, where the trust had relinquished its primary functions and was controlled by the parent company. Conclusion: The Tribunal concluded that the CIT (Exemptions) had no authority to reject the registration application under section 12AA, as the trust's objects were charitable, and its activities were genuine. The Tribunal directed the CIT (Exemptions) to grant registration to the appellant trust under section 12AA from the date of application. The appeal of the assessee was allowed.
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