2024 (11) TMI 1090 - AT - Income Tax

Rejected registration u/s 12AB - Whether any object of the trust has been found to be profit making? - HELD THAT - CIT(E) relied on decision in Ahmedabad Urban Development Authority 2022 (10) TMI 948 - SUPREME COURT wherein it was clarified that the assessee advancing general public utility cannot engage itself in any trade, commerce or business or provide service in relation thereto for any consideration. Section 2(15) of the Act defines charitable purposes . Appellant has pointed out that in the MOA/deed, it has been specifically mentioned that the activities or objects of the trust specified therein would not be to earn profit. In India Trade Promotion Organisation 2015 (1) TMI 928 - DELHI HIGH COURT while upholding the constitutional validity of the proviso to section 2(15) of the Act held that same would apply where the dominant intention of a trust or the institution is profit making. Here, nothing has been brought to our notice from the side of the department to suggest that any of the objects of the trust was found to be profit oriented/making. Whether any activity was conducted by the trust against its objects? - The events were organized by Ms. Ritu Agarwal, it cannot be said that any activity was conducted by the applicant trust against its objects, particularly, and when Learned CIT(E) has clearly mentioned in para 3.2 of the impugned order that no expenses are shown to have been incurred on the said activity, as per Income and Expenditure Account statements submitted before him. This supports the contention raised by the applicant trust that it did not conduct any such activity. We find that CIT(E) fell in error in arriving at the conclusion that activities of the applicant trust were found to be not in accordance with its objects. As a result, the impugned order deserves to be set aside. Accordingly, this appeal is disposed of and the impugned order rejecting prayer of the applicant trust seeking registration u/s 12AA is set aside. CIT(E) to do the needful for registration of the applicant trust in accordance with law.

Summary

Issues:
1. Rejection of registration under section 12AB of the Income Tax Act, 1961.
2. Rejection of approval under section 80G of the Income Tax Act, 1961.

Analysis:

Issue 1: Rejection of registration under section 12AB of the Income Tax Act, 1961:
The appeal was filed due to the rejection of the applicant trust's registration under section 12AB of the Income Tax Act. The rejection was based on the grounds that certain objects of the trust were deemed commercial in nature and that the activities did not align with the trust's objects. The appellant argued that the trust had never engaged in the commercial activities mentioned in the objects. The tribunal found that the Income and Expenditure Account statements did not reflect any profit-making activities as per the objects in question. The tribunal referred to legal precedents to establish that the trust's intention was not profit-making. It was concluded that the rejection was erroneous, and the order was set aside.

Issue 2: Rejection of approval under section 80G of the Income Tax Act, 1961:
The appeal challenged the rejection of the applicant trust's application for approval under section 80G of the Income Tax Act. The rejection was primarily due to the late filing of the application, as per the observations of the Learned CIT(E). However, subsequent to the order, the CBDT extended the deadline for such applications. The tribunal noted that the circular allowed trusts to file fresh applications within the extended period. As the applicant trust had the option to avail this remedy, the tribunal set aside the rejection under section 80G as well, considering the setting aside of the rejection under section 12AB. The matter was remanded to the Learned CIT(E) for a fresh decision in accordance with the law.

In conclusion, both appeals were disposed of, and the orders rejecting the registrations were set aside. The tribunal directed the Learned CIT(E) to proceed with the registration process in compliance with the law and provide a reasonable opportunity for the applicant to be heard.