2025 (4) TMI 300 - HC - Income Tax

Denial of registration u/s 12AA - objects and purposes of the assessee Trust is only religious in nature - HELD THAT - In view of the categorical finding recorded by the ITAT that the purposes and objects of the assessee Trust are both charitable and religious in nature which could not be contradicted competently by learned counsel appearing for the appellant / Revenue during the course of argument before us as such the ITAT is absolutely justified in holding that the assessee Trust is entitled for registration u/s 12AA of the Act which is pure and simple finding of fact based on the evidence available on record and is neither perverse nor contrary to law. Decided in favour of the assessee.

Summary

ISSUES PRESENTED and CONSIDERED

1. Whether the Income Tax Appellate Tribunal (ITAT) was correct in directing the Commissioner of Income Tax (Exemption) [CIT(E)] to grant registration under Section 12AA of the Income Tax Act, 1961, despite the CIT(E)'s findings that the activities of the trust were not entirely charitable for the public at large.

2. Whether the ITAT was correct in not considering the CIT(E)'s findings that the trust received substantial donations as a corpus fund without specifying the purpose or details of donors in the donation receipts.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Grant of Registration under Section 12AA

Relevant legal framework and precedents: Section 12AA of the Income Tax Act outlines the procedure for the registration of a trust or institution, requiring the Commissioner to be satisfied with the objects and genuineness of the trust's activities. The Supreme Court's decision in Ananda Social and Educational Trust v. Commissioner of Income Tax emphasized that the Commissioner must ensure the trust's objects and activities are genuinely charitable before granting registration.

Court's interpretation and reasoning: The Court referred to the ITAT's findings that the trust's objects were both charitable and religious, aligning with the requirements of Section 12AA. The ITAT's reliance on the Gujarat High Court's decision in Commissioner of Income Tax v. Barkate Saifiyah Society was noted, which supports the view that a composite trust with both charitable and religious purposes is eligible for registration.

Key evidence and findings: The ITAT reviewed the trust's objects, concluding they were both charitable and religious. This conclusion was not effectively contested by the appellant during arguments.

Application of law to facts: The ITAT applied the legal principles from relevant precedents to determine that the trust's composite nature did not preclude it from registration under Section 12AA.

Treatment of competing arguments: The appellant argued that the trust's activities were solely religious, thus not qualifying for charitable status. However, the ITAT found the trust's objects to be genuinely charitable and religious, dismissing the appellant's argument.

Conclusions: The Court upheld the ITAT's decision, affirming that the trust was entitled to registration under Section 12AA, as its objects were both charitable and religious.

Issue 2: Consideration of Donation Details

Relevant legal framework and precedents: The requirement for transparency in donations is crucial for assessing the genuineness of a trust's activities under Section 12AA. However, the primary focus remains on the trust's objects and activities.

Court's interpretation and reasoning: The Court did not find it necessary to delve deeply into the specifics of donation receipts, as the primary issue was the nature of the trust's objects and activities.

Key evidence and findings: The CIT(E) had noted the lack of specific purposes or donor details in donation receipts. However, this did not outweigh the ITAT's findings regarding the trust's charitable and religious nature.

Application of law to facts: The ITAT's focus remained on the trust's objects and activities, which were found to be in compliance with Section 12AA, rendering the donation receipt details less critical in this context.

Treatment of competing arguments: The appellant's emphasis on donation receipt details was not sufficient to counter the ITAT's findings on the trust's objects and activities.

Conclusions: The Court supported the ITAT's decision, indicating that the absence of specific donation details did not preclude the trust from registration under Section 12AA.

SIGNIFICANT HOLDINGS

The Court upheld the ITAT's decision, emphasizing that:

"The ITAT is absolutely justified in holding that the assessee Trust is entitled for registration under Section 12AA of the Act, which is pure and simple finding of fact based on the evidence available on record and is neither perverse nor contrary to law."

The core principle established is that a trust with both charitable and religious objects can qualify for registration under Section 12AA, provided its activities align with these objects. The Court dismissed the appeal, affirming the ITAT's decision and answering both substantial questions of law in favor of the respondent trust and against the appellant Revenue.