9911796707
TMI Blog2016 (3) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act on 19.03.2009. Pursuant to the directions issued by the authorities under the Act, a deed of modification was also executed on 18.06.2009. However, on 25.06.2009 the application was rejected relying on the survey conducted on 19.03.2009. It was found that the Trust had received contributions prior to registration and the expenditure of the Trust was not verifiable. On the ground that "the Trust is involved in continuous violation of the provisions of the I.T Act, eg., not filing the returns in time, not paying the tax etc. and also because Trust deed has no provision to the effect that it is not for profit", it was found that the Trust cannot be granted registration. On appeal, the Tribunal found that the reasons stated by the registering authority for refusal of registration are not relevant for the purpose of registration. It was held that the findings of the Commissioner of Income Tax, in so far as they relate to activities of the Trust, are germane and relevant. It was further held that the acceptance of amounts from prospective students towards tuition fee cannot by itself be a relevant ground, unless it is shown that what was collected was not tuition fees at all, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly charitable in nature or not would not arise for consideration at the stage of grant of registration to the Trust under Section 12AA of the Act. Going by the specific wordings in Section 12AA of the Act, what is germane to the issue is only as to the genuineness of the Trust and its activities. It is therefore argued that what is to be considered is only whether the Trust is a genuine registered legal entity and whether it is capable of carrying out its professed object. The question with regard to the nature of its activities would become relevant only at the time of assessment of contributions made to it or with regard to the application of its income. In the above view of the matter, it is argued that the reliance placed by the Revenue on the survey report as well as the sworn statement of the Managing Trustee to state that the Trust had profit as its motive was misconceived. It is further contended that going by the definition of the word 'charitable purpose' contained in Section 2(15) of the Act, the purposes of the Trust being relief to the poor and education, the question whether there is an element of profit involved in the activities of the Trust would not arise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court in Director of Exemptions Vs Sreevi Samaj Tambaram Trust. [(2014)362 ITR 199] as well. The learned counsel also placed reliance on a bench decision of the Karnataka High Court in Director of Income Tax (Exemptions) v. Meenakshi Amma Endowment Trust [(2013)354 ITR 219] to contend that the objects of the Trust as contained in the Trust deed have to be taken into consideration by the authority while considering an application for registration. In the subsequent returns filed by the Trust, if the Revenue finds that the Trust had not conducted any charitable activities, it is open to the authorities concerned to withdraw the registration already granted under Section 12AA(3) of the Act. In that case, the authority was directed to consider the application made by the Trust within eight months of its formation without insisting on evidence of charitable activities conducted by it. 6. Per contra, the learned Senior Counsel appearing for the Revenue would contend that there is no rationale in the argument advanced on behalf of the appellant that registration to a Trust has to be granted without looking into the genuineness of its activities or objects and contending that in case i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income-Tax [(2001)247 ITR 18], Dawn Educational Charitable Trust v. Commissioner of Income-Tax [(2015)370 ITR 724], Travancore Education Society v. Commissioner of Income-Tax [(2014)369 ITR 534]. Reliance is placed on the dictum of the apex court in J.B.Boda and Co. Pvt.Ltd. v. Central Board of Direct Taxes [(1997)223 ITR 271(SC)] to contend that a formal remittance and a receipt of refund of the self same amount would be an empty formality. In Commissioner of Income-Tax v. National Institute of Aeronautical Engineering Educational Society [2009)315 ITR 428] a Division Bench of the Uttarkhand High Court held that where a Trust or charitable society is clearly an orgnisation floated with blatant profit making as its object and indulges in illegal activities including collection of capitation fee, there is absolutely no error of law in a registering authority refusing registration under Section 12A of the Act. 7. We have considered the arguments raised on either side as well as the materials on record. It is pertinent to note that the wording in Sections 12A and 12AA of the Act does not make any reference to 'charity' or 'charitable purpose'. Section 2(15) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making the application before the expiry of the period aforesaid for sufficient reasons; (ii) from the 1st day of the financial year in which the application is made, if the Commissioner is not so satisfied: Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007; (aa) the person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June, 2007 in the prescribed form and manner to the Commissioner and such trust or institution is registered under section 12AA; (b) where the total income of the trust or institution as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard." 10. It is clear from a plain reading of Sections 12A and 12AA of the Act that what is intended thereby is only a registration simpliciter of the entity of a trust. This has been made a condition precedent for the claiming of benefits under the other provisions of the Act regarding exemption of income, contribution, etc. No examination of the modus of the application of the funds of the Trust or an examination of the ethical background of its settlers is called for while considering an application for registration. The stage for consideration of the relevance of the object of the Trust and the application of its funds arises at the time of the assessment. Where benefits are claimed by assessees in terms of Sections 11 and 12 of the Act, the question as to the nature of such contribution and income can be looked into. At the time of registration of the Trust, going by the binding judgments of the apex court , what is to be looked into is whether the Trust is a genuine one and whether it is a sham institution floated only to ava ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
