2013 (3) TMI 624 - AT - Income Tax

Appellate Tribunal rules in favor of Trust, directing registration under sec.12AA

M/s. SEERVI SAMAJ TAMBARAM TRUST Versus The Director of Income Tax (Exemptions), CHENNAI.

The Appellate Tribunal ITAT Chennai ruled in favor of the assessee Trust in the case concerning the refusal of registration under sec.12AA of the I.T. Act ... Registration u/s 12AA denied - refusing to grant registration as the assessee Trust is formed for doing both charitable and religious activities therefore, not qualified for registration and also that the assessee Trust though came into existence on 13.8.2010, no activity has been started - Held that:- The income derived from the property held under trust wholly for charitable or religious purposes, shall not be included in the total income of the Trust. Therefore, the said provision would be applicable to both the Trusts established with the object of charitable as well as religious purposes Therefore, Section 12AA of the Act does not make any difference between the Trusts created with the object of charitable and religious purposes and, even if the Trust is not created with both the objects, law does not make any disqualification for the trust to make an application for registration. Therefore, the Tribunal has correctly applied the provision of law and allowed the appeal, which finding is based on valid material evidence. See CIT v. Arulmigu Sri Kamatchi Amman Trust [2012 (2) TMI 159 - MADRAS HIGH COURT] We also find that Hon'ble Gujarat High Court in the case of CIT v. Kutchi Dasa Oswal Moto Pariwar Ambama Trust (2012 (12) TMI 876 - GUJARAT HIGH COURT) held that registration under sec.12AA of the Act should not be refused on the ground that the activities of the Trust have not commenced. In view of the above, we direct the DIT(E) to grant registration under sec.12AA of the Act to the assessee Trust. - Decided in favour of assessee. Issues:1. Refusal of registration under sec.12AA of the I.T. Act based on charitable and religious activities.2. Rejection of registration due to non-commencement of activities.Issue 1: Refusal of Registration based on Charitable and Religious Activities:The appeal was filed against the Director of Income Tax (Exemptions) for refusing registration under sec.12AA of the I.T. Act, citing that the Trust was formed for both charitable and religious activities. The Counsel for the Assessee argued citing the decisions of the Hon'ble Jurisdictional High Court and the Hon'ble Gujarat High Court, emphasizing that registration should not be denied based on having objects of both charitable and religious activities. The Departmental Representative supported the DIT(E)'s order. The Tribunal examined the case law and found that the Trusts established with charitable or religious purposes are eligible for registration under Section 12AA without any disqualification for having both objectives. The Tribunal upheld the appeal, stating that the DIT(E) was incorrect in refusing registration based on the dual nature of the Trust's objectives. The Tribunal directed the DIT(E) to grant registration to the assessee Trust under sec.12AA of the Act, as per the decisions of the High Courts.Issue 2: Rejection of Registration due to Non-Commencement of Activities:The DIT(E) also rejected the registration on the grounds that although the Trust was formed in 2010, no activities had commenced. However, the Tribunal referred to the decision of the Hon'ble Gujarat High Court, which held that non-commencement of activities is not a valid reason to reject registration under sec.12AA of the Act. The Tribunal allowed the appeal, emphasizing that the law does not disqualify a Trust from applying for registration even if activities have not started. The Tribunal directed the DIT(E) to grant registration to the assessee Trust under sec.12AA of the Act, as the grounds raised by the assessee were valid. Consequently, the appeal of the assessee was allowed by the Tribunal.In conclusion, the Appellate Tribunal ITAT Chennai, in the cited judgment, addressed the issues of refusal of registration under sec.12AA of the I.T. Act based on charitable and religious activities, and rejection of registration due to non-commencement of activities. The Tribunal ruled in favor of the assessee Trust, directing the DIT(E) to grant registration under sec.12AA of the Act, as per the decisions of the High Courts and the provisions of the law.