2016 (7) TMI 1302 - AT - Income Tax

Appeal granted for trust registration despite objections on fees and loans.

Lord Krishna Charitable Trust Versus Commissioner of Income-tax, Rohtak.

Lord Krishna Charitable Trust Versus Commissioner of Income-tax, Rohtak. - TMI Issues:- Rejection of application for registration u/s. 12AA by the Commissioner of Income-tax- Grounds for rejection: Charging fees from students and unsecured loans- Appellant's argument: Trust's objects are charitable, fees charged are legitimate, and source of unsecured loans is not relevant for registration- Commissioner's objections: Fees charged are taxable, failure to prove identity and creditworthiness of loan providers- Legal provisions under section 12AA for grant of registration to a trust or institutionAnalysis:The judgment involves the rejection of an application for registration u/s. 12AA by the Commissioner of Income-tax, based on the grounds that the appellant trust charged fees from students and failed to prove the identity and creditworthiness of loan providers. The appellant argued that all trust objects are charitable, fees charged are legitimate, and the source of unsecured loans is not relevant for registration. The Commissioner's objections were that the fees charged were taxable and there was a failure in proving the identity and creditworthiness of loan providers.The legal analysis focused on the provisions of section 12AA, which outline the procedure for granting registration to a trust or institution. It requires the Commissioner to conduct inquiries to ensure the genuineness of the trust's activities and the charitable or religious nature of its objects. The judgment highlighted that the scope of the inquiry revolves around the nature of charitable or religious objects and the genuineness of the trust's activities. The High Court's guidelines emphasized the importance of how income derived from trust property is applied to charitable purposes, rather than the nature of the income-generating activities.The judgment noted that the Assessing Officer had accepted the trust's income at nil for a specific assessment year, indicating that the fees charged from students were likely applied for the trust's aims and objects. It was observed that the Commissioner did not provide specific details from the departmental authorities' report that led to the non-recommendation for registration. The judgment distinguished between assessment proceedings and registration under section 12AA, indicating that the Commissioner's reliance on certain decisions was not applicable to the registration process.Ultimately, the Tribunal held that the appellant-trust was eligible for registration, as the activities aligned with its charitable objects. The Commissioner's rejection was deemed unjustified, and the Tribunal directed the Commissioner to grant registration to the trust in accordance with the law. The appeal of the assessee-trust was allowed, emphasizing the trust's eligibility for registration under section 12AA.