2013 (1) TMI 537 - HC - Income Tax

High Court Upholds Trust's Registration Appeal, Emphasizes Compliance with Tax Act

The Commissioner of Income Tax. Rohtak Versus BKK. Memorial Trust

The High Court heard an appeal under Section 260A of the Income Tax Act against the rejection of a Trust's application for registration by the ... Registration u/s 12A – Trust - Charitable activities – Trust was created on 23.6.2010 - Application u/s 12A(1) (aa) was moved on 19.7.2010 - Same was rejected on 26.11.2010 - Held that:- Following the decision in case of Surya Educational & Charitable Trust (2011 (10) TMI 47 - PUNJAB AND HARYANA HIGH COURT) that the application for registration is required to be made within one year of the creation of the Trust and there is no requirement that the Trust or the institution should have started all its envisaged activities in the first year itself. Under Section 12AA of the Act satisfaction regarding the genuineness of the activities of the Trust is to be seen and the stage for application of income is yet to arrive i.e. when such Trust or Institution files its return. The object of Section 12AA, is to examine the genuineness of the objects of the Trust, but not the income of the Trust for charitable or religious purposes The Trust was not set up for charitable purposes and it was utilizing its income not for the said purpose cannot be examined at this stage as only objects of the Trust had to be considered by the Commissioner. The Trust was in nascent stage and was yet to work towards its objects. No substantial question of law - Decides against revenue Issues:1. Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal.2. Substantial questions of law raised by the revenue regarding registration of the Trust under Section 12A of the Income Tax Act.3. Rejection of Trust's application by the Commissioner of Income Tax, Rohtak.4. Tribunal's decision to grant registration to the Trust.5. Contention regarding charitable activities of the Trust.6. Interpretation of Section 12AA of the Income Tax Act.7. Application for registration within one year of Trust creation.8. Examination of Trust's objects for registration.9. Comparison with previous judgments regarding registration of Trusts.Detailed Analysis:1. The High Court heard an appeal under Section 260A of the Income Tax Act against the order of the Income Tax Appellate Tribunal. The revenue raised substantial questions of law concerning the registration of the Trust under Section 12A of the Income Tax Act. The Trust's application was rejected by the Commissioner of Income Tax, Rohtak, based on various grounds, including lack of charitable activities and potential misuse for non-charitable purposes.2. The Tribunal, however, granted registration to the Trust after considering Section 12AA of the Act and the Trust's objects. The Tribunal noted that the Trust's properties were in its name, and the power of the trustees to remove others was for the Trust's benefit. The Tribunal also examined the evidence of trustees' identity and initial investments, distinguishing previous cases and supporting the Trust's registration.3. The revenue contended that the Trust did not engage in charitable activities, but the Court emphasized that the Trust was in its nascent stage and had not yet fully operated towards its objectives. The Court interpreted Section 12AA, highlighting the importance of examining the Trust's genuineness and objects for registration, rather than its current income usage.4. Referring to previous judgments, the Court emphasized the requirement of applying for registration within one year of Trust creation and reiterated that the focus should be on the Trust's objects and activities, not its income usage. The Court dismissed the appeal, stating that no substantial question of law arose, as the Trust's registration was valid based on the provided evidence and compliance with the Act.5. The Court's decision aligned with previous rulings, emphasizing that the Trust's registration should be granted based on its objects and activities, with the possibility of cancellation if deviations were later observed. The Court upheld the Tribunal's decision to grant registration to the Trust, dismissing the revenue's contentions and affirming the importance of examining the Trust's objectives for registration under Section 12AA of the Act.