2013 (9) TMI 438 - AT - Income Tax

Trust remains eligible for Section 80G exemption despite change in legal status; Tribunal directs exemption grant.

The Tribunal allowed the appeal by the assessee Trust for renewal of exemption under Section 80G of the Income Tax Act. It held that despite the Trust ... Exemption u/s 80G of the Income Tax Act – Registration u/s 12AA - Charitable purpose - Person u/s 2(31) - Applicant, a trust or a society – Held that:- Be it a Trust or a Society, the legal status of either is that of a body of individuals and the benefit in either case inures to the same indeterminate public - Moreover, there is nothing on record to show that the management of the Trust has been taken over by the Society, or that the property of the Trust, post registration as Society, belongs to the Society. Undisputedly, the Board of Trustees are the same. The property, as earlier, continues to be held under Trust for pro bono publico or for the benefit of the public. As such, there is no transfer of ownership of property and the assessee continues to be the indeterminate beneficiary and not the Trust. And due to this reason, the ld. CIT has fallen into error in holding that the approval u/s 12A of the Act was granted to the Trust and not to the Society, the Society is not eligible for grant of certificate u/s 80G (5) of the Act - Change over to the status of Society makes no difference in this position and implementation of the objects of the Trust is still a legal obligation to be discharged - Merely registration as a Society does not disentitle the applicant from the exemption claimed - The ld. CIT is directed to grant exemption u/s 80G of the Act to the assessee in accordance with law – Decided in favor of Assessee. Issues Involved:1. Whether the assessee Trust is eligible for renewal of exemption under Section 80G of the Income Tax Act, 1961.2. The legal status of the assessee as a Trust or Society.3. Compliance with Section 12AA of the Income Tax Act.4. The impact of registration under the Societies Registration Act, 1860, on the Trust's status.5. The relevance of historical exemptions granted under Section 80G.Issue-wise Detailed Analysis:1. Eligibility for Renewal of Exemption under Section 80G:The assessee Trust filed an application for renewal of exemption under Section 80G on 22.06.2009. The CIT rejected the application, stating that the Trust had changed its legal status to a Society, which was not registered under Section 12AA of the Income Tax Act. The Tribunal found that the Trust had been granted exemption under Section 80G since its inception in 1978, and there was no change in the facts during the year under consideration. The Tribunal directed the CIT to grant exemption under Section 80G, noting that the Trust continued to meet all conditions prescribed in Section 80G.2. Legal Status as a Trust or Society:The CIT observed that the assessee was initially incorporated as a Trust but was later registered as a Society on 23.10.1981. The CIT argued that once registered as a Society, the entity lost its status as a Trust. The Tribunal disagreed, stating that the legal status of either a Trust or a Society is that of a body of individuals, and the benefit in either case inures to the same indeterminate public. The Tribunal noted that the management of the Trust had not been taken over by the Society, and the property continued to be held under Trust for public benefit.3. Compliance with Section 12AA:The CIT contended that the Society was not registered under Section 12AA, which is a prerequisite for approval of exemption under Section 80G. The Tribunal found that the Trust had been granted registration under Section 12A in 1978, and this registration continued to be valid. The Tribunal noted that the Trust was an irrevocable charitable trust, and the change to a Society did not affect its legal obligations.4. Impact of Registration under the Societies Registration Act, 1860:The CIT argued that a Trust could not be registered as a Society and that this created ambiguity in the legal status of the entity. The Tribunal found that the registration under the Societies Registration Act did not change the fundamental nature of the Trust. The Tribunal noted that the objects of the Trust and the Society were similar, and the property of the Trust remained under Trust for public benefit.5. Relevance of Historical Exemptions:The CIT argued that past exemptions granted under Section 80G did not validate the exemption for the year under consideration. The Tribunal found that the Trust had been regularly granted exemption under Section 80G since 1978, and there had been no change in the facts or circumstances. The Tribunal concluded that the historical exemptions were relevant and supported the continued exemption under Section 80G.Conclusion:The Tribunal allowed the appeal filed by the assessee Trust, directing the CIT to grant exemption under Section 80G. The Tribunal dismissed the Cross Objections filed by the Revenue, which supported the CIT's order. The Tribunal's decision emphasized that the Trust's registration as a Society did not affect its eligibility for exemption under Section 80G, and the Trust continued to meet all necessary conditions.