2015 (10) TMI 801 - AT - Income Tax

Tribunal denies Trust registration due to non-charitable activities

The Tribunal upheld the Commissioner's decision to refuse registration under Section 12AA of the Income Tax Act, 1961 for a Trust. The Trust's activities ... Registration U/s 12AA denied - as per CIT(A) object of the Trust are not charitable and the activities of the Trust are not genuine and consultancy charges receipts shown by Trust is income of its sole Trustee - Held that:- It is a fact that Shri Bhagwana Ram Bagaria is sole trustee of the assessee Trust for the life, is a qualified Doctor and an expert in joint replacement in orthopedic department. As per clause-12, the sole Trustee may at any time, dissolve the Trust and spend the entire income and corpus of the Trust for charitable purposes. This clause shows that trustee has given absolute power to dissolve the Trust and utilize the income as per his sweet will. Prima facie, it appears that Dr. Bagaria, sole trustee has used this device to avoid the tax payment of his professional income. Whatever evidence available on record shows that object of the Trust is neither charitable nor genuine. Therefore, we uphold the order of the learned Commissioner of Income Tax, Jaipur-II, Jaipur. - Decided against assessee. Issues:1. Refusal to grant registration under Section 12AA of the Income Tax Act, 1961 based on the charitable nature and genuineness of the Trust's activities.Analysis:The appeal involved a case where the assessee Trust sought registration under Section 12AA of the Income Tax Act, 1961, which was refused by the Commissioner of Income Tax-II, Jaipur. The primary grounds for refusal were that the object of the Trust was not deemed charitable and the activities were not considered genuine. The Trust was settled by an individual with his son appointed as the sole trustee. The Trust received significant consultancy charges, donations, and interest, with the consultancy fees being a major portion of the receipts. The Commissioner found that these consultancy charges were received for services provided by the sole trustee in his personal capacity, not on behalf of the Trust. It was concluded that the Trust was a means to shift the trustee's income to avoid taxation, rather than serving charitable purposes. The Commissioner highlighted the absolute power vested in the sole trustee to dissolve the Trust and use the funds for personal benefit, indicating a lack of charitable intent.The Commissioner emphasized the requirements for registration under Section 12AA, stating that the Trust's charitable objects must be translated into genuine activities. The Commissioner's decision was based on the lack of charitable activities carried out by the Trust and the absence of evidence to support the genuineness of its operations. The rejection of registration was also supported by legal precedents emphasizing the importance of actual charitable deeds, not just proposed activities, for registration approval.The assessee challenged the Commissioner's decision, arguing that the Trust's activities were charitable and genuine, citing instances of medical camps and humanitarian services organized by the Trust. The Trust's counsel presented details to support the charitable nature of the Trust's work, including provisions in the trust deed allowing for scientific research and public interest activities. Legal cases were referenced to strengthen the argument for registration approval.After considering the arguments from both sides, the Tribunal upheld the Commissioner's decision to refuse registration under Section 12AA. The Tribunal noted the sole trustee's ability to dissolve the Trust and utilize funds at will, indicating a lack of genuine charitable intent. The Tribunal agreed that the evidence presented did not establish the Trust's activities as charitable or genuine, leading to the dismissal of the assessee's appeal.In conclusion, the Tribunal affirmed the refusal to grant registration under Section 12AA, emphasizing the importance of actual charitable activities and genuineness in Trust operations for registration approval.