Tribunal grants appeal for trust, orders registration & approval under Income Tax Act

The tribunal allowed the appeals filed by the appellant-trust, directing the CIT (Exemptions) to grant both the registration under Section 12A and the approval under Section 80G of the Income Tax Act, 1961.

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Issues Involved:
1. Denial of registration under Section 12A of the Income Tax Act, 1961.
2. Denial of approval under Section 80G of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Denial of Registration under Section 12A:

The appellant-trust, formed on 01-09-2014, applied for registration under Section 12A of the Income Tax Act, 1961, on 30-12-2014. The CIT (Exemptions) denied the registration on the grounds that the proposed activities of the trust were commercial in nature, citing the construction of a building by the son of the settler in the name of Ozone Orbana Infra Pvt. Ltd., and inferred a violation of Section 13(2)(g) of the Act. Additionally, the CIT (Exemptions) argued that the genuineness of the activities could not be verified due to the absence of relevant details and commencement of activities.

The appellant-trust contended that the objects of the trust were charitable and not commercial, and the activities being carried out in rented premises did not render the objects commercial. They argued that the issue of violation of Section 13 could be examined during assessment proceedings and that the genuineness of activities could only be tested after the commencement of activities. They supported their arguments with various judicial precedents, including CIT vs. A.S.Kuppuraju Brothers Charitable Trust, DIT(E) vs. Meenakshi Ammal Endowment Trust, and Garden City Educational Trust.

The tribunal held that the approach of the CIT (Exemptions) was erroneous. It cited several judgments, including Sri Gururaja Seva Samithi and A.S.Kuppuraju Bros. Charitable Foundation Trust, which established that the question of verifying the activities of a trust could only be considered after it is registered and carries on activities. The tribunal emphasized that at the time of granting registration under Section 12A, the CIT is only empowered to look at the objects of the trust to determine if they are charitable. Once the objects are found to be charitable, registration must be granted. The tribunal concluded that the objects of the appellant-trust were charitable, falling within the limb of education, and directed the CIT (Exemptions) to grant registration under Section 12A.

2. Denial of Approval under Section 80G:

The appellant-trust also applied for approval under Section 80G of the Income Tax Act, 1961, on 20-02-2015. The CIT (Exemptions) denied the approval for the same reasons as the denial of registration under Section 12A. The tribunal noted that since it had directed the CIT (Exemptions) to grant registration under Section 12A, the issue of approval under Section 80G was consequential. Following the same reasoning, the tribunal directed the CIT (Exemptions) to grant approval under Section 80G.

Conclusion:

The tribunal allowed the appeals filed by the appellant-trust, directing the CIT (Exemptions) to grant both the registration under Section 12A and the approval under Section 80G of the Income Tax Act, 1961. The order was pronounced in the open court on 13th January 2016.

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