2016 (5) TMI 1496 - AT - Income Tax

Tribunal orders Income Tax Commissioner to grant registration under Section 12A

The Tribunal directed the Commissioner of Income Tax to grant registration to the assessee under section 12A of the Income Tax Act, 1961. The Tribunal ... Exemption u/s 11 - grant of registration u/s 12A denied - trust deed had not provided for a dissolution clause for use of net assets of the trust for its objects in case of dissolution - HELD THAT:- Referring to clause 14 of trust deed we see that the mandate of the said clause is to transfer the remaining assets and liabilities of the assessee to a similar trust at the time of dissolution. There is no intention of giving benefit to a specific person out of whatever remains in the hands of the assessee trust. Therefore, we see no reason for doubting the said clause. School is run by one family headed by father as Settler-cum-President and two sons as trustees - we find no relevance of the fact that the trust is being headed by the members of only one family. Even if a trust is run by only one family, there is no bar on such trust to be registered u/s 12A. At the time of granting registration what the CIT has to see is that the objects of the trust are charitable in nature and the activities of the same are genuine. The fact whether some benefit directly or indirectly is being diverted to one family, can be taken care of by the AO at the time of making the assessment and granting exemption under section 11 of the Act. Section 13 of the Act provides for refusing exemption under section 11 of the Act in such cases which the Assessing Officer can examine on yearly basis in every assessment year. Trust is not registered under the new Haryana Registration & Regulation of Societies Registration Act, 2012 - we find ourselves in agreement with the arguments of the learned counsel for the assessee that the provisions of Haryana Registration & Regulation of Societies Registration Act, 2012 are applicable to the society only. The assessee is a trust formed under the Indian Trust 1882 and has been duly registered with Sub-Registrar, Bilaspur. There is no bar under the Income Tax Act to give registration under section 12A of the Act to a trust. There is no provision which says that only societies can be registered under section 12A of the Act. Therefore, we do not find this objection raised by the Commissioner of Income Tax being as per law. Right to Education Act 2010 is not implemented by the school - the issue is covered by the order of the I.T.A.T., Chandigarh Bench in the case of Kids-R-Kids International Educational & Social Welfare Trust [2016 (3) TMI 1083 - ITAT CHANDIGARH] whereby it has been very categorically held that the issue of school complying with the provisions of the RTE Act is not a relevant consideration to be taken care of by the Commissioner of Income Tax at the time of registration under section 12A of the Act. - Decided in favour of assessee. Issues:- Rejection of registration under section 12A of the Income Tax Act, 1961 by the Commissioner of Income Tax, Panchkula for assessment year 2011-12.Detailed Analysis:1. The Commissioner rejected the registration application based on several grounds, including the absence of a dissolution clause in the trust deed, alleged profit motive, family-run school, non-registration under the Haryana Registration & Regulation of Societies Registration Act, 2012, and non-implementation of the Right to Education Act, 2010.2. The appellant challenged the rejection on various grounds, including the presence of a dissolution clause in the trust deed, clarification on the family-run school allegation, the charitable nature of activities, and the inapplicability of certain acts to trusts.3. The appellant argued that the trust deed did contain a dissolution clause transferring assets to a similar trust, refuting the profit motive allegation by highlighting surplus from charitable activities, and clarifying that the trust was registered under the Indian Trust Act, 1882, not the Haryana Registration & Regulation of Societies Registration Act, 2012.4. The appellant also contended that the Right to Education Act, 2010 was irrelevant for registration under section 12A of the Act, supported by precedents from the Punjab & Haryana High Court and the ITAT, Delhi Bench.5. The Tribunal analyzed each objection raised by the Commissioner, finding that the trust deed did provide for a dissolution clause, the family-run nature of the school did not bar registration, the trust being a trust and not a society exempted it from society registration requirements, and compliance with the Right to Education Act was not a prerequisite for registration under section 12A.6. Relying on legal precedents, the Tribunal concluded that the Commissioner's objections lacked legal merit, emphasizing that the charitable nature of the trust's objects and activities were not in question. Consequently, the Tribunal directed the Commissioner to grant registration to the assessee under section 12A of the Act.This detailed analysis provides a comprehensive overview of the legal judgment, addressing each issue raised by the Commissioner and the appellant, along with the Tribunal's final decision and reasoning based on legal principles and precedents.