Tribunal grants registration to trust under Income Tax Act Section 12A with charitable activity condition

The tribunal directed the CIT (Exemption) to grant registration under Section 12A of the Income Tax Act to the appellant trust, with the condition that registration could be withdrawn if the trust fails to conduct charitable activities. The tribunal emphasized that the Revenue Authority has the discretion to cancel registration if the trust does not fulfill its objectives. As a result, the appeals filed by the trust were allowed.

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Issues Involved:
1. Rejection of registration under Section 12AA of the Income Tax Act, 1961.
2. Denial of registration on the grounds of non-activity.
3. Denial of registration due to change in the location of the proposed school.
4. Denial of registration due to control of the trust by one family.

Issue-wise Detailed Analysis:

1. Rejection of Registration under Section 12AA:
The appellant trust’s application for registration under Section 12AA was rejected by the CIT (Exemption), Chandigarh. The trust, founded on 12.03.2015, applied for registration on 15.05.2015. The CIT(E) rejected the application on the grounds that the trust had not carried out any charitable activities, had only entered into an agreement to purchase land, and had restrictive clauses in its trust deed indicating control by a single family.

2. Denial of Registration on the Grounds of Non-activity:
The CIT(E) observed that the trust had not carried out any charitable activities and had only received a donation of Rs. 20 lakhs, which was converted into an FDR. The tribunal noted that the trust was established and registered only on 12th March 2015, and the application for registration was filed on 29.04.2015. The tribunal referred to judicial precedents, including the Delhi High Court in the case of DIT Vs. Foundation of Ophthalmic & Optometry Research Education Center, and the Gujarat High Court in the case of CIT -1, vs. Kutchi Dasa Oswal Moto Pariwar Ambama Trust, which held that the CIT is not required to examine whether the trust has commenced charitable activities at the time of registration.

3. Denial of Registration Due to Change in Location of the Proposed School:
The CIT(E) also denied registration on the grounds that the trust initially decided to construct a school and meditation hall at Asar Doda but later purchased land for the school at Niabhat, Nagrota. The tribunal found this reasoning unsound, noting that the trust was at a nascent stage and had made efforts to procure land for the school, which aligns with its main objective of establishing educational institutions.

4. Denial of Registration Due to Control by One Family:
The CIT(E) expressed apprehension that the trust's activities were controlled by one family. The tribunal dismissed this concern, stating that such apprehension cannot be the basis for rejecting registration. The Revenue Authority has the liberty to withdraw or cancel the registration if it later finds that the trust's activities are not genuine.

Conclusion:
The tribunal concluded that the CIT(E) should have considered the objects of the trust as stated in the trust deed and noted that the Revenue Authority could withdraw the registration if the trust failed to conduct charitable activities. The tribunal directed the CIT(E) to grant registration under Section 12A of the Act to the assessee, with the clarification that the registration could be withdrawn if the trust does not satisfy its objectives or engage in genuine activities. Consequently, the appeals filed by the assessee were allowed.

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