2016 (12) TMI 678 - AT - Income Tax

ITAT Remands Trust's Application Denial, Emphasizes Reevaluation

The ITAT set aside the rejection orders under Section 12AA(1)(b)(ii) and Section 80G(5), remanding the matter for fresh consideration by the Commissioner ... Grant of Registration u/s. 12AA(1)(b)(ii) rejected - Held that:- Denial of Registration is based on the ground that on the dissolution of the assessee-trust the properties were to go to Sri Ramakrishna Ashrama whose status of Registration under Section 12A was not known. As the assessee was not given an opportunity to clarify on this point therefore, the denial of Registration is without verifying the necessary record and status of Sri Ramakrishna Ashrama. In any case, the assessee has subsequently amended the Trust Deed vide Supplementary Deed dt.10.3.2016 whereby it has incorporated the necessary amendment in the said irrevocability clause regarding distribution of property on dissolution to satisfy the requirement as per the provisions of the Income Tax Act. In the facts and circumstances of the case, we set aside the impugned order passed under Section 12AA(1)(b)(ii) of the Income Tax Act and remand the matter to the record of the CIT (EXEMPTIONS) for deciding the matter afresh after considering the amendment carried out by the assessee vide Supplementary Deed dt.10.3.2016 as well as after giving an opportunity of hearing to the assessee. Entitlement to exemption under Section 80G(5) - Held that:- As the application for Registration under Section 80G(5) ws rejected by the CIT (EXEMPTIONS) based on the order dt.6.11.2015 passed under Section 12AA(1)(b)(ii) of the Act. As we have already set aside the order passed under Section 12AA(1)(b)(ii) therefore the impugned order rejecting the application under Section 80G(5) is also set aside for reconsideration. Issues:1. Rejection of registration under Section 12AA(1)(b)(ii) of the Income Tax Act.2. Denial of application for recognition under Section 80G(5).Analysis:Issue 1: Rejection of registration under Section 12AA(1)(b)(ii) of the Income Tax Act:The appellant's appeals were against the order of the Commissioner of Income Tax (Exemptions) rejecting the application for registration under Section 12AA(1)(b)(ii) and Section 80G(5)(iv) of the Income Tax Act. The rejection was primarily due to a clause in the Trust Deed stating that in case of dissolution, the assets of the trust should go to Sri Ramakrishna Ashrama. However, the Income Tax Act requires that in case of dissolution, the assets should go to a trust with similar objectives. The Commissioner held that without knowing the registration status of Sri Ramakrishna Ashrama, it was not possible to verify the trust's genuineness. The appellant argued that they had amended the Trust Deed to comply with the requirements, but the Commissioner did not provide an opportunity to rectify the defect. The ITAT noted that the denial was based on incomplete information and remanded the matter back to the Commissioner for fresh consideration after considering the amendments made by the appellant.Issue 2: Denial of application for recognition under Section 80G(5):The order rejecting the application under Section 80G(5) was based on the earlier rejection under Section 12AA(1)(b)(ii). The appellant contended that the order was not sustainable as it was based on a subsequent date order. The ITAT observed that since the order under Section 12AA(1)(b)(ii) was set aside and remanded, the rejection under Section 80G(5) was also set aside for reconsideration. Therefore, the appeals were allowed for statistical purposes, and the matter was remanded for fresh consideration by the Commissioner of Income Tax (Exemptions).In conclusion, the ITAT set aside the orders of rejection under Section 12AA(1)(b)(ii) and Section 80G(5) and remanded the matter back to the Commissioner for fresh consideration, taking into account the amendments made by the appellant in the Trust Deed. The denial was found to be based on incomplete information and lack of opportunity for rectification, necessitating a reevaluation of the application for registration and recognition.