Tribunal orders registration under Section 12A for trust with focus on trust deed objectives

The tribunal directed the CIT (Exemption) to grant registration under Section 12A of the Income Tax Act, emphasizing that the trust's objectives, as stated in the trust deed, should be considered over the lack of activities at the nascent stage. The registration could be withdrawn if the trust fails to conduct genuine charitable activities in the future. As a result, the appeals filed by the assessee were allowed.

---

---

Issues Involved:
1. Rejection of registration under Section 12AA of the Income Tax Act, 1961.
2. Denial of registration on the ground of not carrying out any activity.
3. Denial of registration due to a change in the location of the proposed school.
4. Denial of registration based on control by a single family.

Detailed Analysis:

1. Rejection of Registration under Section 12AA:
The appeal arises from the rejection of the application for registration under Section 12AA by the CIT (Exemption), Chandigarh, dated 31.11.2015, for the Assessment Year 2015-16. The trust was established on 12.03.2015 and applied for registration on 15.05.2015. The CIT(E) rejected the registration based on three main reasons: lack of charitable activity, change in the location of the proposed school, and control by a single family.

2. Denial of Registration on the Ground of Not Carrying Out Any Activity:
The CIT(E) observed that the trust had only received a donation of Rs. 20 lakhs, which was converted into an FDR, and had not carried out any charitable activity. The tribunal noted that the trust was at a nascent stage and had not yet commenced its activities. Citing judicial precedents, the tribunal emphasized that the CIT is not required to examine whether the trust has actually commenced charitable activities at the time of registration. The Delhi High Court in DIT Vs. Foundation of Ophthalmic & Optometry Research Education Center and the Gujarat High Court in CIT -1, vs. Kutchi Dasa Oswal Moto Pariwar Ambama Trust supported this view, stating that the Commissioner should focus on the objectives and genuineness of the trust's activities, not the commencement of activities.

3. Denial of Registration Due to Change in the Location of the Proposed School:
The CIT(E) also denied registration because 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 still in its initial stages and had shown intent by purchasing land for the school. The tribunal held that the change in location did not undermine the trust's objectives, which included establishing educational institutions.

4. Denial of Registration Based on Control by a Single Family:
The CIT(E) expressed concerns that the trust's activities were controlled by one family. The tribunal dismissed this apprehension, stating that such concerns could not be the basis for rejecting registration. The tribunal pointed out that the Revenue Authority has the power to withdraw or cancel the registration if it later finds that the trust is not conducting genuine charitable activities.

Conclusion:
The tribunal concluded that the CIT(E) was obligated to consider the trust's objectives, which were clearly stated in the trust deed, and not to focus solely on the lack of activities at the nascent stage. The tribunal directed the CIT(E) to grant registration under Section 12A of the Act, with the clarification that the registration could be withdrawn or canceled if the trust fails to conduct genuine charitable activities in the future. Consequently, the appeals filed by the assessee were allowed.

---