2018 (2) TMI 173 - AT - Income Tax

Tribunal emphasizes charitable objects over activities in granting registration under Income-tax Act

Aasho Charitable Trust Versus The C.I.T [E], Lucknow

The Tribunal set aside the CIT(E)'s order rejecting the application for registration under Section 12AA(1)(b)(ii) of the Income-tax Act, emphasizing that ... Rejecting the application u/s 12AA(1)(b)(ii) - proof of charitable activities - prescribed conditions for registration of the trust - Held that:- CIT has to examine the objects of the trust or institution and the genuineness of the activities. Since in the present case there is no activity carried out by the assessee, therefore, there is no question of genuineness and satisfaction of the ld. CIT. Accordingly, the said conditions of section 12AA(1) of the Act become infructuous. The only condition left is satisfying about the objects of the trust or institution which have been reproduced in the present case. The ld. CIT(E) has not brought an iota of evidence to prove that the said objects of the assessee society are not of charitable in nature. Therefore, in such facts and circumstances of the case, the ld. CIT(E) has to examine the objects of the trust and if they are found to be charitable, the assessee deserves to be granted registration u/s 12AA(1) of the Act. Since the issue in the present case is squarely covered by the decision of the coordinate bench of ITAT Delhi in the case of Vidyadayani [2017 (12) TMI 1251 - ITAT DELHI], we set aside the order of the ld. CIT(E) and direct him to grant registration u/s 12AA(1) of the Act. - Decided in favour of assessee. Issues Involved:1. Rejection of application under Section 12AA(1)(b)(ii) of the Income-tax Act, 1961.2. Failure of the assessee to appear for the hearing and provide necessary documents.3. Examination of the genuineness of the trust's activities and its objects.4. Legal precedents and interpretations regarding the registration under Section 12AA.Detailed Analysis:1. Rejection of Application under Section 12AA(1)(b)(ii):The primary issue was the rejection of the assessee's application for registration under Section 12AA(1)(b)(ii) of the Income-tax Act, 1961 by the Commissioner of Income Tax (Exemptions) [CIT(E)]. The CIT(E) observed that the assessee merely submitted the trust deed without providing income and expenditure accounts, receipts, and payment accounts. Consequently, the CIT(E) could not determine whether the activities were charitable, leading to the rejection of the application.2. Failure to Appear for Hearing and Provide Necessary Documents:The assessee contended that they intended to appear personally for the hearing but could not due to an inability to secure train reservations. This absence led to a failure to produce the required details and documents, which the assessee argued made the rejection arbitrary and unjustified.3. Examination of the Genuineness of the Trust's Activities and Its Objects:The CIT(E) emphasized the need to satisfy the genuineness of the trust's activities as per the Act. The CIT(E) concluded that the assessee had not carried out any charitable activities and failed to provide sufficient material to corroborate the charitable nature of the objects and the genuineness of the activities. The CIT(E) relied on various legal precedents, including the case of CIT Vs. National Institute of Aeronautical Engineering Education Society, which empowered the CIT to make necessary inquiries to satisfy the genuineness of the trust's activities.4. Legal Precedents and Interpretations Regarding the Registration under Section 12AA:The assessee's counsel argued that at the stage of granting registration under Section 12AA, the CIT is only required to examine the objects of the society and not the application of income, which is the duty of the Assessing Officer on a year-to-year basis. The counsel cited several decisions, including the case of Vidyadayani Shiksha Samiti Vs. CIT(E), which supported the view that the CIT should only examine the objects of the trust at the registration stage.The Tribunal, after considering the rival arguments, legal precedents, and the provisions of Section 12AA(1) of the Act, concluded that the CIT(E) had not provided evidence to prove that the objects of the assessee society were not charitable. The Tribunal emphasized that since there were no activities carried out by the assessee, the question of genuineness did not arise. Therefore, the CIT(E) should have examined the objects of the trust, and if found charitable, the assessee deserved registration under Section 12AA(1).The Tribunal referred to the decision of the coordinate Bench of ITAT Delhi in the case of Vidyadayani Shiksha Samiti, which supported the assessee's claim. The Tribunal directed the CIT(E) to grant registration under Section 12AA(1) of the Act, thus allowing the appeal filed by the assessee.Conclusion:The Tribunal set aside the order of the CIT(E) and directed the granting of registration under Section 12AA(1) of the Act, emphasizing that the CIT(E) should have focused on the charitable nature of the trust's objects rather than the genuineness of its activities, which were not yet conducted. The appeal of the assessee was allowed.