2018 (3) TMI 48 - AT - Income Tax

Tribunal reinstates trust's registration under Income Tax Act, citing charitable activities and rectifiable irregularity.

The Tribunal found that the cancellation of the assessee-trust's registration under section 12A of the Income Tax Act was not justified. It held that the ... Registration u/s 12AA cancelled - proof of charitable activities - Held that:- Establishing of a diagnostic center was in the knowledge of the department. Impliedly intimation was given to it. The department did not change status of the assessee continuously for more than 20 years. It has accepted the status of the assessee as charitable institution. There is no change in the facts and circumstances of the assessee-trust through these twenty years which can authorise the ld.Commissioner to call for details and brand activities of the assessee as non-genuine or not in accordance with objects of the assessee. We are of the view that order of the ld.Commissioner is not sustainable. It is set aside. Registration granted to the assessee under section 12A is restored. Issues Involved:1. Cancellation of registration under section 12A of the Income Tax Act, 1961.2. Amendments made to the trust deed and their impact on the trust's registration.3. Whether the activities of the trust are consistent with its original objects.4. The legal implications of non-communication of amendments to the Income Tax Department.Detailed Analysis:1. Cancellation of Registration under Section 12A:The primary issue in this case is the cancellation of the assessee-trust's registration under section 12A of the Income Tax Act, 1961. The Commissioner of Income Tax (CIT) cancelled the registration on the grounds that the trust had amended its objects without informing the department, which was deemed inconsistent with the original objects for which the registration was granted.2. Amendments Made to the Trust Deed:The assessee-trust, originally registered on 15.6.1977, amended its trust deed on 24.2.1990 to include new objects related to providing medical diagnostic services. The CIT argued that these amendments were not communicated to the department, which led to the cancellation of the registration. The trust contended that the amendments were ancillary to the existing objects and were duly notified to the Assistant Charity Commissioner under the Bombay Public Trust Act.3. Consistency of Activities with Original Objects:The CIT held that the diagnostic center run by the trust was a commercial venture and inconsistent with the original objects of the trust. However, the assessee argued that the activities were charitable in nature and aligned with the original objects, which included providing relief to the poor and supporting hospitals and dispensaries. The Tribunal noted that the trust's activities, including the diagnostic center, were per se charitable and did not deviate from the original objects.4. Non-Communication of Amendments:The CIT emphasized that the trust failed to communicate the amendments to the department, which was a violation of the conditions for maintaining registration under section 12A. The Tribunal, however, referred to various judicial precedents, including decisions from ITAT Mumbai and the Delhi High Court, which held that non-communication of amendments is a rectifiable irregularity and does not warrant cancellation of registration if the amended objects are still charitable.Tribunal's Findings:On the Issue of Cancellation:The Tribunal found that the CIT's decision to cancel the registration was not sustainable. It held that the activities of the trust, including the diagnostic center, were charitable and consistent with the original objects. The Tribunal emphasized that the trust had been operating under the amended objects for over 20 years, and the department had consistently accepted its status as a charitable institution.On the Amendments and Communication:The Tribunal noted that the trust had notified the amendments to the Charity Commissioner and had also included the amended trust deed in its applications for renewal of registration under section 80G. The Tribunal held that the failure to communicate the amendments to the Income Tax Department was an irregularity that could be rectified and did not justify cancellation of registration.Judicial Precedents:The Tribunal relied on several judicial precedents, including:- Bhansali Trust, ITAT Mumbai: Amendments providing enabling clauses do not signify new objects but rather means to achieve original charitable purposes.- Mehta Jiveraj Makandas & Parekh Trust, ITAT Mumbai: No statutory requirement to intimate changes to the department; non-communication is a rectifiable irregularity.- Moolchand Khairati Ram Trust, Delhi High Court: Consistency in accepting the charitable status over decades should not be unsettled without material change.Conclusion:The Tribunal concluded that the order of the CIT was not sustainable and set it aside, restoring the registration granted to the assessee under section 12A. The appeal of the assessee was allowed.Order Pronouncement:The order was pronounced in court on 27th February 2018.