2021 (1) TMI 207 - AT - Income Tax

Tribunal directs grant of registration to trust under section 12AA emphasizing assessment over registration

The Tribunal set aside the Ld. CIT (Exemption)'s order and directed the Department to grant registration u/s.12AA to the assessee trust. It emphasized ... Exemption u/s 11 - rejecting registration to Trust u/s.12AA - Assessee submitted that Ld. CIT(Exemption) was not justified in rejecting the grant of registration and the Ld. CIT(Exemption) is only expected to examine whether the objects of the trust are charitable in nature and examine whether the activities of the trust are genuine or not - HELD THAT:- In the present case, the objects of the trust are not doubted by the Department and they have also not disputed the charitable nature of the activities conducted by the assessee trust. In these two areas, in fact, there has been no examination/verification conducted by the Ld.CIT(Exemption). Meaning thereby, all the relevant records were submitted before the Revenue Authorities and they have verified the same and were satisfied on this aspect. As in the case of CIT Vs. Manekji Mota Charitable Trust [2019 (8) TMI 1497 - BOMBAY HIGH COURT] has held “at the time of the registration of the trust u/s.12A, the question of application of income of the trust is premature.” Thus, whether taxes are due to be paid on any income received that issue has to be looked into only at the time of assessment proceeding. We are of the considered view that when all the requirements of registration u/s.12AA of the Act has been satisfied by the assessee trust, registration therein should be granted. In view thereof, we set aside the order of the Ld. CIT(Exemption) and direct the Department to grant registration u/s. 12AA of the Act to the assessee trust. - Decided in favour of assessee. Issues:Grant of registration u/s.12AA to the assessee trust.Analysis:The appeal arose from the Ld. CIT (Exemption) Pune's order rejecting registration to a trust u/s.12AA of the Income Tax Act, 1961. The assessee trust applied for approval under charitable trust/institution category, claiming activities like blood donation camps and tree plantation. However, discrepancies were noted regarding funds credited directly to reserves without routing through income and expenditure account, leading to tax exemption claims under section 11(1)(d) for previous years. The Ld. CIT (Exemption) rejected registration citing non-payment of taxes on donations under 'Building Fund' as income, crucial for granting u/s.12AA.The assessee contended that the denial was unjustified, emphasizing examination of charitable nature and genuineness of activities. Legal precedents like Anand Social and Educational Trust Vs. CIT were cited. The Department did not dispute trust objectives or activities' authenticity. The Pune Tribunal's decision in Kai Shri Mahadebrao Naykude Dnyanvikas Prabhodhini Trust case highlighted that non-filing of return u/s. 139(4A) shouldn't bar registration if trust objects and activities are genuine.The Tribunal observed that the denial was solely due to unpaid taxes on donations, not disputing trust objects or activities' genuineness. Referring to the Anand Social and Educational Trust case, it emphasized examining trust objects' charitable nature during registration. The Bombay High Court's ruling in CIT Vs. Manekji Mota Charitable Trust stressed that tax issues should be addressed during assessment proceedings, not registration.In conclusion, the Tribunal set aside the Ld. CIT (Exemption)'s order, directing the Department to grant registration u/s.12AA to the assessee trust. It highlighted that tax matters should be addressed during assessments, not registration, and all requirements for registration had been met. The decision emphasized the importance of examining trust objects' nature and genuine activities during the registration process.