2021 (3) TMI 636 - HC - Income Tax

Tribunal orders tax registration for inactive trust based on genuine objects, rejecting revenue's operation requirement.

Director of Income Tax Exemptions, Chennai Versus M/s. M.L. Meyyappan Charitable Trust

The Income Tax Appellate Tribunal directed the Deputy Commissioner of Income Tax to grant registration and approval under sections 12AA and 80G to a trust ... Exemption u/s 11 - eligibility of registration under section 12-AA and approval under section 80 G - as per revenue no activities were started by the Trust? - HELD THAT:- As relying on M/S. ANANDA SOCIAL AND EDUCATIONAL TRUST VERSUS THE COMMISSIONER OF INCOME TAX & ANOTHER [2020 (2) TMI 1293 - SUPREME COURT] term ‘activities’ in the provision includes ‘proposed activities’. That is to say, a Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of section 12AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust - Decided in favour of assessee. Issues:Registration under section 12AA and approval under section 80G for a trust with no activities started.Analysis:The case involved the challenge against a common order passed by the Commissioner of Income Tax (Appeals) regarding the registration of a trust under section 12AA and approval under section 80G. The trust had applied for registration, but as no activities had commenced, the Deputy Commissioner of Income Tax (DITE) rejected the application due to the inability to verify the trust's objects and activities. The Income Tax Appellate Tribunal allowed the trust's appeals, directing the DITE to grant registration and approval. The key question of law was whether the trust was entitled to registration and approval despite not starting any activities.During the hearing, the respondent cited relevant legal precedents, including a Supreme Court decision and an unreported judgment by the same bench. The Supreme Court's ruling emphasized that the term 'activities' in section 12AA includes proposed activities, requiring consideration of the trust's charitable nature and alignment with its objects. The unreported judgment highlighted that if the genuineness of a trust's objects was not in question and operations had not commenced, the revenue could not refuse registration upfront. The bench found the precedents applicable to the current case.The appellant failed to provide any contradictory judgments to support their argument. Consequently, the court, following the Supreme Court's and its own previous judgments, ruled against the revenue and in favor of the trust. The Tax Case Appeals were dismissed with no costs incurred. The decision was based on the interpretation of relevant legal provisions and established case law, ensuring consistency in the treatment of trusts seeking registration and approval under the Income Tax Act.