2021 (5) TMI 801 - AT - Income Tax

Tribunal emphasizes genuine charitable activities over tax payment for trust registration

Shree Lakadipool Vitthal Mandir Versus The Commissioner of Income Tax (Exemption) Pune.

The Tribunal set aside the rejection of registration under section 12AA of the Income Tax Act by the Ld. CIT(Exemption), Pune, emphasizing that the focus ... Rejecting the registration u/s.12AA - Whether voluntary contributions (towards corpus) received by the charitable trust are not income as defined vide section 2(24)(iia)? - 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. Meaning thereby, all the relevant records were submitted before the Ld. CIT(Exemption) and he had verified the same and was satisfied on this aspect fulfilling the requirement of Section 12AA of the Act. We are of the considered view that this is not a fit case for rejection of application for registration u/s.12AA of the Act on the reasons mentioned in the order of the Ld. CIT(Exemption). There is no finding on facts that the activities carried out by the assessee are not genuine. CIT(Exemption) has not mentioned in his finding that the objects of the trust were not in order or that the application made for registration was also not in accordance with law. In absence of these findings, just because, the taxes were not paid on the donations/voluntary contributions received cannot be the ground for rejection of application u/s.12AA of the Act. These things can be examined by the Department and scrutinized at the assessment stage. When all the requirements of registration u/s.12AA of the Act have been satisfied by the assessee trust, registration therein should be granted - 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:1. Rejection of registration u/s.12AA of the Income Tax Act2. Treatment of voluntary contributions as income3. Denial of reasonable opportunity of being heard4. Justification for rejection based on tax paymentAnalysis:1. The appeal pertains to the rejection of registration u/s.12AA of the Income Tax Act by the Ld. CIT(Exemption), Pune. The assessee contended that the rejection was unwarranted as the focus should have been on the charitable nature of the trust's objects and the genuineness of its activities, as per relevant judicial decisions. The Ld. CIT(Exemption) had enumerated reasons for rejection based on the tax treatment of voluntary contributions.2. The Ld. CIT(Exemption) considered voluntary contributions as part of the trust's income, leading to a requirement for tax payment. The rejection of registration was premised on the non-payment of taxes on these contributions, which, according to the Ld. CIT(Exemption), hindered the determination of the trust's objectives and activities' genuineness as mandated by Section 12AA of the Act.3. The assessee argued that the rejection lacked merit, emphasizing that the Ld. CIT(Exemption) should have focused on the charitable nature of the trust's objects and the genuineness of its activities, citing relevant legal precedents. The assessee highlighted that the tax payment issue should be addressed during assessment proceedings, not at the registration stage.4. The Tribunal, after considering the submissions and relevant case laws, concluded that the rejection of registration based solely on tax payment grounds was unjustified. It was emphasized that the focus at the registration stage should be on the trust's objects and the genuineness of its activities. Since the Department did not dispute the trust's objects or the activities' genuineness, the non-filing of tax returns should not have been a basis for denial of registration.5. The Tribunal referred to various judicial pronouncements to support its decision, emphasizing that the tax payment issue should be addressed during assessment proceedings, not at the registration stage. Ultimately, the Tribunal set aside the Ld. CIT(Exemption)'s order and directed the Department to grant registration u/s. 12AA of the Act to the assessee trust, ruling in favor of the assessee.This detailed analysis of the judgment highlights the key legal issues, arguments presented by both parties, relevant legal principles, and the final decision rendered by the Tribunal.