2021 (11) TMI 632 - AT - Income Tax

Trust Granted Registration for Genuine Charitable Activities under Income Tax Act Section 12AA

Shri Baba Balakpuri Dharmarath Aushadhalaya Trust Versus COMMISSIONER OF INCOME TAX (EXEMPTION)

Shri Baba Balakpuri Dharmarath Aushadhalaya Trust Versus COMMISSIONER OF INCOME TAX (EXEMPTION) - TMI Issues Involved:1. Rejection of application u/s 12A of the Income Tax Act, 1961.2. Genuineness of the charitable activities under Section 2(15) of the Income Tax Act.3. Compliance with binding judgments of higher courts.4. Financial transparency and proper documentation.Issue-wise Detailed Analysis:1. Rejection of Application u/s 12A of the Income Tax Act, 1961:The assessee trust appealed against the rejection of its application for registration under Section 12A by the CIT (Exemption), Chandigarh. The CIT (Exemption) had denied the registration on the grounds that the trust did not own any land or building, and the financial transactions were not transparent. The trust argued that the land and building were provided by Baba Kanakpuri for charitable purposes without any lease or rent, and that all financial transactions were properly documented and audited.2. Genuineness of Charitable Activities under Section 2(15) of the Income Tax Act:The CIT (Exemption) questioned the genuineness of the trust's activities, including running a Gaushala, dental laboratory, and Aushadhalaya, and the construction of a Satsang Bhavan. The trust provided evidence such as bank statements, balance sheets, and photographs to support its claim of engaging in charitable activities. The tribunal found that the trust's activities, including medical services, education promotion, and sports promotion, fell within the definition of charitable purposes under Section 2(15) of the Act.3. Compliance with Binding Judgments of Higher Courts:The trust contended that the CIT (Exemption) failed to follow binding judgments of the Supreme Court and jurisdictional High Court on similar facts. The tribunal noted that the CIT (Exemption) did not provide any evidence or instances where the trust's activities were not charitable in nature. The tribunal emphasized that the object of Section 12AA is to examine the genuineness of the trust's objects, not the application of its income.4. Financial Transparency and Proper Documentation:The CIT (Exemption) raised concerns about financial transparency, including discrepancies in bank deposits during the demonetization period and the maintenance expenses of an ambulance. The trust explained that the cash deposits were from Dharmarth Gulaks and regular receipts, and the ambulance was used for charitable purposes. The tribunal found that the trust had provided sufficient documentation, including audited accounts and bank statements, to demonstrate financial transparency.Conclusion:The tribunal directed the CIT (Exemption) to grant registration to the trust under Section 12AA of the Income Tax Act, as the trust was found to be carrying out genuine charitable activities in accordance with its objects and the provisions of the Income Tax Act. The appeal filed by the assessee was allowed.