2021 (12) TMI 818 - AT - Income Tax

ITAT directs registration for charitable Trust, emphasizes aim and genuineness over tax issues.

The case involved an appeal against the denial of registration to a charitable Trust under Section 12AA of the Income Tax Act. The Income Tax Appellate ... Exemption u/s 11 - Registration u/s.12AA rejected - corpus donation received - HELD THAT:- CIT(E) ought not to have rejected an application for grant of registration u/s. 12AA - In our considered opinion, CIT(E) ought to have seen and examine the aim and object of the trust whether same are consonance to the spirit of law or not. CIT(E) should have seen the genuineness of activities of the trust. In this present case, Ld. CIT(E) has not exercised the same before rejecting the registration. CIT(E) has neither pointed out any defect in aim and object of the society nor doubted the genuineness of the activity of the society. We direct Ld. CIT(E) to grant registration u/s.12AA of Income Tax Act to the applicant within 60 days from the receipt of this order. - Decided in favour of assessee. Issues:1. Denial of registration to charitable Trust u/s. 12AA of the Income Tax Act, 1961.2. Rejection of application for registration based on diversion of receipts.3. Consideration of trust's aim, object, and genuineness of activities.4. Delay in filing the appeal and its condonation.5. Interpretation of Section 12AA by the ITAT.6. Application of judicial pronouncements to the case.7. Granting registration u/s. 12AA by the ITAT.Analysis:Issue 1: Denial of registration to charitable Trust u/s. 12AA:The appeal was against the denial of registration to a charitable Trust under Section 12AA of the Income Tax Act. The appellant argued that the denial was improper as there was no doubt regarding the trust's objects and genuineness of activities. The ITAT emphasized that the CIT(E) should have examined the trust's aim, object, and genuineness of activities before rejecting the registration application.Issue 2: Rejection based on diversion of receipts:The CIT(E) rejected the registration application citing diversion of receipts in the trust's balance sheet. However, the ITAT held that this should not have been the sole reason for denial. The focus should have been on the trust's charitable objectives and the genuineness of its activities.Issue 3: Consideration of trust's aim, object, and genuineness:The ITAT stressed that the CIT(E) failed to assess the trust's aim, object, and genuineness of activities before denying registration. Judicial precedents highlighted that at the registration stage, the focus should be on the trust's charitable nature and genuine activities, not on tax-related issues.Issue 4: Delay in filing the appeal and its condonation:The appeal was delayed by 140 days, but the ITAT condoned the delay based on a Supreme Court order granting an extension of limitation. This allowed the appeal to proceed on merit despite the delay.Issue 5: Interpretation of Section 12AA by the ITAT:The ITAT interpreted Section 12AA to emphasize that the CIT(E) should focus on the trust's objects and genuineness of activities at the time of granting registration. Tax-related matters should be addressed during assessment proceedings, not during registration.Issue 6: Application of judicial pronouncements:The ITAT referred to various judicial pronouncements to support its decision. These cases emphasized that the focus at the registration stage should be on the trust's objectives and the genuineness of its activities, rather than tax-related issues.Issue 7: Granting registration u/s. 12AA by the ITAT:Based on the above analysis and in line with judicial precedents, the ITAT directed the CIT(E) to grant registration under Section 12AA of the Income Tax Act to the applicant within 60 days. The appeal was allowed, setting aside the CIT(E)'s order of denial.This detailed analysis of the judgment showcases the ITAT's thorough consideration of the issues involved and the legal principles applied in reaching its decision.