Tax Tribunal rules PCIT cannot impose conditions on charitable trust registration under section 12AB.

The Tribunal held that the Principal Commissioner of Income Tax (PCIT) does not have the authority to impose conditions on the registration granted under section 12AB of the Income Tax Act to charitable trusts. The conditions imposed were deemed legally unsustainable, as the assessment of compliance lies with the Assessing Officer during assessment proceedings. Relying on precedent, the Tribunal allowed the appeals, setting aside the conditions and making the registration under section 12A absolute without additional requirements. The judgment was pronounced by the Tribunal on 25.08.2022.

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Issues:
1. Whether the Principal Commissioner of Income Tax (PCIT) has the authority to grant registration under section 12AB of the Income Tax Act subject to conditions imposed on the assessee.

Analysis:
1. The appellants, two charitable trusts, challenged the order passed by the PCIT granting registration under section 12AB of the Income Tax Act for the assessment years 2022-23 to 2026-27. The key contention was that the PCIT erred in imposing conditions on the registration, which, according to the assessees, was not permissible under the Act.

2. The main issue in both appeals was whether the PCIT had the power to grant registration under section 12AB with conditions for compliance by the assessee. The Tribunal examined the facts, legal provisions, and arguments presented by both parties to reach a conclusion.

3. The Tribunal noted that registration under section 12A cannot be subject to conditions as there is an inherent mechanism for compliance by the assessee post-registration under section 12AA. The role of the PCIT is to ensure the genuineness of the activities of the trust and compliance with relevant laws before granting registration. The Tribunal held that the conditions imposed by the PCIT were not legally sustainable, as the assessment of compliance lies with the Assessing Officer during assessment proceedings.

4. The Tribunal cited a similar case, Bai Hirabai Jamshetji Tata Navsari Charitable Institution vs. CIT (E), Mumbai, where a co-ordinate Bench had decided a comparable issue. Based on the legal analysis and precedents, the Tribunal concluded that the conditions imposed by the PCIT were not valid in the eyes of the law.

5. Consequently, the Tribunal allowed the appeals filed by the assessees, setting aside the conditions imposed by the PCIT and making the registration under section 12A absolute without any additional requirements. The judgment was pronounced on 25.08.2022 by the Tribunal comprising Shri Kuldip Singh, Judicial Member, and Shri Om Prakash Kant, Accountant Member.

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