Charitable registration cannot be denied for procedural lapse where trustee advances were unsecured and used for trust objects.

Registration under section 12A read with section 12AB was held not to be denied merely because the trust had obtained unsecured loans or advances from trustees without prior permission under the Maharashtra Public Trust Act. The trust's educational objects and activities were accepted as charitable, the advances did not encumber trust property, and the funds were used for the trust's objects, so the omission was treated as a procedural lapse rather than a substantive disqualification. Once primary registration was directed to be granted, the consequential refusal of section 80G registration also could not survive. Both registrations were therefore directed to be granted.

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Issues: (i) Whether rejection of registration under section 12A read with section 12AB of the Income-tax Act, 1961, on the ground that the trust obtained loans or advances from trustees without prior permission of the Charity Commissioner under the Maharashtra Public Trust Act, was justified; (ii) Whether rejection of registration under section 80G of the Income-tax Act, 1961, could survive once registration under section 12A read with section 12AB was directed to be granted.

Issue (i): Whether rejection of registration under section 12A read with section 12AB of the Income-tax Act, 1961, on the ground that the trust obtained loans or advances from trustees without prior permission of the Charity Commissioner under the Maharashtra Public Trust Act, was justified.

Analysis: The trust was found to be running approved educational institutions and its objects and activities were accepted as charitable within section 2(15) of the Income-tax Act, 1961. The only basis for refusal was the alleged non-compliance with section 36A of the Maharashtra Public Trust Act. On the facts, the advances were unsecured, did not create any encumbrance on trust property, and were used for the objects of the trust. The requirement under section 12AB(1)(b) is confined to genuineness of activities and compliance with other law material for achieving the objects, and the omission to obtain prior permission in these circumstances was treated as a procedural lapse rather than a substantive violation.

Conclusion: The rejection of registration under section 12A read with section 12AB was not justified and registration was directed to be granted in favour of the assessee.

Issue (ii): Whether rejection of registration under section 80G of the Income-tax Act, 1961, could survive once registration under section 12A read with section 12AB was directed to be granted.

Analysis: The refusal of section 80G registration was solely consequential to the refusal under section 12A read with section 12AB. Once the primary registration was directed to be granted, the sole foundation for denying section 80G relief disappeared.

Conclusion: The rejection of section 80G registration could not be sustained and registration was directed to be granted in favour of the assessee.

Final Conclusion: The trust's charitable status and the genuineness of its activities were accepted, the alleged defect regarding trustee advances was treated as a curable procedural lapse, and both registration applications were allowed.

Ratio Decidendi: For registration under section 12AB, the Commissioner must examine only the genuineness of the trust's activities and material compliance with other law; a non-encumbering advance or loan taken for the objects of the trust does not, by itself, justify denial of registration as a substantive legal violation.

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