TaxTMI 
TaxTMI 
2025 (6) TMI 46
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....rinciples of natural justice is liable to be quashed. 3. The impugned order passed by the learned Commissioner of Income Tax (Exemptions) is not based on legal provisions but based on erroneous conclusions and is liable to be cancelled. 4.1 In any case, and without further prejudice the learned Commissioner of Income Tax (Exemptions) has erred in holding that the appellant has not satisfied the conditions laid under section 12AB(1) of the Act. Such a conclusion is without basis, adhoc and is therefore not to be accepted and acted upon. 4.2 In particular the learned Commissioner of Income Tax (Exemptions) has erred in concluding that the appellant has not carried on any charitable activities. Infact, the appellant had commenced charitable activities as per objectives in the trust deed. 4.3 The learned Commissioner of Income Tax (Exemptions) also erred in holding that the differences in provisional statement and audited statement have not been explained at all. Infact, no such opportunity was given to the appellant to explain the provisional and audited statements. 4.4 The grounds of rejection for application of registration being....
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....d providing boarding & lodging facility with food to the travellers. As per the assessee's claim, the rooms were provided free of cost however the assessee failed to provide the detail how the cost of running such facilities were met. The JAO found that the financial statement of the assessee trust particularly receipt and payment account does not suggestion cost incurred toward charitable activity. The JAO also notices discrepancies between the provisional and audited financials for the Year 2024-25. As such in provisional financials, the corpus fund and loans and liability was shown at Rs. 5,38,13,000/- and Rs. 5,71,41,600/- respectively however in audited financials, the corpus fund was reduced by 4,02,68,000/- and the loans and liabilities were increased by the same amount. Likewise, there was difference of Rs. 50 lakhs in the value of fixed assets shown in the provisional and audited financial statements. However, such material difference was not explained despite the fixed assets being purchased for Rs. 9.74 crores on 02.02.2024. Accordingly, the JAO recommended not to grant the approval of final registration under section 12AB of the Act. 7. The Ld. CIT(E), concurring wit....
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....proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of section 12AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust. 10.2 We further note that the Hon'ble Allahabad High Court in the case of CIT vs. Red Rose School reported in [2007] 163 Taxman 19 (All.) held that while granting registration under Section 12A, the Commissioner is not to act as an Assessing Officer and is only required to examine the objects and genuineness of activities based on materials placed before him. The relevant part of the judgment is extracted as under: 33. In regard to the genuineness of the activities of the trust or the institution, whose objects do not run contrary to public policy and ....
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.... with respect to expenses incurred towards the object of the trust is the part of assessment proceedings and not for raising at the time of granting the registration. Regarding this, we find support and guidance from the judgment of Hon'ble Karnataka High Court given in the case of Director of Income Tax (Exemptions) vs. Garden City Educational Trust [2010] 191 Taxman 238 (Karn.), the Hon'ble Karnataka High Court held that registration cannot be refused merely because at the initial stage the trust has not carried out large-scale activities or only incurred administrative expenses. What is relevant is the intention to carry out charitable activities as reflected from the trust's objects and initial activities. The relevant headnotes of the judgment are detailed as under: "Section 12A, read with sections 2(15), 11 and 12, of the Income- tax Act, 1961 - Charitable or religious trust - Registration of - Whether so long as a trust has education as one of its objects which is one of enumerated heads which qualifies and comes within scope of charitable purpose as enumerated in section 2(15), it has to be accepted that trust is having a charitable purpose as its object and ma....