TaxTMI 
TaxTMI 
2026 (4) TMI 1613
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....s as and when called for. On perusal of the submissions of the assessee, the ld.CIT(E) noted that the trust aims for rural transformation through technology and entrepreneurship, empowering rural women, Running the solar dyer production system, MOU with NIIFL (National Investment and Infrastructure Fund Limited) aiming introduction of effective dehydration system in fruits and Vegetables. Further, it is also observed that the funds have been transferred to the assessee by NIIFL. Hence, the ld.CIT(E) passed the impugned order by rejecting the registration u/s.12AB of the Act stating that the activities of the trust is commercial in nature and the activities does fall under 'Charitable Purposes' as envisaged u/s.2(15) of the Act. 3. Aggrieved by the order of the ld.CIT(E), the assessee is in appeal before us by raising the following grounds of appeal: "1. The Learned CIT has rejected the application for registration without comprehending that the nature of activity of the Trust falls squarely under the ambit of "Relief of the Poor" 2. The Learned CIT, has, by ignoring the concept of Relief of Poor that is in-built and associated in the activities of the Trust, ha....
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....." 4. The ld.AR for the assessee assailing the action of the ld.CIT(E), submitted that the order does not record any finding that the Trust deed is non-charitable, nor that the activities are not genuine, nor that funds have been misapplied, nor that trustees derive any personal benefit. The entire cancellation rests solely on the reasoning that the Trust maintains purchase and sale accounts, incurs salary expenditure, and therefore operates in a commercial line of activity. 5. The ld.AR submitted that the scope of enquiry u/s.12AB of the Act is limited. The ld.CIT(E) is required to satisfy himself about the objects of the Trust and the genuineness of its activities. This position has been settled by the Hon'ble Supreme Court in Ananda Social and Educational Trust v. CIT (2020) 426 ITR 340 (SC), wherein it was held that at the stage of registration, the authority must examine only whether the objects are charitable and whether activities are genuine; the application of income and computation issues arise at the assessment stage. The impugned order travels far beyond this limited jurisdiction. The assessee's activities squarely fall within the limb of relief of the poor and pr....
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....AR submitted that the ld.CIT(E) has wrongly invoked the proviso to Section 2(15). It is further submitted that the proviso primarily affects entities falling under the limb advancement of any other object of general public utility. The assessee's activities are not confined to GPU; they independently fall under relief of the poor and preservation of environment, which are separate limbs. Even otherwise, the proviso applies only where the activity is in the nature of trade, commerce, or business with profit motive. The Hon'ble Supreme Court in CIT (Exemptions) v. Ahmedabad Urban Development Authority (2022) 449 ITR 1 (SC) (AUDA case) clarified that the test is whether the activity is carried out with a profit motive in a commercial sense. It did not hold that existence of sale transactions ipso facto renders an institution commercial. 10. Hence, the ld.AR submitted that the reliance placed on AUDA case is misplaced. That case dealt with statutory development authorities engaged in large-scale land allotment and infrastructure development for consideration. The factual matrix is wholly distinguishable from a welfare trust rehabilitating terror widows and injured army personnel thr....
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....n itself. The registration and exemption are distinct stages, as clarified in Ananda Social and Educational Trust (supra). 14. In light of the above reasons and arguments, the ld.AR submitted that the impugned order is unsustainable in law and liable to be set aside and restore the registration of the Trust in the interest of justice. 15. Per contra, the ld.DR supported the order of the ld.CIT(E) and prayed for confirming the same as the activities of the assessee is commercial in nature. 16. We have considered the rival submissions, perused the material available on record, and examined the impugned order passed by the ld.CIT(E). At the outset, it is an undisputed fact that the assessee is a Trust constituted by a duly executed Trust Deed dated 05.10.2017. The objects of the Trust, as borne out from the Trust Deed, include relief of the poor, preservation of environment, and advancement of other charitable purposes. The ld.CIT(E) has not recorded any adverse finding with regard to the charitable nature of the objects of the Trust. 17. The primary issue for our consideration is whether the ld.CIT(E) was justified in rejecting the application for registration u/s.12AB of....
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....gation of private profit or benefit to trustees. Therefore, the mere existence of sale transactions does not render the activity commercial in nature. 24. The ld.CIT(E) has invoked the proviso to Section 2(15) of the Act to conclude that the assessee's activities are commercial. However, we find merit in the contention of the assessee that its activities fall within the specific limbs of relief of the poor and preservation of environment, which are independent categories under Section 2(15) and the proviso primarily applies to entities engaged in "advancement of any other object of general public utility". 25. Even otherwise, as clarified by the Hon'ble Supreme Court in CIT (Exemptions) v. Ahmedabad Urban Development Authority (2022) 449 ITR 1 (SC), the decisive test is the presence of a profit motive in a commercial sense. In the present case, the facts do not indicate any such profit motive. 26. Further, the ld.CIT(E) has also observed that funds received from NIIFL constitute consideration. We find that the funds were received as CSR contributions and there is no evidence of quid pro quo or commercial obligation. We also find that the funds were utilized for procurement....