5. [2019] 72 ITR 14
(Trib.) (Amrit.) Acharya Shri Tulsi
Kalyan Kendra vs. CIT(E) ITA No.: 335
(Amritsar) of 2017 A.Y.: 2017-18 Date of order: 28th
January, 2019
Section 12AA – At
the time of granting of registration u/s 12A, the only requirement is examining
the objects of the trust / society and genuineness of its activities
FACTS
The assessee is a
trust. It had applied for registration u/s 12A of the Act. However, the CIT(E)
denied the said registration citing the following reasons:
(i) The assessee had carried out certain
activities which were not covered under charitable purposes u/s 2(15) of the
Income-tax Act, 1961;
(ii) Complete inactivity since inception in 1979
till the sale of land in 2007 reflects that the activities were not in sync
with the stated objects;
(iii) The registration was sought to be obtained
after a gap of ten years after the sale of land in 2007, indicating
unwillingness to carry out charitable activities;
(iv) Amendment of the trust deed incorporating the
dissolution clause and at the same time introduction of new trustees indicated
that the motive of the applicant to seek registration under this section was
merely to save on taxes on interest income;
(v) Changes in the trust deed do not have proper
legal sanction and though a supplementary deed was submitted to the
sub-registrar, his jurisdiction to accept the same was questionable.
Aggrieved by the
rejection order passed by the Commissioner, the assessee preferred an appeal to
the Tribunal.
HELD
The Tribunal
observed the following in relation to the reasoning given by the Commissioner:
It is trite to say
that at the time of registration u/s 12AA, the CIT(E) has to consider the twin
requirements of (a) objects of the assessee society, and (b) genuineness of its
activity. Nowhere in the order had the CIT(E) either pointed out any defect in
the objects of the society and / or the activities of the applicant assessee
society, or doubted the genuineness of the activities specifically. Therefore,
the Tribunal concluded that the assessee is carrying out its activities in
accordance with its objects specified in the trust deed and for charitable
purposes. As a matter of fact, the Tribunal found that the trust also carried
out other charitable activities as per its objects.
The trust was in
operation since 1979. However, much activity was not carried out until 2007 due
to paucity of funds. When the trust had accumulated a good amount of funds from
rollover of investments after sale of land in 2007, it constructed certain
halls / rooms which were used in the course of its charitable activities. This
fact was clearly demonstrated by the assessee and the same was considered to be
a logical reason for not carrying out any activity previously. The main reason
for rejection of registration was that amendment of the trust deed
incorporating the dissolution clause and at the same time introduction of new
trustees indicated the motive of the applicant to seek registration under this
section was merely to save on taxes on interest income. This reasoning given by
the CIT(E) was merely a general remark without considering the intricacies of
the law and therefore the reason was illogical.
Considering the
above, the Tribunal directed the CIT(E) to grant registration to the trust. It
further clarified that the CIT(E) while granting the registration shall be at
liberty to endorse the condition, if any, he finds to be reasonable in accordance
with law.
