Case Law Details
Brief of the Case
ITAT Chandigarh held in the case of M/s Prabhat (A House of Hope for Special Children) Vs CIT (Exemptions) that as per section 12AA, the commissioner has to satisfy himself about the objectives of the Trust and genuineness of its activities and for such purpose he has the power to call for such documents or information from the assessee as he thinks necessary. The language used in the section only require that the activities of the Trust must be genuine, which would mean that they are in consequence with the objects of the Trust and not mere camouflage or against the objects of the Trust. The CIT cannot go beyond these two parameters while granting registration. Nowhere in his order, the CIT (Exempt ion) has made any adverse remarks as to the objects of the trust being not charitable or the activities of the Trust being not genuine. Also, even if no charitable activities could be done by the society in its initial years, the registration under section 12AA cannot be denied to it solely on this basis. Hence trust registration u/s 12AA allowed.
Facts of the Case
The assessee filed an application in Form No. 10A before the CIT (Exemption), Chandigarh dated 2.12.2014, for registration under section 12AA. The CIT (Exemption) denied assessee the registration on the ground that on perusal of income & expenditure account for the year ended 31.3.2014, the gross receipts of the assessee were 27,163/- out of which an expenditure of Rs.22,189/- were incurred , which were general in nature. No major expenditure was incurred by the assessee society on account of charity. The learned Commissioner of Income Tax was of the view that most of the expenses debited to income & expenditure account are not covered within the meaning of section 2(15) .In this view, the application for registration was rejected.
Contention of the Assessee
The ld counsel of the assessee submitted that the CIT (Exempt ion) has not drawn any adverse inference against the objects of the t rust or that on the genuineness of activities carried on by the trust. The only reason given by the CIT (Exemption) in his order is that the assessee has not incurred any major expenses on account of charity. In this background, it was submitted that the CIT (Exemption) cannot deny assessee the registration under section 12AA.
Reliance was placed on the judgment of jurisdictional Punjab & Haryana High Court in the case of CIT Vs Surya Educational & Charitable Trust 203 Taxmann 53 (P&H) and CIT Vs. B.K.K. Memorial Trust (2013) 256 CTR 424 (P&H) .
Contention of the Revenue
The ld counsel of the revenue relied on the order of the CIT(Exemption) and relied on the judgment of the Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Shri Guru Gorakhnath Charitable Educational Society (2015) , 233 Taxman 189 (P&H) .
Held by ITAT
ITAT held that from the income & expenditure account of the assessee for the year ended 31.3.2014, it is clear that during the year, the assessee has received Rs.26,300/- as donation and Rs.863/- as interest , out of which it has incur red an amount of Rs.27,079/- on administrative expenses such as accounting charges, advertisement , office maintenance, etc. Only an amount of Rs.84/- is the excess of income over expenditure. The object ion of the CIT (Exemption) is that the assessee has not spent any major amount for charitable purpose. In this regard, we also observe that the assessee society was started only on 22n d March, 2013 and during the intervening period, it has received only Rs.26,300/- as donation. Though this amount has not been expanded for charitable purposes, the expenditure incurred out of this are all expenses necessary to run the society. With this miniscule amount received as donations, what charity could have been done. However, even if no charitable activities could be done by the society in its initial years, the registration under sect ion 12AA cannot be denied to it solely on this basis. This proposition has been upheld by the Hon’ble Jurisdictional Punjab & Haryana High Court in the case of CIT Vs. B.K.K. Memorial Trust (2013) 256 CTR 424 (P&H).
Further as per section 12AA, the commissioner has to satisfy himself about the objectives of the Trust and genuineness of its activities and for such purpose he has the power to call for such documents or information from the assessee as he thinks necessary. The language used in the section only require that the activities of the Trust must be genuine, which would mean that they are in consequence with the objects of the Trust and not mere camouflage or against the objects of the Trust. The CIT cannot go beyond these two parameters while granting registration. The analysis of the income of Trust or its application is under the jurisdiction of the Assessing Officer in the assessment proceedings.
In the present case, the registration under sect ion 12AA has been denied to the assessee only on some extraneous grounds, which have no bearing on granting of registration. Nowhere in his order, the CIT (Exemption)has made any adverse remarks as to the objects of the trust being not charitable or the activities of the Trust being not genuine. We see that all the aims and objects of the assessee trust are charitable in nature and no adverse remarks as to the genuineness of any of these activities have been made by the CIT (E). Therefore, the CIT (Exemption) in directed to grant registration under section 12AA.
Accordingly appeal of the assessee allowed.
