Denying registration u/s 12AA by testing ancillary objects rather than main objects for their charitable nature is unfair

Brief of the case:

The ITAT Bangalore in the case of Nanda Gokula vs. CIT held that denial of registration u/s 12AA by the CIT by considering only the ancillary objects is unfair, because it is the main objects of the trust which are required to be tested for their charitable nature. Ancillary objects are only a means to achieve the main objects which may not be charitable.

Facts of the case:

• Assessee a trust incorporated on 13.06.2008 filed an application for registration u/s 12AA of the Act on 07.01.2014. CIT required the assessee to furnish its financial statements for the years ending 31.03.2009, 31.03.2010, 31.03.2011, 31.03.2012 and 31.03.2013 and also a description of activities it is undertaking.
• CIT after verifying the trust deed concluded that certain objects mentioned in the deed were purely not charitable in nature. For that reason the application for registration u/s 12AA was rejected.
• Against such order of CIT, assessee is in appeal before ITAT Bangalore.

Contention of the Assessee:

• In trust deed charitable objects like maintenance of goshala, veterinary hospitals and similar such types were mentioned. Such objects cannot be considered as non-charitable as they are in general public interest to promote social welfare.
• CIT rejected application only by going through supplementary objects which are only the incidental activities necessary for achievement of main objects which are charitable without any doubt.
• As such the denial of registration was totally unfair.

 Contention of the Revenue:

• Revenue supported the order of CIT who rejected application on the ground that certain objects as mentioned in trust deed was not charitable and beneficiaries of the trust activities were not well defined in the deed.

 Held by ITAT Bangalore:

• On reading of the main objects of trust nothing as such was found which could make the activities undertaken as non-charitable rather all the main objects were for general public welfare.
• CIT rejected the application by considering only the ancillary objects which indicate only that what all activities would be undertaken for achieving main objects.
• It is not the case of revenue that accounts submitted by the assessee indicate a different line of activity other than what was mentioned in the objects clause of the assessee’s trust. Further, it is the general public who would be beneficiary of the trust activities.

• In view of these observations, the denial of registration by CIT was unfair and the ITAT therefore, directed the CIT to grant registration to the assessee u/s 12AA.