Visan Foundation Vs CIT (ITAT Delhi)
Delhi ITAT: Registration U/s 12AB Cannot Be Denied by Examining Expenditure; CIT(E) Must Confine Inquiry to Objects & Genuineness of Activities
The Delhi ITAT directed the CIT(E) to grant registration under section 12AB to a charitable trust after holding that the Commissioner had travelled beyond the limited scope of inquiry prescribed under the Act. The registration had been rejected on the ground that the trust failed to satisfactorily substantiate its food, rent and training expenses, that substantial expenditure had been incurred through the Managing Trustee, and that the trust was executing CSR projects under contractual arrangements, which, according to the CIT(E), were not charitable activities for the benefit of the public at large. The Tribunal held that, at the stage of granting registration, the Commissioner is required to examine only whether the objects of the trust are charitable and whether its activities are genuine, and cannot undertake a detailed scrutiny of the application of income or admissibility of expenditure, which are matters to be examined during assessment proceedings while considering exemption under sections 11 and 12. Relying on the Supreme Court’s decision in Ananda Social and Educational Trust v. CIT and the Allahabad High Court’s ruling in CIT v. Red Rose School, the Tribunal reiterated that registration cannot be denied on mere suspicions regarding expenditure or alleged misuse of funds, particularly when there is no finding that the trust’s objects are non-charitable or that its activities are not genuine. Accordingly, the Tribunal set aside the order of the CIT(E) and directed that registration under section 12AB be granted, subject to the trust satisfying the statutory requirements under section 12A, while leaving it open to the Revenue to examine the allowability of exemption during regular assessment proceedings.
