Case Law Details
Just because the assessee has not filed income tax returns in earlier years, it can not be said that the activities of the assessee of the charitable trust / society were not genuine and grant of the registration under section 12AA cannot be denied
Section 12AA of the Income Tax Act, 1961 (for short ‘the Act’) deals with procedure for registration of a trust or an institution in respect of an application for exemption.
Recently, in the CIT (Exemptions), Chandigarh vs. Shri Shirdi Sai Darbar Charitable Trust (Dharamshala), Barnala (A.Y. 2012-13 to 2014-15) [ ITA No. 38 of 2017 (P&H), decided on 27.03.2017], the Punjab & Haryana High Court held that it had been rightly directed by the ITAT, Chandigarh to the CIT(E) to grant registration under section 12AA of the Act.
Earlier, in Shri Shirdi Sai Darbar Charitable Trust (Dharamshala), Barnala vs. CIT (Exemptions), Chandigarh [ITA No. 692/Chd/2015], briefly, an application under section 12A of the Act was filed by the assessee as on 9.12.2014 before the CIT(E), Chandigarh. After giving an opportunity of being heard the CIT(E) denied the assessee the registration under section 12AA of the Act vide his order dated 26.6.2015.
The assessee trust preferred an appeal before ITAT, Chandigarh. Following grounds were raised before ITAT:
1. That the Ld. Commissioner of Income Tax has erred in law as well as on facts in rejecting registration under section 12AA of the Act which is arbitrary & unjustified.
2. That the registration has been refused only on the basis of suspicion, conjectures and surmises which is not permitted under the Law and as such the order refusing registration is illegal, arbitrary and unjustified.
3. That the Ld. Commissioner of Income Tax has further erred in holding that clause 12 of the memorandum gives absolute powers to the trustees to manage the property of the trust which is unfounded, without any basis and as such the order is arbitrary and unjustified.
4. That the order of the Ld. Commissioner of Income Tax is erroneous, arbitrary, opposed to law and facts of the case and is, thus, untenable.
The ITAT, Chandigarh allowed the appeal of the assessee trust. Aggrieved by the order of the ITAT, Revenue filed appeal before Punjab & Haryana High Court. The High Court observed that the first reason on the basis of which the CIT(E) had refused to grant registration to the assessee was that the assessee had not been filing its income-tax returns in the earlier years. It was further observed that it is not a good reason to reject the application for registration since the two conditions which the CIT(E) has to satisfy while granting the registration under section 12A of the Act, are that the objects of the assessee are charitable in nature and the activities are genuine. Just because the assessee has not filed its income tax returns in earlier years, it can not be said that the activities of the assessee were not genuine.
Section 13 of the Act comes into play at the time of granting exemption under section 11 of the Act and not at the time of granting registration under section 12A of the Act. The only two requirements as stated herein above while granting registration under section 12A of the Act, are with respect to the charitable nature of the objects of the assessee and genuineness of the activities. No adverse remarks have been made by the CIT(E) with regard to the objects contained in Memorandum and that the observations of the CIT(E) do not lead to the conclusion that the activities of the assessee were not genuine. The Punjab & Haryana High Court held ITAT rightly directed to the CIT(E) to grant registration under section 12AA of the Act.
