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June 7, 2021

Mere non-spending of income for charitable activities cannot be reason for denial of 12AA registration

Mere non-spending of income for charitable activities cannot be reason for denial of 12AA registration

Fact and Issue of the case

The brief facts of the case are as under :-

The appellant, namely, Dr. N T Ghatte Charitable Trust is a trust formed on 02.04.2014 and is registered under the BPT Act, 1950 vide registration number E-2173/Sangli dated 13.07.2015 with the following objects :-

1) Establishment, acquisition, construction and/or maintenance or support of primary schools, high schools, colleges, vidyapeeths, study centers, medical colleges, technical colleges, and other institutions for imparting education and training of students.

2) Establishment and support of Professorship, Fellowship, Lectureships, Scholarships, Loan Scholarships, Free Ships and Prizes at any schools, colleges or other educational institutions in India.

3) Establishment maintenance and/or construction of hostels and / or boarding houses and grant of free boarding and lodging to poor, deserving students and other persons upon such terms and for such period in each case as the TRUSTEES may think fit.

4) To take over the management and administration of educational and cultural institutions of the aforesaid nature and orphanages already established with all their assets and liabilities.

5) To construct, establish, equip, maintain and/or manage laboratories, workshops and to undertake, conduct, carry on or help to carry on scientific research and other scientific works and to provide fund for such works or for payment to any person or persons engaged in research work whether in such laboratories or else where in the fields of natural or applied science including Geology, Medicine, Agriculture or Animal Husbandry, Information Technology, Computer Systems, Computer Hardware developments, Sericulture, Floriculture.

The appellant trust filed Form 10A for registration under the provisions of section 12AA of the Act on 07.12.2018. On receipt of the said application for registration of the trust u/s 12AA of the Act, ld. Commissioner of Income Tax (Exemption) had called upon the applicant through ITBA portal on 05.01.2019 to furnish certain information/clarification. In response to the same, the appellant uploaded the information on 01.02.2019. On perusal of the said information furnished by the appellant trust, the ld. Commissioner of Income Tax (Exemption) had concluded that the appellant society had not carried on any charitable activities during the last three financial years and based on this findings, the ld. Commissioner of Income Tax (Exemption) held that the genuineness of charitable nature of the activities is not established, accordingly, he denied the registration u/s 12AA of the Act vide order dated 22.06.2019.

Being aggrieved by the order of ld. Commissioner of Income Tax (Exemption), the appellant is in appeal before us in the present appeal.

Observation of the Tribunal

Tribunal has heard the rival submissions and perused the material on record. The only issue in the present appeal relates to the grant of registration u/s 12AA of the Act. From the perusal of the impugned order, it is crystal clear that the ld. Commissioner of Income Tax (Exemption) had denied the registration solely on the ground that the appellant had not undertaken any charitable activities pursuant to objects on which it was set up activities of the trust in the last three financial years. It is not the case of the ld. Commissioner of Income Tax (Exemption) that the objects of the appellant society are not charitable in nature. The reasoning of the ld. Commissioner of Income Tax (Exemption) is not tenable under the law in view of the recent judgement of the Hon’ble Supreme Court in the case of Ananda Social and Educational Trust (supra).

Further, the Hon’ble Supreme Court in the case of M/s. Ananda Social and Educational Trust vs. CIT in Civil Appeal No.1727/2020 (@SLP (C) No.25761/2015) dated 19.02.2020 held that merely because the trust has not spent any amount of its income for charitable activities and the fact that the trust has not spent any amount of income for charitable purpose does not amount to carrying on the activities contrary to its objects. In the light of legal position discussed supra, the order of the ld. Commissioner of Income Tax (Exemption) cannot be sustained in the eyes of law.

The submission of the ld. CIT-DR the matter be remanded to the ld. Commissioner of Income Tax (Exemption) for fresh examination cannot be acceded to for the reason that it amounts to ordering fresh enquiry which is not permissible under the law. In the light of the above discussion, we direct the ld. Commissioner of Income Tax (Exemption) to grant registration of the appellant trust u/s 12AA of the Act.

Conclusion

The Tribunal allowed the appeal of the assessee and direct the Commissioner of Income Tax (Exemption) to grant registration of the appellant trust u/s 12AA of the Act

Read the full order from below

Mere-non-spending-of-income-for-charitable-activities-cannot-be-reason-for-denial-of-12AA-registration

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