2025 (6) TMI 1387 - AT - Income Tax

Rejecting the application for registration u/sec. 12AB and approval u/sec. 80G - as per CIT(E) no substantial charitable activities are carried-out by the assessee trust which is in violation of provisions of sections 11 and 12 - HELD THAT - CIT(E) without considering the documentary evidences furnished by the assessee-trust has simply rejected the application of the assessee-trust filed in Form-10B for registration u/sec. 12AB as well as approval u/sec. 80G of the Act. We find that the assessee-trust is incorporated for a Nobel cause to provide some services to the retired Military Personnel irrespective of religion caste or creed who are not in a position to meet their existing requirements of their parents children etc.. Further we find that it is not a case that assessee-trust has not filed it s submissions in response to the notices issued by the learned CIT(E) which is evident from the orders of the learned CIT(E). In response to the notice issued by CIT(E) the assessee- trust has furnished all details. In view of the above we direct the CIT(E) to grant registration u/sec. 12AB of the Income Tax Act 1961. Assessee appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in these appeals are:

• Whether the assessee-trust is entitled to registration under section 12AB of the Income Tax Act, 1961, which is a prerequisite for claiming exemption under sections 11 and 12 of the Act?
• Whether the assessee-trust qualifies for approval under section 80G of the Income Tax Act, 1961, which allows donors to claim deductions for donations made to the trust?
• Whether the learned Commissioner of Income Tax (Exemption) was justified in rejecting the applications filed in Form-10AB by the assessee-trust for registration and approval on the ground that no substantial charitable activities were carried out by the trust?
• Whether the assessee-trust complied with procedural requirements by furnishing all requisite documents and information as called for by the assessing authority during the registration process?

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Registration under Section 12AB

Relevant legal framework and precedents: Section 12AB of the Income Tax Act, 1961 mandates that any trust or institution seeking exemption under sections 11 and 12 must first obtain registration. The registration is granted after satisfying the tax authorities that the trust is engaged in charitable activities as defined under the Act. The law requires that the activities be substantial and genuine in nature.

Court's interpretation and reasoning: The Tribunal noted that the learned Commissioner of Income Tax (Exemption) rejected the registration application primarily on the basis that the assessee-trust had not carried out substantial charitable activities. However, the Tribunal observed that the CIT(E) had not adequately considered the documentary evidence and submissions filed by the assessee-trust in response to notices issued during the proceedings.

Key evidence and findings: The assessee-trust was registered under the Societies Registration Act, 2001, with clearly stated objects focusing on charitable activities such as providing financial assistance to widows, dependent parents and children of serving and retired military personnel, awarding scholarships and fellowships, payment of tuition and other educational fees, supporting pursuits in arts and sports, and establishing educational and welfare institutions. The trust submitted all relevant documents and detailed replies to the CIT(E)'s queries, which were acknowledged in the record.

Application of law to facts: The Tribunal held that the assessee-trust's objects are inherently charitable and aimed at a noble cause, specifically aiding retired military personnel and their families without discrimination. The failure of the CIT(E) to consider the submissions and documentary evidence before rejecting the application amounted to non-application of mind and procedural impropriety.

Treatment of competing arguments: While the CIT-DR supported the rejection on the ground of absence of substantial charitable activities, the Tribunal found that the assessee-trust had discharged its onus by furnishing all required information and documents. The Tribunal emphasized that mere absence of past activities cannot be a ground for rejection if the trust is newly incorporated and has demonstrated bona fide intentions and compliance.

Conclusion: The Tribunal directed the learned CIT(E) to grant registration under section 12AB to the assessee-trust, recognizing the sufficiency of the documents and submissions filed and the charitable nature of the trust's objects.

Issue 2: Approval under Section 80G

Relevant legal framework: Section 80G of the Income Tax Act, 1961 provides for approval of trusts so that donors can claim deductions for donations made to such approved entities. Approval under section 80G is consequential upon registration under section 12AB.

Court's interpretation and reasoning: The Tribunal noted that since approval under section 80G is consequential in nature, it logically follows the grant of registration under section 12AB. The rejection of approval without granting registration was inconsistent with the statutory scheme.

Key evidence and findings: The assessee-trust had applied simultaneously for both registration and approval and had complied with the procedural requirements by submitting all necessary documents.

Application of law to facts: The Tribunal held that the learned CIT(E) erred in rejecting approval under section 80G when the registration under section 12AB was also rejected without proper consideration. Since the registration was ordered to be granted, approval under section 80G must also be granted.

Treatment of competing arguments: The CIT-DR contended that the rejection of approval was justified due to lack of substantial charitable activities. The Tribunal, however, found this argument untenable given the direction to grant registration.

Conclusion: The Tribunal directed the learned CIT(E) to grant approval under section 80G of the Income Tax Act, 1961.

Issue 3: Procedural Compliance and Consideration of Evidence

Relevant legal framework: The principles of natural justice and statutory requirements mandate that the tax authorities must consider all relevant evidence and submissions before passing an order rejecting applications for registration or approval.

Court's interpretation and reasoning: The Tribunal found that the learned CIT(E) did not adequately appreciate or consider the documentary evidence and detailed submissions filed by the assessee-trust in response to notices. This amounted to non-application of mind and procedural unfairness.

Key evidence and findings: The record showed that the assessee-trust responded to the CIT(E)'s notices by furnishing all required information, including the Memorandum of Association/Trust deed and other supporting documents.

Application of law to facts: The Tribunal emphasized that rejection of applications without proper consideration of submissions and documents is contrary to the principles of fair procedure and the statutory scheme.

Treatment of competing arguments: The CIT-DR argued that the trust failed to prove its charitable activities. The Tribunal rejected this contention, noting that the evidence was not properly considered rather than absent.

Conclusion: The Tribunal held that the learned CIT(E) must consider all submissions and documents before passing orders and directed accordingly.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"The learned CIT(E), without considering the documentary evidences furnished by the assessee-trust, has simply rejected the application of the assessee-trust filed in Form-10B for registration u/sec. 12AB as well as approval u/sec. 80G of the Act."

and further observed,

"The assessee-trust is incorporated for a Nobel cause to provide some services to the retired Military Personnel irrespective of religion, caste or creed, who are not in a position to meet their existing requirements of their parents, children etc., Further, it is not a case that the assessee-trust has not filed its submissions in response to the notices issued by the learned CIT(E) which is evident from the orders of the learned CIT(E)."

The Tribunal established the core principle that registration under section 12AB and approval under section 80G cannot be denied solely on the ground of absence of past charitable activities if the trust is newly established and has complied with procedural requirements by furnishing all necessary documents and evidence demonstrating its charitable objectives.

Final determinations:

• The appeals filed by the assessee-trust against the rejection of registration under section 12AB and approval under section 80G were allowed.
• The learned Commissioner of Income Tax (Exemption) was directed to grant registration under section 12AB and consequential approval under section 80G of the Income Tax Act, 1961.