TMI Blog2014 (9) TMI 951X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from carrying on of any activity of commercial nature if such commercial activity is intended for achieving the objects of the trust. So far as Director of Income-tax (Exemption)'s observation with regard to violation of provision contained under section 11(1)(d) of the Act is concerned, on going through the said provision, we are of the view that the observation made by the Director of Income-tax (Exemption) is not only irrelevant but is also misplaced. Furthermore, if there is any violation of the provision contained under section 11, the same can be looked into by the Assessing Officer while examining the assessee's claim under section 11 of the Act in the course of assessment proceeding. At the time of grant of registration under section 12A of the Act, the Director of Income-tax (Exemption) cannot step into the shoes of the Assessing Officer and examine the claim of the assessee under section 11. In view of the aforesaid, we hold that the Director of Income-tax (Exemption) was not justified in rejecting the assessee's application for grant of registration under section 12A. Accordingly, we set aside the impugned order of the Director of Income-tax (Exemption) and direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Director of Income-tax (Exemption) was of the view that the assessee-trust was not able to establish its claim about carrying on towards achieving the objects of the trust. Except the press release, the assessee has not explained how it has carried on activities for furtherance of objects mentioned in the trust deed. The Director of Income-tax (Exemption) was of the opinion that in absence of necessary information with regard to carrying on of activities by the trust, the genuineness of the activities cannot be ascertained, hence, the trust cannot be granted registration under section 12A of the Act. Further, referring to para 4 of the trust deed, the Director of Income-tax (Exemption) noted that as per the said clause, the trust is empowered to treat any donation or part thereof as corpus fund of the trust. According to the Director of Income-tax (Exemption), the said provision in the trust deed is inconsistent with or in violation of the provisions contained under section 11(1)(d) of the Act, hence, the trust cannot be granted registration under section 12A of the Act. The Director of Income-tax (Exemption) noted that as per the trust deed, the trustees are empowered to carry o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss activity is legally permissible. In this context, the learned authorised representative relied upon the decision of the Income-tax Appellate Tribunal, Hyderabad Bench in the case of Kusumba Dhirajlal Parekh and Lila Nautamlal Parekh Foundation in I. T. A No. 380/Hyd/13 dated July 12, 2013. So far as the third ground of rejection relating to violation of provision contained in section 11(1)(d) of the Act is concerned, the learned authorised representative submitted that reasoning of the Director of Income-tax (Exemption) is totally misplaced and irrelevant as there cannot be any violation as inferred by the Director of Income-tax (Exemption). 4. The learned Departmental representative, on the other hand, submitted, at the time of grant of registration, the Director of Income-tax (Exemption) is empowered under the Act to look into the objects of the trust as well as genuineness of the activities. As the assessee could not produce any evidence with regard to activities undertaken by it for furtherance of its objects, the Director of Income-tax (Exemption) was justified in rejecting the assessee's application. It was submitted that language of section 12A of the Act, makes it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. So far as the first reason for rejecting the assessee's application is concerned, in our view, at the time of granting registration under section 12A of the Act, commencement of activity is not a relevant consideration if the trust is a new one. From the facts on record, it is seen that the assessee-trust was created by trust deed dated Septem ber 11, 2007 and it applied for registration on February 26, 2008. Hence, it cannot be expected that the trust could have commenced activity within such a short time. Moreover, it is a well settled prin ciple of law that at the time of grant of registration the registering authority has only to consider whether the objects of the trust are charitable or not. At that stage, it is not required to go into the activi ties of the trust which can be looked into at the time of assessment proceeding. The hon'ble Gujarat High Court in the case of CIT v. Kutchi Dasa Oswal Moto Pariwar Ambama Trust [2014] 362 ITR 194 (Guj) has held as under (page 198) : 5. It can thus be seen that under section 12AA of the Act, the Commissioner has to satisfy himself about the objectives of the trust and the genuineness of its activities. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts of the society are maintained in the manner as suggested by the said section. The hon'ble High Court further held that merely because a trust is of a religious nature, it will not be disentitled from claiming registration under section 12A of the Act. So far as the allegation of the Director of Income-tax (Exemption) that the objects of the trust are not specific and therefore, are not verifiable we find that such finding is vague and without any basis. On going through the objects of the trust, it is obvious that there are specific objects which are charitable in nature. Similarly rejection of the application by referring to clause 30 of the trust deed also cannot be held to be valid since it is a settled principle of law that for achieving its charitable object a trust or institution may also carry on business activity. Moreover, it is a fact on record that the Director of Income-tax (Exemption) before rejecting the assessee's application for registration has not disclosed his mind so far as his doubts either with regard to objects of the trust or the nature of activity of the assessee is concerned. Had the Director of Income-tax (Exemp tion) given adequate oppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shoes of the Assessing Officer and examine the claim of the assessee under section 11. In view of the aforesaid, we hold that the Director of Income-tax (Exemption) was not justified in rejecting the assessee's application for grant of registration under section 12A of the Act. Accordingly, we set aside the impugned order of the Director of Income-tax (Exemption) and direct him to grant registration to the assessee under section 12A of the Act. Further, we direct the Director of Income-tax (Exemption) to grant approval under section 80G(5) of the Act subject to fulfilment of conditions prescribed under clauses (i) to (v) of section 80G(5) of the Act. 7. Before parting we need to clarify, grant of registration under section 12AA automatically will not entitle the assessee for exemption under section 11 as the assessee has to fulfil many more conditions, one of them being registration under section 12AA of the Act. Further, sub-section (3) of section 12AA empowers the Commissioner of Income-tax/Director of Income-tax (Exemption) to cancel registration already granted if subsequently, on the basis of information available, he is satisfied that either activities of the trust ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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