TMI Blog2020 (1) TMI 1045X X X X Extracts X X X X X X X X Extracts X X X X ..... see-trust or its charitable objects is doubtful. Direction to grant exemption under section 12A of the Act to the assessee-company. - Decided in favour of assessee. - I.T.A. No. 181/Chd/2019 - - - Dated:- 20-12-2019 - N. K. Saini Vice-President And Sanjay Garg Judicial Member For the Assessee : Sudhir Sehgal , Advocate For the Department : G. S. Phani Kishore , Commissioner of Income-tax-Departmental representative ORDER SANJAY GARG (JUDICIAL MEMBER). - 1. The present appeal has been preferred by the assessee-trust against the order dated January 30, 2019 of the Commissioner of Income-tax (Exemptions), Chandigarh (hereinafter referred to as the CIT(E) ) agitating the denial of registration to the assessee-trust under section 12A of the Income-tax Act, 1961 (in short the Act ) as a charitable institution. 2. The assessee-trust in this appeal has taken the following grounds of appeal : 1. That the learned Commissioner of Income-tax (Exemptions), Chandigarh has erred in denying the registration under section 12A to the appellant-company by ignoring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Commissioner of Income-tax (Exemptions), Chandigarh has erred in not granting the approval under section 12A which is against the facts and circumstances of the case and evidences on record. 10. That the appellant craves leave to add or amend any of the grounds of appeal before the appeal is finally heard of disposed of. 3. The brief facts of the case are that the assessee-company filed an application with the learned Commissioner of Income-tax (Exemptions) for seeking registration under section 12A of the Act. The stated aims and objects of the assessee-company are to undertake, promote, support, aid, help, grant, directly or indirectly, activities related, to health and wellness, sports, entrepreneurial development/employment, educational, charitable, scientific, public welfare and skill training related objects, to seek, identify, evaluate, select and/or support causes relating to the welfare of public at large, animals and/or environment and organisations working for the welfare of public, animals and environment, and related matters, to promote the practice of giving, through promotions and campaigns including, but not limited to even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Private Ltd., to serve as an in-house captive company osten sibly for doing corporate social responsibility activity so that the amount, which is compulsorily to be spent by the parent company remains within their control. The attempted task is (i) to create a company which in the present case is controlled by Round Glass Wellbeing Private Ltd., (ii) seek exemption from taxation by taking recourse to purported charitable activity under section 2(15) of the Income-tax Act, and (iii) to retain control over money, invested in a closely held company, that has otherwise been precluded from being claimed as business expenditure by the Finance (No. 2) Act of 2014. 10. In view of the above it is safe to conclude in the present case (i) that the main aim appears to be forming a company merely for com plying to corporate social responsibility requirements by the holding company, (ii) that the applicant-company has been stated to be formed to implement the corporate social responsibility activities of the financing/parental company, (iii) that the composition of the applicant-company is restrictive and to that extent not amenable to public charity, (iv) that additionally, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is pertinent to note that the reasons (i) and (ii) given by the Commissioner of Income-tax (Exemptions) is that the main aim appears to be forming a trust merely for complying with corpo rate social responsibility requirements. When a trust is created for the purpose of carrying out corporate social responsibility activities, the registration under section 12AA of the Income-tax Act, 1961 cannot be denied. Vide notifications dated February 27, 2014 the Ministry of Corporate Affairs in the rules framed for the purpose of corporate social responsibility has implicitly provided for forming the dedicated trust under sub-rule (2) of rule 4. It has been stated as under : '(2) The board of a company may decide to undertake its corpo rate social responsibility activities approved by the corporate social responsibility committee, through the registered trust or a registered society or a company established by the company or its holding or subsidiary or associate-company under section 8 of the Act or otherwise.' Even the Companies Act provide for compliance with the corporate social responsibility provision through a dedicated trust or society. Just bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Exemptions) is not in conformity with any of the provisions of the Income-tax Act. A profit making company can grant certain donation to the charitable trust, how can the activities of the trust become not charitable with this Act. The fact that the corporate social responsibility expenditure are not allowable expenditure under section 37 of the Act is relevant only for the taxability of the company incurring such expenditure. From the perception of the assessee-trust the amount received as donation whether will it be eligible for exemption under section 11 depends on the application of such fund for the charitable activities by the trust only. The Commissioner of Income-tax is empowered to satisfy himself only about the two factors, i. e., the objects of the trust and the genuineness of the activities of the trust or institution and such powers does not extend to the eligibility of the trust/institution for exemption under section 11 read with section 13 of the Income-tax Act, 1961 which falls in the domain of the Assessing Officer. Once the Commissioner of Income-tax has not doubted about the genu ineness of the activities of the assessee nor doubted its charitable objects, his ..... 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