Section 12AA 80G5 charitable trust approval rejection on defective dissolution clause in the deed is beyond the scope of enquiry for grant of registration

INCOME TAX APPELLATE TRIBUNAL, KOLKATA ‘A’ BENCH, KOLKATA

I.T.A. Nos. 1456 & 1457/KOL/ 2015

RP-Sanjiv Goenka Group CSR Trust …. Appellant vs. CIT (Exemptions) …. Respondent

Date of Order: 04-03-2016

ORDER

Per Shri P.M. Jagtap :-

These two appeals filed by the assessee are directed against two separate orders passed by the ld. Commissioner of Income Tax (Exemptions), Kolkata both dated 30.09.2015, whereby he rejected the application filed by the assessee for grant of registration under section 12AA and consequently rejected the application of the assessee for grant of approval under section 80G(5)(vi).

2. The assessee in the present case is a Public Charitable Trust, which has been duly constituted under the Deed of Trust dated 07.02.2015. It filed an application with the Commissioner of Income Tax (Exemptions) for registration under section 12A in the prescribed Form No. 10A on 23.03.2015. The said application was, however, rejected by the ld. CIT(Exemptions) for the following reasons given in his impugned order passed under section 12AA of the Act:-

“On going through the Trust Deed submitted by the applicant Trust, dissolution clause was found to be as follows:-

“In case of dissolution of Trust, the remaining assets of the Trust, after meeting all the debts and liabilities, will be distributed and/or donated to such organisation(s), which are registered under section 12AA of the Income Tax Act, 1961”.

This clause does not mention about the majority who will decide the dissolution of trust. Hence the Deed of the Trust is found to be defective. Hence, I am not satisfied with the applicant Trust as genuine”. 

3. Consequently the ld. CIT(Exemptions) also rejected the application filed by the assesese for grant of approval under section 80G(5)(vi) of the Act vide a separate order passed simultaneously. Aggrieved by the orders of the ld. CIT(Exemptions), the assessee has preferred this appeal before the Tribunal.

4. We have heard the arguments of both the sides and also perused the relevant material available on record. As agreed by the ld. Representatives of both the sides, the issue involved in the appeal of the assessee relating to the grant of registration under section 12AA is squarely covered in favour of the assessee by the decision of Mumbai Bench of this Tribunal in the case of Tara Educational and Charitable Trust –vs.- Director of Income Tax (Exemptions) rendered vide its order dated 18.07.2014 in ITA No. 1247/Mum./2013, wherein the order of the ld. DIT(Exemptions) rejecting the application of the assessee for registration under section 12A for the similar reasons as given in the present case was set aside by the Tribunal with a direction to grant registration to the assessee under section 12A for the following reasons given in paragraph no. 4 of the order:-

“4. We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the application filed by the assessee u/s 12A of the Act has been rejected by the Id. DIT (Exemptions) mainly on the ground that the relevant Trust Deed does not contain the so-called “dissolution clause”. As per the provisions of section 11 & 12 of the Act, income derived from property held for charitable or religious purposes and income of Trusts or Institutions from contributions are exempt from tax provided such Trusts or Institutions are registered u/s 12A of the Act. The procedure for registration u/s 12A is prescribed in section 12AA of the Act which provides that the Commissioner, on the receipt of an application for registration of a Trust or Institution made u/s 12A, shall call for such information from the Trust/Institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the Trust/Institution and may also make such inquiries as deemed necessary on this behalf. It further provides that after satisfying himself about the objects of the Trust/Institution and the genuineness of its activities, the Commissioner shall pass an order in writing registering the Trust/Institution u/s 12A and if he is not so satisfied, he shall pass an order in writing refusing to register the Trust/Institution. The scope of enquiry contemplated u/s 12AA of the Act thus is limited to the extent of Commissioner getting himself satisfied about object of the Trust and the genuineness of its activities so as to grant or refuse the registration u] s 12A of the Act. A perusal of the impugned order of the Id. DIT (Exemptions), however, shows that he has not recorded any adverse comment or dis-satisfaction about the object of the Trust or genuineness of the Trust activities. He has refused to grant the registration u/s 12A of the Act on the ground that its Trust Deed does not contain “dissolution clause”. In our opinion, the Id. DIT (Exemptions) thus has clearly gone beyond the scope of enquiry contemplated u/s 12A of the Act and has refused to grant the registration u/s 12A of the Act to the assessee Trust on a totally irrelevant ground without pointing out as to how he was not satisfied either about the object of the Trust or the genuineness of its activities. We therefore set aside the impugned order of the Id. DIT (Exemptions) and direct that the registration u/s 12A of the Act as applied by the assessee Trust be granted”.

As the issue involved in the present case as well as the material facts relevant therein are similar, respectfully following the order of the Coordinate Bench of this Tribunal in the case of Tara Educational and Charitable Trust (supra), we set aside the impugned order of the ld. CIT(Exemptions) with a direction to grant registration to the assessee under section 12A. The ld. CIT(Exemptions) is also directed to grant approval to the assessee under section 80G(5)(vi) as a necessary corollary.

5. In the result, both the appeals of the assessee are allowed.

Order pronounced in the open Court on March 04, 2016.

(S.S. Viswanethra Ravi) Judicial Member (P.M. Jagtap)  Accountant Member

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