Trust for benefits of particular community no ground to deny Registration u/s 12AA

Trust set up for providing benefits to a particular community no ground to  deny Section 12AA registration

ABCAUS Case Law Citation:
ABCAUS 3295 (2020) (04) ITAT

Important case law relied upon by the parties:
Leuva Patel Seva Samaj Trust
M/s Ananda Social & Educational Trust

In this case, the appellant assessee had filed the appeal before the ITAT against the order of the Commissioner of Income Tax (Exemption) denying    registration in proceedings u/s 12AA of the Income Tax Act, 1961 (The Act).

The assessee was a Trust who had applied to CIT(E) for registration u/s 12AA of the Act for getting its income exempt from income tax. However, The CIT (Exemption) declined the application for registration by his twin folded reasoning that the trust had been set up to provide benefits to only a particular community and therefore its activities could not be said to be genuine.

The Tribunal however did not find any merit in the findings of the CIT(E).

The Tribunal found that in a similar case, the Commissioner had declined Section 12AA Registration being prohibited under section 13(1)(b) of the Act. However the Hon’ble High Court had upheld the decision of the Tribunal reversing the order of the CIT(E). The Hon’ble High Court had held that the question of a trust set up for providing  benefits to a particular community is not a ground to deny section 12AA registration since the issue arises during the course of exemption proceedings u/s 11 only.

The Hon’ble High Court had stated that while considering an application for registration of a trust, the Commissioner must also make a clear distinction between the requirement of registration and the requirement for claiming tax benefit. The latter question falls squarely to be considered by the Assessing Office.

Further, in the instant case, the Tribunal further observed that on the aspect of non-genuine activities, the Hon’ble Supreme Court had held that only an assessee’s objects have be examined at the time of granting Section 12AA registration and not the activities

Accordingly, the Tribunal held that the assessee was entitled for the impugned Section 12AA registration and allowed the assessee’s appeal.

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