Hardayal Charitable & Educational Trust v. Commissioner of Income Tax

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The Tax Publishers2013 TaxPub(DT) 1480 (All-HC) : (2013) 052 (I) ITCL 0400 : (2013) 355 ITR 0534 : (2014) 271 CTR 0599 : (2013) 214 TAXMAN 0655 : (2013) 092 DTR 0320 INCOME TAX ACT, 1961 --Charitable trust--Registration under section 12AANon-commencement of charitable activity--During registration proceedings it was observed by Commissioner that assessee was established with object of establishment and maintenance of school, college and institution for imparting education in different fields/subjects for poor and destitute. However, it was noted by Commissioner that assessee had not commenced yet its charitable activity. He, thus, refused registration to assessee-trust. *Held:* Not justified. At time of enquiry for granting registration, it would be restricted to genuineness of objects and not commencement of activities, unless such activities have been commenced by assessee-trust. At the time of registration under section 12AA, which is necessary for claiming exemption under sections 11 and 12, the Commissioner is not required to look into the activities, where such activities have not or are in the process of its initiation. Where a trust, set up to achieve its objects of establishing educational institution, is in the process of establishing such institutions, and receives donations, the registration under section 12AA cannot be refused on the ground that the Trust has not yet commenced the charitable or religious activity. Any enquiry of the nature would amount to putting the cart before the horse. At this stage only the genuineness of the objects has to be tasted and not the activities, which have not commenced. The enquiry of the Commissioner at such preliminary stage should be restricted to genuineness of the objects and not the activities unless such activities have commenced. The Trust or society cannot claim exemption, unless it is registered under section 12AA and thus at that such initial stage the test of the genuineness of the activity cannot be a ground on which the registration may be refused. [Para 21] It is not denied that for subsequent year the appellant has been granted exemption under section 12AA and has also been approved under section 80G, subject to certain conditions. If the Commissioner was satisfied with the genuineness of the objects of the trust for the subsequent assessment year, the refusal of the registration for the previous assessment year 2011-12 was not justified. [Para 22] The question of the exemption of the application of income received by way of donation, is a separate issue and which may be required to be considered, when the return is filed by the Trust and is examined by the Income Tax Officer. The question as to whether the donations by the societies was the expenditure of the Trust for charitable and religious purposes will be examined at the time of examining the return. [Para 23] In the result, the income-tax appeal is allowed. [Para 24] Income Tax Act, 1961 Section 12AA In the Allahabad High Court Sunil Ambwani & Bharat Bhushan, J.J. Hardayal Charitable & Educational Trust v. CIT IT Appeal No. 107 of 2012 SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 1480 (All-HC) : (2013) 052 (I) ITCL 0400 : (2013) 355 ITR 0534 : (2014) 271 CTR 0599 : (2013) 214 TAXMAN 0655 : (2013) 092 DTR 0320

INCOME TAX ACT, 1961

--Charitable trust--Registration under section 12AANon-commencement of charitable activity--During registration proceedings it was observed by Commissioner that assessee was established with object of establishment and maintenance of school, college and institution for imparting education in different fields/subjects for poor and destitute. However, it was noted by Commissioner that assessee had not commenced yet its charitable activity. He, thus, refused registration to assessee-trust. Held: Not justified. At time of enquiry for granting registration, it would be restricted to genuineness of objects and not commencement of activities, unless such activities have been commenced by assessee-trust.

At the time of registration under section 12AA, which is necessary for claiming exemption under sections 11 and 12, the Commissioner is not required to look into the activities, where such activities have not or are in the process of its initiation. Where a trust, set up to achieve its objects of establishing educational institution, is in the process of establishing such institutions, and receives donations, the registration under section 12AA cannot be refused on the ground that the Trust has not yet commenced the charitable or religious activity. Any enquiry of the nature would amount to putting the cart before the horse. At this stage only the genuineness of the objects has to be tasted and not the activities, which have not commenced. The enquiry of the Commissioner at such preliminary stage should be restricted to genuineness of the objects and not the activities unless such activities have commenced. The Trust or society cannot claim exemption, unless it is registered under section 12AA and thus at that such initial stage the test of the genuineness of the activity cannot be a ground on which the registration may be refused. [Para 21] It is not denied that for subsequent year the appellant has been granted exemption under section 12AA and has also been approved under section 80G, subject to certain conditions. If the Commissioner was satisfied with the genuineness of the objects of the trust for the subsequent assessment year, the refusal of the registration for the previous assessment year 2011-12 was not justified. [Para 22] The question of the exemption of the application of income received by way of donation, is a separate issue and which may be required to be considered, when the return is filed by the Trust and is examined by the Income Tax Officer. The question as to whether the donations by the societies was the expenditure of the Trust for charitable and religious purposes will be examined at the time of examining the return. [Para 23] In the result, the income-tax appeal is allowed. [Para 24]

Income Tax Act, 1961 Section 12AA

In the Allahabad High Court

Sunil Ambwani & Bharat Bhushan, J.J.

Hardayal Charitable & Educational Trust v. CIT

IT Appeal No. 107 of 2012