The Income Tax Appellate Tribunal, Chandigarh has recently ruled that an application filed by the assessee u/s 12A cannot be rejected on the ground that the assessee has not filed returns for the previous years. The brief facts of the case are given below.
The assessee, Shri Shirdi Sai Darbar Charitable Trust (Dharamshala), Barnalafiled an application u/s 12A of the Income Tax Act, 1961 before the Commissioner of Income Tax (Exemptions). The Commissioner rejected the application on the ground that the accounts of the trust are not reliable since they have not filed returns for the earlier years. Further, as per clause-12 of the Memorandum of the trust, absolute powers were given to the trustees to manage the property of the trust which may attract the provisions of section 13(1) (c) of the Act. The assessee approached the ITAT, Chandigarh challenging the said order.
The ITAT took a view that failure on part of the assessee to file income- tax returns in the earlier years cannot be considered as a valid ground for rejecting application for registration since the two conditions which the Commissioner of Income Tax (Exemptions) has to satisfy while granting the registration under section 12A of the Act, are that the objects of the assessee are charitable in nature and the activities are genuine. It was observed that just because the assessee has not filed its income tax returns in earlier years, it cannot be said that the activities of the assessee are not genuine.
Regarding the second contention it was observed that as per clause-12 of the Memorandum of trust, the trustees have been given absolute powers to manage the property. As per clause-12 of the Memorandum of the trust, the trustees are authorized to demise the immovable property or properties of the trust either from year to year or for any fixed term or for any term of years or no monthly basis at such rent and subject to such conditions as they deem fit and proper and also accept surrender of lease and may manage the property as they think proper.The members of the Tribunal, in this regard, expressed that “We do not find anything wrong in this clause so as to deny the assessee the registration under section 12A of the Act. As regards the apprehension of the Commissioner of Income Tax (Exemptions) that his clause may attract the provisions of section 13(1) (c) of the Act. We are of the view that the conditions as provided in section 13 or elsewhere are to be seen by the Assessing Officer at the time of assessment proceedings on yearly basis and not by the CIT (Appeals) while granting registration under section 12A of the Act.”
The Tribunal further held that Section 13 comes into play at the time of granting exemption under section 11 of the Act and not at the time of granting registration under section 12A of the Act. The only two requirements as stated hereinabove while granting registration under sect ion 12A of the Act,are with respect to the char i table nature of the objects of the assessee and genuineness of the activities. On this basis, the Tribunal directed the Commissioner to grant registration under section 12A of the Act to the assessee.
Read the full text of the order below.
