CIT(E) Rejects Trust's Registration over limited review of objectives: ITAT orders Fresh Consideration [Read Order]

The Surat Bench of Income Tax Appellate Tribunal (ITAT)  ordered fresh consideration of an application for registration under Section 12AB of the Income Tax Act,1961, following the rejection of the registration by the Commissioner of Income Tax(Exemption)[CIT(E)] on grounds of limited review of the trust’s objectives.

Shree Machhi Mahajan Sports and Cultural Association,appellant-assessee,filed an application for registration under Section 12AB of the Act on 30/11/2023. The CIT(E) issued notices on 19/03/2024 and 13/05/2024, seeking explanations and audited accounts for FY 2022–23.

In the show-cause notice dated 13/05/2024, the CIT(E) observed that the trust’s objectives were charitable but restricted to its members and not for the public at large. Based on this, the CIT(E) held that the objectives did not meet the definition of "charitable purposes" under Section 2(15) of the Act.

The CIT(E) also noted that no response was filed to the notice and, referring to a Punjab & Haryana High Court decision, denied the registration under Section 12AB and canceled the provisional registration under Section 12A(1)(ac)(iii) of the Act.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

Aggrieved by this order, the assessee filed an appeal before the tribunal.

The tribunal reviewed the submissions, the CIT(E)’s order, case laws cited by the appellant, and the evidence provided. It noted that the CIT(E) rejected the application, stating that the trust’s objectives, while charitable, were limited to benefiting a specific community or its members.

Referring to the High Court’s decision in CIT vs. Jamiatul Banaat Tankaria, it held that this reasoning was incorrect, as Section 13(1)(b) applies during assessment under Section 11, not during registration under Section 12A/12AB.

The appellate tribunal also found that the CIT(E) had not fully examined the trust’s objectives and activities, focusing only on certain clauses rather than the entire memorandum of association.

The two member bench comprising Pawan Singh ( Judicial Member ) and Bijayananda Pruseth ( Accountant Member ) set aside the order and sent the matter back to the CIT(E) for fresh consideration of the application under Section 12AB.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

It directed the CIT(E) to review all objectives and activities, consider the cited decisions, and provide the assessee an opportunity for a hearing and to submit additional evidence, if necessary.

In short,the appeal filed by the assessee was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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