The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) granted the trust registration under Section 12AA Income Tax Act, 1961 created to manage the legal responsibilities of the employees of the parent trust, which falls under the charitable activity.
The appeals filed by M/s International Centre for Research on Women (ICRW) Group Gratuity Trust and ICLEI South Asia Group Gratuity Trust against the order of the Commissioner of Income Tax (Exceptions) [CIT(E)] rejecting the application for registration under Section 12AA of the Income-tax Act were heard together. The bench has taken up the issue of the ICRW Group Trust with the consent of the both appellants.
The Appellant, M/s ICRW Group Gratuity Trust, is a non-profit organization registered under Section 25 of the Companies Act of 1956 with the purpose of advancing social and economic development with the full involvement of women.
On August 23, 2017, the trust submitted a request through the internet for registration under Section 12AA of the Income Tax Act to the CIT(E). As required by the CIT(E), the assessee submitted a trust deed along with other documentation.
After examination of the same, the CIT(E) observed that the trust’s aims and objectives were only for the workers/employees of the ICRW and did not appear to be for general charitable purposes and, accordingly, rejected the application.
The CIT(E) noted that there was no requirement of making contribution to the fund as a payment of entrance fee by the employees are mandated and it can be seen from the financial statements that the funds have instead been received by the assessee trust from International Centre for Research on Women, the parent trust.
Furthermore, the assessee trust is only acting as an agent to discharge the statutory liability of ‘ICRW’ of making gratuity payment to its employees. Also, despite specific show-cause notice issued by him, the assessee trust had not furnished any documentary evidence indicating the purpose of formation of its trust.
Accordingly, the CIT(E) concluded that the said purpose would not fall within the ambit of ‘charitable purpose’ as defined under the Section 2(15) of the income Tax Act and dismissed the application seeking registration under the Section 12AA of the Income Tax Act.
However, the bench noted that the CIT(E)’s arguments regarding the non-furnishing of documentary evidence were totally factually incorrect and contradictory with the impugned order because they had copied the assessee’s response to the show-cause notice he had issued.
The Two-bench tribunal consisting C.M. Garg and M. Balaganesh while granting the registration under the Section 12AA of the Income Tax Act held that any trust that has been created for the purpose of managing the statutory obligations of employees of the parent trust would certainly fall within the ambit of advancement of general public utility and, hence, to be considered as a charitable activity as defined under the Section 2(15) of theIncome Tax Act.
The same ruling is applicable to M/s ICLEI South Asia Group Gratuity Trust.
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