THE ROTARY MEGAPOLIS FOUNDATION,NEW DELHI vs. CIT (EXEMPTION), NEW DELHI

That on facts and circumstances of the case, the order passed by the Ld. CIT - Exemption is bad both in the eyes of law and on facts.

Briefly stated the facts necessary for adjudication of the controversy at hand are : the applications moved by the assessee company in Form No.10A and 10G for registration under section 12AA of the Income-tax Act, 1961 (for short ‘the Act’) and approval u/s 80G of the Act respectively have been rejected by the ld. CIT on the grounds that the nature of the Trust in question is against the norm and character of a charitable organisation; that all same for personal benefits and the donors would be controlling the function of the Trust at their own wishes and objects; and that the balance sheet filed by the Trust is unsigned and is not containing the detailed list of donors.

Feeling aggrieved, the assessee company has come up before the Tribunal by challenging the impugned order passed by ld. CIT by way of filing the present appeals.

We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.

Undisputedly, the assessee has produced before ld. CIT (Exemptions) the Trust Deed, bank statement, copy of provisional accounts, original vouchers related to expenses on charitable activities. The assessee has constituted a Trust vide Trust Deed containing comprehensive object clause with main objects as under:-

The ld. CIT (Exemptions) declined the registration and approval u/s 12AA and 80G of the Act to the assessee by picking up the three clauses of the Trust Deed which are as under :-

POWER TO MODIFY THE TERMS OF THE TRUST IN THE INTEREST OF BENEFICIARY: The Trustees appointed in this deed will have the power to modify the terms of the Trust as they deem fit to keep the interest of the beneficiaries always in their mind. Whenever such modification is proposed,

Bare perusal of the aims and object of the Trust constituted by the assessee leads to the conclusion that the same has been established for rehabilitation of slum and street children; to set up orphanages and old age homes; providing education to the weaker sections of the society, rehabilitation of handicapped persons and grant of scholarships to the deserving students, etc.

The ld. CIT (E), without examining the aims and objects of the assessee Trust, picked up three clauses from other objects centralizing powers of the Board of Trustees to start, discontinue, abolish and restart any charitable institution and to impose any condition to any subscription or donation and that it may also join, cooperate and amalgamate the Trust with any Trust or institution having similar objects and having powers to modify the terms of the Trust in the benefit of the beneficiaries.

The ld. CIT (E) has also pointed out that the balance sheet placed on file by the assessee is unsigned and detailed list of donors has not been submitted nor the detailed notes on its activities have been filed. We are of the considered view that when the assessee has categorically brought on record the activities being carried out in order to achieve objects of the Trust vide letter, available at pages 15 & 16 of the paper book, along with annual report, available at page 18 of the paper book, showing the detailed notes on its activities, the registration u/s 12A cannot be declined on the basis of mere conjectures particularly when aims and objects of the assessee Trust are categoric one and they have already hired

Furthermore, when we examine the clauses 15.2 & 15.3 of the Trust Deed again it goes to prove the Board of Trustees shall spend each and single penny in furtherance of the cause of main objects of the assessee Trust and they will maintain the true and accurate accounts which would otherwise be subject to the scrutiny at the time of assessment of the assessee Trust in every assessment year. So, all aims and objects enshrined in the Trust Deed need to be read as a whole to work out if the Trust has been established to carry out the charitable activities.

So far as question of complete list of donors by the assessee is concerned, the same is otherwise required at the time of assessment and not at the time of registration u/s 12A of the Act.

Ld. CIT (E) was only required to firstly satisfy himself if the Trust has been established for charitable activities and its activities Act. Moreover, in the instant case, the CIT (E) has not given any contrary observation that the assessee Trust’s activities are not genuine rather he has declined the registration u/s 12A and approval u/s 80G merely on the ground that Board of Trustees having absolute powers which, to our mind, are to be examined in the light of the activities being carried out and to be carried out by

Hon’ble Allahabad High Court in case cited as CIT (E) vs. Yamuna Expressway Industrial Development Authority – (2017) 395 ITR 18 (All.) while discussing the scope of sections 11 & 12 of the Act has held that it is not within the purview of Commissioner to examine whether the assessee was entitled to exemption u/s 11 or 12 since that was within the jurisdiction of AO and not the Commissioner (E). Hon’ble High Court further held that, “A body or institution which is functioning for advancement of objects of general public utility and whose activities are not in the nature of trade, business or commerce or sheer profit making, is entitled to claim itself to be constituted for "charitable purposes" and seek registration under section 12A(1) of the Income-tax Act, 1961. Charitable purpose primarily means that the predominant object must be to promote welfare of general public. An ancillary would not render such institution "non-charitable".

In view of what has been discussed above, we are of the considered view that the assessee Trust having been constituted to carry out the charitable activities is entitled for registration u/s 12AA of the Act and consequent approval u/s 80G but the ld. CIT (E) has erred in declining the registration u/s 12AA of the Act on the basis of conjectures and surmises that the Trust can be utilized for personal benefits of the Trustee which could be even commercial in nature without having any material on file in this regard, which is not sustainable in the eyes of law. Consequently, appeals filed by the assessee are allowed directing the ld. CIT (E) to provide registration u/s 12AA to the assessee and also to grant consequent approval u/s 80G of the Act. Order pronounced in open court on this 30th day of November, 2018.