NURTURE vs. CIT (EXEMPTIONS),

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ITA 102/PAT/2016Status: DisposedITAT Patna16 March 20186 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that registration of the trust deed under the Indian Registration Act is not mandatory. It also clarified that at the stage of registration, the CIT(E) should verify the genuineness of the trust and its activities as per its objects, not the application of funds or the nature of income derived.

What were the facts?

The assessee trust challenged the CIT(E)'s refusal to grant registration under Section 12AA of the Income-tax Act. The CIT(E) denied registration primarily because the trust deed was not registered under the Indian Registration Act and the trust received grants-in-aid.

What were the issues?

Whether registration of a trust deed under the Indian Registration Act is a prerequisite for obtaining registration under Section 12AA, and whether receipt of grants-in-aid is a valid ground for rejecting such registration.

Which sections of the Income-tax Act were involved?

Section 12AA

AI-generated summary — verify with the full judgment below

IN THE INCOME TAX APPELLATE TRIBUNAL PATNA BENCH, PATNA Before Sh: N_ K. Saini, AM and Sh. Sudhanshu Srivastava, JM ITA No: 102/Pat./2016, Asstt: Year : Nurture-A development initiative, Old Purulia Road, Jesu Bhawan, Mango Jamshedpur: (APPELLANT) PAN No. AABTN5353L Vs Commissioner of Income Tax (Exemptions), Patna (Bihar) RESPONDENT) Assessee by :Shri Ashish Kr: Agrawal Adv. Revenue by Smt: Archana Sinha, Sr: S.C: Date of Hearing 15.03.2018 Date of Pronouncement : 16.03.2018 ORDER Per Sudhanshu_Srivastava_JM: This appeal has been preferred by the assessee and challenges the action of the Ld. CIT(E) in refusing to grant registration u/s 12AA of the Income-tax Act; 1961 (hereinafter referred to as "the Act") , to the assessee trust vide the impugned order dated 14.07.2016_ 2 The Ld _ AR submitted that the Ld_ CIT (E) has denied the benefit of registration to the assessee trust on the ground that the trust deed was not registered under the Indian Registration Act. It was also submitted that another reason for rejecting the assessee $ 2 ITA No. 102/Pat /2016 application for registration was that the assessee trust had received grant-in-aids from Government Authorities The Ld. AR submitted that it was not mandatory for a trust to register the trust under the Indian Registration Act. Our attention was drawn to Rule 17A of the Income- Tax Rules , 1962 and it was submitted that the same nowhere mentioned that the trust deed should be registered. The Ld_ AR also submitted that the Ld_ CIT (E) had not disputed the objects of the trust being charitable in nature_ It was prayed that the Ld. CIT (E) be directed to grant registration to the assessee trust. 3 In response, the Ld. Sr . Standing Counsel for the Department placed reliance on the order of the Ld. CIT (E) 4_ We have heard the rival submissions and have also perused the material on record. It is seen that the first reason cited by the Ld; CIT (E) for refusing registration was that the assessee trust was not registered under the Indian Trust Act. The Ld. AR has made reference to Rule 17 A of the Income-tax Act Rules in this regard and has submitted that there is no requirement for a trust to be created or established under an instrument: It follows 3 ITA No. 102/Pat./2016 from that that the registration under Indian Registration Act is not mandatory We agree with the contentions of the Ld_ AR in this regard and hold that as per the scheme of the Act and the Rules it is not necessary that the trust should be registered under the Indian Trust Act: On this issue, we find support from order of the ITAT Cochin Bench in the case of Merciful Jesus Church VS. CIT reported 160 ITD 42 (Coc.) The relevant observations of the ITAT Cochin Bench are contained in paragraphs 6 and 7 of the said order and same are being reproduced here for ready reference: "We have heard the rival submissions and perused the material on record: The issue for our consideration is whether execution of a formal deed of trust is necessary for granting registration u/ s 12A of the IT Act: Rule 17A of the Income tax Rules 1962, deals with the procedure for application for registration of charitable/ religious trust of institution u/ s12A of the Act. Rule 17A of the IT Rule, 1962 read as follows: (17A. An application under {clause (aa) of sub.sec(l)} of section 12A for registration of a charitable or religious trust or institution shall be made in duplicate in Form no.10A and shall be accompanies the following documents namely: (a) where the trust is created, or the institution is established, under an instrument; the instrument in original, together with one copy thereof; and where the trust is created, or the institution is established, otherwise then under an instrument; the document ITA No. 102/Pat /2016 evidencing the creation of the trust or the establishment of the institution, together with one copy thereof; Provided that if the instrument or document in original cannot conveniently be produced, it shall be open to Commissioner to accept a certified copy in lieu or the original; (b) Where the trust or institution has been in existence during any year or years, prior to the financial year in which the application for registration is made, two copies of the accounts of the trust or institution relation to such prior year 0r years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up.)"

7.

A plain reading of Rule 17A makes it clear that a religious or charitable organization can be an institution other than a 'trust' . The usage of the words "charitable or religious trust or institution- in the first and second limb of the rule 17A connotes that; where the Trust is created or institution is established, under an instrument; the instrument in original together with a copy thereof; has to be filed along with the prescribed form no.10A for registration. However; the second limb of Rule 17A provides that where the Trust is created or the institution is established; otherwise than by an instrument; the document evidencing the creation of the trust or the establishment of the institution, together with one copy of thereof; has to be filed along with the application in form 1OA for registration of the institution/ trust u/ s 12A. Thus, the applicable Rule 17A itself provides that it is not even necessary that the institution/ trust should be established under an instrument: What is required is only a document evidencing the creation of the Trust or the establishment of the institution together with a copy thereof:' 5 ITA No. 102/Pat./2016 4.1 The ITAT Cochin Bench went on to hold that it was not correct on the part of the Ld_ CIT (E) to deny registration for the reason that there was no instrument evidencing creation of the Trust. 4.2 The second objection of the Ld. CIT (E) in granting registration to the assessee trust is that the assessee trust is receiving grants- in-aid which cannot be treated as income of the assessee trust: In this regard, we are of the considered opinion that the Ld. CIT (E) has completely misinterpreted the duty cast upon him while examining the assessee' s application for registration. It is well settled law that at the time of registration, Ld_ CIT (E) has to verify whether the trust is genuine and whether the activities are as per the objects of the trust: The Ld. CIT (E), at the time f considering the application for registration u/s12AA of the Act, is not required to examine the application of funds and further is also not required to examine the nature of activities by which income is derived by the trust. A perusal of the impugned order shows that Ld. CIT (E) has not examined the objects of the trust: He has nowhere caused any enquiry into the objects of the trusts or the genuineness of the trust: Thus, it is ITA No. 102/Pat./2016 very much evident that the Ld: CIT (E) has not carried out the duty enjoined upon him with regard to the grant of registration u/s12AA of the Act. Under the circumstances we deem it expedient to restore the file to the office of the Ld. CIT (E) to adjudicate on the assessee 6 application for registration de novo after duly considering the objects of the trust. 5 In the result, the appeal of the assessee stands allowed for statistical purposes: (Order Pronounced in the Court on 16/03/2018) / N.K Saini) / (Sudhanshu Srivastava) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 16 /03/2018 S . sinha*

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