INCOME TAX ACT, 1961

Section 12AA

Charitable trust - Registration under section 12AA - Denial of registration - Diversion of funds for personal purpose

Assessee-society applied for registration under section 12AA, which was rejected by CIT mainly on the ground that payment of rent of premises to related parties was not on pro rata basis though the premises were adjoining and the rent was being paid only to the office bearers of the society. Further, the rent agreement with the office bearers of the assessee did not provide for expenses on maintenance and taxes to be borne by the assessee, though the assessee incurred the expenses on the same and, therefore, it could be said that the funds of the assessee were being diverted for personal purpose of office bearers and families. However, Tribunal allowed the appeal of the assessee and directed the CIT to grant registration to it. Held: Section 12AA nowhere provides that CIT while considering the application for registration is also required to examine whether the income derived by the trust is being spent for charitable purposes or the trust is earning profit. Further, while considering the registration application, only the objects of the assessee were required to be seen. It was further, concluded that the issue regarding payment of rent to the members could be examined at the time of the assessment proceedings. In instant case, as there was no doubt about genuineness of objects of the assessee-society, the CIT was rightly directed to grant registration under section 12AA to the assessee.

REFERRED : CIT v. DPR Charitable Trust (2011) 16 DTR 410 Vidyadayani Shiksha Samiti v. CIT (E) ITA No. 309/Del/2016 DIT v. Venkatesh Education Society, High Court of Karnataka (2012) 82 CCH 309 Fifth Generation Education Society v. CIT, High Court of Allahabad 87 CIR (All) 169

FAVOUR : In assessee's favour

A.Y. :

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