Order under section 254(1) of Income Tax Act

PER PAWAN SINGH, JUDICIAL MEMBER:

1. This appeal by the assessee is directed against the order of ld. Commissioner of Income Tax (Exemption), Pune [for short “CIT(E)”], in rejecting the application for registration of trust u/s. 12AB of the Income Tax Act, 1961 (the Act), in order dated 23.12.2024.

2. Rival submissions of both the parties have been heard and record perused. The ld. Authorised Representative (AR) of the assessee submits that the assessee is a charitable trust/institution and engaged in the charitable activities. The assessee filed an application for registration of trust u/s. 12AB, in form 10AD on 28.06.2024. Along with the application, the assessee furnished required details with necessary evidence. The application of assessee was rejected by ld. CIT(E) by taking view that assessee trust generated large surplus over last three financial years, which have not been utilized for charitable purposes. And that the assessee has significant surplus of Rs. 1.78 lakhs which were transferred to the balance sheet. The assessee failed to furnish adequate details and evidences for conducting charitable activities. The ld. CIT(E) also held that assessee trust failed to demonstrate genuine charitable activity of proper utilisation of its income for charitable purposes. The ld. AR of the assessee submits that assessee trust was set up for the purpose of performing charitable activities. Copy of trust deed was furnished. It is settled position in law that at the time of granting registration u/s. 12AB, the ld. CIT(E) is required to examine the object of trust and not the application of income which has to be seen by Assessing Officer (AO) on year to year basis on claiming exemption u/s. 11. The object of assessee is not doubted. The assessee is undertaking its activity in furtherance of its object. Hence, the assessee was eligible for availing registration u/s. 12AB of the Act. The ld. AR of the assessee further submits that Hon’ble Apex Court in Anand Social and Education Trust vs. CIT [426 ITR 340/[2020] 114 taxmann.com 693 (SC)], held that even without any activities having been undertaken by the trust, it is possible to consider whether trust could be registered u/s. 12AA. Further, in CIT vs. International Healthcare Education and Research Institute in Civil Appeal No. 19528/2018, the Hon’ble Apex Court held that mere registration u/s. 12AA automatically does not entitle in charitable trust to claim exemption u/s. 10 and 11 of the Act. When return is filed by the assessee trust claiming exemption, it is for the AO to look into all the material and set aside itself whether exemption has been claimed genuinely or not. If the AO is not convinced, it is always open for him to decline grant of exemption. The ld. AR of the assessee reiterated that application of income has to be examined by AO on year to year basis while allowing exemption u/s. 11 of the Act. The ld. AR of the assessee submits that in view of the decision relied by him, the ld. CIT(E) may be directed to allow registration u/s. 12AB and also to restore provisional registration till passing final order.

3. On the other hand, ld. Commissioner of Income Tax- departmental representative (CIT-DR) for revenue supported the order of ld. CIT(E). The CIT-DR for the revenue submits that at the time of registration of assessee trust u/s. 12AB of the Act, the ld. CIT(E) is entitled to seek details on objects and the activities carried out by the assessee. The ld. CIT(E) in his order clearly held that assessee was having sufficient surplus which was not incurred on the activities. The ratio decisions relied upon by ld. AR of the assessee is not applicable on the facts of the present case.

4. We have considered the rival submissions of both the parties and have seen the order of ld. CIT(E). We find that while examining the application of assessee, the ld. CIT(E) recorded that no charitable activities have been carried out by assesse