R.C. Sharma, Accountant Member - This is an appeal filed by the assessee against the order of the Director of Income-tax (Exemption) dated December 21, 2012 for the assessment year 2012-13, in the matter of order passed under section 12AA(1)(b)(ii) read with section 12A of the Act, declining the registration under section 12A of the Act.
2. Rival contentions have been heard and record perused. The assessee-trust has filed an application for registration under section 12A of the Income-tax Act, 1961 in the prescribed Form No. 10A on June 4, 2012. The trust has been constituted by a deed of trust dated September 10, 2011. It has been registered with the Charity Commissioner, Mumbai on February 15, 2012 while deciding registration under section 12AA. The Director of Income-tax (Exemption) observed as under :
"3. As per the provisions of section 12AA(1)(b), a trust is to be granted registration if the Commissioner is satisfied about the objects of the trust and the genuineness of its activities. Both these requirements are cumulative and not alternative. If either of these conditions is not satisfied, the applicant will not be entitled to registration. A perusal of the trust deed reveals that the applicant trust has charitable as well as non-charitable/business objects such as the following :
'E. To create a culture among the elite class of the society for considering work of art an asset that can be passed on to the next generation with pride and prestige.
F...... to convert plays into...... episodes on TV......
H. to conduct classes or courses for the development of dramatic arts, including acting, stage settings and decorations, face painting and make up.
M. to produce documentary films on social and cultural subjects and to exhibit them through T.V. or......
N. to establish a mini academy to carry out any one or more of the abovementioned objects.
S. to open, establish, maintain........ Industrial homes and institutions.
AG to establish, maintain........ public hall or gallery for...... means of public recreation.
AJ......... to encourage promotion of....... sports, games and health science by establishing, maintaining........ gymnasiums......... recreation centres health centres.'
Further, as per clause 4 at page 4 of the trust deed, the trustees shall apply the income or any part of the corpus of the trust fund for all or any of the objects as they may in their absolute discretion think fit from time to time. In other words, the trustees enjoy full discretion to apply the income of the trust towards attainment of anyone or more of its objects including non-charitable ones and there is no binding legal obligation on them to apply such income/trust funds solely for charitable purposes. In this connection, the applicant vide letter dated November 16, 2012 submitted that there was no element of commerce involved in the above objects and that the beneficiaries of all the above activities were general public without any distinction of religion, colour, class or creed. It is argued that if these objects were commercial in nature, the Charity Commissioner would have asked the applicant to delete the same. It is submitted that in fact trustees will have to spend the time and money on the activities to achieve the objects of the trust rather than carry out any commercial activities."
3. Accordingly, the assessee's claim of registration was declined. Against the above order of the Director of Income-tax (Exemption), the assessee is in further appeal before us.
4. We have considered rival contentions, carefully gone through the order of the Director of Income-tax (Exemption) and found that registration was declined on the plea that the trustees enjoy full discretion to apply the income of the trust towards attainment of anyone or more of its objects including non-charitable ones and there is no binding legal obligation on them to apply such income/trust funds solely for charitable purposes. We had carefully gone through the various object clause in the trustee deed and especially the object clause highlighted by the Director of Income-tax (Exemption) at page 1 of his order, however, nowhere we found that any of the object of the trust was for non-charitable one. The decisions cited by the learned Departmental representative are distinguishable on facts, in so far as all the objects of the trust was charitable in nature, genuineness of its activities were not in doubt. It is also pertinent to mention here that at the time of registration under section 12A, the Commissioner of Income-tax is required to verify the objects of the trust and genuineness of its activities. If the objects of trust are charitable and its activities are genuine, the registration is to be granted. If subsequently it is found that the assessee is not following its objects or that the objects are not charitable or its activities are not genuine then during the course of assessment, the Assessing Officer has all the powers to tax such receipts of the trust which are not charitable or commercial in nature or to apply the provisions of section 13 of the Act so as to exclude income from properties held under a trust for private religious purposes which does not enure for the benefit of the public. During the course of assessment, the Assessing Officer is also empowered to exclude such receipts/income of the trust if he finds that any funds of the trust or institution are invested or deposited in any form or mode specified in sub-section (5) of section 11. The Assessing Officer is also empowered to exclude income of such trust from the provisions of exemption if he finds that such funds were utilised for benefit of any of the persons, who made substantial contribution to the trust or institution, any trustee of the trust or manager of the institution or any concern, in which any of the persons referred to in clauses (a), (b), (c) and (d) of the sub-section (3), has substantial interest. Furthermore, various clauses in the trust deed with regard to promotion of education, medical relief in no way amounts to carrying on of any business so as to deny the claim of registration under section 12AA.
5. In view of the above, we do not find any merit in the order passed by the Director of Income-tax (Exemption) declining the claim of registration under section 12A.
6. In the result, the appeal of the assessee is allowed.