Charitable trust–Registration under section 12AA–Rejected on the ground that trust formed to carry out CSR activities

section 12AA

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Nanak Chand Jain Charitable Trust v. CIT

Decision:    In assessee’s favour.

Charitable trust–Registration under section 12AA–Rejected on the ground that trust formed to carry out CSR activities

Facts:

Assessee-trust was started by M a limited company who in order to carry out its duties under the Corporate Social Responsibility (CSR), as provided under section 135 of the Companies Act, 2013 created this trust. The objects of the assessee trust were in the nature of eradicating hunger and poverty, promotion of education, promoting gender equality, etc. Apart from this it was also provided that the trust may carry on other activities as prescribed by the government. The registration under section 12AA was rejected on the ground that the assessee trust has been formed by M for the purpose of carrying out its CSR activities and a trust cannot be a direct recipient of money from a corporate as it is a profit making company.

Held:

A profit making Company can grant certain donation to the charitable trust, then how can the activities of the trust become not charitable with this act. The fact that the CSR expenditure was not allowable expenditure under section 37 was relevant only for the taxability of the company incurring such expenditure.CIT was empowered to satisfy himself only about two factors, i.e., the objects of the trust and the genuineness of the activities of the trust or institution and such powers does not extend to the eligibility of the trust/ institution for exemption under section 11 r.w.s 13 which falls in the domain of the AO. Once the CIT has not doubted about the genuineness of the activities of the assessee nor doubted its charitable object, his powers under section 12AA end.


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