There is no requirement that an institution constituted for advancement of any object of general public utility must be registered as a trust for registration u/s 12AA

IN THE INCOME TAX APPELLATE TRIBUNAL, “G” BENCH, MUMBAI.
I.T.A No. 1937/ Mum/2009

Grameen Initiative for Women Vs DIT (E)

O R D E R

Per Pramod Kumar:

1. The short issue that we are required to adjudicate in this appeal is whether or not the Director of Income Tax (Exemption) was justified in declining the registration under section 12A of the Income tax Act, 1961 to the assessee- appellant. The impugned order so declining the registration was passed on 27.1.2009.
2. The short issue that we are required to adjudicate in this appeal is whether or not the Director of Income Tax (Exemption) was justified in declining the registration under section 12A of the Income tax Act, 1961 to the assessee- appellant. The impugned order so declining the registration was passed on 27.1.2009.
3. Briefly stated the relevant material facts are like this. The assessee moved an application, seeking registration under section 12A of the Act on 2.7.2008. In the proceedings which followed, one Ms Vinita Bhimbhat, Managing Trustee & Ms  Sucheta Shah, attended the proceedings before the DIT(E) and made submissions in supports of eligibility for registration, but, as noted by the Director of Income tax (Exemption), “failed to produce the certificate of Charity Commissioner”. This observation was made by the Director of Income Tax (E) in the background that the assessee is a company registered under section 25 of the Companies Act and the learned Director was of the view that the Charity Commissioner’s certificate was a condition precedent for the assessee being granted registration under section 12A as a charitable institution. It was in this backdrop and having noted that the assessee­ appellant has failed to file certificate of registration of the Charity Commissioner which, according to the Director, was a condition precedent for grant of registration under section 12A of the Act, the registration was declined to the assessee. In support of this action, reliance was also placed on the judgment of the Hon’ble Bombay High Court in the case of Bhraman Madhav Murthi Mandal vs Joint Charity Commissioner Maharashtra (1973) 43 Comp. case 361(Bom). The Director thus concluded as follows:

“It is amply clear in the light of above discussion the institution under discussion is liable for registration with charity commissioner, Maharashtra in order to be eligible for certification under section 12A of I.T.Act and in absence of charity commissioner’s certificate, the institution is not a genuine public trust to be eligible for registration 12A of the Income tax Act particularly in the light of the Hon’ble High Court decision that it would result in large scale evasion of the provisions of Public Trust Act.’

As per the provisions of section 12AA(1)(b), a Trust is to be registered if the Commissioner is satisfied about the objects of the Trust and the genuineness of its activities. The appellant has not complied properly with the requirements necessary for registration under section 12A of the Act. There is, thus, no material before me to satisfy myself about the genuineness of its activities the condition precedent to grant registration in this case is not satisfied. In view of the above, I refuse to register the applicant trust.”

3. The assessee is aggrieved and is in appeal before us.
4. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position.
5. The grievance of the assesse indeed deserves to be upheld. We find that so far as learned Director’s reliance in the case of Bhraman Madhav Murthi Mandal vs Joint Charity Commissioner Maharashtra (supra) is concerned, this judicial precedent only deals with the question as to whether a company, even if it owns property as a trustee in trust for a class of beneficiaries for public religious and charitable purposes, is required to be registered under Public Trust Act or not. That question obviously has no relevance to the inference drawn by the Director to the effect that the registration as a public trust is a condition precedent for grant of registration under section 12A of the Act. The judicial precedent relied upon by the Director is, therefore, wholly irrelevant in the present context. Quite to the contrary to the proposition so canvassed by the learned Director, Hon’ ble Bombay High Court has, in the case of CIT vs. Agriculture Produce and Market Committee and Ors v CIT(2 007) 291 ITR 419, having noted that the assesses before Their Lordships were companies incorporated under Section 25 of the Companies Act, observed that “the contention of the revenue that the assesses are not required registration as a trust and hence, not entitled for registration is also without any merit, because, there is no requirement under the act that the institution constituted for advancement of charity, must be registered as a trust”. The law, as explained by Their Lordships, thus is that incorporation under section 25 of the Companies Act does not bar an assesse being granted registration as a chartiable institution. Relying upon these observations of Hon’ble Jurisdictional High court, a co-ordinate Bench of this Tribunal in the case of Disha India Micro Credit vs CIT, (2011) TOIL 199 (Del) has observed as follows:

“24. The learned CIT has also given one more reason that it is not comprehensible as to why not the assessee got itself registered as a society, if the motive of the assessee was to do activities of public charity. This reason given by the CIT is found, in our considered view, to be improper. It is not necessary that in order to do public charity, any one association is to be registered as a society or a trust. In the case of CIT vs. Agricultural Produce and Market Committee (supra), the Hon’ble Bombay High Court – Nagpur Bench has held that there is no requirement under the Act that an institution constituted for advancement of any object of general public utility must be registered as a trust. Therefore, in the present case before us, mere because the assessee association is registered as company under sec. 25 of the Companies Act, that by itself cannot be a ground to refuse registration under sec. 12A/12AA of the Act. Thus, this ground of rejection of registration by the Commissioner of Income-tax, is also rejected.”

6. In view of the above discussion, it is clear that the objections of the Director are devoid of any legally sustainable merits. We, accordingly, reject the same and hold that the order of the DIT is devoid of any legally sustainable merits and, therefore, must be vacated.. We may also mention that in terms of requirements of form No.10-A, filed by the assessee under Rule 17A of the Income Tax Rules read with Section 12A of the Income Tax Act, the assessee has already filed instrument under which the institution was established i.e. Memorandum of Association and Articles of Association under which the assessee company was formed. Learned Director has not pointed out any reasons to doubt that the objective of the assessee company set up as a non-profit making company under section 25, are not charitable in nature, not bonafide, or not genuine.The only reason for which the registration was declined was on the ground that the assessee could not produce the certificate from the Charity Commissioner and that reason, as we have noted above, is not legally sustainable. In view of these discussions, and bearing in mind entirety of the case, we direct the learned Director to grant registration to the assesse appellant. The assesse succeeds in the appeal.
7. In the result, appeal is allowed in the terms indicated above.

Pronounced in the open court on 3rd May 2011.