Issue : Whether a registered trust should wait to prove the AO by demonstrating the activity carried on as per its objectives or it can file the requisite documents for obtaining the registration under section 12AA.

DIT v. Foundation of Ophthalmic & Optometry Research Education Centre 2012 (8) TMI 77 (Del.) in which it was held as under :

“Denial of registration as charitable trust under Section-12AA (1)(B) – no charitable activity had in fact taken place since the society was a newly established one – Held that:- Considering the procedure for registration as lead in Section 12AA the statute does not prohibit or enjoin the Commissioner from registering Trust solely based on its objects, without any activity, in the case of a newly registered Trust. The statute does not prescribe a waiting period, for a trust to qualify itself for registration.

Issue : Whether the Trust can pay an amount as advance to acquire leasehold rights and the same is treated as application of income of the trust.

Nadigar Sangam Charitable Trust V. Asst DIT Exemptions IV Chennai. Feb 2019

The leasehold rights paid by a trust to acquire a leasehold right in an auditorium shall be considered as applied during the said year when such advance amount is paid for such purpose. The same has to be treated as application of income and not as investment.

The meaning of the word applied is referred in the following cases.

Satya Vijay Patel Hindu Dharamshala Trust v. CIT (1972) 86 ITR 683 (Guj.),

Indian Molasses Co. (P.) Ltd. v. CIT (1959) 37 ITR 66.

CIT v. St. George Forane Church [1988] 36 Taxman 42/170 ITR 62

Issue : Whether the trust can apply for 80G along with 12A. 

If the activities of the assessee trust are genuine at the stage of commencement of the institution, registration has to be granted and approval under section 80G of the Act can be followed with grant of registration.

Keshar Devi Godara Samajik Kalyan Sansthan Singor v. CIT (Exemptions)

Chandrawati Devi Foundation Trust v. CIT (Exemption) [2015

Badri Narain Kantha Devi Katta Charitable Trust V.CIT Exem.Jaipur July 2019

It is pertinent to note that if there is a substantial gap between the registration under section 12AA and the application for approval under section 80G, then the mere grant of registration under section 12AA will not automatically create a right of getting approval under section 80G(5) of the Act but the ld. CIT (Exemptions) has to see whether the activity of the Trust has been carried out as per objects and for achieving the objects of the assessee trust.

In the case in hand, the assessee applied for registration under section 12AA as well as approval under section 80G(5) of the Act on the same date vide two separate applications both dated 15th February, 2018. Therefore, there was no new development to be verified by the ld. CIT (E) after grant of registration under section 12AA for the purpose of granting approval under section 80G(5) of the Act. Once the objects of the assessee trust are found to be charitable, then non-start of the activity by the assessee trust cannot be a reason for denial of approval when on the basis of same set of facts, the registration under section 12AA was granted by the ld. CIT (E)

Issue : Whether the deemed deduction under section 24 is allowed against the income earned on the property held under trust.

Santharam Bhat Charitable Trust V.CIT Mumbai. 2020

Even where the trust derives income from property or dividends, such income will be computed on actual commercial basis and not under provisions relating to income from house property or income from other sources. Hence the deduction under section.24 towards the repairs @30% shall not be available for the income from the property held under trust. Hence the total income received from the property held by the trust to be considered however the actual expenditure incurred towards repairs and maintenance incurred for earning the income from the property are allowed as deduction.

CIT vs. Programme for Community Organization [2001] 248 ITR 1 (SC)

CIT vs. Rao Bahadur Calavala Cunnan Chetty Charities [1982] 135 ITR 485 (Mad)

Nandalal Tolani Charitable Trust V.ITO Mumbai 2019.

Issue : The provision of sec 11(3A) allows to revise purpose more than once provided the AO allows modification of the purposes for which the accumulation to be applied.

The CBDT Circular No. 204 dated 24.7.1976 also holds the same view in regard to AO’s role for allowing such application. The time-frame given to modify the purpose is not open-ended but would be valid upto the year in which the amount becomes taxable u/s 11(3)(c) of the Act. Thus, if the period expires, then the option to revise the purposes cannot be exercised.

Issue : Donation out of current income to another institution with religious objects cannot be considered as application of income for charitable purpose.

In other words, the charitable trust cannot donate to the trust which is formed for religious purpose.

CIT v. Dawoodi Bohara Jamat [2009]

Topic : Tribunal

Sub Topic : Powers of Tribunal

Issue : Whether the Tribunal shall have allow an additional ground to be raised during the proceedings.

Opinion : Yes the Tribunal will have the discretion to allow or not to allow a new ground to be raised.

National Thermal Power Co.Ltd V.CIT

CIT V.Cellulose Products Pvt Ltd.

CIT V.Karamchand Premchand P.Ltd.

CA K Balamurugan BSc.,LLB,FCA

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