Assessment Issues Cannot Block Charitable Trust Section 12AB Registration: ITAT Clarifies:

Assessment Issues Cannot Block Charitable Trust Section 12AB Registration: ITAT Clarifies The ITAT in a recent case had made it clear that any doubts about income or transactions can be examined later during assessment, but they cannot prevent registration. C. J. Mangaliwala filed the present appeal before the ITAT Delhi, challenging an order passed by the CIT(Exemptions), Chandigarh, on March 21, 2024. Through the impugned order, CIT(Exemptions) rejected the assessee's renewal application filed under section 12A(1)(ac)(iii) of the Act, claiming the trust’s activities were not fully genuine.

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The assessee is a public charitable trust set up in February 2005. The trust filed an application seeking registration under Section 12AA of the Act on September 28, 2016; approval was granted on the same day. The tax authorities noted that the main sources of the assessee are agricultural income, Dharamsala receipts, interest income from the bank, and rent. A building is owned by the assessee, which includes 10 shops in it, and they are all leased out. Additionally, the building includes six rooms and two halls and is also used as a Dharamshala. It spends money on its charitable objectives. The CIT noted some surplus income, land sales, cash deposits, and loans, which raised doubts about the trust’s genuineness.

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In conclusion to the aforesaid findings, the CIT rejected the assessee's 12A(1)(ac)(iii) renewal application, saying the assessee could not explain some transactions in full and also alleged the trust was not spending enough on charity. The aggrieved assessee, with the order of CIT, filed an appeal before ITAT. When the ITAT heard the arguments of the sides, it concluded that these concerns were matters for income assessment, not for deciding registration. Since the trust’s objectives are charitable and it was already registered under 12AA, the issues highlighted by CIT(A) to cancel its 12AB registration were not valid, and they cannot prevent the assessee from getting permanent registration. In the final decision, the tribunal allowed the assessee's appeal and directed CIT to approve the assessee's registration under Section 12AB.