ITAT explains why charitable trust was deemed as registered

ITAT explains why charitable trust was deemed as registered

The Income Tax department wrongly assumed that the society was a commercial venture

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has ruled in favor of the assessee holding that the charitable trust was deemed to be registered under the Income Tax Act in the absence of refusal of registration within six months.

The appellant, a charitable society, is registered under the provisions of the Societies Registration Act, 1860. It is engaged in charitable works including maintaining and running a dharamshala for the benefit of the general public.

The assessee-appellant had filed its Income Tax Return (ITR) under the Income Tax Act, 1961 for the relevant assessment years as NIL income.

However, the income of the assessee for the Assessment Years 2008-09 and 2009-10 were reassessed at Rs.6,54,890 and Rs.7,67,320, respectively. For the remaining Assessment Years 2010-11, 2012-13, and 2014-15, the case of the assessee came up for scrutiny and the income was reassessed at Rs.11,27,795, Rs.10,99,430, and Rs.12,49,170, respectively.

The additions were made by disallowing the exemption and deeming the assessee as a non-registered charitable society under the IT Act, it was wrongly assumed that the society was a commercial venture.

The assessee pleaded before the Commissioner of Income Tax (Appeals), which submitted that it was incumbent upon the assessee to furnish the certificate of registration. He contended that for claiming exemption the assessee was required to get itself registered under the IT Act. He further said that a mere application was not sufficient for getting the exemption.

The department maintained that the assessee had failed to produce a copy of the application and other relevant supporting evidence. Therefore, the authorities were justified in rejecting its claim.

On the other hand, the assessee submitted that in the absence of any order of refusal of registration by the authorities, the charitable trust could be treated as registered.

The tribunal observed that the IT department had not placed any formal order regarding the refusal of the registration. It had also not rebutted the fact that the assessee was allowed the claim exemption up to the Assessment Year 2009-10. Moreover, the application of the assessee had been pending consideration as of July 1999 without any formal order of rejection or grant of registration.

ITAT stated that while the claim of exemption was allowed for many years, the IT department's officer had suddenly woken up from slumber and issued a notice.

The single bench of Judicial Member Sri Kul Bharat held that the revenue department had been treating the income of the assessee as exempt as it was a charitable society. "Under this peculiarity of facts and circumstances and also relying on the judgment of the Supreme Court in a previous case, the action of the assessing officer was not justified," he said.