21 November 2022


Income Tax Appellate Tribunal

ICRW Group Gratuity Trust Vs. CIT (Exemption)



Direct Taxation

Registration of the assessee trust cannot be rejected merely on basis that it is for the benefit of a restricted group of employees of the Company

In facts of present case, International Centre for research on Women Ltd. ('ICRW') is a non-profit organisation with the object of promoting social and economic development with women's full participation and is incorporated as a limited company under Section 25 of the Companies Act, 1956. This trust applied for online application before the Learned CIT(E) for seeking registration under Section 12AA of the Income Tax Act, 1961 (IT Act). The assessee filed trust deed and another documents as desired by the Learned CIT(E). After examination of objects of the trust, the Learned CIT(E) observed that trust's aims and objectives is only for the worker/employee of the 'ICRW' and does not appear to be for general charitable purpose. The Learned CIT(E) accordingly rejected the application of the registration under Section 12AA of the IT Act.

As per Section 12AA(1)(b) of the IT Act, for registering the trust or institution, the competent authority must satisfy about the object of the trust or institution and genuineness of its activities. As per Section 12AA(1)(a)(ii) of the IT Act, the competent authority may satisfy about the compliance of such requirement of any other law for the time being in force by the trust or institution, as material for the purpose of achieving its objects. In the case before present Tribunal, the application for registration under Section 12AA of the IT Act has been rejected by the appropriate authority on the ground that, object of the trust is only for the benefit of worker/employee of the company who has created the trust and does not appear to be for the general charitable cause.

In the case of Hiralal Bagwati Vs CIT, the trust was created for the benefit of employees of the 16 institutions with the object of providing aid in case of sickness and disablement. The Hon'ble High Court following the decision of Hon'ble Supreme Court in the case of Ahmedabad Rana caste Association held that, an object beneficial to a section of the public is an object of general public utility.

The registration of the assessee trust cannot be rejected merely on the ground that, it is for the benefit of a restricted group of employees of the company 'ICRW'. However, there is some merit in the argument of the Revenue that, trust has been engaged in discharging the statutory obligation of the company "ICRW' of making gratuity payment to their employees. But in this regard, the competent authority has not examined the activities actually carried out by the trust, sources of funds and how the same are distributed to the employees, whether by way of creating the trust, the company is getting some benefit of saving of money, whether any activity of welfare of the employees other than making gratuity payment has been carried out by the trust etc. The assessee has also not filed any information with regard to its activities. Issue restored back to the Learned CIT(E) for re-examination of the application of the assessee trust as per the provisions of the law. Adequate opportunity of being heard shall be provided to the assessee. The grounds of the appeal of the assessee are allowed for statistical purposes. The appeal of the assessee is allowed for statistical purposes.

Tags : Registration Trust Eligibility

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