12AA Registration cannot be denied to a Trust created for carrying out CSR Activities: ITAT [Read Order]

While hearing an appeal filed by M/s Nanak Chand Jain Charitable Trust, Delhi bench of Income Tax Appellate Tribunal (ITAT), last week, held that the registration under section 12AA of the Income Tax Act 1961 cannot be denied to a trust when it is created for the purpose of carrying out Corporate Social Responsibility (CSR) activities.

The assessee in the instant case is a trust started by the settler M/s. Veer Overseas Ltd. a limited company who in order to carry out its duties under the Corporate Social Responsibility (CSR), as provided under Section 135 of the Companies Act, 2013. The objects of the assessee trust are in the nature of eradicating hunger and poverty, promotion of education, promoting gender equality etc.

Apart from this, the Assessee carry on other activities prescribed by the Government in exercise of the powers conferred under certain clauses of the Companies Act 2013. During the year 2016, the Assessee Company filed an application before the CIT (exemption) for getting registration under section 12AA of the Act. However, the authority passed an order by rejecting the application filed by the Assessee for granting registration under the said section by holding that assessee trust has been formed by the settler M/s Veer Overseas Ltd. for the purpose of carrying out its CSR activities.

Aggrieved by the order passed by the authority the Assessee approached the Tribunal on appeal.

Before the bench counsel for the Assessee, Advocate Ved Jain and advocate Rano Jain submitted that as per the Companies Act, 2013 wherein under section 135 of the Companies Act, 2013, the Companies are allowed to settle a trust to carry out Corporate Social Responsibility (CSR) and for that the trust is formed by the assessee company and Income Tax Act also recognize the said Section of the Companies Act. The Counsel for the Assessee further submitted that moreover, objects of the trust are public charity only therefor; the Assessee is eligible to get registration under the aforesaid section.

After considering the above-narrated facts and circumstances, the Tribunal bench comprising of Judicial Member Suchitra Kamble and Accountant Member N.K.Saini observed that “When a trust is created for the purpose of carrying out CSR activities, the registration under section 12AA of the Income Tax Act, 1961 cannot be denied and the Ministry of Corporate Affairs in the rules framed for the purpose of CSR has implicitly provided for forming the dedicated trust under sub-rule 2 to rule 4”.

The division bench further held that “Even Companies Act provide for compliance of CSR provision through a dedicated trust or society. Just because the trust has been formed for complying CSR requirements it cannot per se be the reasons for denying registration under Section 12AA of the Income Tax Act”.

Allowing the appeal, the bench found that the activities of the Assessee are in the nature of public charity and the CSR activities itself are in the nature of public charity also.