INCOME TAX TRIBUNAL’S ORDER LIKELY TO ENTHUSE TRUSTS

In what could be good news for trusts going in for registration with the Income-Tax department, the Income Tax Appellate Tribunal (ITAT) has ruled that the registration process would be deemed as complete if the application is not rejected by the authorities within a stipulated period of six months. Giving its ruling in the Devraha Baba Trust (DBT) case, the tribunal held that the I-T department could not reject registration of its application after the expiry of six months even if certain queries are raised before the expiry of the six-month period. “...it is mandatory for the CIT (Commissioner of Income-Tax) to dispose of the application for registration within six months from end of the month in which the application was filed,” ITAT’s order said. In the instant case, the CIT had refused registration to the trust after the expiry of six months even as it had initiated some enquiries within the stipulated period. On appeal by DBT against CIT’s decision, the tribunal said: “The orders [for acceptance or rejection by the CIT] have to be passed within the time limit prescribed and if not, the application should be deemed to have been granted.” At the same time, however, the ITAT also held that once registration is granted, “there is nothing in law to prevent the CIT from making his own enquiries even after the expiry of time limit and making use of the results thereof to cancel the registration...” Mandatory Under the I-T Act, it is mandatory for a trust that has been set up for charitable or religious purposes to get itself registered with the department to claim exemptions. Further enquiries As per the provisions of the Act, the I-T official is required to satisfy himself about the genuineness of the trust or institution before granting registration. For this purpose, the official is permitted under the law to call for information and documents and conduct further enquiries. – www.hindubusinessline.com