2018 (2) TMI 43 - AT - Income Tax

Non granting of approval for registration u/s 12AA - proof of charitable activities - Held that - We observe that CIT rejected the application u/s 12AA on the premise of his observation that the society is running for profit motive and not providing charitable services. The society is registered by the M.P. State Government under the gazette notification placed and the society is an university running under the approval of the M.P. State Government. This fact is not disputed by Revenue. We agree to the fact that some of the details which were called for by CIT were not provided by the assessee during the course of proceedings. Further CIT has made specific observation about the application of income towards the cost of its assets but merely for applying the surplus from activities carried out during the year towards investment in fixed assets, per se, cannot prove that the assessee is not engaged in charitable activities. We observe that CIT has rejected the application u/s 12AA without considering relevant facts, financial statements, gazette notification of State Government and examining the activities carried out by the assessee in detail. Both the 4 parties have no objection if the issue raised in this appeal is remitted back to the file of the CIT for de novo adjudication. - Decided in favour of assessee for statically purposes.

Summary

Issues Involved:
- Appeal against CIT's order denying registration u/s 12AA of the Act for the society claiming to be a non-profit educational institution.

Detailed Analysis:

1. Grounds of Appeal:
The appeal was directed against the CIT's order dated 29/05/2014, where the sole grievance was the denial of approval for registration u/s 12AA of the Act for the society. The society was registered under the M.P. State Government Registration Act, and the application for registration u/s 12AA was filed on 18/11/2013.

2. CIT's Observations:
The CIT noted the society's substantial income and gross surplus for consecutive financial years. The CIT requested information on activities, fees charged, and evidence of charitable activities. The society provided details of students with fee concessions but did not provide information on other students' fees. The CIT, relying on a Madras Tribunal decision, concluded that the society's consistent surplus contradicted its claim of being a non-profit educational institution.

3. Appellant's Arguments:
The appellant contended that the society, registered as a university solely for educational purposes by the State Government of M.P., should be exempt under u/s 10(23C) of the Act. The appellant argued that the CIT failed to acknowledge this fact, leading to the denial of registration u/s 12AA.

4. Tribunal's Decision:
After hearing both parties, the Tribunal observed that the society was registered by the M.P. State Government as a university and was running under government approval. The Tribunal noted that the CIT did not consider relevant facts, financial statements, and the gazette notification while rejecting the registration. Consequently, the Tribunal remitted the issue back to the CIT for fresh adjudication.

5. Final Outcome:
The Tribunal allowed the appeal for statistical purposes, emphasizing the need for a detailed examination of the society's activities and financial statements by the CIT. The issue of registration u/s 12AA was sent back to the CIT for reconsideration based on the observations made during the appeal.

This comprehensive analysis highlights the key aspects of the legal judgment, including the grounds of appeal, CIT's observations, appellant's arguments, Tribunal's decision, and the final outcome of remitting the issue for fresh adjudication.