2014 (3) TMI 962 - AT - Income Tax

Denial of registration u/s 12AA(1)(b)(ii) - Held that - there is no doubt about the charitable objects of the assessee. No objects focused investigation by the ld. CIT yielded any results jeopardizing the charitable character of the assessee. Even the ld. CIT has not made out a case on this line. The activities focused inquiries conducted by the ld. CIT do not in any manner whatsoever thwart the charitable objects of the assessee. This leads us to irresistible conclusion that the refusal to the grant of registration by the ld. CIT led to the miscarriage of justice. We, therefore, overturn the impugned order and direct the granting of registration contemplated u/s 12AA(1)(b)(i). - Decided in favour of assessee.

Summary

Issues:
Denial of registration u/s 12AA(1)(b)(ii) of the Income-tax Act, 1961 based on the charitable activities of the assessee trust.

Analysis:

1. Issue 1 - Denial of Registration by the Commissioner of Income-tax:
The Commissioner of Income-tax denied registration to the assessee trust under section 12AA(1)(b)(ii) of the Income-tax Act, 1961. The denial was based on the grounds that the charitable activities, specifically medical relief camps organized by the trust, were not substantiated adequately. The Commissioner raised concerns regarding the lack of evidence of advertising or publicity for the camps, incomplete addresses in the register, and the prescription of medicines in bulk without clear necessity. However, the Income Tax Appellate Tribunal (ITAT) observed that organizing medical relief camps without advertisement or publicity is not barred by law. The ITAT also noted that the register provided by the assessee contained essential details, and the absence of complete addresses should not have been a reason for denial. The ITAT found the Commissioner's reasoning regarding the prescription of medicines and the involvement of medical professionals to be insufficient to refuse registration, emphasizing that the focus should be on the charitable nature of the activities rather than procedural aspects.

2. Issue 2 - Powers of the Commissioner under Section 12AA:
The ITAT addressed the powers of the Commissioner under section 12AA to conduct inquiries to verify the genuineness of a trust's activities. While acknowledging the Commissioner's authority to inquire into the trust's activities, the ITAT emphasized that such inquiries should primarily focus on the charitable or religious objects of the trust. The ITAT highlighted that the purpose of registration under section 12AA is to ensure the genuineness of the trust's objectives, with activities being a secondary consideration. The ITAT underscored that the law allows trusts to seek registration before commencing charitable activities and provides safeguards to prevent misuse of registration benefits. Additionally, the ITAT noted that the Commissioner has the power to cancel registration if the trust's activities are not in line with its stated objectives, as per section 12AA(3). In this case, the ITAT found that the charitable nature of the trust's activities was evident, and the Commissioner's refusal to grant registration was deemed unjust, leading to the decision to overturn the denial and direct the granting of registration under section 12AA(1)(b)(i).

3. Conclusion:
The ITAT allowed the appeal of the assessee, overturning the Commissioner's decision to deny registration under section 12AA(1)(b)(ii). The ITAT emphasized the importance of focusing on the charitable nature of activities rather than procedural technicalities, and reiterated the significance of verifying the trust's objectives during the registration process. The judgment underscored the need for a balanced approach in assessing the genuineness of charitable activities while upholding the principles of law and ensuring the proper utilization of registration benefits for charitable purposes.