2013 (1) TMI 775 - AT - Income Tax

Legality of registration u/s 12AA - grant of approval under S. 80G(5) - Held that - the assessee is engaged in the advancement of educational activities and support in the field of project management and undertakes training facilities as part of its charitable activities - registration can be cancelled u/s 12AA(3), if at any stage, it is found that the activities of the applicant institution are not genuine or are not being carried out in accordance with the objects of the Trust - there is no mention about violation of these two conditions - There is no evidence on record to consider that the assessee s activities are commercial in nature The activities to provide a platform to exchange knowledge, information and expertise and bringing together the industrial practices and to promote and professionalise the project management through conducting seminars, workshops, etc. could not be said to be inconsistent with the objects of the trust and therefore, registration granted to the assessee could not be withdrawn u/s12AA(3) - AO is free to examine whether the assessee is fulfilling the conditions of sec 11 and 12 of the Act in the assessment proceedings - Decided in favor of assessee

Summary

Issues Involved:
1. Cancellation of registration under Section 12AA of the Income-tax Act.
2. Rejection of application for approval under Section 80G(5) of the Income-tax Act.

Detailed Analysis:

Issue 1: Cancellation of Registration under Section 12AA

Background:
The assessee, a charitable institution registered under a Trust Deed and Memorandum & Articles of Association dated 4.8.2001, was granted registration under Section 12AA effective from 1.4.2005. The registration was subject to conditions laid out under Section 12AA, including the possibility of cancellation if the trust's activities were found not genuine or not in accordance with its objectives.

Director of Income-tax (Exemption)'s Actions:
1. The Director of Income-tax (Exemption) cancelled the registration under Section 12AA on 12.12.2011, citing that the assessee's activities were commercial in nature and not charitable as defined under Section 2(15) of the Income-tax Act.
2. The Director observed that the assessee's activities, such as 'student leadership competency building' and 'International Student Leadership Day,' were not substantial in comparison to total receipts and were not charitable.

Assessee's Arguments:
1. The assessee argued that its activities were genuinely carried out in accordance with the trust's objectives, focusing on educational programs in project management on a no-profit-no-loss basis.
2. The assessee provided financial details to show substantial expenditure on charitable activities and argued that the Director of Income-tax (Exemption) failed to prove that the activities were not genuine or were not in accordance with the trust's objectives.

Tribunal's Findings:
1. The Tribunal noted that the original registration order allowed for cancellation only if the activities were not genuine or not in accordance with the trust's objectives.
2. The Tribunal found no evidence in the Director's order indicating that the activities were not genuine or were being carried out contrary to the trust's objectives.
3. The Tribunal emphasized that the activities related to education did not fall under 'any other object of general public utility,' which would be subject to the proviso under Section 2(15) regarding commercial activities.
4. The Tribunal cited precedents from the ITAT Chandigarh Bench, which held that the proviso to Section 2(15) does not apply to educational activities and that the Director's reliance on this proviso was misplaced.

Conclusion:
The Tribunal set aside the Director's order dated 12.12.2011, reinstating the registration granted on 25.09.2006. It directed the Assessing Officer to examine the fulfillment of conditions under Sections 11 and 12 during assessment proceedings, if required.

Issue 2: Rejection of Application for Approval under Section 80G(5)

Background:
The Director of Income-tax (Exemption) rejected the assessee's application for approval under Section 80G on 15.09.2011, concluding that the activities were not charitable.

Assessee's Arguments:
The assessee contended that its objectives were charitable in nature and that the rejection was based on incorrect assumptions about the nature of its activities.

Tribunal's Findings:
1. The Tribunal found that the assessee's activities were indeed charitable, focusing on education and professional development in project management.
2. The Tribunal directed the Director of Income-tax (Exemption) to reconsider the application for approval under Section 80G, ensuring compliance with other conditions and providing the assessee an opportunity for a hearing.

Conclusion:
The Tribunal cancelled the Director's order dated 15.09.2011 and directed a fresh consideration of the application for approval under Section 80G.

Summary:
- ITA No.217/Hyd/2012: Allowed, reinstating the registration under Section 12AA.
- ITA No.1915/Hyd/2011: Allowed for statistical purposes, directing reconsideration of approval under Section 80G.