2013 (2) TMI 782 - AT - Income Tax

Summary

Issues Involved:
1. Rejection of application for registration u/s 12AA of the IT Act.
2. Whether educational activities qualify as charitable activities.
3. Procedural lapses in the conduct of enquiry and granting of hearing.

Summary:

Issue 1: Rejection of Application for Registration u/s 12AA of the IT Act
The appeal was directed against the order of CIT(A)-II, Agra, dated 26.07.2012, which rejected the assessee's application for registration u/s 12AA of the IT Act. The CIT noted that the assessee, engaged in educational activities, did not spend surplus funds on charitable activities and was operating on commercial lines. The CIT concluded that education per se is not a charitable activity and rejected the application.

Issue 2: Whether Educational Activities Qualify as Charitable Activities
The Tribunal highlighted that educational activities are per se charitable activities as per Section 2(15) of the IT Act, which includes education as a charitable purpose. The Tribunal referenced ITAT Agra Bench's decision in Shiksha Sankalp Society vs. CIT, which affirmed that educational institutions fulfilling the conditions of Section 80G(5) are eligible for registration u/s 12AA.

Issue 3: Procedural Lapses in the Conduct of Enquiry and Granting of Hearing
The Tribunal found significant procedural lapses in the conduct of the enquiry. The CIT did not personally conduct any proceedings or provide the assessee with a reasonable opportunity of being heard, as required by law. Instead, the enquiry was conducted by the ITO (Tech.), and the CIT merely approved the draft order without independent verification. The Tribunal noted that the CIT's actions were mechanical and violated the provisions of Rule 11AA(6) of the IT Rules, which mandates a decision within six months of the application.

Conclusion:
The Tribunal set aside the CIT's order, directing the CIT-II, Agra, to grant registration u/s 12AA of the IT Act to the assessee within one month from the date of the order. The Tribunal emphasized that the assessee's educational activities are genuine and charitable, and the procedural lapses by the CIT warranted the reversal of the rejection. The appeal was allowed in favor of the assessee.