2013 (1) TMI 885 - AT - Income Tax

Summary

Issues Involved:
1. Rejection of application for grant of registration u/s 12AA of the Income Tax Act, 1961.
2. Rejection of application for grant of approval u/s 80G(5) of the Income Tax Act, 1961.

Summary:

Issue 1: Rejection of application for grant of registration u/s 12AA of the Income Tax Act, 1961

The assessee Trust filed an application dated 22.12.2011 in Form No.10A for registration u/s 12AA of the Income Tax Act, 1961. The CIT rejected the application on the ground that post the amendment by the Finance Act, 2008, effective from 01.04.2009, any activity in the nature of trade, commerce, or business, or any activity rendering any service in relation to any trade, commerce, or business for a cess or fee or any other consideration ceases to be a 'charitable activity'. The CIT concluded that the assessee's claim is hit by the proviso to section 2(15) of the Act, thus the Trust cannot be considered for charitable purposes.

Upon review, the Tribunal noted that the CIT did not act according to the law and provisions of section 12AA. The CIT failed to apply his mind before rejecting the application, as evidenced by the order sheet and the RTI reply indicating that the file approval process was unclear. The Tribunal referenced similar cases where the CIT was directed to grant registration, such as Smt. Bimla Devi Gopal Prasad Press Wale Charitable Trust vs. CIT-1, ITA Nos. 288 & 289/Agr/2012. Consequently, the Tribunal directed the CIT to grant registration u/s 12AA of the Act.

Issue 2: Rejection of application for grant of approval u/s 80G(5) of the Income Tax Act, 1961

The assessee Trust also filed an application dated 22.12.2011 in Form No.10G for approval u/s 80G(5) of the Income Tax Act, 1961. The CIT rejected this application on similar grounds as the rejection of the 12AA application, citing the amendment by the Finance Act, 2008, and the proviso to section 2(15) of the Act.

The Tribunal, after hearing the representatives and reviewing the records, found that the CIT did not conduct a proper inquiry or provide a reasonable opportunity of being heard to the assessee. The Tribunal referenced the case of Shiksha Sankalp Society vs. CIT, ITA No.418/Agr/2010, where it was held that the CIT's order was not sustainable in law due to lack of proper inquiry and mechanical reliance on subordinate's drafts. The Tribunal directed the CIT to grant approval u/s 80G(5) of the Act.

Conclusion:

The Tribunal set aside the CIT's orders dated 21.06.2012 for refusal of registration u/s 12AA and approval u/s 80G of the Act. The CIT was directed to grant registration u/s 12AA and approval u/s 80G(5) with effect from the date the assessee requested. Both appeals filed by the assessee were allowed.