2015 (8) TMI 1364 - AT - Income Tax

Registration under section 12AA rejected - the amended object was against the spirit of section 13(1)(b) - Held that - Going through the said amended objects we do not find that the objects were confined towards any particular sect or biradari. It has been clearly mentioned that the society had to work for the benefit of poor and general public at large and these activities are to be based in consonance with the teachings of Bhai Mansa Singh Ji. It is not a case that the charity has to be done for the followers of Bhai Mansa Singh Ji only. Further in our opinion, the provisions of section 13(1)(b) of the Act can be invoked only at the time of making assessment of the entity registered under section 12AA of the Act. At the stage of granting registration under section 12AA of the Act, the learned Commissioner of Income Tax should not get carried away by the provisions of this section. At the time of granting registration, the learned Commissioner of Income Tax has to confine himself to the twin conditions for registration i.e. the objects of the trust being charitable and the activities being genuine. It is not the stage in which the learned Commissioner of Income Tax should be commenting on the taxability of the assessee. That stage comes later while making the assessment. In the present case, nowhere in the whole order the learned Commissioner of Income Tax has been able to comment on the objects of the society being not charitable. On perusal of the memorandum of the society even, we do not find any of its objects being not charitable. None of the activities taken by the assessee was held to be not genuine also. In the absence of any such finding, the learned Commissioner of Income Tax cannot reject the application of the assessee. - Decided in favour of assesssee

Issues Involved:
1. Rejection of registration under section 12AA of the Income Tax Act.
2. Alleged insufficient charitable activities and application of funds.
3. Ownership and lien of the building used by the society.
4. Composition of the society's members and office bearers.
5. Documentation of donations received.
6. Alleged furtherance of the cause of a specific sect or biradari.

Issue-Wise Detailed Analysis:

1. Rejection of Registration under Section 12AA:
The main issue revolves around the rejection of the appellant's application for registration under section 12AA of the Income Tax Act by the Commissioner of Income Tax (CIT), Panchkula. The rejection was based on the alleged violation of section 13(1)(b) and insufficient activities related to the society's objectives. The ITAT Chandigarh had previously remanded the case to the CIT for a de novo decision, emphasizing the need to consider the aims, objects, and activities of the society comprehensively.

2. Alleged Insufficient Charitable Activities and Application of Funds:
The CIT rejected the application, citing no substantial charitable activities and no funds applied towards the society's charitable objects. The appellant countered by presenting a detailed note on activities and proposed activities, and referenced the judgment of the Punjab & Haryana High Court in Suchinta Educational Society v. CIT, which supports that the genuineness of activities can be judged based on existing or future activities. The ITAT agreed that lack of current activities should not preclude registration if the objects are charitable.

3. Ownership and Lien of the Building Used by the Society:
The CIT noted that the building where the society operates has no lien with the society. The appellant clarified that the society operates from a historical Gurudwara provided free of cost, which supports various social and charitable activities. The ITAT found this explanation satisfactory and not a valid ground for rejection.

4. Composition of the Society's Members and Office Bearers:
The CIT raised concerns that most members and office bearers are from the Chadha family and related to each other. The appellant explained that while members share the surname 'Chadha,' they are not closely related and are descendants of Bhai Mansa Singh Ji. The ITAT found this explanation reasonable and not a valid ground for rejection.

5. Documentation of Donations Received:
The CIT claimed no documentary evidence was provided for donations. The appellant contested this, stating that documentary evidence was indeed submitted. The ITAT noted that the evidence was filed and accepted this clarification.

6. Alleged Furtherance of the Cause of a Specific Sect or Biradari:
The CIT argued that one of the society's amended objects was for the furtherance of a specific sect or biradari, which contradicts section 13(1)(b). The appellant clarified that the society's objectives are for the benefit of the general public and poor, based on the teachings of Bhai Mansa Singh Ji, not limited to his followers. The ITAT agreed, stating that the objects are not confined to any particular sect and that section 13(1)(b) considerations are more relevant at the assessment stage, not during registration.

Conclusion:
The ITAT concluded that the CIT should focus on the charitable nature of the society's objects and the genuineness of its activities at the registration stage. The CIT's order did not sufficiently prove that the society's objects were not charitable or that its activities were not genuine. Consequently, the ITAT set aside the CIT's order and directed the CIT to grant the registration under section 12AA to the appellant.

Result:
The appeal of the assessee was allowed.

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