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2016 (1) TMI 1304 - AT - Income TaxRefusing to grant registration to the assessee u/s 12AA - Society had not carried out charitable activities and had also not applied its accumulated income as laid down in section 11 of the Act - Held that - Commissioner of Income Tax could not have refused grant registration u/s 12A / 12AA of the Act to the assessee society for the reason that it had not carried out any charitable activities. Further we find that the Ld. CIT had refused registration also for the reason that the assessee had not applied 85% of its receipts for charitable purpose nor accumulated the same for application in future years, as per the provision of section 11 of the Act. The provision of section 12AA are very clear, as per which the only mandate given to the CIT before granting registration is to satisfy himself about the genuineness of the objects of the Trust and the activities of the Trust. Ld. CIT has only to see whether the objects of the Trust are charitable or not and the activities are genuine. The purpose being to establish the identity of the Trust to enable it to claim the benefits u/s 11 & 12 of the Act. The fulfillment of conditions of section 11 is a separate issue which is to be considered when return is filed by the assessee and examined by the AO. CIT could not have refused registration to the assessee u/s 12A for not complying with the condition of application / accumulation of income as specified in section 11 of the Act. Further we find that the Ld. CIT has refused registration on the recommendation of the AO, without disclosing the complete contents of the report and without confronting the same to the assessee. This we hold is against the principle of natural justice. Thus we direct the Commissioner of Income Tax to grant Registration to the assessee society u/s 12AA - Decided in favour of assessee.
Issues Involved:
1. Refusal to grant registration under section 12AA. 2. Non-application of income as per section 11. 3. Recommendations from the Assessing Officer and the principle of natural justice. Issue-wise Detailed Analysis: 1. Refusal to grant registration under section 12AA: The appeal was filed by the assessee against the order of CIT (Exemptions), Chandigarh, which refused to grant registration under section 12AA. The CIT's refusal was based on the observation that the assessee trust had not spent any amount towards its aims and objects and had neither applied 85% of its income for charitable purposes nor accumulated the same as per section 11(2) of the Income Tax Act. The CIT also relied on a report from the Income Tax Officer (Exemptions) who did not recommend the registration due to the assessee's failure to furnish the required information/documents. The Tribunal referenced the case of CIT Vs. BKK Memorial Trust (2013) and Surya Educational & Charitable Trust (2013), emphasizing that the application for registration must be made within one year of the creation of the trust, and there is no requirement that the trust should have started all its envisaged activities in the first year itself. The Tribunal clarified that the CIT should only assess the genuineness of the trust's objects and not the application of income, which is to be examined during the assessment stage. 2. Non-application of income as per section 11: The CIT also refused registration on the grounds that the assessee had not applied 85% of its receipts for charitable purposes nor accumulated the same for future application as per section 11. The Tribunal noted that the provisions of section 12AA require the CIT to be satisfied about the genuineness of the objects and activities of the trust. The application of income is a matter to be considered during the assessment when the trust files its return of income. The Tribunal cited the Hardayal Charitable & Educational Trust Vs. CIT (2013) and CIT Vs. Vijay Vargiya Vani Charitable Trust (2014), which held that the question of exemption of income application is separate and should be examined at the time of assessment, not during the registration process. 3. Recommendations from the Assessing Officer and the principle of natural justice: The CIT's refusal was also based on the recommendation of the Assessing Officer, who did not recommend granting registration due to the assessee's failure to furnish the required documents. The Tribunal found this approach to be against the principle of natural justice, as the assessee was not confronted with the contents of the report. The Tribunal referenced the case of Kishinchand Chellaram Vs. CIT (1980), which established that no evidence can be used against the assessee without being confronted to it. Conclusion: The Tribunal concluded that the CIT could not refuse registration under section 12AA for the reasons stated and directed the Commissioner of Income Tax to grant registration to the assessee society under section 12AA. The appeal of the assessee was allowed.
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