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2016 (2) TMI 1097 - AT - Income TaxRegistration under section 12AA denied - Held that - In the present case, we observe that the registration under section 12AA of the Act has been denied to the assessee only on some extraneous grounds, which have no bearing on granting of registration. Nowhere in his order the CIT(Exemption) has made any adverse remarks as to the objects of the trust being not charitable or the activities of the Trust being not genuine. We have perused the aims and objects of the Trust as laid down in its Trust deed. We see that all the aims and objects of the assessee trust are charitable in nature and no adverse remarks as to the genuineness of any of these activities have been made by the CIT(E). In view of the above, we hold that the objects of the trust are charitable in nature and activities are genuine. Therefore, the CIT(Exemption) in directed to grant registration under section 12AA of the Act to the assessee trust. Denial of approval u/s 80G - Held that - The only remarks made by the CIT(Exemption) are with regard to which he cannot do while considering the approval for section 80G. These are the matters to be consider by the Assessing Officer at the time of granting exemption under section 11 of the Act. In view of the above, we directed the CIT(E) to grant assessee the approval under section 80G of the Act.
Issues Involved:
1. Denial of registration under section 12AA of the Income Tax Act. 2. Denial of approval under section 80G of the Income Tax Act. Detailed Analysis: 1. Denial of Registration under Section 12AA of the Income Tax Act: The assessee filed an application for registration under section 12AA, which was denied by the CIT(Exemption) on the grounds that the assessee did not incur major expenses on charity. The CIT(Exemption) noted that the gross receipts were Rs. 27,163, out of which Rs. 22,189 was spent on general expenses like accounting charges, advertisement, and printing & stationery. The CIT(Exemption) viewed that these expenses did not fall within the meaning of "charitable purpose" as defined under section 2(15) of the Act. The assessee argued that the CIT(Exemption) did not question the objects of the trust or the genuineness of its activities. It was contended that the expenses incurred were essential for the initial setup and awareness activities and that the CIT(Exemption) cannot deny registration solely based on the quantum of charitable expenditure. The Tribunal observed that the assessee society was newly established and had received minimal donations, which were spent on necessary administrative expenses. It was held that even if no significant charitable activities were conducted initially, registration under section 12AA cannot be denied on this basis alone. The Tribunal cited the jurisdictional High Court's judgment in CIT Vs. B.K.K. Memorial Trust, emphasizing that the genuineness of the trust's activities and its charitable objectives are the primary considerations for granting registration, not the quantum of expenditure. The Tribunal concluded that the CIT(Exemption) exceeded his jurisdiction by focusing on the expenditure rather than the charitable nature and genuineness of the trust's activities. The Tribunal directed the CIT(Exemption) to grant registration under section 12AA, noting that the trust's objects, such as working for the welfare of mentally retarded and mentally ill individuals, were charitable in nature. 2. Denial of Approval under Section 80G of the Income Tax Act: The CIT(Exemption) also denied approval under section 80G based on the same reasoning used for denying registration under section 12AA. The Tribunal noted that the CIT(Exemption) should have evaluated the application for approval under section 80G based on the specific provisions of that section, which were not considered. The Tribunal referred to a recent order of the Chandigarh Bench of ITAT in the case of Shri Krishna Kirpa Gaushala Samiti, which clarified that rejection of approval under section 80G can only be made if the conditions laid down in clauses (i) to (v) of sub-section (5) of section 80G are not fulfilled. The Tribunal emphasized that the CIT(Exemption) cannot reject approval based on issues that are to be considered by the Assessing Officer during the assessment process. The Tribunal directed the CIT(Exemption) to grant approval under section 80G, as the reasons cited for denial were not relevant for the approval process under this section. Conclusion: The Tribunal allowed both appeals of the assessee, directing the CIT(Exemption) to grant registration under section 12AA and approval under section 80G of the Income Tax Act, thereby ensuring that the trust's charitable objectives and genuine activities were duly recognized.
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