2012 (6) TMI 876 - AT - Income Tax

Summary

Issues Involved:
1. Refusal of registration u/s 12AA(1) of the Income-tax Act, 1961.
2. Denial of exemption u/s 80G(5) of the Income-tax Act, 1961.

Summary:

Issue 1: Refusal of registration u/s 12AA(1)
The assessee-society, engaged in providing education, applied for registration u/s 12AA(1) of the Act. The Commissioner of Income-tax denied the registration, observing that the society operated like a commercial enterprise due to the surplus in its financial statements. The Commissioner relied on the judgment of the Hon'ble Apex Court in Municipal Corpn. of Delhi v. Children Book Trust [1992] 63 Taxman 385. However, the Tribunal noted that the Commissioner did not provide evidence that the society was engaged in non-charitable activities. The Tribunal emphasized that the scope of enquiry for registration u/s 12AA is limited to the genuineness of the trust and its objects, as established in CIT v. Red Rose School [2007] 163 Taxman 19 (All.) and other cited cases. The Tribunal concluded that mere surplus does not disqualify the society from registration, directing the Commissioner to grant registration u/s 12AA.

Issue 2: Denial of exemption u/s 80G(5)
Following the denial of registration u/s 12AA(1), the Commissioner also rejected the application for exemption u/s 80G(5). The Tribunal, referencing cases like Dr. Virendra Swarup Educational Foundation v. CIT [2010] 43 DTR 267 and Gaur Brahmin Vidya Pracharini Sabha [2011] 203 Taxman 226, reiterated that surplus generation alone is not a valid ground for denying exemption u/s 80G(5). The Tribunal found no evidence that the society's activities deviated from its educational objectives. Consequently, the Tribunal set aside the Commissioner's order and directed the grant of exemption u/s 80G(5).

Conclusion:
The Tribunal allowed the appeals, directing the Commissioner to grant both the registration u/s 12AA and the exemption u/s 80G(5) to the assessee-society.