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2017 (12) TMI 1546 - AT - Income TaxRefusal for registration u/s 12AA - proof of charitable activities - charitable object - section 13 applicability - Held that - Sections 13 comes into play at the time of granting exemption under Section 11 of the Act and not at the time of granting registration under Section 12A of the Act. The only two requirements as stated hereinabove while granting registration under Section 12A of the Act, are with respect to the charitable nature of the objects of the assessee and genuineness of the activities. Since we observe that no adverse remarks have been made by the Commissioner of Income Tax (Exemptions) with regard to the objects contained in Memorandum and as stated hereinabove that the observations of the Commissioner of Income Tax (Exemptions) do not lead to the conclusion that the activities of the assessee are not genuine, we hereby direct the Commissioner of Income Tax (Exemptions) to grant registration under Section 12A of the Act to the assessee - Decided in favour of assessee.
Issues Involved:
1. Refusal of registration under Section 12AA of the Income Tax Act. 2. Examination of the genuineness of the society's activities. 3. Non-filing of income tax returns for the assessment year 2013-14. 4. Details regarding ownership of land and reflection in the balance sheet. 5. Application of funds and expenditure related to charitable activities. Detailed Analysis: 1. Refusal of Registration under Section 12AA: The primary issue in this case was the refusal by the Commissioner of Income Tax (Exemptions) [CIT(E)] to grant registration under Section 12AA of the Income Tax Act. The appellant, a society registered under the Registrar of Societies, J&K Government, aimed to promote yoga and related activities. The CIT(E) rejected the application citing lack of evidence for charitable activities, non-filing of returns for a specific assessment year, and inadequate documentation regarding land ownership. 2. Examination of the Genuineness of the Society's Activities: The CIT(E) questioned the genuineness of the society's activities, noting that there were no expenses directly attributable to the propagation of yoga in the financial statements. The society argued that kitchen expenses, which included free food and milk for yoga teachers and students, were part of their charitable activities. The tribunal noted that the explanation was plausible and supported by previous judicial decisions, including the Hon'ble Allahabad High Court in CIT, Agra vs. Radha Raman Niwas Trust. 3. Non-Filing of Income Tax Returns for the Assessment Year 2013-14: The CIT(E) also objected to the non-filing of income tax returns for the assessment year 2013-14. The tribunal referenced the Hon'ble Punjab & Haryana High Court's decision in CIT(E) vs. Shri Shirdi Sai Darbar Charitable Trust, which held that non-filing of returns in earlier years does not necessarily indicate that the activities are not genuine. The tribunal found that the society had provided balance sheets and income and expenditure accounts for the relevant year, showing a loss, which justified the non-filing. 4. Details Regarding Ownership of Land and Reflection in the Balance Sheet: The CIT(E) raised concerns about the ownership of land and its reflection in the balance sheet. The society provided a judgment from the Hon'ble J&K High Court affirming its ownership of the land. The tribunal noted that the land was donated and thus not reflected in the balance sheet, which only showed the value of buildings. The tribunal found this explanation acceptable and consistent with the evidence provided. 5. Application of Funds and Expenditure Related to Charitable Activities: The CIT(E) questioned the application of funds, particularly kitchen expenses, which were seen as inconsistent. The tribunal found that these expenses were part of the society's charitable activities, including providing food to yoga teachers and students. The tribunal referenced multiple judicial precedents, including the Hon'ble Punjab & Haryana High Court in CIT-II, Chandigarh vs. Surya Educational & Charitable Trust, which held that at the time of registration under Section 12AA, the CIT(E) should only examine the objects and genuineness of the activities, not the application of income. Conclusion: The tribunal concluded that the CIT(E) did not properly appreciate the facts and evidence provided by the society. The society's objects were charitable, and the activities were genuine. The tribunal directed the CIT(E) to grant registration under Section 12AA to the society, allowing the appeal. The order was pronounced in the open court on 13.12.2017.
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