2012 (4) TMI 421 - AT - Income Tax

Rejection for registration under sec. 12A Held that - It is not ascertainable as to how the activities of the assessee are not genuine - the only reason that marginal surplus at 21.4% over the gross receipts in A/Y 2008-09 would not establish as to how the activities of the assessee could not be put to a test of genuineness and not to be a consideration for rejecting the application for grant of registration - allow the appeal of assessee and direct the Learned CIT to issue registration certificate in accordance with law - in favour of assessee.

Summary

Issues:
1. Rejection of application for registration under sec. 12A
2. Verification of charitable activities and objects of the society
3. Recommendations by Assessing Officer and Joint Commissioner
4. Consideration of surplus in assessment year 2008-09
5. Compliance with requirements of section 12AA(1)(a) and (b)
6. Grant of registration under sec. 12A

Analysis:
1. The appeal was filed against the rejection of the assessee's application for registration under sec. 12A by the Learned Commissioner, citing reasons under section 12AA(1)(b)(ii) of the Income-tax Act, 1961. The assessee, a registered society aiming to provide elementary education to street children and those living in slums, had submitted all necessary documents with its application, including financial statements and audit reports for assessment years. The rejection was based on doubts regarding the charitable nature of the society's aims/objects and the genuineness of its activities.

2. The assessee's counsel argued that all objects in the Memorandum of Association were charitable in nature. The Assessing Officer recommended registration after verifying the society's activities, which included running educational centers for underprivileged children. The Joint Commissioner did not make any adverse observations but highlighted a surplus in the assessment year 2008-09, raising doubts about genuineness. The counsel presented evidence of charitable activities, appreciation certificates, and newspaper cuttings to support the claim.

3. Section 12AA(1)(a) mandates the Commissioner to verify the genuineness of activities and make necessary inquiries before granting registration. The order lacked specifics on why certain objects were deemed non-charitable or how activities were not genuine. The presence of a surplus in one year should not automatically disqualify registration; it could be addressed during assessment proceedings. The Tribunal found the society's activities genuine and deserving of registration, directing the Commissioner to issue the certificate accordingly.

4. The Tribunal's decision emphasized the importance of thoroughly assessing the charitable nature and genuineness of activities before rejecting registration applications. The presence of a surplus in one year should not be the sole basis for refusal, especially when supported by evidence of charitable work. The judgment highlighted the need for a detailed examination of all relevant material and a fair consideration of the applicant's case before making a decision on registration under sec. 12A of the Act.