2012 (6) TMI 707 - HC - Income Tax

Whether ITAT was right in law in granting registration to the assessee Trust when no work of relief to the poor in the field of education was done as per definition of Charitable Purposes provided u/s 2(15) of the Act. Respondent-society which was admittedly running a Polytechnic College and the activities were interwoven for furthering the projects and activities pertaining to education Held that - Tribunal rightly directed that registration should be granted to the respondent-society with the rider that the same could always be cancelled if it came to the notice of the CIT that the society was not carrying on the activities as per its objects. The Commissioner while processing the application under Section 12AA of the Act was not to act as an Assessing Authority and thus, the Tribunal has rightly allowed the appeal filed by the society. Appeal is dismissed.

Summary

Issues:
Registration under Section 12AA of the Income Tax Act, 1961.

Analysis:
The respondent-society applied for registration under Section 12AA of the Income Tax Act, 1961, which was declined by the Commissioner of Income Tax. The Commissioner observed that the society had received donations without explaining the capacity of donors or the genuineness of the transactions. Additionally, the society was running a Polytechnic College and had claimed exemption under Section 10(23C) of the Act, raising questions about switching to Section 11 for exemption under Section 12AA. The Commissioner concluded that the society's activities, such as charging various funds, did not qualify as charitable under Section 2(15) of the Act.

The society appealed to the Income Tax Appellate Tribunal, which allowed the appeal, directing the registration under Section 12AA to be granted. The revenue raised questions of law, challenging the Tribunal's decision. The Tribunal emphasized that the Memorandum of Association and the society's objects focused on charitable work related to education, which the Commissioner had overlooked. It highlighted that the CIT should have assessed the genuineness of the society's activities and cited circular No.11/2008 to clarify that Section 2(15) does not apply to a society. The Tribunal differentiated between Sections 10(23C) and 12AA, emphasizing the need for revenue authorities to examine claims under Sections 11 and 13 based on individual cases.

The High Court considered the scope of Section 12AA in previous judgments, emphasizing the need for the Commissioner to ensure the genuineness of a trust's activities. It noted the power under Section 12AA(3) to cancel registration if activities deviate from the trust's objects. Referring to a case involving a school, the Court reiterated that the Commissioner's jurisdiction during registration processing is limited to verifying the genuineness of activities in line with the trust's objects. In this case, since the society was operating a Polytechnic College and its activities were intertwined with educational projects, the Tribunal's decision to grant registration was upheld with the caveat that registration could be revoked if the society did not align its activities with its stated objectives.

Ultimately, the Court found no substantial question of law in the appeal and upheld the Tribunal's order, dismissing the appeal.