2012 (8) TMI 680 - AT - Income Tax

Denial of registration u/s 12AA - Held that - It is well settled legal proposition that the registration proceedings u/s 12A r.w.s. 12AA are not to be confused with the assessment proceedings wherein the provisions of section 11, 12 and 13 are applicable - In the present case CIT invoked only the provisions of section 11, 12 and 13 for the purpose of denial of grant of registration u/s 12AA , thus, it is clear that the impugned order is founded to be on irrelevant provisions of section 11, 12 and 13 , which are operative and relevant in the course of assessment proceedings as provisions of section 12A and 12AA are material and relevant, for the purpose of granting registration u/s 12AA - order of CIT is set aside and he is directed to grant registration to the assessee society - in favour of assessee.

Issues:
1. Appeal against order of CIT denying registration u/s 12AA of the Act.
2. Interpretation of provisions of section 12AA and related sections.
3. Consideration of objects of the society for charitable purposes.
4. Application of Article 29 and 30 of the Constitution of India.
5. Compliance with conditions for grant of registration u/s 12AA.

Issue 1: Appeal against order of CIT denying registration u/s 12AA of the Act:
The appeal was filed by the assessee society challenging the order of the CIT denying registration u/s 12AA of the Act. The appellant contended that the order was contrary to the provisions of section 12A read with section 12AA of the Act. The appellant argued that the CIT had ignored the definition of charitable purpose under section 2(15) of the Act and had based the denial of registration on irrelevant considerations. The appellant sought the quashing of the CIT's order and requested the grant of registration u/s 12AA of the Act.

Issue 2: Interpretation of provisions of section 12AA and related sections:
The CIT refused registration to the appellant society by invoking provisions of section 11 to 13 of the Act. The CIT observed that sections 11, 12, and 13 form a distinct code from other provisions of the Act and that institutions created for the benefit of a particular religious community or caste cannot benefit from the provisions of section 11 and 12. The CIT concluded that as the society's objects focused on providing religious education to a specific community, registration u/s 12AA was not applicable. However, the ITAT emphasized that the CIT's reliance on sections 11, 12, and 13 was misplaced as registration proceedings under section 12AA are separate from assessment proceedings. The ITAT held that the denial of registration based on irrelevant provisions was against the legislative intent of sections 12A and 12AA, directing the CIT to grant registration to the society.

Issue 3: Consideration of objects of the society for charitable purposes:
The CIT highlighted the society's objects of establishing schools for Muslim boys and girls, teaching Urdu, Arabic, and Persian, and providing Islamic education. The CIT argued that these activities did not align with charitable purposes under section 2(15) of the Act. However, the ITAT found that the CIT failed to prove that the society's activities were non-genuine or that its objects were not charitable. The ITAT concluded that the denial of registration based on the society's activities was unfounded, directing the CIT to grant registration.

Issue 4: Application of Article 29 and 30 of the Constitution of India:
The CIT considered the society's establishment under Article 29 and 30 of the Constitution of India but deemed this argument irrelevant to the registration proceedings under section 12AA. The CIT rejected the argument that the society's activities were protected under these Articles, emphasizing that registration proceedings were limited in scope. The ITAT concurred with the CIT's rejection of this argument, maintaining that the denial of registration did not impede the society's right to establish institutions under Article 29 and 30.

Issue 5: Compliance with conditions for grant of registration u/s 12AA:
The ITAT analyzed the conditions for grant of registration under section 12AA, emphasizing that the CIT must satisfy himself about the genuineness of the activities and objects of the trust or institution. The ITAT found that the CIT's reliance on irrelevant provisions and failure to demonstrate non-genuineness or lack of charitable objects warranted the grant of registration to the society. The ITAT concluded that the denial of registration was against the provisions of section 12AA and directed the CIT to grant registration to the appellant society.

In conclusion, the ITAT allowed the appeal, setting aside the CIT's order and directing the grant of registration to the assessee society under section 12AA of the Act.

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