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2013 (10) TMI 596 - AT - Income TaxRegistration u/s 12AA - Commencement of charitable activity - taking over the management of another school - CIT(A) observed that the creation of this new society without carrying out such an exercise can best be described as an attempt of the assessee to split up assets of an already existing society and conveniently pass it over to a new one with sole intention of evading tax liability. This if allowed unchecked would in all probability defeat the very purpose for which the exemption provisions have been contained in the I.T. Act. - Held that - some of the objects of the assessee society are not charitable in nature - though the assessee society was registered with Registrar of Societies on 13.4.2012 but no activity had been started up to the date of present proceedings and in the absence of the same there was no material to verify the objects and activities of the society and their genuineness - order of CIT refusing the registration sustained - Decided against Revenue.
Issues Involved:
1. Whether the Commissioner of Income Tax (CIT) erred in rejecting the registration under section 12AA of the Income Tax Act, 1961. 2. Whether the assessee society effectively carried out any charitable activities. 3. Whether the registration was refused based on suspicion, conjectures, and surmises. 4. Whether the order of the CIT was erroneous, arbitrary, and opposed to law and facts. Detailed Analysis: 1. Rejection of Registration under Section 12AA: The assessee society filed an application for registration under section 12AA of the Income Tax Act, 1961. The CIT rejected the application on the grounds that the society had not commenced any activities since its registration and there was no material to verify the genuineness of its objects and activities. The CIT noted that the new society proposed to take over the management of an existing school but had not yet done so, indicating that no activities had been carried out. The CIT concluded that the creation of the new society appeared to be an attempt to split the assets of an existing society to evade tax liability. 2. Charitable Activities: The CIT observed that the assessee society had not effectively carried out any charitable activities. Although the society claimed to have distributed free stationery to poor students, no such expenditure was reflected in the income and expenditure account. The CIT emphasized that the society had not initiated any activities related to its stated objects, which included providing education and running schools. 3. Basis of Refusal: The CIT's refusal to grant registration was based on the lack of evidence of any activities being carried out by the society. The CIT held that the society's claim of distributing stationery was unsupported by financial records. The CIT also noted that the society's varied objects were not focused on a particular charitable activity, making it difficult to verify the genuineness of its activities. 4. Erroneous and Arbitrary Order: The assessee argued that the CIT's order was erroneous and arbitrary, as the CIT failed to consider the aims and objects of the society and relied on the absence of activities to deny registration. The assessee contended that even if no activities had commenced, the society was entitled to registration based on its charitable objects. The assessee cited judicial precedents to support its claim that the CIT should only consider the objects of the trust at the stage of granting registration. Conclusion: The Tribunal upheld the CIT's order, agreeing that the objects of the assessee society were varied and not focused on a specific charitable activity. The Tribunal found that the assessee had not identified a primary object to undertake and had not initiated any activities to establish the genuineness of its charitable purpose. The Tribunal concluded that the CIT was justified in refusing registration under section 12AA due to the lack of evidence of charitable activities and the varied nature of the society's objects. The appeal filed by the assessee was dismissed.
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