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2013 (11) TMI 165 - AT - Income TaxRejection of Application for Registration u/s 12AA - Compliances Were Duly Made As Per the Act - Aims and Objects of Society - Charitable in Nature OR Not - Provisions of RE Act Validity of Activity Conducted Held that - The main object of the Assessee Society was education, which, undeniably, was of charitable nature, in line with the provisions of Section 2 (15) of the Act - the CIT had taken recourse to the RTE Act to reject the assessee s application - Under Section 12AA, what was required to be seen by the CIT while considering an application for grant of registration, was as to whether the object of the applicant was charitable and as to whether its activities were genuine any further - The jurisdiction and competence to examine an issue under the RTE Act obviously lies with the authorities mentioned - the CBDT Circular clearly stated that the proviso to Section 2 (15) does not apply in the case of education and where the purpose of a Trust or institution was education, it will constitute charitable purpose even if it incidentally involves in carrying on of commercial activities. The order passed by the CIT was cancelled CIT was directed to grant registration to the Society on verifying the original document of establishment of the assessee Trust - Shri Sain Ji Dharmarth Trust v.. CIT 2006 (1) TMI 455 - ITAT DELHI and St. Don Bosco Educational Society v. CIT 2003 (12) TMI 306 - ITAT LUCKNOW and CIT vs. Surya Educational & Charitable Trust 2011 (10) TMI 47 - PUNJAB AND HARYANA HIGH COURT - at the stage of granting or refusing registration, CIT was not required to examine as to what amount should form corpus of trust, in what manner accounts were maintained and what should appear in balance sheet - mere charging of high fees was not no ground of refusing registration, where the CIT had not doubted the objects and genuineness of the assessee s activities - u/s 12AA of the Act, the CIT was only to examine the genuineness of the objects of the Trust and not the application of income for charitable purpose, which can be examined at the stage when the Trust files its return. Disallowance of Deduction u/s 80 (G) - The matter of grant of exemption u/s 80(G) of the Act becomes consequential - Accordingly, the order passed u/s 80(G) of the Act was also cancelled and the appeal of the assessee was allowed.
Issues Involved:
1. Whether the rejection of the application for registration under Section 12A of the Income Tax Act, 1961, by the CIT was justified. 2. Whether the rejection of the application for approval under Section 80(G) of the Income Tax Act, 1961, by the CIT was justified. Issue-wise Detailed Analysis: 1. Rejection of the Application for Registration under Section 12A: Facts and Grounds of Appeal: The assessee Society appealed against the CIT's order rejecting its application for registration under Section 12A of the Income Tax Act, 1961. The grounds of appeal included claims that the CIT erred in law and on facts by rejecting the application despite it being complete and compliant with the Act's provisions, and by holding that the society's aims and objects were not charitable in nature. CIT's Observations: The CIT rejected the application, noting that the assessee did not submit the original instrument of its establishment, only a photocopy of its amended constitution. The CIT questioned the charitable nature of the society, citing that the society charged substantial fees and made systematic profits, which suggested a commercial rather than charitable intent. The CIT also referenced the Right of Children to Free and Compulsory Education Act, 2009 (RTE Act), and found that the society did not comply with its requirements to provide free education to at least 25% of students from weaker sections. Assessee's Contentions: The assessee argued that the CIT wrongly concluded that the society did not meet the essence of charity and that the CIT had no jurisdiction to make observations regarding compliance with the RTE Act. The assessee maintained that its aims and activities were in line with Section 2(15) of the Act and that the CIT should only consider whether the objects were charitable and the activities genuine. Tribunal's Findings: The Tribunal found that the CIT did not raise any objections against the society's objects, which were educational and thus charitable under Section 2(15) of the Act. The Tribunal held that the CIT's reliance on the RTE Act was misplaced, as the CIT's role under Section 12AA is limited to examining the charitable nature of the objects and the genuineness of the activities. The Tribunal also noted that the CBDT Circular No.11 of 2008 clarifies that the proviso to Section 2(15) does not apply to education, even if it involves commercial activities incidentally. Legal Precedents: The Tribunal referenced several case laws supporting the view that at the stage of granting registration, the CIT should only verify the charitable nature of the objects and the genuineness of the activities, not the application of income or compliance with other laws like the RTE Act. Conclusion: The Tribunal cancelled the CIT's order and directed the CIT to grant registration to the society after verifying the original document of establishment. The appeal was allowed. 2. Rejection of the Application for Approval under Section 80(G): Facts and Grounds of Appeal: The assessee appealed against the CIT's order rejecting its application for approval under Section 80(G) of the Income Tax Act, 1961, on the grounds that the rejection was arbitrary and ignored the evidence provided by the assessee. CIT's Observations: The CIT rejected the application for approval under Section 80(G) because the assessee was not registered under Section 12AA of the Act. Tribunal's Findings: Since the Tribunal allowed the assessee's appeal against the rejection of its application for registration under Section 12AA, the matter of granting approval under Section 80(G) became consequential. The Tribunal cancelled the CIT's order rejecting the approval under Section 80(G). Conclusion: The Tribunal allowed the appeal, directing that the assessee be granted approval under Section 80(G) following the registration under Section 12AA. Summary: Both appeals by the assessee were allowed. The Tribunal directed the CIT to grant registration under Section 12AA after verifying the original document of establishment and consequently granted approval under Section 80(G). The Tribunal emphasized that the CIT's role is to verify the charitable nature of the objects and the genuineness of activities, not to assess compliance with other laws like the RTE Act.
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