2014 (5) TMI 155 - HC - Income Tax

Dismissal of registration u/s 12AA of the Act Running of school Purpose charitable or not - Held that - Running of a school falls within the scope of activities for which registration can be granted u/s 12AA of the Act - the similar activities carried out by Shishu Niketan Model School have been granted registration, which is running four institutions - The Society has been established to manage one of such schools - There cannot be any attempt of the assessee to evade tax liability, as Shishu Niketan Model School has been granted registration and availing the benefit of tax thus, the order of the CIT and the Tribunal in declining the registration to the assessee are not sustainable in law Decided in favour of Assessee.

Summary

Issues:
1. Registration under Section 12AA of the Income Tax Act denied due to non-commencement of charitable functions.
2. Interpretation of genuineness of activities as a pre-condition for registration under Section 12AA.
3. Comparison with previous judgments regarding registration denial.

Issue 1: Registration under Section 12AA denied:
The appeal was against the Income Tax Appellate Tribunal's order dismissing an appeal against the Commissioner of Income Tax's decision to decline registration under Section 12AA of the Income Tax Act. The appellant, a Society, was formed to take over the management of a school but had not yet commenced any activities. The Commissioner found the appellant's intention to split assets of an existing society to evade tax liability.

Issue 2: Genuineness of activities for registration under Section 12AA:
The Tribunal observed that the appellant had a wide range of objects but had not identified primary objects for charitable activities. The Tribunal emphasized the need to establish the purpose of the Trust to verify the genuineness of activities. It was concluded that without commencing activities, there was no material to verify the objects and activities of the society, upholding the Commissioner's decision to refuse registration.

Issue 3: Interpretation and comparison with previous judgments:
The appellant argued that registration cannot be denied solely based on non-commencement of activities, citing relevant case laws. The genuineness of activities as a pre-condition for registration was highlighted, emphasizing that registration could be canceled if activities were not genuine or not in line with the Trust's objects. A comparison was made with a Kerala High Court judgment where registration was declined due to non-charitable activities.

Judgment:
The High Court found that the denial of registration to the appellant was not sustainable in law. It was noted that the activities of running a school fell within the scope of activities for registration under Section 12AA. The Court highlighted that the appellant's case was not similar to the Kerala High Court judgment where activities were found to be non-charitable. As the appellant was established to manage a school similar to those granted registration, the Court allowed the appeal in favor of the appellant, overturning the decisions of the Commissioner of Income Tax and the Tribunal.