2014 (5) TMI 506 - AT - Income Tax

Rejection in grant of registration u/s 12AA of the Act Educational institutions - Held that - No adverse finding has been given to the effect that the assessee society s aims and objects are not charitable in nature - Books of A/Cs are properly maintained on which there are no adverse comments - A certified copy of memorandum is proper compliance to furnish the documents - The assessee having accumulated surplus in past has no effect on the registration in as much as the surplus has been kept by the assessee either in FDRs or investment in purchase of land. There was no merit in the observation that the assessee has not demonstrated any nexus between the purchase of land and objects - For a society running schools, the building construction become integral part of the activity for which purchase of land becomes an essential feature - Thus, the adverse inference on nexus is misconceived in any case the issues about surplus or claiming depreciation become issues relevant for the assessment proceedings and have no bearing at the time of initial registration u/s 12A - Relying upon Shri Gian Ganga Vocational & Educational Society Versus Commissioner of Income-tax, Rohtak 2013 (11) TMI 165 - ITAT DELHI - the assessee society is eligible for registration u/s 12AA which should be granted Decided in favour of Assessee.

Summary

Issues:
- Challenge to denial of registration under section 12AA of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Denial of Registration under Section 12AA
- The appellant, a registered society operating educational institutions, appealed against the CIT's order denying registration under section 12AA for the assessment year 2012-13.
- The CIT's rejection was based on various grounds, including the failure to provide original establishment documents, high surplus levels, delayed application for registration, accumulation of income without permission, and alleged profit-maximizing activities.
- The CIT concluded that the society failed to prove the charitable nature of its aims and activities, especially in accumulating assets and generating wealth beyond permissible limits.
- The appellant argued that the CIT's objections were irrelevant to the registration issue, emphasizing the society's educational objectives, proper maintenance of accounts, and legitimate use of surplus funds for land acquisition.
- The appellant cited precedents where similar educational societies were granted registration under section 12AA based on their charitable nature and genuine activities.
- The ITAT agreed with the appellant, noting that the society's objectives were charitable, accounts were in order, and surplus accumulation did not affect registration eligibility.
- The ITAT emphasized that the purchase of land for school construction was integral to the society's educational activities, dismissing the CIT's concerns about surplus and depreciation as irrelevant for registration purposes.
- Relying on previous ITAT decisions and legal principles, the ITAT held that the society met the criteria for registration under section 12AA and directed the CIT to grant registration accordingly.

This detailed analysis covers the appellant's challenge to the denial of registration under section 12AA, highlighting the key arguments, observations, and legal precedents that influenced the ITAT's decision in favor of the appellant.