2014 (12) TMI 12 - HC - Income Tax

Grant of recognition u/s 80G - Rejection of application of registration u/s 12A Object of Trust charitable or not Held that - It is open to the revenue to cancel the registration invoking sec. 12AA(3) of the Act, if it is satisfied that the activities of the Trust are not genuine and not being carried out in accordance with the objects of the Trust Thus, the application filed under sec.12A for registration was granted by its order dated 10/7/2009 - In the meanwhile the assessee had filed an application before the Director of Income Tax seeking recognition u/s 80G of the Act - As the application filed for registration u/s 12A had been rejected, the application came to be dismissed by the Director of Income Tax both the provisions are exclusive - In order to get recognition u/s 80G, mere registration u/s 12A is not sufficient - the assessee has to satisfy the requirement mentioned u/s 80G - Though grant of registration u/s 12A is a condition precedent, unless the conditions stipulated in sec.80G are fulfilled, the recognition u/s 80G cannot be granted thus, the order of the Tribunal to that extent is set aside and the matter is remitted back to the DIT for consideration of the application for recognition u/s 80G Decided in favour of revenue.

Summary

Issues:
Grant of recognition under sec.80G upon registration under sec.12A.

Analysis:
The judgment revolves around the issue of whether the grant of recognition under sec.80G is automatic upon the assessee being granted registration under sec.12A of the Income Tax Act, 1961. The assessee had applied for registration under sec.12A, which was initially rejected by the Director of Income Tax citing commercial activities in the Trust's objects. However, the Tribunal later granted registration under sec.12A after finding the Trust's objects to be charitable in nature. The Tribunal also granted recognition under sec.80G, stating that it is a consequential order following registration under sec.12A. The Revenue appealed this decision before the High Court.

The High Court analyzed the legal provisions and established that while registration under sec.12A is a prerequisite for recognition under sec.80G, the conditions specified under sec.80G must also be met for such recognition. The Court emphasized that both provisions are exclusive and independent of each other. Therefore, the mere grant of registration under sec.12A does not automatically entitle the assessee to recognition under sec.80G. As the Tribunal's decision to grant recognition under sec.80G solely based on registration under sec.12A was deemed erroneous, the High Court allowed the appeal, set aside the order, and remitted the matter back to the Director of Income Tax for reconsideration of the application for recognition under sec.80G in accordance with the law.

In conclusion, the judgment clarifies the distinct requirements for registration under sec.12A and recognition under sec.80G of the Income Tax Act, highlighting that compliance with sec.80G conditions is essential for obtaining recognition, even after securing registration under sec.12A. The decision underscores the independent nature of these provisions and the need for separate fulfillment of criteria for each.