2015 (4) TMI 303 - HC - Income Tax

Registration u/s 12AA(3) rejected by CIT(A) - activities of the society found non-genuine during the years involved as the funds of the assessee society were being siphoned off by debiting bogus purchase of software - Tribunal allowed registration - Held that - In case the activities are not genuine and they are not being carried out in accordance with the objects of the trust/society or the institution, of course, the registration can again be refused. But on mere presumptions and on surmises that income derived by the trust or the institution is being misused or that there is some apprehension that the same would not be used in the proper manner and for the purposes relating to any charitable purpose, rejection cannot be made. Commissioner of Income Tax was not justified in passing the impugned order for withdrawing the exemption as admittedly, the respondent-assessee is carrying out educational activities by running a large number of educational institutions all over the country and, therefore, the questions of law sought to be raised do not arise. - Decided in favour of assessee.

Summary

Issues:
- Appeal against withdrawal of registration under Section 12AA(3) of the Income Tax Act, 1961.
- Genuine activities of the society in accordance with the objects.
- Eligibility for registration under Section 12AA of the Income Tax Act.

Analysis:
The judgment addressed two Income Tax Appeals concerning the withdrawal of registration under Section 12AA(3) of the Income Tax Act, 1961. The main issue revolved around the genuineness of the society's activities in line with its objects. The appellant challenged the Tribunal's decision to set aside the withdrawal of registration, citing non-genuine activities due to alleged misutilization of funds through bogus software purchases. The Tribunal, however, found that the society was indeed engaged in educational activities across multiple institutions, meeting the requirements of Sections 11 and 12 of the Act. The Tribunal concluded that the withdrawal of registration was unjustified based on the substantial evidence presented.

The Commissioner of Income Tax had withdrawn the registration based on findings from a search and seizure operation, alleging non-genuine activities by the society. The Commissioner relied on statements and evidence indicating misutilization of funds through bogus transactions. However, the Tribunal found that the society's educational activities were genuine and aligned with its objectives, as evidenced by the significant expenses incurred for educational purposes. The Tribunal highlighted the importance of activities being in consonance with the objects of the trust, as per legal provisions.

The judgment emphasized the significance of the Commissioner's satisfaction regarding the genuineness of the institution's activities for granting and maintaining registration under Section 12AA of the Act. The Tribunal's decision to overturn the withdrawal of registration was supported by the extensive educational operations of the society, spanning various locations and affiliations with recognized educational bodies. The judgment cited legal precedents to underscore the necessity of activities being genuine and in line with charitable purposes, rather than focusing solely on profit-making aspects.

Ultimately, the High Court dismissed both income tax appeals, affirming the Tribunal's decision that the withdrawal of registration was unwarranted. The Court concluded that the society's educational endeavors were legitimate and aligned with its charitable objectives, thereby rejecting the raised questions of law. The judgment underscored the importance of activities being genuine and in accordance with the trust's stated objects for maintaining registration under Section 12AA of the Income Tax Act.