2015 (10) TMI 804 - AT - Income Tax

Registration u/s 12AA denied - Administrative Commissioner rejected the application of the assessee only on the ground that the mandatory clause was not incorporated in the bye laws - Held that - Section 12AA does not say that any mandatory clause has to be incorporated in the bye laws. The Administrative Commissioner has to examine the genuineness of the activity of the trust within the meaning of section 2(15) of the Income-tax Act. In this case, the Administrative Commissioner has not examined the genuineness of the activity of the trust. This Tribunal is of the considered opinion that the Administrative Commissioner has to examine the application of the assessee as provided in section 12AA(1) r.w.s. 2(15) of the Act and satisfy himself about the genuineness of the activity of the object of the trust. Since the same was not examined by the Administrative Commissioner, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Administrative Commissioner. Accordingly, the order of the Administrative Commissioner is set aside and the issue is remanded back to reexamine the matter afresh regarding the genuineness of the activities of the trust. The Administrative Commissioner shall examine specifically why the society was formed by the Government officials to implement health care programme when they are otherwise supposed to implement the policy of Government of India and Government of Kerala as well. The Administrative Commissioner shall bring on record the genuineness of the activity of the trust and its object and thereafter decide the issue afresh in accordance with law after giving reasonable opportunity to the assessee.- Decided in favour of assessee for statistical purpose.

Issues:

1. Rejection of application for registration u/s 12AA of the Income-tax Act.
2. Requirement of mandatory clauses for audit as per section 12A(b) of the Act.
3. Examination of the genuineness of the activities of the trust by the Administrative Commissioner.
4. Need for reexamination of the matter by the Administrative Commissioner.

Issue 1: Rejection of Application for Registration u/s 12AA:

The appellant, a society assisting the district health administration, appealed against the rejection of its registration application under section 12AA of the Income-tax Act by the Administrative Commissioner. The appellant argued that the source of income was government aid, and the society aimed to support health programs in Kasargod district. However, the purpose of forming a separate society by government officials was questioned as they were expected to serve the people directly. The appellant contended that the Act did not mandate audit clauses in the trust deed for registration under section 12AA.

Issue 2: Requirement of Mandatory Clauses for Audit:

The Administrative Commissioner rejected the appellant's claim based on the absence of mandatory audit clauses in the deed, citing section 12A(b) of the Act. The appellant argued that while audited statements are necessary for availing exemptions under sections 11 and 12, they are not mandatory for registration under section 12AA. The appellant maintained that their accounts were regularly audited as per the bylaws. The Tribunal noted that the Administrative Commissioner's decision solely based on the absence of mandatory clauses was not in line with the Act's requirements.

Issue 3: Examination of Genuineness of Trust Activities:

The Tribunal emphasized that the Administrative Commissioner failed to examine the genuineness of the trust's activities as required by section 2(15) of the Income-tax Act. It was highlighted that the Commissioner must assess the trust's purpose and activities to ensure compliance with the Act. The Tribunal concluded that a reexamination by the Administrative Commissioner was necessary to determine the legitimacy of the trust's objectives and activities.

Issue 4: Need for Reexamination by the Administrative Commissioner:

Given the lack of scrutiny regarding the genuineness of the trust's activities by the Administrative Commissioner, the Tribunal set aside the previous order and remanded the issue for reexamination. The Administrative Commissioner was instructed to thoroughly assess why the society, formed by government officials, was necessary for implementing healthcare programs when their roles already encompassed such duties. The Commissioner was directed to reevaluate the trust's activities and decide on the registration application after providing a fair opportunity to the appellant.

In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the importance of a comprehensive examination of the trust's activities and objectives by the Administrative Commissioner in accordance with the provisions of the Income-tax Act.

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