2016 (2) TMI 395 - AT - Income Tax

Registration u/s 12AA denied - Held that - At the time of granting registration, the Commissioner has to see that whether the assessee is established for the charitable purpose or not and whether the funds collected are being utilized for that purpose. Once the assessee has satisfied the conditions that it is existed for the purpose of charitable nature and the funds received also are being utilized to achieve the objects of the trust, the Commissioner has to grant the registration u/s 12AA of the Act. If at all doubts are there in respect of activities of the trust, there are other safeguards already provided by the Act. It can be considered at the time of the assessment and decided accordingly. In the present case, we find that the Ld. Commissioner rejected the registration u/s 12AA of the Act without there being any justified reasons. After careful consideration of the entire facts and circumstances of the case and also keeping in view of the judgement of Hon ble Karnataka High Court, we are of the opinion that assessee deserve to be granted registration u/s 12AA of the Act. Thus, we quash the order passed by the Ld. Commissioner and grant registration u/s 12AA of the Act to the assessee - Decided in favour of assessee

Summary

Issues:
Registration u/s 12AA of the Income-Tax Act, 1961 denied by the Commissioner based on various grounds including interest-free advances to HUF, payments to relatives, and non-registration under the Andhra Pradesh Charitable and Hindu Religious Institution and Endowments Act, 1987.

Analysis:
The appeal was filed against the order of the CIT denying registration u/s 12AA of the Act. The assessee, an educational society, applied for registration on 14.2.2012. The CIT issued a show cause notice after receiving the application and rejected registration based on various grounds, including interest-free advances to HUF, payments to relatives, and non-registration under the Andhra Pradesh Charitable and Hindu Religious Institution and Endowments Act, 1987.

The assessee contended that its objects were charitable, as accepted by the CIT, and therefore, registration should be granted. The counsel relied on a Karnataka High Court decision to support the charitable nature of the trust. The DR supported the CIT's decision.

The Tribunal found that the society existed for educational and social activities, accepted by the CIT. The rejection was mainly based on the CIT's reliance on the Chief Commissioner's order rejecting approval u/s 10(23C)(vi) of the Act. However, the Tribunal noted that the CIT did not thoroughly examine the explanation provided by the assessee and rejected registration unjustly, especially considering the educational nature of the activities. Additionally, the non-registration with the Andhra Pradesh Charitable and Hindu Religious Institution and Endowments Act, 1987, was not a valid ground for rejection.

Referring to a Karnataka High Court decision, the Tribunal emphasized that the authorities must ensure the genuineness of the trust's activities and the proper utilization of funds for charitable purposes. In this case, the society's educational activities were charitable, and the rejection lacked reasonable justification. Therefore, the Tribunal quashed the CIT's order and granted registration u/s 12AA of the Act to the assessee.

In conclusion, the appeal was allowed, and registration u/s 12AA of the Act was granted to the assessee, emphasizing the genuine charitable nature of the educational society's activities.