2017 (2) TMI 1400 - HC - Income Tax

Charitable activity - Grant of benefit u/s 12A denied - activity of the applicant could not be termed as charitable within the meaning of section 2(15) and there were huge surpluses and accounts were not audited and returns of income for such years in which total income exceed ₹ 50,000/- were not filed alongwith Form No. 10B - Held that - The issue is squarely covered by the decision of Director of Income Tax (Exemptions) vs. Spic Educational Foundation 2001 (11) TMI 22 - MADRAS HIGH COURT wherein held non - filing of the audit report in Form No. 10B of the Income Tax Rules, 1962, would not defeat the claim of the assessee for exemption under Sections 11 and 12 The registration U/s 12A of the Act for entitlement to claim the benefits U/Ss 11 & 12 of the Act requires two conditions to be fulfilled, firstly that the person concerned should have made an application for registration in the prescribed form and in the prescribed manner to the authorities named in that section before the first day of July, 1973, or before the expiry of the period of one year from the date of the creation of the trust or establishment of the institution and secondly, the person concerned would deep the accounts in a particular manner and such accounts should be audited. Thus the assessee has fulfilled both the conditions and the delay in making the application for registration has also been successfully explained and that being sufficient cause for the delay, we condone the delay with direction to the Ld. CIT to grant the registration on the application filed by the assessee for the purpose in Form No. 10A before Ld. CIT on 27.3.2005 for the claimed period. - Decided in favour of assessee

Summary

Issues:
Department's appeal against Tribunal's decision granting benefit u/s 12A of the Income Tax Act to the assessee society.

Analysis:
The case involved the Department challenging the Tribunal's decision granting the assessee society benefits under section 12A of the Income Tax Act. The society had applied for registration under section 12A, but the application was initially rejected by the CIT due to various reasons, including the non-charitable nature of the society's activities, significant surpluses in multiple financial years, lack of audited accounts, and failure to file returns for years with income exceeding a certain threshold. The substantial question of law framed by the court was whether the ITAT acted legally in directing the CIT to grant registration to the respondent under section 12A for the claimed period.

The court referred to a decision by the Madras High Court to analyze the issue. The court highlighted the conditions specified under section 12A for registration of a trust or institution, emphasizing the requirement for audited accounts and submission of audit reports along with the income tax return. The Department argued that the Tribunal erred in directing registration despite the non-compliance with these conditions.

However, the Tribunal's order was based on a detailed examination of the society's activities, especially related to the Seed Act, which aimed to ensure the supply of proper seeds to farmers for their benefit. The Tribunal found these activities aligned with the definition of charitable purpose under section 2(15) of the Act. Additionally, the Tribunal noted that all necessary formalities for registration were eventually fulfilled, and any delays were explained satisfactorily. The Tribunal also cited instances where similar benefits were granted to other institutions in different states, further supporting the decision to grant registration to the assessee society.

Ultimately, the court upheld the Tribunal's decision, stating that the benefits conferred in other states justified the condonation of delays and the grant of registration to the society. The court concluded that there was no reason to interfere with the Tribunal's order, and the issue was decided in favor of the assessee society, leading to the dismissal of the appeal brought by the Department.