2013 (5) TMI 1013 - AT - Income Tax

Summary

Issues Involved:
1. Rejection of application u/s. 12AA of the IT Act.
2. Examination of the genuineness of the objects and activities of the assessee society.
3. Procedural lapses in the decision-making by the CIT.

Summary:

1. Rejection of application u/s. 12AA of the IT Act:
The appeal is directed against the order of the CIT-II, Agra, dated 21/27.07.2011, which rejected the application u/s. 12AA of the IT Act. The CIT found that the assessee society, which intended to run a school as a franchisee of M/s. Zee Learn Ltd., was not formed for charitable purposes but was rather running a commercial venture.

2. Examination of the genuineness of the objects and activities of the assessee society:
The assessee society, registered under the Societies Act, aimed to provide educational activities and had started educational activities in F.Y. 2011-12. The CIT did not dispute the educational nature of the society's objects but rejected the application based on the commercial nature of M/s. Zee Learn Ltd. The Tribunal noted that the genuineness of the objects, being educational, should be the focus at the stage of registration, not the activities, which had not yet commenced. The Tribunal cited the Hon'ble Allahabad High Court's decision in Hardayal Charitable and Educational Trust vs. CIT-II, Agra, which held that at the stage of grant of registration, the genuineness of the objects has to be tested, not the activities.

3. Procedural lapses in the decision-making by the CIT:
The Tribunal observed that the CIT-II, Agra, acted on a draft order prepared by the ITO (Tech.) without conducting an independent examination of the case. This approach was deemed impermissible under the law. The Tribunal referred to its earlier decisions in similar cases, which emphasized the need for the CIT to personally satisfy himself about the genuineness of the activities and objects of the assessee institution. The Tribunal found that the CIT's reliance on the ITO (Tech.)'s draft order and the lack of adverse material against the assessee were procedural lapses.

Conclusion:
The Tribunal set aside the impugned order dated 21/27.07.2011 and directed the CIT-II, Agra, to grant registration to the assessee u/s. 12AA of the IT Act from the date of filing of the application. The registration was to be granted within one month from the receipt of the Tribunal's order. The appeal of the assessee was allowed.