2014 (10) TMI 1048 - AT - Income Tax

Exemption u/s 11 - refusing registration u/s 12AA - Proof of charitable object u/s 2(15) - non-approval of the state government for running educational institutions - HELD THAT - There is no dispute that the assessee s objects hereinabove point out education and ancillary activities are charitable purposes prescribed u/s 2(15) of the Act. There is no preference given to any particular group of people. We find from page 43 of the paper book that the Directorate of Tamil Nadu Matriculation Schools, Chennai has already accorded approval on 4.3.2014 permitting the assessee to open a school for LKG to VIIIth class from academic year 2014-15. Therefore, the first objection does not survive. Assessee has not commenced its charitable activities and its activity as a commercial organization - the assessee has already enrolled students in the school. The hon'ble jurisdictional high court in DIT(E) vs M/s Seervi Samaj Tambaram Trust 2014 (2) TMI 32 - MADRAS HIGH COURT has held that registration u/s 12AA of the Act ought not be refused on the ground of non-commencement of charitable activities. Lack of genuineness in the assessee s activities as well - we accept the assessee s contentions and hold it entitled for registration u/s 12AA of the Act. Needless to say, the issue of commercial activities and lack of genuineness abovesaid are left to be examined in the course of assessment as per law. - Decided in favour of assessee.

Summary

Issues:
1. Refusal of registration u/s 12AA of the Income-tax Act, 1961 by the Commissioner of Income-tax.
2. Non-approval of the state government for running educational institutions.
3. Allegation of non-commencement of charitable activities and acting as a commercial organization.
4. Lack of genuineness in the activities of the trust.

Analysis:

Issue 1: Refusal of registration u/s 12AA:
The appeal was against the order of the Commissioner of Income-tax refusing registration u/s 12AA of the Income-tax Act, 1961. The trust deed of the assessee outlined various charitable objects, including educational institutions, hospitals, libraries, and scholarships. The Commissioner raised concerns about the trust not being approved by the State Government and not carrying out charitable activities despite generating donations. The Commissioner rejected the registration application based on the lack of evidence supporting charitable activities.

Issue 2: Non-approval by the State Government:
The Commissioner cited non-approval by the State Government as a reason for rejecting the registration application. However, it was noted that the Directorate of Tamil Nadu Matriculation Schools had approved the trust to open a school for academic year 2014-15, thus invalidating this objection.

Issue 3: Allegation of Non-commencement of Charitable Activities:
The Commissioner alleged that the trust had not commenced charitable activities and was operating as a commercial organization. However, the Tribunal referred to a previous judgment that registration should not be refused solely based on non-commencement of charitable activities. The Tribunal found that enrolling students in the school satisfied the requirement of commencing charitable activities, dismissing this objection.

Issue 4: Lack of Genuineness in Activities:
The Commissioner also raised concerns about the lack of genuineness in the trust's activities, suggesting it was acting as a commercial organization. The Tribunal, however, accepted the trust's contentions and held it entitled to registration u/s 12AA. The issue of commercial activities and genuineness was left to be examined during the assessment process.

In conclusion, the Tribunal allowed the assessee's appeal, granting registration u/s 12AA of the Income-tax Act. The judgment highlighted the charitable nature of the trust's objects, dismissed objections related to non-approval and non-commencement of activities, and emphasized that further examination of commercial activities and genuineness would occur during assessment.