2018 (7) TMI 2280 - AT - Income Tax

Exemption u/s 11 - Cancellation of Registration u/s 12A - Assessee given donations to various organizations - HELD THAT - The assessee admittedly has given donations to various organizations as reproduced in earlier part of out order. When asked to show during proceedings before the Ld. Commissioner of Income Tax as to how they were actually utilized by the donee societies/institutions nothing was shown by the assessee. The assessee has therefore neither established the user of the donations for charitable purposes nor demonstrated that the said donee society was a charitable society registered u/s 12A - Meaning thereby that the assessee society has not demonstrated the application of its funds for charitable purposes. The assessee therefore is not entitled to claim the donations as application of its income. We agree with the CIT that the assessee is indulging in the activity of giving donations to other institutions which is not in consonance with the approved objects of the assessee society. We therefore uphold the action of Commissioner of Income Tax in cancelling the registration granted u/s 12A of the Act by invoking the provisions of section 12AA(3) of the Act. - Decided against assessee.

Summary

Issues:
1. Eligibility for exemption u/s 11(2) of the Income Tax Act 1961 due to cancellation of Registration u/s 12A.
2. Denial of exemption and disallowance of donations made to other organizations.

Analysis:
1. The Assessee appealed against the order of the Ld. CIT(A)-2, Chandigarh, arguing that the cancellation of Registration u/s 12A should not affect eligibility for exemption u/s 11(2) of the Income Tax Act 1961. The Ld. AR contended that the issue was similar in all years and presented ITA No. 522/CHD/2018 as the lead case. The Assessing Officer denied exemption u/s 11(2) and disallowed donations made by the Assessee, leading to an addition to the taxable income. The Assessee highlighted compliance with trust objectives and charitable activities, citing CBDT instructions on donations as application of income.

2. The Ld. CIT(A) upheld the denial of exemption, emphasizing that the cancellation of Registration was due to the Assessee not engaging in charitable activities as per trust objectives, especially in the FYs 2007-08 to 2009-10. The Ld. CIT(A) noted the cancellation of Registration u/s 12AA(3) and confirmed by ITAT, indicating the lack of genuine charitable activities by the Assessee. The Ld. AR argued that the matter was pending in the High Court and contended against retrospective application of the cancellation.

3. The ITAT reviewed the case and previous orders, including ITA No. 397/CHD/2013, where it was established that the Assessee primarily applied income through donations, not in line with trust objectives. The ITAT referenced CBDT instructions and case laws on donations to charitable trusts, highlighting the need for funds to be utilized for charitable purposes. The ITAT found that the Assessee failed to demonstrate the utilization of donations for charitable purposes, leading to the conclusion that the Assessee's activities did not align with approved trust objectives, upholding the cancellation of Registration u/s 12A.

4. Considering the above, the ITAT dismissed all appeals of the Assessee, affirming the orders of the Ld. CIT(A) based on the Tribunal's decision. The judgment emphasized the importance of genuine charitable activities and compliance with trust objectives for eligibility for exemptions under the Income Tax Act 1961.