2015 (1) TMI 1488 - AT - Income Tax

Assessment of trust - CIT dismissed the application u/s 12AA - registration has been denied on allegation that almost in every activity there is a scent of commercialization/ profit motive - HELD THAT - The registration cannot be refused on the basis of vague findings like the scent of commercial activity and accounts audit being as per state govt. rules and not a CA. From the verification of the relevant Urban Development Rules, it emerges that assessee carries on various activities which appear to be charitable in nature. CIT has not appreciated the application for registration in proper perspective, the activities of the assessee can be judged from the documents submitted by it. Thus we are inclined to set aside the issue back to the file of the ld. CIT to decide the same afresh in accordance with law by providing reasonable opportunity of being heard to the assessee expeditiously. Thus the appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
Denial of registration u/s 12AA of the I.T. Act, 1961 based on commercial activities and lack of charity element.

Analysis:
The appeal was against the denial of registration u/s 12AA by the ld. CIT, challenging the commercial nature of the activities with no charity element. The ld. Counsel argued that the denial was unsustainable as the activities were charitable, and any surplus generated was utilized for charitable purposes. The AO is responsible for determining the nature of activities during assessment. The registration cannot be refused based on vague findings like "scent of commercial activity" or non-CA audit. The Tribunal found the ld. CIT's perspective lacking and remanded the issue for reconsideration, emphasizing a fair hearing for the assessee.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, setting aside the denial of registration and instructing the ld. CIT to review the matter with fairness and in accordance with the law. The decision highlighted the need for a proper assessment of the charitable nature of the activities and the utilization of any surplus for charitable purposes. The Tribunal's ruling aimed to ensure a just and thorough evaluation of the registration application, emphasizing the importance of providing a reasonable opportunity for the assessee to present their case effectively.