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2016 (7) TMI 110 - HC - Income TaxScope of enquiry for granting registration u/s 12A - Held that - Enquiry shall be confined to the objects of the trust or institution & genuineness of its activities and cannot travel to the extent that whether the income of the trust from the property is wholly applied for the charitable purposes or not so as to make them entitle to claim exemption under Section 11 & 12. While considering registration application, CIT has transgressed its jurisdiction in recording that it is not proved that the assessee has applied 85% of its income. ITAT has rightly observed that it was nowhere found by the CIT that the objects mentioned in the trust deed are not charitable or non genuine. Entire factual & legal position examined by the ITAT and only after being satisfied about the genuineness of the objects and activities of the assessee trust, granted the application for registration preferred by the appellant u/s 12A of the Act. Decided in favour of assessee
Issues:
Appeal against rejection of application under Section 12A of the Income Tax Act, 1961 by the Commissioner of Income Tax (CIT) - Jurisdiction of CIT in considering application - Grant of registration by Commissioner - Deemed registration due to failure to dispose of application within stipulated period - Examination of factual and legal position by Income Tax Appellate Tribunal (ITAT) - Entitlement of trust for exemption under Section 11 & 12 of the Act. Analysis: The appeal was filed against the order of the ITAT allowing the appeal of the assessee trust against the rejection of its application under Section 12A of the Income Tax Act by the CIT. The appellant contended that the CIT rightly rejected the application as the trust's activities were not genuine and failed to prove corpus fund donation. The ITAT, however, set aside the CIT's order and directed to issue registration to the assessee under Section 12A. The respondent argued that failure to dispose of the application within the stipulated period would amount to deemed registration, and the CIT's finding on the trust's objects being non-genuine was perverse. The respondent also highlighted that the ITAT's decision did not raise any substantial question of law. The High Court analyzed the provisions of Section 12AA of the Act, emphasizing that registration under Section 12A is a condition precedent for claiming exemption under Section 11 & 12. The court clarified that the scope of enquiry under Section 12A is limited to the objects of the trust and genuineness of its activities, not the application of income for charitable purposes. The court noted that the CIT exceeded its jurisdiction by transgressing into the examination of whether the trust applied 85% of its income towards its objects. It was observed that the CIT did not consider a report from the Income Tax Officer and failed to pass any order on the application within the stipulated period, leading the assessee to approach the High Court for relief. The High Court upheld the ITAT's decision, stating that the ITAT thoroughly examined the factual and legal position before granting registration to the appellant under Section 12A. The court also noted that the Revenue did not raise the issue of deemed registration due to the CIT's failure to decide the application within the stipulated period. As the ITAT allowed the registration after due examination on merits, the question of deemed registration was deemed irrelevant. Consequently, the High Court dismissed the appeal, stating that no substantial question of law arose for consideration in the case.
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