2016 (7) TMI 510 - AT - Income Tax

Entitlement for registration u/s 12AA - non carrying any activities as per its objects - CIT(A) denied the exemption as no worthwhile activities are conducted by the society since its inception except plan approval for building construction, bank charges and society registration - Held that - The objection raised by the Ld. Commissioner is not correct for the reason that the assessee society is existed very recently and therefore it will take some time to start its operations to achieve the objects as per the Trust deed. It is not possible for the assessee to achieve all the objects. In this case, the assessee wanted to construct a building for the purpose of establishment of library for which the trust has applied for approval before the competent authority that it has incurred certain expenditure. The Ld. Commissioner himself has accepted that the objects of the assessee are charitable in nature. However, he has rejected the registration u/s 12AA of the Act for the reason that the society has not commenced its operations. In our opinion, having accepted the assessee trust as charitable in nature, rejecting on the ground of non- commencement of operations and not granting registration u/s 12AA of the Act by the Ld. Commissioner is prematured. Also see Sanjeevamma Hanumanthe Gowda Charitable Trust Vs. Director of Income-Tax (Exemptions) 2006 (3) TMI 91 - KARNATAKA High Court - Decided in favour of assessee

Summary

Issues:
1. Registration u/s 12AA of the Act denied by CIT based on lack of activities conducted by the society.
2. Appeal filed by the assessee challenging the CIT's order.
3. Whether the assessee is entitled to registration u/s 12AA of the Act.

Analysis:
Issue 1: The CIT rejected the assessee's request for registration u/s 12AA of the Act, citing lack of significant activities conducted by the society beyond plan approval and registration charges. The CIT opined that the society had not carried out any worthwhile activities aligned with its charitable objectives.

Issue 2: The assessee appealed this decision before the Tribunal, which carefully examined the timeline of events. The society was registered in January 2013 and applied for registration u/s 12AA in March 2013. The Tribunal noted that within three months, it was unreasonable to expect the society to have fully executed its charitable activities. The main objective was to establish a library, for which the society had already taken steps by obtaining plan approval and incurring expenses.

Issue 3: The Tribunal disagreed with the CIT's assessment, emphasizing that the society's charitable nature was acknowledged. The Tribunal highlighted that the CIT's rejection based on non-commencement of operations was premature. The Tribunal referenced the Income Tax Act's provisions allowing for cancellation of registration if activities are not genuine, providing safeguards against misuse. Citing a similar case from the Karnataka High Court, the Tribunal emphasized the need to assess the genuineness of activities and the application of income towards charitable purposes for registration under s. 12AA.

Conclusion: In line with the Karnataka High Court's decision and considering the facts and circumstances, the Tribunal overturned the CIT's order and granted registration u/s 12AA of the Act to the assessee Trust. The appeal filed by the assessee was allowed, emphasizing the importance of assessing the genuineness of activities for charitable registration.