2016 (8) TMI 260 - AT - Income Tax

Registration under S.12AA - dissolution clause - incidental objects - Held that - A bare reading of the order of the CIT(Exemption) would show that the objections of the CIT(Exemption) to the applications of the assessee for registration under S.12AA and approval under S.80G are two fold. Firstly, as per the dissolution clause specified in the Memorandum of Association, extracted above, there is no intention on the part of the assessee to transfer the assets to any other similar institution having registration under S.12AA of the Act. We find no rationale in this objection of the Commissioner. Relevant dissolution clause clearly specifies that surplus arising on dissolution, after satisfaction of its debts and liabilities shall be transferred to other institutions pursuing objects similar to the those of the assessee company. The second objection of the CIT(Exemption) is based on the reading and interpretation of the incidental objects as provided for attainment of main objects in the Memorandum of Association. As per CIT(Exemption), the incidental objects indicate the intention of the assessee to pursue its activities outside India. This objection of the Commissioner for denial of registration is also without any force. We notice from the relevant incidental clause relied upon by the Revenue that such clause primarily enables the assessee to raise funds to attain the main objects of the company. It does not give any impression that the assessee shall carry out its activities outside India. We set aside the impugned order of the Commissioner of Income-tax (Exemption) and restore the matter back to his file with a direction to reconsider the applications of the assessee for registration under S.12AA and approval under S.80G afresh in accordance with law and after giving reasonable opportunity of hearing to the assessee.

Summary

Issues:
Refusal of registration under S.12AA and approval under S.80G by the Commissioner of Income-tax (Exemption).

Analysis:
The appeal was filed against the Commissioner's order refusing registration under S.12AA and approval under S.80G of the Income Tax Act,1961. The assessee company was incorporated for charitable objects as per its Memorandum of Association (MOA). The Commissioner refused registration under S.12AA and approval under S.80G based on the dissolution clause indicating no intention to transfer assets to another institution registered under S.12AA and on the grounds of incidental objects indicating activities outside India. The Commissioner's order highlighted these objections, leading to the appeal before the Tribunal.

The Tribunal analyzed the objections raised by the Commissioner. Regarding the dissolution clause, the Tribunal found no rationale in the objection as the clause specified transferring surplus assets to institutions with similar objectives. The Tribunal cited a similar case where such an objection was found unsustainable, emphasizing the conformity of the dissolution clause with legal requirements. On the issue of incidental objects suggesting activities outside India, the Tribunal noted that the clause primarily focused on raising funds for the main objectives without indicating operation outside India. Referring to precedents, the Tribunal concluded that denial of registration based on activities extended outside India was not justified, aligning with legal provisions and previous decisions.

In light of the above analysis, the Tribunal set aside the Commissioner's order and directed a reconsideration of the applications for registration under S.12AA and approval under S.80G. The Tribunal emphasized granting a reasonable opportunity for the assessee to present their case. Consequently, the assessee's appeal was treated as allowed for statistical purposes, providing relief from the Commissioner's objections and ordering a fresh review of the registration and approval applications in accordance with the law.