2017 (8) TMI 381 - HC - Income Tax

Grant of registration u/s 12AA - proof of charitable activities - non commencement of business - Held that - Issues raised in this appeal are squarely covered by the case in Commissioner of Income Tax-II Vs. R.S. Bajaj Society 2014 (1) TMI 761 - ALLAHABAD HIGH COURT stating that the registration under section 12AA cannot be refused, on the ground that the trust has not yet commenced the charitable or religious activity - At this stage, only the genuineness of the objects has to be tested and not the activities, which have not commenced - The enquiry of the Commissioner of Income-tax at such preliminary stage should be restricted to the genuineness of the objects - Decided against Revenue.

Summary

Issues:
1. Appeal under Section 260A of Income Tax Act, 1961 regarding registration u/s 12AA.
2. Justification of ITAT's direction to grant registration.
3. Proof of charitable activities and genuineness for registration.

Analysis:
The High Court dealt with an income tax appeal under Section 260A of the Income Tax Act, 1961, arising from a judgment by the Income Tax Appellate Tribunal, Agra Bench. The appeal questioned the justification of the ITAT's direction to grant registration under Section 12AA of the Act to the assessee. The substantial questions of law raised included whether the ITAT was justified in directing the Commissioner of Income-tax to grant registration despite doubts about the charitable activities being carried out by the applicant society. The Division Bench judgment cited by the Court emphasized that at the registration stage under Section 12AA, the focus should be on the genuineness of the objects and not on the activities that have not yet commenced. The Court highlighted that the genuineness of the activities need not be a ground for refusal of registration at the initial stage. The judgment also clarified that the rejection of registration based solely on the non-commencement of charitable activities was contrary to law.

The Court found that the Commissioner's rejection of registration was not in line with the law as laid down by the Division Bench judgment. The Tribunal's decision to direct the Commissioner to grant registration was supported by the consistent legal position. The Court distinguished other judgments cited by the revenue, including one from the Kerala High Court and another from the Punjab and Haryana High Court, based on their unique factual circumstances. It was emphasized that the focus should be on the charitable nature of the objects of the trust or society seeking registration under Section 12AA, rather than on the commencement of activities. The Court dismissed the appeal, aligning with the principles established in the Division Bench judgment and clarifying that the substantial questions of law were answered against the Revenue.

In conclusion, the High Court upheld the ITAT's decision to direct the grant of registration under Section 12AA, emphasizing the importance of examining the genuineness of the objects of the trust or society seeking registration rather than the commencement of charitable activities. The judgment provided clarity on the legal position regarding registration under Section 12AA of the Income Tax Act, ensuring that the focus remains on the charitable nature of the organization's objectives during the registration process.