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2018 (4) TMI 865 - AT - Income TaxApplication for registration u/s.12AA rejected - proof of charitable activities - Held that - We find that in the instant case, the CIT, Cuttack was not justified in refusing to grant registration u/s.12AA of the Act on the grounds stated in the impugned order. CIT, Cuttack could not point out that any of the objects of the assessee society was not charitable in nature or any of the activity of the assessee society was non-genuine. Simply because the activities of the assessee society were little or not substantial cannot be a ground to not to grant registration u/s.12AA of the Act. Further, whether the activity of the assessee is of commercial nature or not is to be examined while granting exemption u/s. 11 & 12 by the Assessing Officer at the time of making the assessment. We set aside the impugned order passed by the CIT, Cuttack and direct him to grant registration u/s.12AA of the Act to the assessee society. Appeal of the assessee are allowed.
Issues Involved:
1. Rejection of application for registration under section 12AA of the Income Tax Act. Issue-wise Detailed Analysis: 1. Rejection of Application for Registration under Section 12AA: The appeal was filed by the assessee against the order of the Commissioner of Income Tax (CIT), Cuttack, dated 29.7.2013, which rejected the application for registration under section 12AA of the Income Tax Act. Facts of the Case: The assessee, a registered society under the Societies Registration Act, 1860, applied for registration under section 12AA of the Income Tax Act on 21.1.2013. The CIT rejected the application on the grounds that the financial statements for the last three years showed minimal surplus and limited activities, primarily construction of a tennis court and charging fees from participants. The CIT observed that the society's activities were not charitable or philanthropic and anticipated that future activities involving sponsors and donors might lead to commercial considerations, which would not qualify as "charity" under section 2(15) of the Act. Arguments by the Assessee: The assessee argued that for granting registration, the CIT should consider the objects of the trust and the genuineness of its activities. The presence of incidental surplus should not be a ground for rejecting the registration application. Arguments by the Revenue: The Revenue relied on the order of the CIT. Tribunal's Observations: The Tribunal noted that the assessee is a registered public society formed on 23.2.1985, and its application for registration under section 12AA was denied by the CIT. The Tribunal examined the objects of the society, which included promoting tennis and other sports, acquiring property for its aims, and conducting necessary activities to achieve its objectives. Legal Precedents Considered: 1. Hardayal Charitable & Educational Trust vs CIT (355 ITR 534): The court held that at the time of registration under section 12AA, the CIT should not focus on the activities if they have not commenced but should test the genuineness of the objects. 2. CIT vs. Red Rose School (212 CTR 394): The court emphasized that registration cannot be refused based on presumptions about the misuse of income or apprehensions about non-charitable activities. 3. Professional Golf Tour of India vs CIT (143 ITD 165): The Tribunal held that prudent management to become self-sustained does not make a society commercial, and activities aimed at promoting a sport do not negate its charitable nature. 4. Queen’s Educational Society vs CIT (372 ITR 699): The Supreme Court discussed the definition of "charitable purpose" and stated that the predominant object should be to serve the charitable purpose, not profit-making. Tribunal's Conclusion: The Tribunal found that the CIT, Cuttack, was not justified in refusing registration under section 12AA based on the grounds stated. The CIT could not demonstrate that any object of the society was non-charitable or any activity was non-genuine. The Tribunal emphasized that minimal activities or incidental surplus should not be grounds for denial of registration. The issue of commercial nature should be examined during the assessment for exemption under sections 11 and 12. CBDT Circular No. 21/2016: The Tribunal referred to the CBDT circular clarifying that exceeding the cut-off for receipts from commercial activities in a particular year does not mandate cancellation of registration unless there is a change in the nature of activities. Order: The Tribunal set aside the order of the CIT, Cuttack, and directed the CIT to grant registration under section 12AA of the Act to the assessee society. The appeal filed by the assessee was allowed. Result: The appeal filed by the assessee was allowed, and the order was pronounced on 12/04/2018.
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