2018 (8) TMI 195 - AT - Income Tax

Seeking registration u/s.12AA and approval under section 80G(5) - Held that - In the instant case, the assessee is a society had applied for registration under section 12AA of the Act in the prescribed Form 10A on 31.7.2017 seeking registration under the Income Tax Act as well as application in Form 10G was filed on the same date by the assessee society for approval u/s.80G of the Act. A reading of above clause shows that the Memorandum of Association specifically provides that upon dissolution of the society, its assets will be handed over to similar registered society or to Government after clearing up all it s debts and liabilities. Therefore, in view of above clause in the MOA of the society, in our considered view, the ld CIT(Exemption) was not justified in refusing registration to the assessee society on this ground also. The refusal to grant registration u/s.12AA of the Act to the assessee society is not proper and justified. Similarly, the refusal to grant of approval u/s.80G of the Act is also not justified. Hence, we set aside the order of the CIT(Exemption), Hyderabad and direct him to grant registration u/s.12AA of the Act and approval u/s.80G of the Act to the assessee society. Thus, the grounds of appeal of the assessee are allowed.

Summary

Issues:
1. Rejection of application for registration u/s.12AA of the Act by CIT(Exemption) based on specific grounds.
2. Analysis of the grounds raised by the assessee in the appeal against the rejection order.
3. Examination of the clauses in the Memorandum of Association (MOA) and Articles of Association (AOA) of the assessee society.
4. Comparison of the rejection reasons with relevant legal precedents.
5. Review of the Tribunal's decision on the rejection grounds.
6. Consideration of the dissolution clause in the MOA and its impact on the rejection of registration.
7. Final decision and direction to grant registration u/s.12AA and approval u/s.80G to the assessee society.

Analysis:
The appeal was filed against the rejection of the registration application u/s.12AA of the Act by the CIT(Exemption) based on specific grounds. The assessee raised multiple grounds in the appeal challenging the rejection order. The main contentions included the rejection being unjust and improper, contrary to facts, and not meeting the legal requirements. The CIT(Exemption) rejected the application citing reasons related to the absence of specific clauses in the MOA, such as the amendment clause, dissolution clause, and investment clause.

During the proceedings, the assessee's representative argued that the rejection reasons were unfounded, presenting clauses from the MOA to support their case. The Tribunal referred to a previous case where similar grounds for rejection were found to be irrelevant and beyond the scope of the registration process. The Tribunal emphasized that the absence of specific clauses in the MOA did not justify the rejection of registration. Additionally, the Tribunal highlighted that the Act prohibits certain investments and the absence of an investment clause was not a valid reason for rejection.

The Tribunal analyzed the dissolution clause in the MOA and concluded that it clearly outlined the procedure for asset distribution upon dissolution, contradicting the CIT(Exemption)'s basis for rejection. Ultimately, the Tribunal found the rejection of registration and approval to be unjustified and directed the CIT(Exemption) to grant the requested registration and approval to the assessee society. The Tribunal allowed the appeal, overturning the rejection order and providing a detailed explanation for its decision.

In conclusion, the Tribunal's thorough analysis of the rejection grounds, comparison with legal precedents, and examination of the MOA clauses led to the decision to grant registration u/s.12AA and approval u/s.80G to the assessee society, highlighting the importance of legal compliance and proper justification for rejection in such cases.