2018 (8) TMI 1197 - AT - Income Tax

Denying registration u/s 12AA - charitable activity - establishment of school in a building on permanent basis - Held that - at the time of processing application for registration under section 12AA of the Act, Ld. CIT is not expected to go in to details, and powers are limited only to examine as to whether or not objects of assessee are charitable in nature and examination regarding genuineness of the activities. In the event Ld. CIT do not have sufficient material to doubt genuineness of activities, registration under section 12AA of the Act, cannot be refused to assessee. Natter remanded back to CIT for reconsideration of application for registration under section 12AA of the Act as per law.

Summary

Issues:
1. Denial of registration under section 12AA of the Income Tax Act, 1961 by Ld.CIT(E).
2. Rejection of application for registration by Ld.CIT based on lack of permanent arrangements for establishing a school.
3. Consideration of agreements for premises by the appellant.
4. Legal sanctity of agreements and the requirement for permanent arrangements.
5. Scope of examination by Ld.CIT under section 12AA.
6. Error in rejecting the application without due procedure.

Analysis:

1. The appeal was filed against the order of the Ld. Commissioner of Income-Tax (Exemptions) denying registration under section 12AA of the Income Tax Act, 1961. The appellant contended that the denial was based on incorrect facts and findings without adequate consideration of submissions and evidence.

2. The Ld.CIT rejected the application citing no activity towards the stated purposes of the society and the absence of arrangements for establishing a school on a permanent basis. The rejection was based on the lack of corroborated activities vis-a-vis the stated objects.

3. The appellant presented agreements with Malibu Little Star Primary School P Ltd. and Chamanpura Cooperative Society L/C Ltd. offering premises for charitable objects. Additionally, a letter from Saini Dharamshala offered rooms for educational activities without charges, demonstrating efforts towards establishing permanent arrangements.

4. The Ld.DR argued against the legal sanctity of agreements and the absence of permanent arrangements for the proposed school, supporting the decision of the Ld.CIT.

5. The Tribunal observed that the Ld.CIT's role is limited to examining the charitable nature of the objects and the genuineness of activities during the registration process under section 12AA. Lack of material to doubt the activities should not result in refusal of registration.

6. It was concluded that the Ld.CIT had not properly examined the genuineness of the objects and erred in rejecting the application without following due procedure. The matter was remanded back to the Ld.CIT for reconsideration in accordance with the law.

In conclusion, the grounds raised by the appellant were allowed for statistical purposes, and the appeal was allowed accordingly.