2018 (9) TMI 707 - AT - Income Tax

Denying the assessee registration u/s. 12AA - relevance of objects and genuineness of the assessee s activities - Held that - CIT(E) has not examined the MoA/bye-laws in-as-much as his order bears that out. His order cannot therefore be upheld. Registration, for which the satisfaction of the competent authority with the objects and genuineness of the activities is a prerequisite, does not therefore follow automatically. That is, while we find no basis for dissatisfaction in the absence of the examination of the relevant material, there is no specific satisfaction for granting registration in terms of s. 12AA(b)(i), which is to be recorded in writing. Why, the assessee s objects, as their perusal reveals, contain religious objects as well, and which would also have to be taken into account. Further, not only is the said authority obliged to examine the same, but, where not satisfied, confront the assessee with his objections, following the principles of natural justice, besides being mandated by law. Restore the matter for the purpose back to the file of the competent authority, with a further direction to dispose of the assessee s application, which is thus pending since long - Assessee s appeal is allowed for statistical purposes.

Summary

Issues:
Appeal against denial of registration u/s. 12AA of the Income Tax Act, 1961.

Analysis:
The judgment pertains to an appeal against the denial of registration u/s. 12AA of the Income Tax Act, 1961. The appellant, a society engaged in providing school education, applied for registration anticipating its annual turnover to exceed a certain threshold. The denial of registration by the Commissioner of Income Tax (Exemptions) was based on the grounds of missing Memorandum of Association (MoA) and lack of details regarding cash deposits during a specific period. The appellant challenged the denial citing that the MoA and other necessary documents were indeed submitted. The appellant argued that the denial was unjustified and contrary to facts. The counsel for the appellant emphasized that all required documents were provided along with the application. The Commissioner, on the other hand, highlighted the importance of examining the society's objects for registration, emphasizing the need for satisfaction of the competent authority. The Commissioner pointed out specific clauses from the MoA indicating mixed objects pursued by the society.

The Bench inquired whether the appellant applied for registration as a charitable or religious institution, to which the appellant's counsel claimed it was charitable, focusing on education provision. The judgment referenced legal precedents emphasizing the institution's power to pursue various objects specified in its MoA. The judgment highlighted that the surplus from one activity could be used for another, as per the MoA terms. The judgment noted that the Commissioner did not thoroughly examine the MoA and by-laws, emphasizing the requirement for the competent authority's satisfaction with the objects and activities' genuineness before granting registration. The judgment emphasized the need for specific satisfaction in writing for registration under section 12AA(b)(i). The judgment also stressed the importance of following principles of natural justice and confronting the appellant with objections if not satisfied, citing legal provisions and relevant court decisions.

Consequently, the judgment ordered the matter to be restored to the competent authority for further examination and disposal of the appellant's application within a specified period. The judgment directed the competent authority to prioritize and resolve the matter within three months from the date of the order. The appellant's appeal was allowed for statistical purposes, and the order was pronounced in an open court on September 07, 2018.