2018 (11) TMI 584 - AT - Income Tax

Grant of registration u/s. 12AA denied - proof of charitable activities - Held that - It is clear that the reply dated 06.06.2017 filed by the assessee before the CIT(E) that the assessee is an Authority incorporated under the Karnataka Urban Development Authorities Act, 1987 and was neither a trust or society. Further in its letter dated 20.6.2017, the assessee has also cited decisions rendered by judicial forums as to how the assessee who are carrying on activities similar to that of the assessee in the present case were held to be institutions entitled to registration u/s. 12AA of the Act. None of these submissions were considered by the CIT(Exemptions). He has proceeded on the basis that the assessee is a trust constituted under a Trust Deed. Therefore the argument that there was non-application of mind by the CIT(E) to the contentions of the assessee is correct. The impugned order should be set aside and the issue with regard to grant of registration u/s. 12AA should be remanded to the CIT(Exemptions) for consideration de novo in the light of the facts as brought out by the assessee in its replies dated 06.06.2017 and 20.6.2017. The assessee will also be at liberty to file further evidence to substantiate its case for grant of registration u/s. 12AA of the Act. The CIT(E) is directed to decide the application for grant of registration u/s. 12AA of the Act of the assessee afresh, after affording assessee opportunity of being heard. - Decided in favour of assessee.

Summary

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

Analysis:
The assessee, an authority constituted under The Karnataka Urban Development Authority Act, 1987, applied for registration under section 12A(a) of the Act. The objects of the authority include planning, promoting, and securing urban development. The CIT (Exemptions) raised queries regarding the authority's activities, including the absence of certain mandatory clauses in the trust deed. The assessee clarified that as a local authority incorporated by an Act of Government, it is not a society or trust requiring registration under the Society or Trust Act. The CIT (Exemptions) issued further letters seeking details, to which the assessee responded, emphasizing its statutory incorporation and charitable activities.

The CIT (Exemptions) rejected the registration application citing the absence of mandatory clauses in the trust deed, which raised doubts about the genuineness of the trust's activities. The CIT relied on a Kerala High Court decision regarding the satisfaction required for registration u/s 12AA. The assessee appealed, arguing that as a statutory authority, its activities were genuine and charitable. The assessee cited precedents where similar authorities were granted registration under section 12AA. The Tribunal noted that the CIT (Exemptions) did not consider the nature of the assessee as a statutory authority and failed to address the submissions made by the assessee.

The Tribunal set aside the CIT (Exemptions) order, directing a fresh consideration of the registration application. The Tribunal emphasized that the authority should be treated as an institution under the Act and granted an opportunity for the assessee to provide further evidence. The appeal by the assessee was allowed, and the matter was remanded for reevaluation by the CIT (Exemptions) in light of the facts presented by the assessee.

In conclusion, the Tribunal found that the CIT (Exemptions) did not adequately consider the nature of the assessee as a statutory authority and ordered a fresh review of the registration application, allowing the assessee to present additional evidence.