2018 (12) TMI 220 - HC - Income Tax

Withdrawal of registration granted u/s 12-A - charitable activity - object of the Trust - Held that - So far as the object of the Trust is concerned, so long as it fits into any one of the objects as enumerated under Section 2(15) such a requirement stands fulfilled. So far as the second requirement with regard to the genuineness of the activities is concerned, the same could be arrived at only during the assessment proceedings. Tribunal was justified in coming to the conclusion that so far as the factum of the assessee being involved in any charitable activities or not, whether the income so derived has to be apportioned towards any other purpose or not, could be considered only during the assessment proceedings. Considering of the application is quite different from the assessment of the income of the assessee. Therefore, at this stage, it is suffice to hold that the conditions for grant of exemption have been satisfied by the assessee. The Tribunal was justified on facts and in law to pass the impugned order. Under these circumstances, we concur with the view of Tribunal. Tribunal was justified in coming to the conclusion that the assessee is entitled for registration under Section 12-A. The substantial question of law is answered in favour of the assessee

Summary

Issues:
Renewal of approval under Section 80G, withdrawal of registration under Section 12-A, charitable activities assessment during renewal, jurisdiction of Tribunal in registration matters.

Renewal of Approval under Section 80G:
The case involved a charitable Trust seeking renewal of approval under Section 80-G of the Income Tax Act, 1961. The Trust's application for renewal was rejected due to lack of charitable activities during certain financial years. The Tribunal initially doubted the Trust's entitlement to benefits under Section 11, leading to a remand. Subsequently, the Commissioner canceled the Trust's registration under Section 12-A. The Tribunal, in the impugned order, set aside the cancellation of registration under Section 12-A, emphasizing that the assessment of charitable activities should occur during assessment proceedings, not renewal applications.

Withdrawal of Registration under Section 12-A:
The key issue revolved around the withdrawal of registration granted under Section 12-A of the Act. The counsel for the revenue contended that the Tribunal erred in suggesting that the assessment of charitable activities and income exemption eligibility should only occur during assessment proceedings. However, the counsel for the assessee argued that the assessment of the Trust's activities should be reserved for assessment proceedings, not renewal considerations. The Tribunal's decision was supported by legal precedents emphasizing that the assessment of charitable activities should be part of the assessment proceedings, not the renewal application stage. The Tribunal was deemed justified in its conclusion that the Trust satisfied the conditions for exemption, leading to the approval of registration under Section 12-A.

Charitable Activities Assessment during Renewal:
The Court referenced previous judgments to support the view that the assessment of a Trust's involvement in charitable activities and the genuineness of such activities should be reserved for assessment proceedings. As long as a Trust's objectives align with charitable purposes and its activities are genuine, the assessment of charitable activities should occur during assessment proceedings, not during renewal applications. The Court emphasized the distinction between considering an application and assessing the income of the assessee, ultimately supporting the Tribunal's decision regarding the Trust's entitlement to registration under Section 12-A.

Jurisdiction of Tribunal in Registration Matters:
The Court affirmed the Tribunal's decision, stating that the Tribunal was justified in concluding that the Trust was entitled to registration under Section 12-A of the Act. By following previous judgments and emphasizing that the assessment of charitable activities should occur during assessment proceedings, the Court upheld the Tribunal's decision and answered the substantial question of law in favor of the assessee. The appeal was disposed of accordingly, highlighting the importance of assessing charitable activities during assessment proceedings rather than renewal considerations.