2019 (5) TMI 353 - HC - Income Tax

Registration u/s 12AA - registration denied on ground that there is no expenses for propagation of Yoga, non filing of return of income, non availability of land and holding of Bhandara - both objects and genuineness of activities need to be examined at the time of granting registration - effect of inclusion Yoga in the definition of charitable purposes by Finance Act, 2015 with effect from 01.04.2016 - HELD THAT - Examining the finding of the CIT(E) that there were no expenses attributable to propagation of Yoga in financial statements, it may be noticed that the salary to main Yoga Teachers was not paid as they were rendering the services without any salary as depicted in the details of salary paid. The plea of the revenue that kitchen expenses were incurred for Bhandara for public would show that the activities of the trust were not genuine. In this regard, it is recorded that the said expenses were incurred for all students or teachers of the Society and sometimes for public which was a plausible explanation and it cannot be brushed aside to hold that the activities of the assessee were not genuine. The holding of Bhandara cannot be a ground to reject the registration unless it was proved that it was for any non-charitable activity or was exorbitant. So far as non-filing of return for the assessment year 2013-14 was concerned, we find that in this year, the assessee had incurred a loss of ₹ 5 lakhs and if the assessee had not filed the return for the said assessment year being loss, it could not be inferred that the activities of the assessee were not genuine. Even the CIT(E) had held that the assessee was owner of the land measuring 51 kanals and the rest of the land was in the name of other persons. The said land was sufficient for imparting Yoga training. The Tribunal had held that while considering registration u/s 12AA, the CIT(E) was required only to determine the objects of the society which undoubtedly were charitable in nature. Still further, the assessee during the proceedings had filed sufficient evidence regarding Yoga activities being carried out and had filed supporting evidence vide letter dated 14.7.2016 but the CIT(E) had failed to appreciate the same. Accordingly, the Tribunal had rightly directed the CIT(E) to grant exemption u/s 12AA to the assessee. No error could be pointed out by learned counsel for the revenue in the findings recorded by the Tribunal warranting interference by this Court. No question of law, much less, substantial question of law arises in the appeal. - Decided against revenue

Summary

Issues:
1. Appeal filed by revenue under Section 260A of the Income Tax Act against ITAT order.
2. Questions of law regarding registration under Section 12AA of the Income Tax Act.
3. Discrepancies in financial statements related to Yoga propagation expenses.
4. Non-filing of return for A.Y. 2013-14 and lack of evidence for claims.
5. Validity of denial of registration under Section 12AA based on charitable activities.
6. Non-disclosure of land ownership and its impact on charitable activities.
7. Examination of objects and genuineness of activities for registration.
8. Assessment of the order of the Appellate Tribunal.

Analysis:
1. The appeal was filed by the revenue against the ITAT order regarding the registration of a society under Section 12AA of the Income Tax Act. The questions of law raised included the direction for registration, discrepancies in financial statements related to Yoga propagation expenses, non-filing of return for A.Y. 2013-14, denial of registration based on charitable activities, non-disclosure of land ownership, examination of objects and genuineness of activities, and assessment of the Appellate Tribunal's order.

2. The society applied for registration under Section 12AA, which was initially rejected by the CIT(E) citing reasons such as lack of expenses for Yoga propagation, non-filing of return, and incomplete details. The ITAT overturned this decision and directed registration based on the charitable nature of the society's activities. The High Court found no merit in the revenue's appeal, emphasizing the amendments in the Act regarding charitable purposes, specifically including Yoga. The court noted discrepancies in financial statements but accepted explanations regarding unpaid salaries and kitchen expenses for charitable activities.

3. Regarding non-filing of return for A.Y. 2013-14 and land ownership issues, the High Court found the society's actions reasonable, considering losses incurred and evidence of land ownership provided. The court highlighted the charitable nature of the society's activities and the failure of the CIT(E) to appreciate evidence submitted. The ITAT's decision to grant registration was upheld based on the genuine charitable activities of the society.

4. The High Court dismissed the revenue's appeal, stating no errors in the ITAT's findings and no substantial questions of law arising. The court allowed the revenue to take action for withdrawal of registration if activities were found to be inconsistent with charitable objectives. The judgment affirmed the registration of the society under Section 12AA, emphasizing the genuineness and charitable nature of its activities.