2020 (5) TMI 88 - AT - Income Tax

Exemption u/s 11 - rejecting the registration of the assessee under section 12AA - as per CIT-E Society is not carrying out any Charitable activities - HELD THAT - Hon ble allowable High Court in the case of Hardyal Charitable and Educational trust 2013 (3) TMI 377 - ALLAHABAD HIGH COURT after analyzing various judicial precedents on the issue in dispute held that registration under section 12AA cannot be refused on the ground that trust has not commenced the charitable or religious activity. Question of exemption of the application of the income received by way of the donation being a separate issue might be examined in assessment proceeding of relevant years. In the instant case the assessee is claiming that it was in the process of establishing educational institution for commencing its charitable activity and thus activity not being commenced, and therefore, the Learned CIT was not required to examine the said activities and reject the registration. But the registration of the assessee society before the register of society shows that the society was resisted prior to financial year 2009. The assessee has not provided any detail of the activities for the period from its establishment till the date for applying registration. In our opinion, the assessee is required to provide all details regarding Constitution of its members, funds received and utilized towards charitable activities et cetera detail since inception of the society. Since all the details have not been examined by the Learned CIT, we set aside the order of the Learned CIT with the direction to decide a fresh on verification of the objects and genuineness of the activities - Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
1. Rejection of registration under section 12AA of the Income-tax Act, 1961.
2. Assessment of charitable activities by the society.
3. Allegations of profit motive and commercial activities.
4. Requirement of providing detailed information regarding activities and funds.

Issue 1: Rejection of registration under section 12AA:
The appeal challenged the rejection of registration under section 12AA of the Income-tax Act, 1961 by the Commissioner of Income-tax (Exemption). The grounds of appeal included contentions of unjustified rejection and incorrect assessment by the CIT.

Issue 2: Assessment of charitable activities:
The CIT rejected the registration primarily due to concerns regarding the pooling of professional receipts by society members for profit sharing, lack of evidence of charitable activities, and earning profit from medical services. The society claimed its objects focused on educational institutions and expansion of education.

Issue 3: Allegations of profit motive and commercial activities:
The CIT highlighted the society's commercial engagement in providing medical services for profit without charitable acts. The distribution of profit among members and failure to provide a list of services with charges were also noted as reasons for rejection.

Issue 4: Requirement of providing detailed information regarding activities and funds:
During the appeal, the society presented documents supporting its intention to establish educational institutions and medical facilities. The High Court precedent emphasized that registration under section 12AA should focus on the genuineness of objects rather than activities not yet commenced. The tribunal directed the CIT to reevaluate the registration application based on the provided documents to verify the objects and activities' genuineness.

In conclusion, the tribunal allowed the appeal for statistical purposes, setting aside the CIT's order and instructing a fresh decision based on a thorough examination of the society's activities and funds. The society was granted the opportunity to submit necessary documents for a reevaluation of the registration application.