2021 (3) TMI 1152 - AT - Income Tax

Exemption u/s 11 - rejecting the application filed seeking registration u/s. 12AA - HELD THAT - We note from the impugned order as rightly pointed by the ld. AR that the CIT(Exemption) did not point out the activities of the assessee are non-genuine and he rejected only on the ground that the assessee accumulated funds and kept the same in FDs not utilizing the same for the objects of the trust. This Tribunal in the case of Sant Zolebaba Sansthan Chikhali 2021 (1) TMI 999 - ITAT PUNE held the issue of grant of registration and the assessment of income of trust are distinct and separate, by placing reliance in the case of Ananda Social and Educational Trust 2020 (2) TMI 1293 - SUPREME COURT held the mandate of the provisions u/s. 12AA of the Act is to examine whether objects of the trust are charitable in nature are not and the activities of the trust are genuine. In the present case as discussed above the CIT(Exemption) did not point out anything against the objects and genuineness of the activities of the trust but however rejected the registration on examination of financial statements of the assessee for the last four years by holding the assessee has made surplus and no taxes paid thereon on such surplus funds. We find that it is a settled principle that the grant of registration and the issue of assessment or exemption u/s. 11 of the Act are separate and distinct. The process of registration is not on occasion for deciding the issue of exemption of donation u/s. 11 of the Act. The issue of exemption cannot be examined during the process of registration. Therefore, in our opinion, the order of CIT(Exemption) in denying the registration u/s. 12AA of the Act cannot be sustained and the impugned order is set aside. The assessee is entitled to have registration u/s. 12AA - Decided in favour of assessee.

Summary

Issues Involved:
- Delay in filing appeal
- Justification of rejecting registration u/s. 12AA of the Act

Delay in Filing Appeal:
The appellant filed an appeal with a delay of 97 days, providing reasons for the delay. The Tribunal, after considering the reasons, condoned the delay as the appellant's reasons were deemed genuine and valid.

Justification of Rejecting Registration u/s. 12AA of the Act:
The main issue revolved around whether the Commissioner of Income Tax (Exemption) was justified in rejecting the application seeking registration u/s. 12AA of the Act. The appellant, a charitable trust, had its application rejected primarily due to non-payment of taxes on surplus funds. The Commissioner also raised concerns about the trust's activities, alleging non-genuineness and non-utilization of funds for the trust's objectives. The appellant argued that these aspects were beyond the Commissioner's purview under section 12AA and should be part of assessment proceedings. The appellant presented evidence of accumulating funds for constructing schools and providing admissions to students. The Tribunal noted that the Commissioner's rejection was based on financial statements rather than questioning the trust's objects or activities. Referring to legal precedents, the Tribunal emphasized that the registration process should focus on the charitable nature of the trust's objects and the genuineness of its activities. As the Commissioner's decision did not address these aspects but focused on financial matters, the Tribunal set aside the rejection and directed the Commissioner to grant registration u/s. 12AA of the Act to the appellant.

In conclusion, the Tribunal allowed the appeal, citing the distinction between the grant of registration and the issue of exemption under section 11 of the Act. The decision highlighted that the registration process should not involve examining exemption issues. The appellant was granted registration u/s. 12AA of the Act, emphasizing the importance of focusing on the charitable nature of trust objects and the genuineness of activities during the registration process.