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2021 (4) TMI 731 - AT - Income TaxRejection of grant of registration under section 12AA - charitable activity u/s 2(15) - HELD THAT - CIT(Exemption) should examine whether the objects of the Trust or Institution are charitable in nature or not and as to whether the activities of the Trust/Institution are in consonance with these objects. We find that the objects of the Society are charitable in nature. We also find that the activities of the Society are in accordance with the objects. The findings of Assessing Officers all dated 28. 03. 2015 for assessment years 2009- 10, 2010 - 11 2011- 12 are similar to the findings of Assessing Officer for Assessment Year 2012- 13 and these findings of the Assessing Officers support the fact that the objects of the assessee is charitable in nature and its activities are in accordance with the objects of the Society. Thus we direct the ld. CIT(Exemption) to grant registration to the assessee under section 12AA of the Act. - Decided in favour of assessee.
Issues Involved:
1. Rejection of application for registration under section 12AA of the Income Tax Act, 1961. 2. Rejection of application for approval under section 80G(5)(vi) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Rejection of Application for Registration under Section 12AA: The primary issue in ITA No. 232/KOL/2020 concerns the rejection of the assessee's application for registration under section 12AA of the Income Tax Act, 1961. The assessee, a society engaged in imparting education through various institutions, had its application rejected by the Commissioner of Income Tax (Exemptions), Kolkata, based on several grounds. The Commissioner cited the following reasons for rejection: - Personal use of trust money by trustees. - Expenditure on personal charities from trust funds. - Unrecorded cash withdrawals. - Payment of commissions for admissions. - Misuse of funds for personal purposes such as construction of residences and personal travel. - Suppression of receipts and non-educational activities. - High advertisement expenses indicating commercial activities. - Questionable treatment of corpus donations as fees. The assessee contended that these issues were procedural and did not reflect the genuineness of its activities. It argued that the Commissioner’s enquiries should focus on whether the society's objects were charitable and whether its activities were genuine, as per established legal precedents. The assessee also pointed out that its books of accounts were impounded by the Income Tax Department, making it impossible to produce them during the registration proceedings. The Tribunal noted that the assessments for various years, including those reopened based on survey findings, did not result in any adverse findings against the assessee. The Tribunal emphasized that the Commissioner’s role under section 12AA is to verify the charitable nature of the objects and the genuineness of the activities, not to delve into the application of funds or procedural lapses. The Tribunal found that the objects of the society were indeed charitable and that its activities were in line with these objects. Consequently, it directed the Commissioner to grant registration under section 12AA. 2. Rejection of Application for Approval under Section 80G(5)(vi): The second issue in ITA No. 233/KOL/2020 is consequential to the first. The rejection of the application under section 80G(5)(vi) was based on the same grounds as the rejection under section 12AA. Since the Tribunal directed the Commissioner to grant registration under section 12AA, it also directed the Commissioner to consider the approval of registration under section 80G(5)(vi). Conclusion: The Tribunal allowed both appeals, directing the Commissioner to grant registration under section 12AA and to consider the approval under section 80G(5)(vi). The Tribunal's decision was based on the principle that the Commissioner should focus on the charitable nature of the objects and the genuineness of the activities, rather than procedural lapses or the application of funds. The Tribunal's findings were supported by various legal precedents emphasizing the limited scope of enquiry under section 12AA.
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