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2021 (8) TMI 1218 - AT - Income TaxExemption u/s 11 - registration u/s 12A denied - proof of charitable activity u/s 2(15) - Commissioner satisfaction to charitable nature of object of assessee society - HELD THAT - As decided in the case of Ananda Social and Educational Trust 2020 (2) TMI 1293 - SUPREME COURT has elaborated that the Commissioner is bound to satisfy himself that the object of the Trust are genuine and that its activities are in furtherance of the objects of the Trust and has further held that the term 'activities' in the provision includes proposed activities also - Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the trust CIT (Exemptions) had no objection to the objects of the assessee which necessarily are charitable in nature and regarding the transactions in the bank account, the same are explainable and these documents were available with her - we are satisfied that the activities of the assessee are genuine and therefore, we direct the CIT (Exemptions) to grant registration u/s 12A of the Act forthwith. - Decided in favour of assessee.
Issues Involved:
1. Rejection of application for registration under section 12A of the Income Tax Act. 2. Whether the assessee performed any activity in pursuance of its objects. 3. Submission of financial accounts and evidence of activities by the assessee. 4. Interpretation of the term "activities" under section 12AA of the Income Tax Act. Issue-wise Detailed Analysis: 1. Rejection of application for registration under section 12A of the Income Tax Act: The appeal was filed by the assessee against the order of CIT (Exemptions), Lucknow, dated 28/10/2020, which rejected the application for registration under section 12A. The primary ground for rejection was that the assessee had not performed any activity in pursuance of its objects, and thus, registration could not be granted. 2. Whether the assessee performed any activity in pursuance of its objects: The CIT (Exemptions) observed that the assessee did not submit any account for any financial year and had made substantial withdrawals from the bank without evidence of any charitable activity. The assessee countered that the amounts withdrawn were for setting up infrastructure, which is capital expenditure, and provided documents such as the bank account, land ledger account, purchase deed of land, and balance sheet to support this claim. The Tribunal found that the acquisition of land is an activity towards the fulfillment of the society's objects. 3. Submission of financial accounts and evidence of activities by the assessee: The CIT (Exemptions) noted that the assessee did not submit annual accounts for any financial year despite being in existence for FY 2019-20. However, the assessee provided a balance sheet and income & expenditure account for the year ending 31/03/2020. The Tribunal found that the assessee had submitted necessary documents, including the bank statement and purchase deed of land, which were available with the CIT (Exemptions). Therefore, the observation regarding the lack of financial accounts was deemed factually incorrect. 4. Interpretation of the term "activities" under section 12AA of the Income Tax Act: The Tribunal referred to the Hon'ble Supreme Court's judgment in the case of Ananda Social and Educational Trust vs. CIT, which held that the term "activities" includes proposed activities. The Commissioner is required to satisfy himself about the genuineness of the trust's objects and proposed activities, even if no activities have been undertaken yet. The Tribunal concluded that the assessee's objects were charitable, and the acquisition of land was in line with these objects. Thus, the second observation by the CIT (Exemptions) also failed. Conclusion: The Tribunal concluded that the CIT (Exemptions) had no objection to the charitable nature of the assessee's objects, and the transactions in the bank account were explainable. The activities of the assessee were found to be genuine. Consequently, the Tribunal directed the CIT (Exemptions) to grant registration under section 12A of the Income Tax Act forthwith. The appeal of the assessee was allowed. Order Pronounced: The order was pronounced in the open court on 26/08/2021.
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