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2022 (4) TMI 534 - AT - Income TaxExemption u/s 11 - not granting the Registration u/s 12A - CIT(E) rejected the application on the ground that the society has not incurred any expenditure on objects of the trust, appellant has earned surplus which explains that activities are not charitable in nature and the society has not utilized the surplus towards the objects of the society - HELD THAT - The plain reading of Section 12AA explains that the Pr.CIT or Commissioner has to satisfy himself regarding genuineness of the activities of the trust. He has also to satisfy himself about genuineness of the object of the trust. Thus, there will be two situations, first situation is that a trust has applied for registration U/s 12AA, within a short period of formation of the trust. Therefore, naturally, in such newly formed trust, there will not be any activity. In such situation, the CIT(E) has to verify the objects of the trust vis a vis Section 2(15) of the Act. The second situation will be a trust which is in existence for a long time. In this situation, the CIT(E) has to verify whether activities of the trust are charitable or not, he has to also verify the objects of the trust. The appellant before us is existing since 2001. However, as demonstrated in earlier paragraphs that though the appellant has earned substantial income, not a rupee has been spent on objects of the society. Rather, appellant is generating income with an intention to earn profit as is visible from the income expenditure account. Though the appellant claimed that it had carried out charitable activities like blood donation etc, no evidence has been filed to substantiate the claim. Also, the CIT(E) has not mentioned anything about the objects of the society. Further he has not given any reasoned findings whether the objects are charitable or not. During the registration proceedings u/s 12AA, the CIT(E) has to decide whether the objects are charitable or not as defined u/s 2(15) - we remand the matter back to the file of CIT(E) for reconsideration of the application filed by the assessee society U/s 12AA and pass an order afresh. The Appellant is also directed to file/produce all necessary documents as desired by CIT(E). CIT(E) shall afford reasonable opportunity of hearing to the assessee before passing the order. Thus, this case is set aside and remanded back to the CIT(E). Appeal of the appellant is allowed for statistical purpose.
Issues Involved:
1. Whether the Commissioner of Income Tax (Exemption) erred in not granting registration under Section 12A of the Income Tax Act, 1961. 2. Whether the appellant can add, alter, amend, take additional grounds, and/or withdraw the grounds during appeal proceedings. Issue-wise Detailed Analysis: 1. Denial of Registration under Section 12A: The appellant, a society registered under the Societies Registration Act since January 8, 2001, applied for registration under Section 12AA of the Income Tax Act, 1961, on August 8, 2018. The Commissioner of Income Tax (Exemption) [CIT(E)], Pune, rejected the application on February 27, 2019, citing the following reasons: - The society had not incurred any expenditure on the objects of the trust. - The society had earned a surplus, indicating that its activities were not charitable in nature. - The surplus was not utilized towards the objects of the society. - No details were furnished by the appellant to process the application under Section 12AA. - The deed did not contain a dissolution clause. The appellant argued that during the registration process under Section 12AA, the CIT(E) is only required to verify the objects of the trust and not its activities. They submitted a paper book containing income and expenditure accounts, balance sheets for the assessment years 2014-15, 2015-16, and 2016-17, and other documents. The appellant claimed to have organized various activities like exhibitions, Engineer's Day celebrations, and blood donation camps. The CIT(E) and the Departmental Representative (DR) contended that the CIT(E) must verify the genuineness of the activities. The CIT(E) found that the society had not spent any money on the objects of the trust, casting doubt on the genuineness of the trust. The income and expenditure accounts showed no expenditure on the trust's objects, despite revenue generation from advertisements, sponsorships, and other activities. The tribunal observed that the appellant had not spent any money on the objects of the society, despite claiming to have organized seminars and other activities. The objects of the society included assisting in solving civil engineering problems, conducting seminars and workshops, representing civil engineers' issues, educating the public, executing charitable works, undertaking research and development, demonstrating advanced technology, and organizing training programs. However, no expenditure was incurred for these objects, and no evidence was provided to establish that the society had carried out activities towards these objects. The tribunal referred to Section 12AA, which requires the Commissioner to satisfy himself about the genuineness of the trust's activities and objects. The Supreme Court in Ananda Social & Educational Trust Vs CIT stated that the purpose of Section 12AA is to enable registration only for trusts whose objects and activities are genuine. Given the appellant's long existence since 2001 and the lack of expenditure on its objects, the tribunal found that the appellant was generating income with an intention to earn profit. The CIT(E) had not provided reasoned findings on whether the objects were charitable. Therefore, the tribunal remanded the matter back to the CIT(E) for reconsideration of the application under Section 12AA, directing the appellant to produce all necessary documents and the CIT(E) to afford a reasonable opportunity of hearing before passing a fresh order. 2. Additional Grounds During Appeal Proceedings: The appellant sought to add, alter, amend, take additional grounds, and/or withdraw the grounds during the appeal proceedings. The tribunal did not specifically address this issue, but by remanding the matter back to the CIT(E), it implicitly allowed the appellant the opportunity to present any additional grounds or evidence during the reconsideration process. Conclusion: The appeal was allowed for statistical purposes, with the matter remanded back to the CIT(E) for fresh consideration and a reasoned order on the appellant's application for registration under Section 12AA. The appellant was directed to provide all necessary documents, and the CIT(E) was instructed to afford a reasonable opportunity of hearing before making a decision. The order was pronounced in the open court on March 24, 2022.
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