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2022 (4) TMI 961 - AT - Income TaxExemption u/s 11 - Application for registration u/s 12A rejected - charitable object u/s 2(15) - HELD THAT - Till the AY 2014 it was not required to file any return of income and therefore the assessee s contention that it was not aware of the requirements of filing returns of income appears to be bonafide. Further, the assessee has made an application for registration only w.e.f AY 2019-20. In such circumstances, the requirement of law is that the Ld. CIT(E) has to consider whether the objectives of the assessee were charitable in nature and if the activities have already begun, then whether the assessee is carrying on its activities accordingly. Therefore, we agree with the Ld. Counsel for the assessee that the Ld. CIT(E) has not looked into the objectives of this University while considering its application for registration U/s. 12A of the Act. The Ld. CIT(E) has also not disputed the activities carried on by the assessee. In view of the above findings, we deem it fit and proper to remand the issue to the file of the Ld. CIT(E) with a direction to grant registration U/s. 12A of the Act. Appeal of assessee allowed.
Issues:
- Denial of exemption under Section 12A of the Income Tax Act, 1961 by the Ld. CIT (Exemptions), Hyderabad. - Violation of principles of natural justice, statutory powers, and law in the order passed by the Ld. CIT (Exemptions). - Registration denial based on failure to file returns, audit accounts, profit-making status, and application of income outside India. - Applicability of amendments to Section 12AA(1)(a) and (b) of the IT Act. - Consideration of University's charitable nature, activities, and compliance with statutory requirements for registration under Section 12A. Analysis: The appeal before the Appellate Tribunal ITAT VISAKHAPATNAM arose from the denial of exemption under Section 12A of the Income Tax Act, 1961 by the Ld. CIT (Exemptions), Hyderabad. The assessee, a University, challenged the order citing violations of natural justice, statutory powers, and law. The Ld. CIT (Exemptions) had raised concerns regarding the failure to file returns, audit accounts, profit-making status, and application of income outside India. The amendments to Section 12AA(1)(a) and (b) were also contested, emphasizing their applicability to the case. The University's charitable nature, activities, and compliance with statutory requirements for registration under Section 12A were pivotal in the analysis. The Ld. Counsel for the assessee argued that the University, funded by the Government and focused on educational purposes, had been exempted from filing returns previously. The Ld. CIT (Exemptions) was criticized for denying registration despite the University fulfilling basic conditions for Section 12A registration. Legal precedents were cited, including a Tribunal decision directing registration for a similar entity with charitable objectives. Documentation was presented to highlight delays in administrative appointments, supporting contentions against registration denial based on profit-making activities. The Ld. Counsel sought a favorable decision akin to previous judicial outcomes. In contrast, the Ld. DR contended that the University had generated significant profits, aligning with the Ld. CIT (Exemptions)' observations. The Ld. DR supported the original order denying registration, emphasizing the financial aspects of the case. Upon review, the Appellate Tribunal acknowledged the University's history, charitable nature, and previous tax exemptions. Legal provisions exempting educational institutions funded by the Government were scrutinized, along with amendments mandating return filings. The Tribunal noted the University's unawareness of filing requirements until the recent application for registration. Emphasizing the need to assess charitable objectives and ongoing activities, the Tribunal found fault with the Ld. CIT (Exemptions) for overlooking these crucial aspects. Consequently, the Tribunal remanded the issue to the Ld. CIT (Exemptions) with a directive to grant registration under Section 12A of the Act, ruling in favor of the assessee. In conclusion, the appeal was allowed, and the decision was pronounced in open court on the 7th of April, 2022.
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