2022 (5) TMI 776 - AT - Income Tax

Exemption u/s 11 - grant of registration u/s 12A - HELD THAT - We find that the assessee has mentioned in the Ground of the Form No. 36 This is factually incorrect as Dr. Madhu Mohan is USA Citizen settled in America and has neither received any salary nor he is an employee of M/s Share Medical Care . Fourthly, CIT(E) has observed that the assessee has received grants from Share USA , Centre for disease Control USA and Other entities in terms of agreements entered with them and hence the assessee is involved in execution of work-contract. We are unable to accept this reasoning too because receipt of grants in terms of agreement per se does not mean that the assessee is executing work-contracts. The grant may be lump sum or based on some agreed factor in the agreement like number of charitable activities undertaken. But to say that if the grant is in terms of the agreement, it is automatically a consideration for work-contract, would be fallacious. We observe that all of the four points taken into account by the Ld. CIT(E) are not sufficient enough to demonstrate any problem in the objects or activities of the assessee. We also observe that the order passed by the Ld. CIT(E) nowhere raises any objection on the nature and characteristics of the objects or activities pursued or undertaken by the assessee. CIT(E) has nowhere observed in his order that any of the object or activity undertaken by the assessee is ingenuine or against the prescription of section 2(15) of the act. Therefore the refusal of the registration by Ld. CIT(E) is not on a sustainable ground. Being so, the Ld. CIT(E) has wrongly rejected the application of the assessee. We direct the Ld. CIT(E) to grant the registration as applied for by the assessee. Appeal of assessee allowed.

Summary

Issues:
Appeal against rejection of registration u/s 12A - Genuine charitable activities - Receipt of funds from foreign entities - Utilization of premises - Employment relationship with another entity - Execution of work-contracts.

Analysis:
The appeal pertains to the rejection of registration u/s 12A of the Income Tax Act, 1961 by the Ld. CIT(E). The assessee, a society named "Share India," applied for registration but was rejected based on various grounds. The Ld. CIT(E) observed that the funds were mainly received from "Share USA," the office was located in a medical college without proper documentation, an office bearer received salary from "Share Medical Care," and grants were received from various entities for executing work-contracts. The Ld. CIT(E) concluded that the activities were not charitable as per Section 2(15) of the Act.

Upon examination, the ITAT found the rejection unjustified. The Ld. CIT(E) can refuse registration only if there are doubts about the objects and genuineness of the activities. The ITAT analyzed each point raised by the Ld. CIT(E). Firstly, receiving funds from multiple sources is not a valid reason for rejection. Secondly, the absence of documentation for office premises did not impact the genuineness of activities. Thirdly, the employment relationship allegation was refuted by the assessee. Lastly, executing work-contracts based on grants does not automatically disqualify charitable activities. The ITAT noted that none of these points indicated any issue with the nature or genuineness of the activities undertaken by the assessee.

Consequently, the ITAT directed the Ld. CIT(E) to grant the registration as applied for by the assessee. The Ld. CIT(E) was given the authority to impose any necessary conditions in accordance with the law. The appeal was allowed in favor of the assessee, emphasizing that the rejection lacked a sustainable ground. The judgment was pronounced on 13th May 2022 by the ITAT Hyderabad.

This detailed analysis highlights the critical examination of the rejection of registration u/s 12A, emphasizing the importance of genuine charitable activities and the need for proper justification before refusing registration based on specific grounds.