2022 (6) TMI 1021 - AT - Income Tax

Exemption u/s 11 - grant of registration u/s 12AA denied - Certain objects of the assessee as mentioned in the order of Ld. CIT(E) are commercial in nature and they are not covered under charitable purpose in terms of section 2(15) - CIT(E) has rejected the assessee s second-application on the sole reason that there is no change in the objects - Assessee stated he already omitted objectionable objects before filing second-application and therefore the reasoning given by Ld. CIT(E) is far from truth - HELD THAT - After a careful consideration, we observe that although there were objections raised by Ld. CIT(E) on the first-application of the assessee, yet the assessee has removed those objections before filing second-application on 20.01.2020. We observe from the submission of Ld. AR, which we do not narrate again to avoid repetition, that there does not survive any of the objections raised by Ld. CIT(E). We also observe that the Ld. CIT(E) has rejected second-application of the assessee with the sole reason that there is no change in objects. Except this one reason, the Ld. CIT(E) has not mentioned any other reason to reject the second-application. In this regard, we find that the Ld. AR has successfully submitted that the objectionable objects had already been removed before filing second-application and this submission of Ld. AR has not been controverted by the Ld. DR. We observe that the rejection of second-application for grant of registration u/s 12AA of the act amounts to miscarriage of justice. Therefore, we are of the considered view that the assessee deserves registration u/s 12AA of the Act. Hence we direct the Ld. CIT(E) to grant the registration as applied for by the assessee. Assessee appeal allowed.

Summary

Issues:
1. Rejection of registration under section 12AA(1)(b)(ii) of the Income Tax Act, 1961 by the Commissioner of Income-Tax (Exemption).
2. Assessment of the charitable nature of the company's objects.
3. Compliance with regulatory requirements for registration under section 12AA.

Analysis:
1. The appeal was filed against the rejection of registration under section 12AA(1)(b)(ii) of the Income Tax Act, 1961 by the Commissioner of Income-Tax (Exemption). The company, incorporated under section 8 of the Companies Act, 2013, aimed to establish and run Atal Incubation Centres in partnership with Atal Innovation Mission, Niti Ayog, Govt. of India, and promote entrepreneurship and innovations. The first application for registration was rejected due to commercial objects not falling under "charitable purpose," lack of MOU or Agreement with Niti Ayog, provision to share benefits among members, and permission for activities outside India. The company amended its Memorandum of Association to address objections and filed a second application, which was also rejected solely on the grounds of no change in objects.

2. The company contended that all objections raised in the first-order were resolved by amending the Memorandum of Association. The company removed objectionable commercial objects, provided necessary documents, and ensured compliance with the Companies Act, 2013, prohibiting profit distribution. The company's submissions highlighted the removal of objectionable clauses, submission of audited accounts, and adherence to regulations governing charitable companies. The Commissioner's rejection based on lack of change in objects was deemed unjustified, as the company had rectified all objections, leading to a plea for registration under section 12AA.

3. Upon review, the Appellate Tribunal noted that the objections raised by the Commissioner were effectively addressed by the company before filing the second application. The Tribunal found no remaining objections and observed that the rejection solely based on unchanged objects was unjust. The Tribunal emphasized that the company had rectified all issues and deserved registration under section 12AA. The Tribunal directed the Commissioner to grant the registration as requested by the company, allowing the appeal and ruling in favor of the assessee.

This detailed analysis showcases the progression of events leading to the rejection of registration, the company's efforts to rectify objections, and the Tribunal's decision to grant registration based on compliance and rectification of issues.