2022 (6) TMI 1117 - AT - Income Tax

Exemption u/s 11 - registration under Section 12A rejected - assessee is a society registered with Registrar of Societies claiming that the objects of the society are of charitable and religious nature, assessee applied for registration u/s 12A - HELD THAT - What is required to be examined at the time of grant of registration, as per the provisions existing at the relevant point of time, is the genuineness of the activities of the trust or institution and the objects of the trust. In so far as the objects are concerned, as discussed by us earlier, the very nature of objects for which the society was created, as appearing in the bye laws, clearly demonstrate that it is for charitable and religious purpose. There cannot be any doubt regarding the objects of the trust. As regards, genuineness of the society, materials on record reveal that it is carrying out activities to advance its objects. Therefore, there cannot be any serious doubt regarding the genuineness of the society. The so called infraction pointed out by CIT(Exemption), such as, claim of exemption under Section 10(23BBA) and section 10(23C)(v) in our view, neither impinge on genuineness of the Trust nor its charitable/religious nature. In case, assessee claims wrong exemption, it can be dealt with appropriately under the relevant provisions of the Act - a wrong claim of exemption, by itself, cannot debar assessee from getting exemption u/s 12AA - As per settled legal principles, though, assessee may be enjoying registration under Section 12A/12AA of the Act, however, its claim of exemption under Section 11 is not automatic. In case of violation of any of the conditions of sections 11 and 13 of the Act, the claim of exemption can be denied. However, that by itself does not affect the grant of registration under Section 12A/12AA of the Act. Allegations of CIT(Exemption) that the source of investment in construction of building was not properly explained, it is observed, in response to the query raised, assessee has furnished supporting evidence to explain such source. In fact, Learned CIT(Exemption) also accepted the aforesaid factual position - alleging that the return of income only shows the donations to have been utilized for day to day affairs and payments were made to other societies from the donations, he has persuaded himself not to grant registration u/s 12AA. One more allegation of the Learned CIT(Exemption) is regarding the receipt of corpus donation in absence of registration under Section 12AA - In our view, these issues should not cloud the vision of Learned CIT(Exemption) at the stage of granting registration under Section 12AA. At the stage of granting registration under Section 12A of the Act, authority concerned should not assume the role of assessing officer to examine whether the conditions for availing exemptions u/s 11 are fulfilled or not. These aspects certainly can be looked into at the stage of assessment. In any case of the matter, even after grant of registration u/s 12AA if in future, it is found that the activities of the trust are ingenuine and the trust is deviating from the objects based on which registration was granted, the authority concerned can proceed to cancel the registration. In the facts of the present case, there is nothing on record to suggest that either the activities of the trust are ingenuine or the objects are not of charitable or religious nature. We set aside the impugned order of Learned CIT(Exemption) and direct him to grant registration to assessee under Section 12AA - Appeal of assessee allowed.

Summary

Issues:
1. Delay in filing appeals for registration under Section 12A and approval under Section 80G of the Income Tax Act, 1961.
2. Rejection of application for registration under Section 12A of the Act.
3. Rejection of application for approval under Section 80G of the Act.

Issue 1: Delay in Filing Appeals
The appeals were filed with a delay of 137 days, and the assessee sought condonation of the delay. The reason given for the delay was conflicting views among society members, leading to the formation of a sub-committee to decide on the course of action. The delay was condoned, and the appeals were admitted for adjudication on merits.

Issue 2: Rejection of Application for Registration under Section 12A
The rejection was based on observations that the society's activities were not transparent, including transferring funds to a sister concern without proper registration, claiming wrongful exemptions, and lack of clarity on fund utilization. The assessee contended that all objects were charitable and religious, fulfilling statutory conditions for registration. The Tribunal found the society's objects to be charitable and religious, and the rejection was not based on the nature of the objects. The Tribunal held that a wrong claim of exemption did not affect registration under Section 12AA, and the source of investment in construction was adequately explained. The Tribunal set aside the rejection and directed the grant of registration under Section 12AA.

Issue 3: Rejection of Application for Approval under Section 80G
The rejection was linked to the denial of registration under Section 12AA. As the Tribunal directed the grant of registration under Section 12AA, it remanded the matter back to the CIT for reconsideration of the application for approval under Section 80G. The Tribunal emphasized providing the assessee with a reasonable opportunity for a fresh decision. The appeal was allowed for statistical purposes.

In conclusion, the Tribunal allowed ITA No. 2469/Del/2017, directing registration under Section 12AA, and ITA No. 2468/Del/2017 for reconsideration of approval under Section 80G. The delay in filing appeals was condoned, and the rejection of registration under Section 12A was set aside, emphasizing the charitable and religious nature of the society's objects. The decision highlighted the importance of separate considerations for registration and exemptions under the Income Tax Act.