2022 (10) TMI 709 - AT - Income Tax

Exemption u/s 11 - registration u/s 12AB subject to the conditions to be complied with by the assessee - HELD THAT - When we examine the questions raised by the assessee according registration under section 12A PCIT subject to certain conditions in the light of the provisions contained in the scheme of the Income Tax Act, 1961, registration under section 12A cannot be subjected to any condition as there is an inbuilt mechanism to be complied with by the assessee after getting the registration under section 12AA - compliance of the conditions by the assessees is to be examined by the Assessing Officer (AO) during the assessment proceedings. The role of the Ld. PCIT while according registration under section 12A is only to make himself satisfied about the genuineness of the activities to be carried out by the assessee trust and the compliance of such requirement of any other law for the time being in force by the trust or institution material to achieve its object and then to accord the registration. Conditions imposed by the Ld. PCIT while according registration under section 12A of the Act are not sustainable in the eyes of law. Identical issue has also been decided by the co-ordinate Bench of the Tribunal in case of Bai Hirabai Jamshetji Tata Navsari Charitable Institution vs. CIT (E), Mumbai order dated 29.07.2022. Registration accorded by the Ld. PCIT under section 12A to the assessees is made absolute sans conditions laid down in para 10 of the impugned order. Consequently, both the appeals filed by the assessees are allowed.

Summary

Issues:
1. Whether the Principal Commissioner of Income Tax (PCIT) has the authority to grant registration under section 12AB of the Income Tax Act subject to conditions imposed on the assessee.

Analysis:
1. The appellants, two charitable trusts, challenged the order passed by the PCIT granting registration under section 12AB of the Income Tax Act for the assessment years 2022-23 to 2026-27. The key contention was that the PCIT erred in imposing conditions on the registration, which, according to the assessees, was not permissible under the Act.

2. The main issue in both appeals was whether the PCIT had the power to grant registration under section 12AB with conditions for compliance by the assessee. The Tribunal examined the facts, legal provisions, and arguments presented by both parties to reach a conclusion.

3. The Tribunal noted that registration under section 12A cannot be subject to conditions as there is an inherent mechanism for compliance by the assessee post-registration under section 12AA. The role of the PCIT is to ensure the genuineness of the activities of the trust and compliance with relevant laws before granting registration. The Tribunal held that the conditions imposed by the PCIT were not legally sustainable, as the assessment of compliance lies with the Assessing Officer during assessment proceedings.

4. The Tribunal cited a similar case, Bai Hirabai Jamshetji Tata Navsari Charitable Institution vs. CIT (E), Mumbai, where a co-ordinate Bench had decided a comparable issue. Based on the legal analysis and precedents, the Tribunal concluded that the conditions imposed by the PCIT were not valid in the eyes of the law.

5. Consequently, the Tribunal allowed the appeals filed by the assessees, setting aside the conditions imposed by the PCIT and making the registration under section 12A absolute without any additional requirements. The judgment was pronounced on 25.08.2022 by the Tribunal comprising Shri Kuldip Singh, Judicial Member, and Shri Om Prakash Kant, Accountant Member.