2023 (9) TMI 749 - AT - Income Tax

Exemption u/s 11 - Rejection of application for registration u/s. 12AA - Rejecting the application of the assessee the CIT(E) observed that the grants / funds received from the Government of Haryana is income of the assessee - assessee vehemently stated that the impugned grants are nothing but capital receipts and, therefore, were directly credited to the reserves and surplus in the balance sheet - HELD THAT - Section 12AA pertains to the registration of the trust and not to assess what a trust has actually done. That is to say the Commissioner is bound to consider whether the objects of the trust are charitable in nature and whether the activities which the trust proposed to carry on are genuine in the sense that they are in line with the objects of the trust. For the above preposition we drawn support from the decision of the Hon ble Supreme Court in the case of Anand Social And Educational Trust 2020 (2) TMI 1293 - SUPREME COURT Incidentally we find that on the same set of facts the PCIT has granted registration to the assessee for A.Y.2022-23 to 2026-27 as per the order. Decided in favour of assessee.

Summary

Issues:
The appeal against the rejection of registration u/s. 12AA of the Act by the CIT(Exemption) is being considered by the Appellate Tribunal ITAT DELHI.

Facts and Analysis:
The assessee, a society formed to promote social welfare activities, applied for registration u/s. 12A of the Act. The CIT(Exemption) requested various documents and clarifications to verify the genuineness of the society's activities. The CIT(E) observed that certain grants received by the society were not accounted for correctly, leading to a discrepancy in gross receipts. The CIT(E) concluded that grants/funds from the Government of Haryana should be considered as income of the assessee.

Legal Interpretation:
The Tribunal noted that the CIT(E) has the authority to examine the genuineness of a trust's activities and objects before granting registration. Section 12AA focuses on assessing whether the trust's objects are charitable and if its activities align with those objects. Reference was made to the decision of the Hon'ble Supreme Court in the case of Anand Social And Educational Trust to support this interpretation.

Decision:
Despite the initial rejection by the CIT(E), the Tribunal found that the society's activities were in line with its charitable objects. Notably, the PCIT had already granted registration to the assessee for subsequent assessment years based on the same set of facts. Therefore, the Tribunal directed the CIT(Exemption) to grant registration to the assessee, allowing the appeal.

Conclusion:
The Appellate Tribunal ITAT DELHI ruled in favor of the assessee, overturning the rejection of registration u/s. 12AA by the CIT(Exemption) based on the alignment of the society's activities with its charitable objects and in accordance with legal precedents.