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2003 (12) TMI 306 - AT - Income TaxScope of the power of CIT while processing application for registration u/s 12A - objects and genuineness of the activities of the assessee society - Charitable Or Religious Trust - imparting education - HELD THAT - The case of the assessee was very much specific that assessee society was found running a college and school and CIT-I had also looked into the accounts of college and school. The number of students of college and school as well as number of staff, which were found working in both the institutions had not been doubted. The existence of college and school is also established. In view of this admitted fact, the scope of enquiry ends as and when finding is recorded to that fact that assessee society was found running a college and school in which substantial number of students as well as staff was there. The second stage will be of claim of benefit from tax of assessee society and that will be given power to the Assessing Officer to examine as to whether assessee who is claiming benefit under section 11/13 of the Act is fulfilling the requirement to claim that benefit or not. It is well-settled proposition of law that fiscal statute are to be examined, as the same stand. The authorities concerned when interpreting the same are not permitted to add/alter any word here and there, but they are supposed to read it as it stand and to use the general meaning of the words used by this Legislature. Here the scope of the powers of the CIT is confined to examine the genuineness of the activities of the Trust or Institution and to examine the object of the Trust or Institution. Once the CIT has not doubted on the genuineness of the activities of the assessee society nor doubted the object, his powers ends and he cannot be allowed to travel beyond it and to enter into the scope to find out as to whether assessee is a charitable institution or not or whether assessee is carrying on any activity which is covered under the definition of section 2(15) of the Act. It is Assessing Officer who will be having exclusive jurisdiction to examine this aspect of the matter when assessee will claim any tax benefit and then the observation of the CIT-I in the impugned order before us may be relevant, but not at this stage. Thus, the inevitable conclusion is that assessee society is entitled to get registration u/s 12AA of the Act as the CIT-I had not doubted on the objects and genuineness of the activities of the assessee society. Therefore, we direct the learned CIT-I to grant the registration. However, this order may not come in the way of the Assessing Officer who is free to examine the case of the assessee society for exemption u/s 11/13 of the Act, for which purpose each year is to be considered as independent year and the Departmental Authorities can examine the claim of the assessee society. The appeal is allowed accordingly and CIT-I is directed to grant Registration.
Issues Involved:
1. Whether the Assessee Society qualifies for registration u/s 12AA of the Income-tax Act, 1961. 2. Whether the activities of the Assessee Society are genuinely charitable within the meaning of section 2(15) of the Act. 3. Whether the CIT-I, Lucknow was justified in denying the registration based on the surplus income generated by the Assessee Society. Summary: Issue 1: Registration u/s 12AA of the Income-tax Act, 1961 The Assessee Society, registered under the Societies Registration Act, 1860, applied for registration u/s 12AA of the Income-tax Act, 1961, as its receipts exceeded Rs. 1 crore during the financial year 2001-2002. The CIT-I, Lucknow, examined the application and noted that the society was generating substantial surpluses each year, which were being applied to the formation of capital assets. The CIT-I formed the opinion that the institution was being run on commercial lines and questioned the charitable nature of the society's activities. Issue 2: Charitable Nature of Activities The CIT-I referred to the Supreme Court decision in the case of Safdarjung Enclave Education Society v. Municipal Corpn. of Delhi, which emphasized that education imparted with a profit motive cannot be considered a charitable purpose. The CIT-I noted that the fees charged by the society were high, resulting in excess income over expenditure each year, and concluded that the society was not conducting any charitable activity. Issue 3: Justification for Denial of Registration The Assessee Society argued that it was solely an educational institution and had been granted exemptions under section 10(22) and section 10(23)(c)(iiiad) of the Act in previous years. The society contended that the CIT-I's reliance on the Safdarjung Enclave Education Society case was misplaced as it pertained to the Delhi Municipal Corporation Act, which has a narrower definition of 'charitable purpose' compared to the Income-tax Act. The society also cited various case laws to support its claim for registration. Tribunal's Findings: The Tribunal noted that the CIT-I did not doubt the genuineness of the society's activities or its objects. The Tribunal emphasized that the CIT-I's powers u/s 12AA are limited to examining the genuineness of the activities and the objects of the trust or institution. The Tribunal concluded that the CIT-I exceeded his jurisdiction by delving into whether the society was running on commercial lines, which is a matter for the Assessing Officer to examine when considering the society's claim for tax benefits under sections 11 and 13 of the Act. Conclusion: The Tribunal directed the CIT-I to grant registration to the Assessee Society u/s 12AA of the Act, as the CIT-I had not doubted the genuineness of the activities or the objects of the society. The Tribunal clarified that this order would not preclude the Assessing Officer from examining the society's claim for exemption under sections 11 and 13 of the Act in subsequent assessments. The appeal was allowed, and the CIT-I was instructed to grant registration accordingly.
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