2024 (7) TMI 699 - AT - Income Tax

Registration u/s 12AB - CIT concluded that the section 8 company is undertaking business activities based on the agreements submitted during proceedings u/s 12A(l)(ac)(iii) of the IT act 1961. During pursuing of registration before the Rajasthan Public Trust Act, 1959, the assessee by wrong advised had withdrawn the application filed before the ld. CIT(E). But later on, the registration under Rajasthan Public Trust was not required as the assessee is already registered under Companies Act - As per AR during the course of the proceedings before the Id. CIT (Exemption) an objection was raised that the registration of even the Companies registered under the Companies Act, 2013, will be required to be registered under the Rajasthan Public Trust Act, 1959 HELD THAT - The assessee is registered under the Companies Act 2013. By wrong advised the assessee had withdrawn the application of registration u/s 12AB of the Act, for pursuing registration under Rajasthan Public Trust. Finally, the assessee came to know that the state registration is not required if the trust registered under the Companies act. The assessee requests to restore the application of registion u/s 12AB of the Act. AR fully relied on the Circular No. 14(XL-35) of 1955 dated 11/04/1955 that the department cannot take the advantage of ignorance of an assessee. Here, the revenue has not taken any advantage of the ignorance of the assessee. The assessee by wrong advised or under different impression had withdrawn the application for registration filed before the CIT(E) u/s 12A of the Act. We find that the order of the ld. CIT(E) is well accepted and need not be intervened by us. Accordingly, the appeal filed by the assessee is duly dismissed.

Issues:
1. Registration under section 12A of the Income Tax Act, 1961
2. Requirement of registration under the Rajasthan Public Trust Act, 1959
3. Withdrawal of application for registration
4. Restoration of application for registration

Analysis:

1. Registration under section 12A of the Income Tax Act, 1961:
The appellant, a section 8 company, filed an appeal against the order of the Commissioner of Income Tax (Exemptions) regarding the registration under section 12A of the Act. The appellant contended that the activities undertaken were in line with the object clause of the company and were on a no-profit, no-loss basis. However, the order of the Commissioner was based on the conclusion that the company was undertaking business activities. The Tribunal found that the withdrawal of the application for registration was due to a mistaken belief regarding the requirement for registration under the Rajasthan Public Trust Act, which was later deemed unnecessary. The Tribunal upheld the Commissioner's order, stating that the appellant's withdrawal was based on wrong advice, and there was no evidence of the revenue authorities taking advantage of the appellant's ignorance.

2. Requirement of registration under the Rajasthan Public Trust Act, 1959:
During the proceedings, an objection was raised regarding the necessity of registration under the Rajasthan Public Trust Act, 1959, even for companies registered under the Companies Act, 2013. However, it was clarified that institutions registered under the Companies Act were not required to be registered under the Rajasthan Public Trust Act. The appellant, under a mistaken belief, withdrew the application for registration under section 12A of the Act, assuming the need for registration under the Public Trust Act. Subsequently, it was realized that such registration was not mandatory, and the appellant sought to reinstate the application for registration under the Act.

3. Withdrawal of application for registration:
The appellant withdrew the application for registration under section 12AB of the Act, intending to reapply after obtaining registration under the Rajasthan Public Trust Act. The withdrawal was based on a misconception of the law, as later clarified that the state registration was not required if the trust was registered under the Companies Act. The Tribunal noted that the appellant's withdrawal was a result of being misinformed and not due to any advantage taken by the revenue authorities.

4. Restoration of application for registration:
The Tribunal considered the appellant's request to restore the application for registration under section 12AB of the Act. Despite the appellant's reliance on a circular prohibiting the exploitation of an assessee's ignorance, the Tribunal found that the revenue authorities did not exploit the appellant's misunderstanding. The Tribunal upheld the Commissioner's order, emphasizing that the withdrawal of the application was a consequence of incorrect advice, and the appeal was consequently dismissed.

In conclusion, the Tribunal dismissed the appeal, affirming the Commissioner's decision regarding the registration under section 12A of the Income Tax Act, 1961, and the subsequent withdrawal and restoration of the application for registration.

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