2025 (4) TMI 99 - AT - Income Tax

Denying assessee the registration u/s 12AB - activities carried out by the applicant are not charitable - HELD THAT - As during the proceedings Ld. CIT(E) neither considered nor discussed material / documents submitted by the assessee/ appellant and rejected the prayer of the assessee whereas it was required by law that before passing any order the Ld. CIT(E ) should properly considered all the material / evidence placed on record. On the basis of the facts mentioned herein before and upon hearing rival contentions without discussing on merits of the case we deem it proper to remit the matter back to the Ld. CIT(E) with the direction to decided afresh in accordance with law after with affording meaningful and effective opportunity to the assessee/ appellant. Appeal of the assessee is allowed for statistical purposes.

Summary

ISSUES PRESENTED and CONSIDERED

The primary legal issues considered in this appeal were:

1. Whether the Commissioner of Income Tax (Exemptions) [CIT(E)] was justified in denying the registration under section 12AB of the Income Tax Act to the assessee, despite the claimed charitable nature of its objects and activities.

2. Whether the nature of receipts and activities conducted by the assessee, such as publishing a journal and organizing events, constituted commercial activities rather than charitable activities.

3. Whether the CIT(E) erred in rejecting the application based on the absence of sufficient evidence to substantiate the charitable activities claimed by the assessee.

ISSUE-WISE DETAILED ANALYSIS

1. Denial of Registration under Section 12AB

The relevant legal framework involves the provisions under section 12AB of the Income Tax Act, which pertains to the registration of charitable institutions. The assessee argued that its activities were charitable in nature, as defined under section 2(15) of the Act, which includes relief of the poor, education, medical relief, and advancement of any other object of general public utility.

The Tribunal noted that the CIT(E) had denied the registration primarily on the grounds that the activities of the assessee appeared to be commercial rather than charitable. The CIT(E) emphasized the nature of the agreement with Springer Nature India Private Limited for publishing a journal, which involved substantial royalty payments and a lack of control over pricing by the assessee.

2. Nature of Receipts and Activities

The CIT(E) observed that the assessee's activities, such as organizing events like Virocon 2020 and charging registration fees, were indicative of commercial ventures. The CIT(E) also noted that the awards given by the society were limited to its members, excluding non-members, which raised questions about the public utility of such activities.

The Tribunal considered the argument that the mere earning of profits or surplus by a charitable society does not negate its charitable status, provided that the surplus is not distributed to private individuals and is used for furtherance of its charitable objects. The Tribunal referenced the CBDT Circular No. 21/2016, which clarifies that exceeding the specified cut-off for commercial receipts does not automatically warrant cancellation of registration, unless the nature of activities changes.

3. Sufficiency of Evidence for Charitable Activities

The CIT(E) also rejected the application on the basis that the assessee failed to substantiate its charitable activities with adequate documentation, such as bills, vouchers, and a list of beneficiaries. The assessee contended that it had submitted comprehensive documentation, including financial statements, agreements, and identity proofs, which were allegedly not considered by the CIT(E).

The Tribunal observed that the CIT(E) did not adequately consider the materials and evidence provided by the assessee. The Tribunal emphasized the importance of considering all submitted evidence before reaching a decision on registration under section 12AB.

SIGNIFICANT HOLDINGS

The Tribunal held that the CIT(E) erred in denying the registration under section 12AB without fully considering the evidence and materials submitted by the assessee. The Tribunal remanded the matter back to the CIT(E) for a fresh decision, directing that all materials and evidence be considered, and an effective opportunity be provided to the assessee to present its case.

The Tribunal stated: "It is required by law that before passing any order the Ld. CIT(E) should properly consider all the material/evidence placed on record." The Tribunal emphasized the necessity of a thorough examination of the evidence to ensure a fair decision-making process.

The appeal was allowed for statistical purposes, and the matter was remitted back to the CIT(E) for reconsideration in accordance with the law, with instructions to provide the assessee with a meaningful and effective opportunity to present its case.