2014 (1) TMI 673 - AT - Income Tax

Registration u/s 12AA - Held that - Before grant of registration u/s. 12AA, the ld. CIT has to satisfy himself about the objects and genuineness of the activities of the assessee trust or institution. Other conditions are not relevant at the stage of grant of registration. The recognition u/s. 80G(5) is consequential to the grant of registration - Following Hardayal Charitable and Educational Trust vs. CIT-II, Agra 2013 (3) TMI 377 - ALLAHABAD HIGH COURT - Most of the objections raised by the ld. CIT in the impugned order are not relevant for the purpose of grant of registration u/s. 12AA of the IT Act and approval of exemption u/s. 80G(5) of the IT Act - For grant of registration u/s. 12AA, The Commissioner of Income Tax is not required to look into the activities where such activities have not or in the process of its initiation - The objects of the Institution shall have to be seen - The issue of receipt of donations is not relevant - The registration could not have been refused on the ground that the trust has not yet commenced the charitable or religious activities. The assessee has filed copy of the aims and objects of the society, which shows that the assessee exists for educational and charitable purpose only, which is also supported by the report of DCIT - The assessee is at the stage of setting up the educational institution, the assessee society was set up to achieve its objects of establishing educational institution is in the process of establishing such institution and received donations - At this stage, the genuineness of the objects have to be tested and not the activities which have not commenced - The reasons given by the ld. CIT in the impugned order for rejection of applications are not relevant at this stage which may be a separate issue and arise whenever the return of income would be filed by the assessee and would be examined at assessment stage - Decided in favour of assessee.

Summary

Issues:
Appeal against rejection of registration u/s. 12AA and recognition u/s. 80G(5)(vi) of the IT Act.

Detailed Analysis:

1. Registration u/s. 12AA and Recognition u/s. 80G(5)(vi) Rejection:
- The appeals were against the rejection by the ld. CIT of the applications for registration u/s. 12AA and recognition u/s. 80G(5)(vi) of the IT Act.
- The ld. CIT identified various shortcomings and irregularities in the application process, including missing audit reports, lack of documentary evidence for donor identities, discrepancies in balance sheets, and inadequate expenditure on charitable activities.

2. Submissions and Arguments:
- The assessee's counsel argued that the society's objectives were educational, with donations received for corpus purposes supported by donor statements and identity proofs.
- The society was in the process of constructing an educational building and seeking affiliations, with evidence provided in the form of documents and photographs.
- The DCIT(Judicial) had recommended registration and approval, citing the educational nature of the society's objects and its charitable activities.

3. Legal Provisions and Precedent:
- Section 12AA of the IT Act requires the CIT to verify the genuineness of the trust or institution's activities before granting registration.
- The judgment of the Hon'ble Allahabad High Court emphasized that registration should focus on the genuineness of the objects, not the activities in the initial stages of trust establishment.
- The court clarified that registration should not be refused based on uninitiated charitable activities, but rather on the trust's objectives and genuineness.

4. Decision and Rationale:
- Considering the legal provisions and the High Court's judgment, the Tribunal found that most objections raised by the ld. CIT were irrelevant for registration and approval purposes.
- The Tribunal noted that the society's educational and charitable objectives were genuine, supported by documentary evidence, donor lists, and construction activities.
- As the society was in the process of establishing an educational institution and had received donations for charitable purposes, the Tribunal concluded that registration u/s. 12AA and approval u/s. 80G(5)(vi) should be granted.

5. Outcome:
- Both appeals by the assessee were allowed, setting aside the ld. CIT's orders and directing the grant of registration u/s. 12AA and approval u/s. 80G(5)(vi) in accordance with the law.

This detailed analysis highlights the legal intricacies, factual submissions, and the Tribunal's decision in granting registration and recognition to the assessee based on the genuineness of their educational and charitable objectives, as per the requirements of the IT Act and relevant judicial precedent.