2014 (1) TMI 1192 - AT - Income Tax

Rejection for registration u/s 12AA - Held that - Section 12AA of the IT Act provides procedure for grant of registration and the ld. CIT shall have to satisfy himself about the objects of the trust or institution and the genuineness of its activities before granting or refusing to grant registration under the above provisions - The objects of the assessee and genuineness of its activities shall have to be considered in the light of the material produced on record - The ld. CIT required the assessee to produce relevant documents/records of the assessee society - The ld. CIT quoted three of the objects of the society in the impugned order and found that dominant objects of the assessee are for the benefit of Agarwal Community only - The assessee society earned income of Rs.17,96,148/- and incurred expenditure of Rs.20,74,763/- in organizing Shree Maharaja Agrasen Jayanti etc. , the activities meant for Agrawal community. The other expenses shown by the assessee society were for donation, website expenses, stationery, bad debts, bank charges, misc. expenses, salary expenses and scooter expense. It was, therefore, evident that the assessee society has incurred expenses mainly on organizing Shree Maharaja Agrasen Jayanti etc. and other expenses incurred by it are not related to any charitable activity - No documentary evidence in support of activities of general public utility was furnished by the assessee society - It can be inferred that the assessee has no intention to carry out any activity for general public and its objects are merely on paper - It could be inferred that even though the assessee has taken certain other objects in its memorandum of association, but the same have never been acted upon or brought into existence to take care of general public - The ld. CIT was, justified in holding that none of the expenses incurred by the assessee are related to any charitable activity - The ld. CIT, found that no charitable activities for general public utility have been carried out by the assessee society - Decided against assessee.

Issues Involved:
1. Rejection of application for registration under Section 12AA of the IT Act.
2. Genuineness of the charitable activities of the assessee society.
3. Assessment of the dominant objects of the assessee society.
4. Consideration of evidence and material provided by the assessee society.
5. Applicability of judicial precedents and jurisdictional High Court decisions.

Issue-wise Detailed Analysis:

1. Rejection of Application for Registration under Section 12AA of the IT Act:
The appeal by the assessee was directed against the order of the CIT-I, Agra, dated 15.07.2013, which rejected the application for registration under Section 12AA of the IT Act. The CIT examined the genuineness of the claim and found that the activities of the assessee society did not qualify as charitable activities under the IT Act.

2. Genuineness of the Charitable Activities of the Assessee Society:
The CIT called for a report from the Assessing Officer (AO), who conducted an on-the-spot enquiry. The AO reported that the activities of the society did not fall under charitable activities and lacked verifiable evidence. The CIT required the assessee to produce relevant documents/records, but the assessee failed to provide evidence supporting activities of general public utility. The dominant objects of the society were found to benefit the Agarwal community exclusively, with substantial expenses incurred on organizing community-specific events like Shree Maharaja Agrasen Jayanti.

3. Assessment of the Dominant Objects of the Assessee Society:
The CIT noted that the dominant objects of the assessee society were for the benefit of the Agarwal community. Although the society had objects like establishing hospitals, dharmshalas, libraries, and schools, no activities or expenses were directed towards these purposes. The CIT concluded that the society's activities were not for the general public utility as required under Section 2(15) of the IT Act.

4. Consideration of Evidence and Material Provided by the Assessee Society:
The assessee argued that the CIT's order was passed without proper opportunity and claimed that it was running a Dharamshala known as Maharaja Agrasen Atithi Bhawan and was in the process of establishing another Dharamshala. However, no evidence or list of occupants was provided to substantiate that these facilities were for the general public. The CIT and AO's findings were not contradicted by the assessee with any substantial evidence.

5. Applicability of Judicial Precedents and Jurisdictional High Court Decisions:
The CIT's decision was supported by the jurisdictional High Court's precedent in Shri Dhakad Samaj Dharamshala Bhawan Trust v. CIT, which emphasized that registration under Section 12AA requires proof that the property is used for charitable or religious purposes. The Tribunal followed this precedent, noting that merely creating a Dharamshala in a religious place does not qualify as a charitable or religious purpose without further evidence of public utility.

Conclusion:
The appeal of the assessee was dismissed. The Tribunal upheld the CIT's order, finding no justification to interfere with the decision. The assessee was granted the liberty to file a fresh application for registration if it could demonstrate that its objects were charitable or religious in nature and that its activities were genuine.

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