2014 (8) TMI 272 - AT - Income Tax

Rejection for registration u/s 12AA Charitable purpose u/s 2(15) Education imparted by Trust Admission of additional evidence under Rule 29 of Rules - Held that - The facts which lead to the conclusion of CIT were based on the agreement between the assessee trust and Lancaster University - CIT could have asked the assessee trust to explain the details of identity cards and procedure of appointment of academic, administrative and support staff and also the source and mode of payment of their salary and perquisites but the CIT without asking any explanation in this regard drew a conclusion that the assessee trust is merely facilitating Lancaster University in the business of education in India and that too for a fee - important evidence and relevant material was not considered by the CIT while rejecting the application of the assessee for registration u/s 12 of the Act - Since there was no query from the CIT, Faridabad, the relevant evidence and documents could not be produced and considered at the level of CIT during the original proceedings - the additional evidence and documents submitted by the assessee are relevant for adjudication of the assessee for registration u/s 12A of the Act - additional evidence submitted by the assessee deserves to be admitted and we admit the same by allowing application of the assessee filed under Rule 29 of the IT(AT) Rules, 1963 Decided in favour of Assessee. Since the additional evidence of the assessee pertaining to the application for registration u/s 12A of the Act is admitted, it would be appropriate that the issue of registration u/s 12A of the Act requires fresh adjudication at the level of CIT, Faridabad the issue of registration u/s 80G of the Act being consequential rejection of the application of the assessee is also restored to the file for fresh adjudication with a direction to CIT that the application of assessee filed in Form No. 10G shall be reconsidered in the light of conclusion drawn for grant of registration u/s 12A of the Act - thus, the matter is remitted back to the CIT for fresh consideration Decided in favour of Assessee.

Summary

Issues Involved:
1. Rejection of application for registration under section 12AA of the Income Tax Act, 1961.
2. Denial of exemption under section 80G of the Income Tax Act, 1961.
3. Admission of additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963.

Issue-wise Detailed Analysis:

1. Rejection of Application for Registration under Section 12AA:
The assessee trust filed an application for registration under section 12AA of the Income Tax Act, 1961, claiming it was engaged in providing education. The CIT, Faridabad, rejected this application, concluding that the trust was providing support services to Lancaster University, a foreign university, rather than independently pursuing educational activities. The CIT noted that the arrangement with Lancaster University involved the latter deciding academic strategies and entering separate contracts with students, which indicated that the trust was not the primary provider of education. Consequently, the CIT held that the trust was covered by the proviso to section 2(15) of the Income Tax Act, rendering it ineligible for registration under section 12A.

2. Denial of Exemption under Section 80G:
Following the rejection of the application for registration under section 12AA, the CIT also denied the trust's application for exemption under section 80G of the Income Tax Act, 1961. This denial was consequential to the primary rejection of the registration application, as the exemption under section 80G is contingent upon the trust being registered under section 12A.

3. Admission of Additional Evidence under Rule 29:
The assessee filed an application to submit additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, claiming that the evidence was necessary for proper adjudication. The additional evidence included identity cards issued to students and appointment letters for staff, which were relevant to counter the CIT's conclusions. The Tribunal observed that the CIT had not provided the assessee with an opportunity to explain these aspects during the original proceedings. Citing the decision in CIT vs Text Hundred India (P) Ltd., the Tribunal admitted the additional evidence and remitted the case back to the CIT for fresh adjudication, emphasizing the need for a fair opportunity to be given to the assessee to present its case.

Conclusion:
The Tribunal allowed the assessee's appeal for statistical purposes, setting aside the CIT's order and directing a fresh adjudication of the application for registration under section 12A in light of the newly admitted evidence. Consequently, the issue of exemption under section 80G was also restored to the CIT for reconsideration based on the outcome of the registration application under section 12A. The Tribunal emphasized the importance of a fair hearing and the consideration of all relevant evidence before making a determination.