2015 (7) TMI 1024 - AT - Income Tax

Grant of registration u/s. 12AA rejected - consequent rejection of approval u/s. 80G(5) - Held that - Trust/institution having charitable and religious objects will also be eligible for exemption u/s. 11, unless hit by restrictions imposed u/s. 13(1)(a) or 13(1)(b) of the Act. The DIT(E) has not brought any material on record to show that provisions of Section 13(1)(a) or 13(1)(b) applies to assessee, denial of registration u/s. 12AA for alleged violation of Section 11 in our view is not justified. Moreover, applicability of Section 13 of the Act can be looked into by the AO at the time of assessment proceedings and not by the DIT(E) while exercising power u/s. 12AA of the Act. Moreover, at present assessee also excluded the three object clauses objected to by the DIT(E). Therefore, the objections raised by DIT(E) does not survive. In view of the above, we are inclined to set aside the impugned order of DIT(E) and direct him to grant registration to the appellant-trust u/s. 12AA of the Act from the period it applied for registration. See Shiva Shakthi Shiridi Sai Anugraha Mahapeetam Versus Dy. Director of Income-tax (Exemptions), Hyderabad 2014 (12) TMI 250 - ITAT HYDERABAD Since the DIT(E) refused approval u/s. 80G only on the reason that registration u/s. 12AA was denied to assessee, we direct the DIT(E) to examine the application and grant registration u/s. 80G, if other conditions are satisfied. - Decided in favour of assessee for statistical purposes.

Issues Involved:
1. Delay in filing appeals.
2. Rejection of registration under Section 12AA of the Income Tax Act.
3. Rejection of approval under Section 80G(5) of the Income Tax Act.
4. Nature of the objectives of the assessee-society (charitable vs. religious).

Detailed Analysis:

1. Delay in Filing Appeals:
The assessee filed two appeals: one with a delay of 3 days and another with a delay of 417 days. The delay of 3 days was attributed to the misplacement of the order by the staff, which was condoned. The delay of 417 days was due to the assessee being unaware that separate appeals were required for different sections, which was also condoned. The tribunal admitted both appeals considering the explanations provided by the assessee.

2. Rejection of Registration under Section 12AA:
The assessee-society, claiming to be a charitable trust, applied for registration under Section 12AA. The DIT(E) rejected the application, citing that the society had objectives of a religious nature. Specifically, clauses XII, XIII, and XIV were considered religious. Despite the society passing a resolution to amend these clauses, the DIT(E) did not receive the revised Memorandum of Association and thus maintained the rejection.

3. Rejection of Approval under Section 80G(5):
The rejection of the application under Section 80G(5) was consequential to the denial of registration under Section 12AA. Since the primary application was rejected, the approval for tax exemption under Section 80G(5) was also denied.

4. Nature of the Objectives of the Assessee-Society:
The tribunal examined whether the objectives of the society were indeed religious or charitable. The contentious clauses aimed at propagating 'Dharma' and 'Dharmic values' through cultural activities and the use of temples. The tribunal found that these objectives were not confined to a particular religion or community but were for the benefit of the general public. It was observed that the term 'Dharma' could refer to any religion or social order beneficial to society at large.

The tribunal referenced several legal precedents, including the Supreme Court's decision in Addl. CIT Vs. Surat Art Silk Cloth Manufacturers Association, which held that if the primary purpose of a trust is charitable, ancillary non-charitable objects do not disqualify it from being a charitable trust. Additionally, the tribunal cited the case of Shiva Shakthi Shiridi Sai Anugraha Mahapeetam, where it was established that a trust with mixed charitable and religious objectives could still qualify for registration under Section 12AA, provided it was not for the benefit of a specific religious community.

Conclusion:
The tribunal concluded that the DIT(E)'s objections were not valid as the society's amended objectives were charitable and for the general public's benefit. Consequently, the tribunal directed the DIT(E) to grant registration under Section 12AA from the period the application was filed. Regarding the Section 80G approval, the tribunal set aside the DIT(E)'s order and directed a re-examination of the application, granting approval if other conditions were satisfied.

Judgment:
Both appeals were allowed for statistical purposes. The tribunal directed the DIT(E) to grant registration under Section 12AA and reconsider the application for approval under Section 80G, ensuring all conditions were met. The order was pronounced in open court on 29th July 2015.

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