2015 (9) TMI 700 - AT - Income Tax

Rejection of registration u/s 12A - expenditure of non-charitable activity - Held that - - DIT (E) held, out the total receipts, substantial amount was expended for administrative purposes. This observation of the DIT(E) is factually incorrect. On perusal of the balance sheet for the year ending 31st March 2012 it is evident that substantial receipt of ₹ 20.61 lakhs was lying in bank account and only the minuscule portion of the receipt was incurred as administrative expenses. The assessee society had received ₹ 30 lacs from India Medtronic Pvt. Ltd. and Boston Scientific India Pvt. Ltd. for medical education programme. It also received ₹ 3,75,000/- from Boston Scientific India Pvt. Ltd. as donation towards Newer Advance Intervention cardiology. DIT(E) has wrongly mentioned that it is professional receipt. The assessee society has conducted the activities /workshop/seminars.he assessee society has also enclosed paper cutting and photographs in support of said activities. From Income & Expenditure account, it is clear that the assessee society has spent a same 7,36,069/- on the above charitable activities. Therefore, DIT(E) is not correct in his conclusions and rejecting the assessee societies application in Form No. 10A. Hence, we direct that assessee society be granted registration u/s 12A of the Act. - Decided in favour of assessee. Application in form No. 10G seeking exemption u/s 80G rejected - Held that - Since registration u/s 12A is granted, the DIT(E) shall examine whether the assesee has satisfied the necessary conditions u/s 80G, for grant of exemption in the said section - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Rejection of registration under section 12A of the IT Act.
2. Rejection of application for exemption under section 80G.

Detailed Analysis:
1. The judgment involves appeals by an assessee society against the order of DIT(E) rejecting their registration under section 12A of the IT Act. The society's grounds of appeal included errors in law and facts by the DIT(E) in rejecting both the registration under section 12A and the application for exemption under section 80G. The delay in filing one of the appeals was condoned due to reasonable reasons provided by the assessee society.

2. The DIT(E) rejected the registration and exemption applications citing that the society did not engage in charitable activities as required. The DIT(E) highlighted that most expenses were administrative, and the society's activities were deemed professional rather than charitable. The rejection was based on the lack of charitable nature in the society's operations, leading to the denial of registration under section 12A and subsequent exemption under section 80G.

3. The assessee society contended that their activities were indeed charitable, and the rejection was unfounded. They presented evidence of charitable events and donations to support their claim. The society argued that the DIT(E) should focus on the charitable nature of their objects during registration under section 12A, not the application of income, citing relevant case laws to support their position.

4. The tribunal analyzed the legal provisions under section 12A, emphasizing that the DIT(E) should primarily verify the charitable nature of the trust's objects during registration. The tribunal referred to previous judgments that supported this interpretation, stating that the assessment of income activities should occur at a later stage, not during the registration process. The tribunal also considered a recent judgment reinforcing the importance of focusing on the trust's objects for registration.

5. After a detailed examination of the facts and submissions, the tribunal found that the DIT(E)'s observations were factually incorrect. The tribunal noted substantial charitable activities conducted by the society, including medical education programs, health camps, and charitable donations. Based on the evidence presented, the tribunal directed the grant of registration under section 12A and ordered further examination for exemption under section 80G, ultimately partially allowing the appeal of the assessee society.

This comprehensive analysis of the judgment highlights the key issues, arguments presented, legal interpretations, and the final decision rendered by the tribunal.