2016 (3) TMI 51 - AT - Income Tax

Grant of registration u/s 12A denied - both the objects as well as the genuineness of the activities could not be established - Held that - The Hon ble Rajasthan High Court in case of CIT Vs. Digambar Jain Mandir 2008 (2) TMI 882 - RAJASTHAN HIGH COURT held that in order to get registration u/s 12A of the Act, the institution need not first establish its claim to exemption u/s 11 and 12. The question of exemption under section 11 and 12 would only come at the time when the trust/institution is assessed to tax. Therefore, considering the facts of the present case in the light of the judicial precedents and also relevant statutory provisions, the only conclusion one can reach is that the DIT(E) was not correct in rejecting assessee s application u/s 12A of the Act. In the aforesaid view of the matter, we direct the DIT(E) to grant registration u/s 12A of the Act to the assessee institution. - Decided in favour of assessee

Summary

Issues Involved:
1. Refusal to grant registration under section 12AA(1)(b)(ii) of the Income Tax Act, 1961.
2. Examination of the charitable nature of the society's objects.
3. Assessment of the genuineness of the society's activities.
4. Consideration of the society's compliance with documentation requirements.
5. Evaluation of the society's initial charitable activities and investments.

Detailed Analysis:

1. Refusal to Grant Registration under Section 12AA(1)(b)(ii):
The assessee society appealed against the order dated 31.03.2015, where the CIT (Exemptions) denied registration under section 12AA(1)(b)(ii) of the Income Tax Act, 1961, on the grounds that the society had not carried out any charitable activities.

2. Examination of the Charitable Nature of the Society's Objects:
The appellant argued that the CIT (Exemptions) failed to appreciate that the society's objects were wholly charitable and religious, as evidenced in its Memorandum of Association. The society was in the process of establishing an educational institution and had organized charitable programs, such as distributing blankets to the poor and conducting workshops for children in remote areas.

3. Assessment of the Genuineness of the Society's Activities:
The CIT (Exemptions) concluded that the society's activities were not genuine due to the lack of substantial charitable activities at the time of application. However, the Tribunal highlighted that the scope of enquiry for registration under section 12AA is limited to the genuineness of the objects and not the activities, especially if the activities have not yet commenced.

4. Consideration of the Society's Compliance with Documentation Requirements:
The appellant contended that all requisite details and documents were submitted as directed, contrary to the CIT (Exemptions)'s findings. The Tribunal noted that the CIT (Exemptions) had overlooked the income and expenditure account and other supporting documents provided by the society.

5. Evaluation of the Society's Initial Charitable Activities and Investments:
The appellant provided evidence of initial charitable activities and investments, including the purchase of school buses, vans, and investments in school infrastructure. The Tribunal observed that the CIT (Exemptions) had ignored these activities and investments, which demonstrated the society's commitment to its charitable objectives.

Legal Precedents and Tribunal's Decision:
The Tribunal referred to several legal precedents, including the Hon'ble Delhi High Court's decision in Ram Piyari Devi Charitable Trust and the Hon'ble Allahabad High Court's decision in Hardayal Charitable & Educational Trust, which established that the enquiry at the registration stage should be limited to the genuineness of the objects and not the activities. The Tribunal concluded that the CIT (Exemptions) erred in denying registration based on the society's initial inactivity and directed the CIT (Exemptions) to grant registration under section 12A of the Act.

Conclusion:
The appeal was allowed, and the Tribunal directed the CIT (Exemptions) to grant registration to the assessee society under section 12A of the Income Tax Act, 1961. The Tribunal emphasized that the genuineness of the objects should be the primary consideration at the registration stage, and the actual application of funds should be examined at the assessment stage.