2016 (12) TMI 357 - HC - Income Tax

Registration granted to the society u/s 12A(a) cancelled - whether Tribunal is justified in holding that the object and purpose of assessee Samiti are charitable falling u/s.2 (15) and further directing the CIT to allow registration u/s.12A ?- Held that - On perusal of the material on record, we find that the assessee has utilized the surplus funds in acquiring the capital/fixed assets for the school and for making the fixed deposits in the bank and income arising from the said fixed deposits has been included in the receipts in each year for utilizing the same for incurring the expenditure for the society/school and /or for acquiring the capital/ fixed assets. As regards providing of fee educational material and books, financial aid, hostel and medical aid to the poor students, the assessee has submitted the explanation at page 4 of ld. CIT order that 50% fees exemption has been granted to few students. Therefore, in the circumstances and facts of the case, the assessee society is running its activity for the purposes for which it was registered. The objections raised are without any basis and material on record and therefore, the registration cancelled by him is not justified - Decided in favour of assessee

Summary

Issues:
Challenge to Tribunal's decision granting benefits under Section 12AA(3) to the assessee society.

Analysis:
The High Court addressed the challenge by the department against the Tribunal's decision granting benefits under Section 12AA(3) to the assessee society. The Society was initially registered under Section 12A(a) of the I.T. Act, 1961. However, concerns arose regarding the society's activities not aligning with its stated objectives. The CIT observed surplus amounts being generated annually, fees being charged in a commercialized manner, and lack of evidence of providing assistance to poor children as intended. Consequently, the registration under Section 12A(a) was canceled under Section 12AA(3) of the Act.

Upon admission of the appeal, the Court framed questions of law, questioning the Tribunal's decision. The appellant contended that the society did not meet the criteria under Section 12AA. The Tribunal's detailed observations highlighted that the society had been registered mainly for providing education, and the surplus funds were utilized for school development and fixed assets. The Tribunal found no basis to conclude that the society was not operating in line with its objectives. It noted the absence of evidence to support the CIT's objections.

The Court agreed with the Tribunal's findings, citing relevant legal precedents to support its decision. It confirmed the Tribunal's decision as just and proper, ultimately dismissing the appeal. The issues were resolved in favor of the assessee society and against the department.