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2017 (2) TMI 689 - AT - Income TaxGrant of registration u/s 12AA - Held that - The registration u/s 12AA and the assessment are separate proceedings. At the stage of registration u/s 12AA only object and genuineness of the trust can be examined and not the activities as well as application of the funds of the assessee trust. This view has been taken by this Coordinate Bench vide its order dated 3-11- 2016 in the case of IMC of ITI Chhabra vs. CIT (Exemptions) 2017 (2) TMI 653 - ITAT JAIPUR . In view of the above facts circumstances of the case and the case laws cited (supra) the CIT (exemptions) is directed to grant registration to the assessee society. Thus the appeal of the assessee is allowed.
Issues Involved:
1. Rejection of application for registration under Section 12AA of the Income Tax Act, 1961. 2. Determination of whether the activities of the society are for charitable purposes as defined under Section 2(15) of the Income Tax Act. 3. Examination of the genuineness of the activities of the society. Detailed Analysis: Issue 1: Rejection of Application for Registration under Section 12AA The assessee filed an appeal against the order of the CIT (Exemptions), Jaipur, which rejected the application for registration under Section 12AA of the Income Tax Act. The CIT (Exemptions) rejected the application on the grounds that the activities of the society were not for charitable purposes as defined under Section 2(15) of the Act. The CIT (Exemptions) held that the society was paying significant amounts to M/s Career Point Ltd. for rent and services, which indicated that the society's activities were not genuinely charitable. Issue 2: Determination of Charitable Purpose The CIT (Exemptions) examined the objects of the society and the genuineness of its activities. The society was running a school affiliated with CBSE, which was considered a charitable purpose under Section 2(15) of the Act. However, the CIT (Exemptions) raised concerns about the high payments made to M/s Career Point Ltd. for rent and services. The CIT (Exemptions) observed that the society was paying rent to M/s Gopi Bai Foundation Trust and M/s Career Point Ltd., and had entered into an agreement with M/s Career Point Ltd. for various educational and administrative services. The CIT (Exemptions) concluded that the society was diverting funds to M/s Career Point Ltd., a profit-making company, which was against the norms of Section 2(15) and could not be considered a genuine charitable activity. Issue 3: Examination of Genuineness of Activities The CIT (Exemptions) required the society to provide various documents and explanations to verify the genuineness of its activities. The society partly complied with the queries. The CIT (Exemptions) found that the society had taken land on lease from M/s Gopi Bai Foundation Trust and that M/s Career Point Ltd. had constructed a building on this land. The society was paying substantial rent to M/s Career Point Ltd. The CIT (Exemptions) also noted that the society had reduced the leased space and entered into another agreement with M/s Career Point Ltd. for educational and administrative services. The CIT (Exemptions) concluded that the society was not carrying out genuine charitable activities as it was diverting funds to M/s Career Point Ltd. Judgment: The Tribunal observed that the CIT (Exemptions) had not given any finding about the object of the society being non-charitable. The Tribunal noted that the society was running a school affiliated with CBSE, which was a charitable activity under Section 2(15). The Tribunal also noted that the registration under Section 12AA and the assessment are separate proceedings. At the stage of registration, only the object and genuineness of the trust can be examined, not the application of funds. The Tribunal referred to various case laws, including the Hon'ble Allahabad High Court in the case of Fifth General Education Society vs. CIT, which opined that at the time of considering the application for registration under Section 12A, the CIT was not required to examine the application of income or carrying on of any activity by the trust. The Tribunal directed the CIT (Exemptions) to grant registration to the assessee society, thereby allowing the appeal. Conclusion: The appeal was allowed, and the CIT (Exemptions) was directed to grant registration under Section 12AA to the assessee society, as the objects of the society were charitable and the activities were genuine. The Tribunal emphasized that the examination at the stage of registration should focus on the objects and genuineness of the trust, not the application of funds.
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