2017 (12) TMI 791 - AT - Income Tax

Registration granted u/s 12AA cancelled - proof of charitable services - assessee has paid donations for charity outside India - Held that - In the present case that the Respondent has found that the assessee has paid donations for charity outside India contrary to the provisions of Section s 11(1)(a) and 11(1)(c) of the Act. In our opinion, this may become point for consideration for disallowance during the course of assessment proceedings and it is the duty of AO to take note of all facts, while considering the same u/s 11 of the Act and thus, the ratio enunciated by the Hon ble High Court of Madras in the case of M/s Tamil Nadu Cricket Association Vs. DCIT(Exemptions) & others reported in 2013 (12) TMI 833 - MADRAS HIGH COURT is applicable to the issue on hand. In our opinion, the Respondent having exercising powers u/s 12AA of the Act has to satisfy that the activities of such trust or institution are genuine or not being carried out in accordance with the objects of the trust or institution and the Respondent is empowered to examine all the details of the trust or institution which has got registration u/s 12A in terms of exercising its power under sub-Section 3 of Section 12AA of the Act. We find no adverse remark made by the Respondent regarding the activities of the assessee are not in accordance with the objects and its activies are not genuine. Therefore, in our opinion, exercising jurisdiction under sub-Section 3 of Section 12AA of the Act in cancelling the registration by the Respondent is not maintainable - Decided in favour of assessee.

Summary

Issues:
Cancellation of registration granted under section 12AA of the Income Tax Act for alleged violation of provisions related to application of funds outside India without prior approval.

Analysis:
The case involved an appeal by the assessee against the cancellation of registration granted under section 12AA of the Income Tax Act due to alleged violations related to the application of funds outside India without obtaining prior approval. The Respondent found that the assessee made donations to an educational institution in Nepal without approval, contrary to provisions of sections 11(1)(a) and 11(1)(c) of the Act. The Respondent issued a show cause notice to the assessee, who failed to respond, leading to the cancellation of registration.

The assessee argued that the trust deed did not prohibit donations outside India and cited relevant case law to challenge the cancellation. The Respondent contended that the assessee's activities were not genuine and violated statutory provisions. The Tribunal examined the submissions and observed that the assessee indeed applied funds outside India without necessary approvals. The Tribunal considered whether this action warranted cancellation of registration under section 12AA of the Act.

The Tribunal referred to a relevant case involving the Tamilnadu Cricket Association and highlighted the distinction between assessing genuineness of activities under section 11 of the Act versus cancellation of registration under section 12AA. It was emphasized that the Assessing Officer should consider all facts during assessment proceedings. The Tribunal concluded that the Respondent did not establish that the activities of the assessee were not genuine or in accordance with the trust's objectives, thus setting aside the cancellation of registration. The Tribunal allowed the appeal, emphasizing the importance of assessing genuineness during assessment proceedings rather than under section 12AA.

In summary, the Tribunal's decision revolved around the assessment of whether the assessee's actions warranted cancellation of registration under section 12AA for violating provisions related to funds applied outside India without approval. The Tribunal emphasized the need for assessing genuineness during assessment proceedings and set aside the cancellation, allowing the appeal of the assessee.