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2019 (1) TMI 1268 - AT - Income TaxDenying 12AA registration - registration u/s 12AA originally granted to the assessee was withdrawn - whether activities carried on by the assessee trust are for charitable purposes as defined u/s 2 (15) of the act and not business and profession? - whether the benefit of u/s 11 and 12 of the Act is allowable to the assessee? - Held that - As assessee is carrying on the activities of medical relief for eradication and education of HIV AIDS patients the assessee is entitled to the registration u/s 12 AA of the income tax act as there is no finding by the learned CIT exemption that the activities of the assessee are not genuine. Same is not the case of the learned departmental representative also. In view of this we cancel the order passed by the learned CIT exemption dated 3/10/2017 cancelling the registration already granted to the assessee by passing an order u/s 12 AA (3) of the income tax act 1961 on 3/10/2017 and direct the ld CIT (E) to restore the registration of the trust u/s 12AA - Also grant benefit of section 11 and 12 of the income tax act to the assessee. - Decided in favour of assessee
Issues Involved:
1. Legality of the withdrawal of registration under section 12AA(3) of the Income Tax Act, 1961. 2. Nature of the activities conducted by the assessee and their classification as charitable or business. 3. Applicability of the proviso to section 2(15) of the Income Tax Act to the assessee. 4. Eligibility for exemption under sections 11 and 12 of the Income Tax Act. Detailed Analysis: 1. Legality of the Withdrawal of Registration under Section 12AA(3): The assessee contested the withdrawal of registration under section 12AA(3) by the CIT (Exemption), arguing that the order was "illegal void since ab-initio." The Tribunal noted that the proposal for withdrawal was submitted by the AO on 15/12/2011, but the CIT (Exemption) passed the order on 3/10/2017, a gap of almost six years. This delay was argued to make the order unsustainable. The Tribunal found that the CIT (Exemption) did not establish that the activities of the assessee were not genuine, thus canceling the order withdrawing the registration and directing the restoration of the registration under section 12AA. 2. Nature of the Activities Conducted by the Assessee: The assessee, a company registered under section 25 of the Companies Act, 1956, and section 12AA of the Income Tax Act, primarily aimed to provide relief to persons suffering from HIV/AIDS. The activities included providing financial, technical, and managerial assistance, public education on HIV/AIDS prevention, and collaboration with other NGOs. The AO had argued that the assessee was involved in business activities by charging management fees for project execution. However, the Tribunal found that the assessee's activities constituted "medical relief," a recognized charitable purpose under section 2(15), and not business activities. 3. Applicability of the Proviso to Section 2(15): The AO had applied the proviso to section 2(15), suggesting that the assessee's activities fell under "object of general public utility" and involved business-like activities. The Tribunal, however, clarified that the proviso applies only to objects of general public utility and not to medical relief. The Tribunal emphasized that the assessee's activities were focused on medical relief for HIV/AIDS patients, thus falling outside the scope of the proviso. 4. Eligibility for Exemption under Sections 11 and 12: For the assessment year 2010-11, the AO denied the exemption under sections 11 and 12, arguing that the assessee was engaged in business activities. The CIT (A) overturned this decision, recognizing the assessee's activities as charitable. The Tribunal upheld this view, confirming that the assessee's activities were charitable and thus eligible for exemptions under sections 11 and 12. The Tribunal directed the AO to grant these benefits to the assessee. Conclusion: The Tribunal concluded that the assessee's activities were charitable, focusing on medical relief for HIV/AIDS patients, and not business activities. The order withdrawing the registration under section 12AA was canceled, and the registration was restored. The assessee was also granted the benefits of sections 11 and 12. The appeal of the revenue was dismissed, and the appeal of the assessee was allowed.
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