2019 (8) TMI 153 - AT - Income Tax

Registration u/s 12AA denied - no charitable activity u/s 2(15) - HELD THAT - It is pertinent to note that from the perusal of the by-laws of the society, all the clauses are general clauses which do not point out any charitable activity. In fact, from the objectives the society will purchase and sell immovable property as per society s needs. CIT(Exemptions) rightly observed that the society purchased the property out of surplus funds and earned rental income from the shops which have been constructed out of these funds. Thus, from these observations it can be seen that the society is having commercial activities. CIT(Exemptions) observed that the society has no investment clause, amendment clause, irrevocability clause, utilization clause, or beneficiary clause in the by-laws of the society. AR could not point out that the society is dealing exclusively in imparting education which is charitable purpose from the bye-laws. In fact main object of the society is to direct, supervise and look after Sanatan Dharam High School, as well as to construct the building of the school, along with purchase movable and immovable property for the Samiti and sale it from time to time. One of the object is to collect money for the proper conduct of Samiti and to impart and sustain Indian Cultural values amongst students. All these are not coming under the purview of imparting education among the society. The applicant society did not file audit report prescribed in the balance sheet as per the requirement for filling application u/s 12AA registration. Thus, the Applicant society also failed to submit the proper documents before the CIT(Exemptions). Thus, the CIT(Exemptions) rightly rejected the application of the applicant society u/s 12A - Decided against assessee. -

Summary

Issues:
1. Refusal of registration of society by CIT(Exemptions) based on surmises and conjectures.
2. Denial of registration without providing an opportunity of being heard.
3. Interpretation of charitable activities under section 11(5) of the Income Tax Act.
4. Consideration of running schools as charitable activities.
5. Purchase and sale of immovable property by an educational institution.
6. Requirement of registration under "Haryana Registration and Regulation of Society Act, 2012" for registration under Income Tax Act.
7. Applicability of section 44AB to institutions seeking registration under section 12A.
8. Emphasis on the application of funds towards charitable objects for registration.
9. Justifiability of denying registration to a public charitable institution imparting education.

Analysis:
1. The appeal was filed against the order of the Commissioner of Income Tax (Exemptions) denying registration to a society. The grounds of appeal challenged the refusal of registration based on surmises and conjectures without considering all facts, and without providing an opportunity of being heard as required by section 12AA of the Income Tax Act, 1961.

2. The society, registered under the Society's Act, 1860, aimed to direct, supervise, and look after a school, construct school buildings, purchase/sell property, and impart Indian cultural values. The Commissioner observed lack of charitable activities, commercial property dealings, absence of required audit reports, and non-compliance with Section 44AB, leading to the rejection of the registration application.

3. The appellant argued that the society's educational activities were charitable, and all relevant documents were produced. However, the Department contended that the society did not meet the requirements for Section 12A, citing legal precedents to support its stance.

4. After considering both parties' arguments and reviewing the society's objectives, the Tribunal found that the society's activities did not exclusively involve charitable purposes as defined in the Income Tax Act. The failure to submit necessary documents and the commercial nature of property transactions led to the rejection of the registration application.

5. The Tribunal upheld the decision to dismiss the appeal, emphasizing the importance of fulfilling registration requirements and demonstrating activities aligned with charitable objectives. The order highlighted the lack of charitable activities in the society's operations, leading to the denial of registration under Section 12A of the Income Tax Act, 1961.