2020 (3) TMI 501 - HC - Income Tax

Exemption u/s 11 - Application for registration under Section 12A denied - registration was applied for almost after 34 years for coming into existence; there was no dissolution clause in the Memorandum of Association and the assessee-society had huge corpus as compared to the amount used - Tribunal allowed registration - HELD THAT - It is evident that the assessee society is engaged in maintenance of Mandir. There is no allegation that the Corpus fund or the surplus accumulated funds are being used for the purpose other than the aims and objects of the assessee society. The corpus as well as accumulated surplus as is claimed is being used for maintenance and development of Shree Durga Mata Mandir which is a religious place visited by the devotees and open to all Learned counsel for the appellant is not able to dispute that there is nothing on record to show that the assessee was not working for achieving its aims and objects or that the accumulated funds were used for purposes other than aims and objects. He has not been able to show that the findings recorded by the Tribunal quoted above are erroneous much less perverse. In such circumstances, no question of law much less substantial question of law arises

Summary

Issues:
1. Registration under Section 260A of the Income Tax Act, 1961
2. Delay in seeking registration under Section 12AA
3. Observations regarding the working of the society towards its aims and objectives
4. Incorporation of dissolution clause in the Memorandum of Association
5. Utilization of funds for charitable activities
6. Unexplained corpus fund and accumulated assets
7. Contradiction in the evidence and material on record

Analysis:

1. The appeal concerns the denial of registration under Section 260A of the Income Tax Act, 1961, by the Income Tax Appellate Tribunal (ITAT). The appellant challenges the ITAT's decision to grant registration to the respondent-society, citing a judgment of the Hon'ble Allahabad High Court. The ITAT's order was based on the society's engagement in religious activities and the utilization of funds for the maintenance of a temple, which align with its stated aims and objectives. The appellant fails to establish any error in the ITAT's findings, leading to the dismissal of the appeal.

2. The delay in seeking registration under Section 12AA after 34 years of the society's operation was a significant point of contention. The Commissioner of Income Tax (Exemptions) rejected the application primarily due to this delay, along with other reasons such as the absence of a dissolution clause in the Memorandum of Association and the substantial corpus fund compared to the amount used. However, the ITAT found that the society's activities were in line with its objectives, especially in maintaining the temple and utilizing funds for religious purposes, justifying the grant of registration.

3. The ITAT's decision was also based on the observation that the society was working towards achieving its aims and objectives, particularly in the context of religious activities and maintenance of the temple. Despite the appellant's arguments, no evidence was presented to contradict the ITAT's findings regarding the society's dedication to its stated goals, leading to the dismissal of the appeal.

4. The incorporation of a dissolution clause in the Memorandum of Association was a crucial aspect raised in the appeal. The ITAT noted that the society had subsequently added a dissolution clause, addressing the deficiency highlighted by the Commissioner of Income Tax. The ITAT's decision to consider this amendment and the explanation provided by the society regarding the corpus fund utilization supported the grant of registration, as the funds were used for religious activities and temple maintenance.

5. The utilization of funds for charitable activities was another point of contention in the appeal. The appellant raised concerns about the lack of evidence supporting the expenditure shown for charitable activities. However, the ITAT found that the funds were utilized for temple maintenance, staff salaries, and other religious functions, aligning with the society's objectives. The absence of evidence to prove otherwise led to the dismissal of the appeal.

6. The appeal also addressed the issue of unexplained corpus fund and accumulated assets, highlighting the lack of written instructions for receiving such funds. The ITAT accepted the society's explanation that the corpus fund was generated from donations for temple maintenance and religious activities. The utilization of funds for the intended purposes and the absence of evidence suggesting misuse supported the ITAT's decision to grant registration, dismissing the appeal.

7. Lastly, the appellant argued that the ITAT's decision was contrary to the evidence and material on record, labeling it as perverse. However, the ITAT's findings regarding the society's activities, fund utilization, and compliance with its objectives were deemed valid and supported by the available evidence. The lack of substantial grounds to challenge the ITAT's decision led to the dismissal of the appeal.