2021 (6) TMI 100 - AT - Income Tax

Grant of registration u/s 12AA - corpus donations collected in the preceding financial years had escaped assessment to tax - HELD THAT - It is a settled position of law that at the time of grant of registration, the ld. CIT, Exemption can only look into two aspects i.e. (i) whether the objects of the trust or society are charitable in nature and (ii) genuineness of the activities of the trust or society in the light of the law laid down by Ananda Social and Educational Trust vs. CIT, 2020 (2) TMI 1293 - SUPREME COURT - It is also equally settled position of law that the grant of registration and assessment are two separate and distinct procedures prescribed under the Income Tax Act. From the perusal of the impugned order, it is clear that the ld. CIT, Exemption had denied the grant of registration by taking into consideration that the corpus donations collected in the preceding financial years had escaped assessment to tax which clearly falls under the realm of the assessment. In view of the settled position of law discussed above, we are of the considered opinion that the grounds on which the ld. CIT, Exemption had rejected the grant of registration are untenable in law. Accordingly, we direct the ld. CIT, Exemption to grant the registration u/s 12AA. - Decided in favour of assessee.

Summary

Issues involved:
Appeal against denial of registration u/s 12AA of the Income Tax Act, 1961.

Analysis:
The appellant society filed an appeal against the order of the Learned Commissioner of Income Tax, Exemption, Pune, which denied the grant of registration u/s 12AA of the Income Tax Act, 1961. The grounds of appeal raised by the appellant included contentions regarding the rejection of registration without appreciating submissions and without providing an opportunity to be heard. The society, engaged in charitable activities, applied for registration under section 12AA, but the CIT, Exemption raised concerns about corpus donations forming part of taxable income. The CIT, Exemption concluded that the society was engaged in non-charitable activities and thus denied registration. The appeal was brought before the Appellate Tribunal challenging this decision.

During the appeal hearing, it was argued that the society was indeed engaged in charitable activities, and the rejection of registration based on assessment issues was improper. The Appellate Tribunal considered the settled legal position that registration and assessment are distinct procedures. The Tribunal referred to various precedents emphasizing that at the time of registration, only the charitable nature of the trust's objects and the genuineness of its activities should be assessed. The Tribunal highlighted that issues related to assessment should not influence the grant of registration, citing specific cases to support this position.

Upon reviewing the impugned order, the Tribunal found that the denial of registration by the CIT, Exemption was based on assessment-related concerns, which was deemed inappropriate in light of established legal principles. Consequently, the Tribunal held that the grounds for rejection of registration were legally untenable. Accordingly, the Tribunal directed the CIT, Exemption to grant registration u/s 12AA of the Act to the appellant society. As a result, the appeal filed by the assessee was allowed, and the decision was pronounced on June 1, 2021.