2021 (8) TMI 862 - AT - Income Tax

Exemption u/s 11 - rejecting assessee's application on Form no. 10A for registration u/s. 12A - since the assessee was claiming exemption from Income Tax u/s. 10(23C)(3)(iii)(ad) hence it had no locus standi to claim registration u/s. 12A - HELD THAT - CIT has been wrong in holding that since the assessee was claiming exemption from Income Tax u/s. 10(23C)(3)(iii)(ad) hence it had no locus standi to claim registration u/s. 12A. It is the right of the assessee to avail either of the benefit of exemptions u/s. 10 (23c) or 12AA of the act available to it, however the assessee has to fulfilled the conditioned prescribed for availing such benefits. As noted the material fact as mentioned by the CIT that One of the objectives of the applicant society was that Special attention has been given upon character building of the students, to prepare the students for various examination conducted by various education departments which includes any educational institution, college, university, board, academy and any other institution, Government or Private, national or international, educational or any other field. It is worthy mention here that whether the object of the assessee society to prepare the students for various examination conducted by various education departments that includes any educational institution, college, university, board, academy and any other institution, Government or Private, national or international, educational contemplates to running coaching institute on commercial pattern for profit emotive needs to be examined. We deem it fit to restore the matter back to the file of the CIT(Exemption) to examine the objects and activities of the assessee society afresh for the issue of grant of registration u/s. 12AA of the act, afresh, as per amended provisions of law, after taking into consideration the material evidence and after affording sufficient opportunity of being heard to the assessee trust. Assessee appeal is treated allowed for statistical purposes.

Summary

Issues:
1. Barred by limitation
2. Rejection of application for registration u/s. 12A
3. Fulfillment of conditions for registration u/s. 12A
4. Locus standi to claim registration u/s. 12A
5. Legality of the order

Issue 1: Barred by limitation
The appeal raised the issue that the order of the Commissioner of Income Tax (Exemptions) was barred by limitation. The contention was that the order was beyond the prescribed time limit, questioning the validity of the timeline within which the order was issued.

Issue 2: Rejection of application for registration u/s. 12A
The core issue revolved around the rejection of the assessee trust's application for registration under section 12A of the Income Tax Act, 1961. The Commissioner found that the applicant did not fulfill the conditions for registration under section 12A, particularly due to the lack of evidence regarding the re-deployment of surpluses into education. The Commissioner highlighted the shift from section 10 to section 12 as contrary to legislative intent and rejected the application for registration under section 12AA.

Issue 3: Fulfillment of conditions for registration u/s. 12A
The argument presented was that the assessee trust fulfilled the conditions for registration under section 12A. The counsel contended that the rejection of the application was erroneous, emphasizing that the applicant had met the necessary criteria for registration under section 12A.

Issue 4: Locus standi to claim registration u/s. 12A
There was a dispute regarding the assessee's locus standi to claim registration under section 12A while simultaneously seeking exemption under section 10(23C)(3)(iii)(ad). The Tribunal held that the assessee had the right to choose between the available exemptions but needed to meet the prescribed conditions for each benefit.

Issue 5: Legality of the order
The overall legality of the order was challenged, asserting that it was erroneous both in terms of law and facts. The Tribunal, after considering the arguments from both sides and examining the material on record, concluded that the Commissioner had erred in holding that the assessee lacked locus standi to claim registration under section 12A. The Tribunal decided to remand the matter back to the CIT(Exemption) for a fresh examination of the assessee's objectives and activities to determine the grant of registration under section 12AA, emphasizing the need for a thorough evaluation of the charitable nature of the objectives and the genuineness of the activities. The Tribunal directed the assessee to cooperate in the proceedings and allowed all available legal pleas in the fresh proceedings before the Commissioner. Ultimately, the appeal was treated as allowed for statistical purposes based on the Tribunal's observations.