2022 (2) TMI 1204 - AT - Income Tax

Exemption u/s 11 - registration u/s 12AA denied - Proof of charitable activity u/s 2(15) - assessee is a society registered under Societies Registration Act and is running educational institutions - whether the assessee is eligible for registration u/s 12A / 12AA? - HELD THAT - The main objects are to provide education through English medium school to the rural population and also to encourage literary, library, cultural and sports activities - if the assessee society is genuinely carrying the charitable activity based on the objectives of the society, the registration u/s 12AA must be granted. For that matter, the primary duty of the Ld.CIT(E) is to examine the objectives of the Society and if he is having any doubt about the genuineness of the activity carried on by the assessee society, it is open to the Ld.CIT(E) to depute income tax officials to examine the objectives of the society by conducting enquiries and after receipt of the enquiry report, the Ld.CIT(E) is empowered to exercise his discretion based on the material available on record, whether to grant registration u/s 12A/12AA of the Act or not. In the present case on hand, the Ld.CIT(E) simply rejected 12AA registration on the ground that the assessee has claimed exemption u/s 11 without having registration u/s 12AA during the A.Ys 2015-16 to 2017-18. In our opinion, the Ld.CIT(E) has not at all looked into the objectives of the society and simply rejected registration u/s 12AA based on the wrong claim made by the assessee during the A.Y.2015-16 to 2017-18. Upon perusal of the order of the Ld.CIT(E), there is no such finding in the impugned order. The decisions, which were relied on by the Ld.CIT(E) has no application in the present case. After considering the provisions of section 12A and 12AA of the Act, we are of the view that the Ld.CIT(E) could have examined only the genuineness of the objectives of the Trust and it s activities. There was no finding given by the Ld.CIT(E) that the objectives and activities of the Trust are not genuine. Therefore, we hold that the ground raised by Ld.CIT(E) for rejection of registration to the assessee cannot be sustained. In the light of the above findings, the impugned order passed by the Ld.CIT(E) is set aside. CIT(E) is directed to grant registration as requested by the assessee in terms of section 12AA of the Act. Accordingly, the grounds raised by the assessee are allowed.

Summary

Issues:
- Eligibility for registration u/s 12A / 12AA of the Income Tax Act, 1961.

Analysis:
1. The assessee appealed against the order of the Commissioner of Income Tax (Exemptions) denying registration u/s 12AA of the Act. The assessee, a society running educational institutions, argued that the denial was based on irrelevant grounds, such as claiming exemption u/s 11 without 12AA registration. The society's objectives included providing education through English medium schools and promoting cultural activities. The ITAT noted that the primary duty of the CIT(E) is to examine the society's objectives and genuineness of activities. The CIT(E) rejected registration solely based on the exemption claim without assessing the society's objectives, which was deemed incorrect by the ITAT.

2. The Departmental Representative (DR) argued that the organization's ingenuity was questionable as it claimed exemption without 12AA registration for years. The DR cited a judgment to support the denial of registration. However, the ITAT emphasized that the CIT(E) should focus on the genuineness of the society's activities based on its objectives. The ITAT highlighted that the CIT(E) failed to assess the society's objectives and wrongly rejected registration based solely on the exemption claim for previous assessment years. The ITAT directed the CIT(E) to grant registration u/s 12AA as requested by the assessee.

3. The ITAT analyzed the provisions of section 12A and 12AA, emphasizing that registration is essential for claiming benefits under the Act. The ITAT clarified that during registration, the focus should be on the trust's genuineness rather than the nature of contributions and income. The ITAT found no evidence in the CIT(E)'s order suggesting the society was not genuine, rendering the grounds for rejection unsustainable. The ITAT set aside the CIT(E)'s order and instructed the CIT(E) to grant registration under section 12AA. Consequently, the ITAT allowed the assessee's appeal.

In conclusion, the ITAT ruled in favor of the assessee, emphasizing the importance of assessing the genuineness of a society's activities based on its objectives for registration under section 12AA of the Income Tax Act. The ITAT directed the CIT(E) to grant registration to the assessee, highlighting the necessity of focusing on the society's genuine charitable activities during the registration process.