2022 (8) TMI 291 - AT - Income Tax

Exemption u/s 11 - rejecting the registration u/s. 12AA - whether the activities of the trust were charitable in nature and in consonance to the objects of the trust? - As disputed that the assessee trust has carried out coaching activities during the financial year under consideration, but the complete details were lacking - HELD THAT - As the main objects of the Trust are providing coaching and training to the students as an intermediatory between the IMPACT and the students and thus, the PCIT observed that the applicant is simply involved in collecting fees from the students and passing it, to IMPACT for coaching. Thus, there was no activity per se being carried out by the appellant and that even if one of the objects turns out to be non-charitable, case for the registration does not exist. AR argued that the appellant Institute is providing entire infrastructure including water, electricity, security and other services like sports grounds etc. and that the coaching and training is provided to the students by way of taking the services of a specialized group of teachers called IMPACT - Counsel has objected to the order of the CIT exemption that he has nowhere pointed out that society has been working for profit and engaged in doing any business instead of charity by ignoring the facts narrated in the submissions APB. The contention of the Ld. AR that the action of Ld. CIT in rejecting the registration under section 12AA(1)(b)(ii) is bad in law and against the facts and circumstances of the case and is contrary to the principles of natural justice as the impugned order has been passed without granting adequate opportunity of hearing, and ignoring the submissions filed by the assessee by recording incorrect facts and findings - we are of the opinion that the assessee trust may be given one more opportunity to produce all the documentary evidences in support of genuineness of the activities being carried out for charitable purpose in consonance to the objects of the trust. CIT(DR) also has no objection in restoring of the matter to the CIT(E) for afresh examination of the application of the assessee for grant of registration. Considering the AR contention that the assessee was prevented in making submission before the lad CIT(Exemption) in absence of sufficient opportunity of being heard to produce the necessary documents as per principles of natural justice as above, we find it deem fit to restore the matter back to the file of the CIT(Exemption) to examine the issue of grant of registration u/s. 12AA of the act, afresh after taking into consideration the material evidence after affording sufficient opportunity of being heard to the assessee trust, as per principles of natural justice. Thus case is restored to the CIT, for afresh consideration and examination of the application of assessee under section 12A(a).

Summary

Issues involved:
Grant of registration under section 12AA of the Income Tax Act, 1961.

Detailed Analysis:

1. Grounds of Appeal Raised by the Assessee:
The appellant challenged the order rejecting registration under section 12AA. The grounds of appeal included objections to the Commissioner's findings regarding the nature of the activities carried out by the appellant, the commercial aspect of the operations, and the charitable status of the stated objects and activities. The appellant contended that it was wrongly denied registration based on incorrect factual observations by the Commissioner.

2. Observations of the Commissioner of Income Tax (Exemptions):
The Commissioner noted that the appellant was acting as an intermediary between IMPACT and students, primarily collecting fees for coaching services. The Commissioner found the activities to be non-charitable, stating that coaching, even at a subsidized cost, was considered non-charitable. Consequently, the application for registration under section 12AA was rejected based on the perceived lack of charitable nature in the appellant's operations.

3. Arguments by the Appellant:
The appellant argued that it provided infrastructure and services to students, engaged specialized teachers for coaching, and had arrangements with a preparatory institute for student selection and training. The appellant disputed the Commissioner's characterization of no activity being carried out, emphasizing the charitable nature of its operations and the absence of profit-seeking motives.

4. Judicial Review by the ITAT:
The ITAT considered the main issue of whether the trust's activities were charitable and aligned with its stated objectives. It acknowledged the coaching activities but sought clarity on their charitable nature. The ITAT found discrepancies in the Commissioner's observations and granted the appellant an opportunity to present evidence supporting the genuineness of its charitable activities.

5. Decision and Directions by the ITAT:
The ITAT concluded that the rejection of registration was not in accordance with natural justice principles, as the appellant was not adequately heard and relevant submissions were allegedly ignored. Therefore, the matter was remanded to the Commissioner for a fresh examination. The ITAT directed the Commissioner to verify the charitable nature of the trust's objectives and activities, ensuring compliance with legal precedents and principles of natural justice.

6. Outcome:
The ITAT allowed the appeal for statistical purposes, indicating a procedural victory for the appellant. The case was remanded to the Commissioner for a fresh review, emphasizing the need for a fair assessment of the trust's charitable activities and alignment with legal requirements.

This detailed analysis highlights the key issues, arguments, observations, and the ITAT's decision regarding the grant of registration under section 12AA of the Income Tax Act, 1961, in the context of the specific case presented before the Appellate Tribunal.