2022 (12) TMI 1264 - AT - Income Tax

Exemption u/s 11 - grant of registration u/s.12A(1) denied - Charitable object u/s 2(15) - HELD THAT - The law requires a conjunctive test whereby objects of the applicant society have to be charitable and genuineness of charitable activities should be established for registration of application u/s. 12A. Mere recital of objects or activities without cogent or corroborative evidence is not sufficient by themselves to enable a registering authority to arrive at the satisfaction mandated by law. In the instant case, the documents on record do not suffice to establish the genuineness of activities. As such the findings of fact regarding its charitable activities or rather the lack thereof arrived at on the basis of the evidence filed and arguments addressed stand uncontroverted. This is fatal to the claim of the applicant. It is clear that applicant has failed to provide sufficient material to corroborate the charitable nature of the objects and genuineness of the activities. Despite being provided timely opportunity the applicant has not been able to substantiate its claim. We are unable to accept the applicants claim in absence of sufficient material required for formation of satisfaction. Therefore, no case fit for grant of registration u/s.12A(1) of the Income-tax Act, 1961. Accordingly, the registration sought by the applicant u/s. 12A(1) of the Income-tax Act, 1961 is hereby rejected. Appeal of the assessee is dismissed.

Issues Involved:

1. Alleged contravention of Section 12AA of the Income Tax Act, 1961.
2. Rejection of the application for grant of registration under Section 12AA.
3. Examination scope under Section 12AA by the Commissioner of Income Tax (Exemptions).
4. Denial of reasonable opportunity of being heard under Section 12AA.

Detailed Analysis:

1. Alleged Contravention of Section 12AA of the Income Tax Act, 1961:

The appellant argued that the Commissioner of Income Tax (Exemptions) [CIT(E)] erred in passing the order in contravention of Section 12AA. The CIT(E) found that the payments sourced from the trust funds were made to trustees, attracting provisions of Section 13(1)(c) read with Section 13(3). The CIT(E) observed that the trust was engaged in commercial activities rather than charitable ones, and failed to produce books of accounts and vouchers for verification, leading to doubts about the authenticity of its charitable claims.

2. Rejection of the Application for Grant of Registration under Section 12AA:

The appellant contended that the CIT(E) erred in rejecting the application for registration under Section 12AA despite the charitable nature of its objects. The CIT(E) noted that the trust generated substantial income through medical services and educational courses, charging hefty fees, and lacked evidence of charitable activities. The trust's financial statements showed significant income from commercial activities, with minimal expenses related to charity, questioning the genuineness of its charitable purpose.

3. Examination Scope under Section 12AA by the Commissioner of Income Tax (Exemptions):

The appellant claimed that the CIT(E) exceeded the scope of examination under Section 12AA. However, the CIT(E) emphasized that Section 12AA empowers the CIT to call for documents or information to verify the genuineness of the trust's activities. The CIT(E) referred to the case of CIT vs. National Institute of Aeronautical Engineering Education Society, highlighting that the CIT must not allow registration blindly and must ensure the trust's activities are genuinely charitable.

4. Denial of Reasonable Opportunity of Being Heard under Section 12AA:

The appellant argued that the order deserved to be quashed as no reasonable opportunity of being heard was granted. The CIT(E) provided multiple opportunities for the trust to present its case and submit required documents. Despite these opportunities, the trust failed to produce the necessary evidence, including books of accounts and vouchers, to substantiate its claims of charitable activities.

Conclusion:

The Tribunal, after reviewing the entire order and material on record, found no infraction in the CIT(E)'s order. The trust failed to provide sufficient material to corroborate the charitable nature of its objects and the genuineness of its activities. The appeal of the assessee was dismissed, affirming the rejection of registration under Section 12AA.

Order Pronounced:

The appeal was dismissed, and the order was pronounced in the Open Court on 16.12.2022.

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