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2023 (2) TMI 59 - AT - Income TaxExemption u/s 11 - denying the Registration u/s 12AA of the Act and also rejected the exemption u/s 80G - RGG - Charitable activity u/s 2(15) - HELD THAT - A plain reading of the object of the Company reveals that the assessee is having the object to carry out the activities of education and there is a specific bar/Clause that none of the object of the Company will be carried out on commercial basis . As also found that the assessee Company is engaging in imparting education in the field of mountaineering, rafting high attitude trekking, wilderness medicines and wilderness first aid. The assessee has produced the materials to show that the assessee company since from its existence from the year 2010 trained so many students including para military forces, BSF Officers. While disposing the application u/s 12AA of the Act the Commissioner is required to see whether the objects of the assessee are charitable in nature or not and also should verify whether the activities are genuine or not. The genuineness of the activities would mean to see that activities are not camouflage, bogus, artificial and should verify whether the activities are in accordance with the object of the institution. Commissioner (exemption) cannot extend the scope of the enquiry beyond that point. CIT(E) has committed an error in not granting registration in the u/s 12AA read with Section 80G of the Act. Therefore, we allow the Grounds of Appeal and further direct the CIT(E) to grant registration to the assessee u/s 12AA of the Act and also grant approval of registration u/s 80G of the Act afresh and grant approval subject to fulfillment of conditions mentioned in the said provision. Appeal of assessee allowed.
Issues Involved:
1. Validity of the CIT (E)'s order under Sections 12AA and 80G. 2. Whether the activities of the assessee qualify as 'education' under Section 2(15) of the Income Tax Act. 3. Compliance with Section 25 of the Companies Act and its relevance to Sections 12AA and 80G. 4. Examination of the genuineness of the assessee's activities. 5. Evaluation of the application of income for charitable purposes. Issue-wise Detailed Analysis: 1. Validity of the CIT (E)'s order under Sections 12AA and 80G: The assessee argued that the CIT (E)'s order was void ab initio and perverse, as it disregarded ITAT's findings from the first round of litigation. The ITAT had previously directed the CIT (E) to re-examine the trust's objects and verify the genuineness of its activities. However, the CIT (E) denied registration and exemption again, leading to the current appeal. 2. Whether the activities of the assessee qualify as 'education' under Section 2(15) of the Income Tax Act: The CIT (E) initially categorized the assessee's activities under 'general public utility' rather than 'education', citing consultancy charges received from NOLS USA. The ITAT, in its earlier decision, referenced various High Court rulings that broadened the definition of 'education' beyond formal classroom teaching to include systematic instruction in specialized fields. The ITAT directed the CIT (E) to reconsider this broader interpretation, but the CIT (E) maintained that the activities did not qualify as 'education'. 3. Compliance with Section 25 of the Companies Act and its relevance to Sections 12AA and 80G: The assessee highlighted its status as a Section 25 company, emphasizing its non-commercial, educational objectives. The CIT (E) countered that compliance with the Companies Act does not automatically satisfy the requirements for registration under the Income Tax Act. The ITAT reiterated that the CIT (E) must verify the charitable nature of the objects and the genuineness of activities, irrespective of the company's status under the Companies Act. 4. Examination of the genuineness of the assessee's activities: The CIT (E) questioned the genuineness of the assessee's activities, suggesting they were primarily consultancy services to NOLS USA. The ITAT clarified that the genuineness of activities should be assessed based on whether they align with the trust's stated objects and are not a facade. The ITAT cited several judicial precedents emphasizing that the scope of inquiry should be limited to verifying the charitable nature and genuineness of activities, not their commercial viability. 5. Evaluation of the application of income for charitable purposes: The CIT (E) argued that the assessee failed to prove the educational nature of its activities and the proper application of funds. The ITAT noted that at the registration stage, the focus should be on the objects and genuineness of activities rather than the detailed application of income, which can be scrutinized during assessments. The ITAT found that the assessee's activities, such as training in mountaineering and wilderness skills, aligned with its educational objectives and were conducted genuinely. Conclusion: The ITAT found that the CIT (E) erred in denying registration under Section 12AA and exemption under Section 80G. The ITAT directed the CIT (E) to grant the requested registrations, subject to the fulfillment of relevant conditions, emphasizing that the assessee's activities were educational and genuine. Order: The appeals in ITA No. 978/Del/2022 and ITA No. 979/Del/2022 were allowed, and the CIT (E) was directed to grant registration under Sections 12AA and 80G afresh. The order was pronounced in the Open Court on 31.01.2023.
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