2014 (7) TMI 473 - AT - Income Tax

Tribunal reverses rejection of society's registration under Income Tax Act, emphasizing charitable objectives and legitimate land ownership.

The Tribunal set aside the CIT's rejection of the appellant society's registration under section 12A of the Income Tax Act, 1961. It directed a ... Grant of registration u/s 12A of the Act – Charitable activity – Held that:- The seller of the land has mentioned that the land being sold is agricultural land which will be used for agricultural purposes only - the CIT has not brought out any fact that the land so purchased was misused or misappropriated by the management of the society - the land so purchased has been regularly owned and controlled by the appellant society which cannot be said to be misappropriation or misuse of the funds of the society - The registration u/s 12A cannot be rejected only on the sole ground by ignoring other charitable activities of the society - there is no limitation of time in the Act for submitting application for registration u/s 12A of the Act – CIT rejected the application of the assessee without any reasonable and justified basis - the CIT rejected the application of the assessee society without considering relevant facts and documentary evidence – Relying upon CIT v R.S.Bajaj Society [ 2014 (1) TMI 761 - ALLAHABAD HIGH COURT] - while granting registration u/s 12A of the Act, only the genuineness of the objects are to be seen – thus, the matter is remitted back to the CIT with a direction that the application shall be decided after considering all relevant facts and evidence as relied by the appellant society by affording due opportunity of hearing for the applicant society – Decided in favour of Assessee. Issues:Appeal against rejection of registration under section 12A of the Income Tax Act, 1961.Detailed Analysis:Issue 1: Rejection of Registration ApplicationThe appellant filed an appeal against the rejection of its registration under section 12A of the Income Tax Act, 1961 by the CIT, Meerut. The rejection was based on the observation that the society diverted income to the owners of the house where the play school was run, rendering it ineligible for registration. The CIT also noted the failure of the society to file income tax returns since its inception, hindering the examination of its genuineness. The rejection was primarily due to the perceived diversion of funds and lack of genuine charitable activities as defined under section 2(15) of the Act.Issue 2: Appellant's ArgumentsThe appellant society argued before the Tribunal that it operated a school up to the 12th standard, conducted health camps, distributed blankets, and promoted cultural activities for social welfare. The society purchased land for expanding the school campus, intending to use it for educational purposes after changing its land use. The appellant contended that the rejection was unjustified and lacked a cogent basis, emphasizing its genuine charitable endeavors and the lawful ownership and control of the purchased land.Issue 3: Tribunal's Observations and DecisionAfter considering both parties' submissions, the Tribunal observed that the CIT's rejection solely based on the land purchase for the school expansion was unjustified. The Tribunal noted that the purchased land was legitimately owned and controlled by the society, without evidence of misappropriation. It highlighted that the rejection failed to consider other charitable activities of the society and that there was no time limitation for registration under section 12A. The Tribunal referenced a High Court decision emphasizing the importance of assessing the genuineness of an organization's objects for registration.Issue 4: Tribunal's RulingThe Tribunal set aside the CIT's order and directed a reevaluation of the appellant society's registration application. It instructed the CIT to consider all relevant facts and evidence presented by the society, particularly regarding the investment in agricultural land. The Tribunal emphasized that the mere purchase of such land should not impede the society's registration under section 12A if it aligns with its charitable objectives. Consequently, the Tribunal allowed the appellant's appeal, granting relief and remanding the matter for a fresh decision by the CIT, Meerut.This detailed analysis encapsulates the key aspects and outcomes of the legal judgment concerning the rejection of registration under section 12A of the Income Tax Act, 1961.