2014 (8) TMI 272 - AT - Income Tax

Tribunal overturns CIT's denial of registration under Income Tax Act, emphasizes fair hearing and evidence review.

GDG Educational Trust Versus Commissioner of Income Tax

GDG Educational Trust Versus Commissioner of Income Tax - TMI Issues Involved:1. Rejection of application for registration under section 12AA of the Income Tax Act, 1961.2. Denial of exemption under section 80G of the Income Tax Act, 1961.3. Admission of additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963.Issue-wise Detailed Analysis:1. Rejection of Application for Registration under Section 12AA:The assessee trust filed an application for registration under section 12AA of the Income Tax Act, 1961, claiming it was engaged in providing education. The CIT, Faridabad, rejected this application, concluding that the trust was providing support services to Lancaster University, a foreign university, rather than independently pursuing educational activities. The CIT noted that the arrangement with Lancaster University involved the latter deciding academic strategies and entering separate contracts with students, which indicated that the trust was not the primary provider of education. Consequently, the CIT held that the trust was covered by the proviso to section 2(15) of the Income Tax Act, rendering it ineligible for registration under section 12A.2. Denial of Exemption under Section 80G:Following the rejection of the application for registration under section 12AA, the CIT also denied the trust's application for exemption under section 80G of the Income Tax Act, 1961. This denial was consequential to the primary rejection of the registration application, as the exemption under section 80G is contingent upon the trust being registered under section 12A.3. Admission of Additional Evidence under Rule 29:The assessee filed an application to submit additional evidence under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, claiming that the evidence was necessary for proper adjudication. The additional evidence included identity cards issued to students and appointment letters for staff, which were relevant to counter the CIT's conclusions. The Tribunal observed that the CIT had not provided the assessee with an opportunity to explain these aspects during the original proceedings. Citing the decision in CIT vs Text Hundred India (P) Ltd., the Tribunal admitted the additional evidence and remitted the case back to the CIT for fresh adjudication, emphasizing the need for a fair opportunity to be given to the assessee to present its case.Conclusion:The Tribunal allowed the assessee's appeal for statistical purposes, setting aside the CIT's order and directing a fresh adjudication of the application for registration under section 12A in light of the newly admitted evidence. Consequently, the issue of exemption under section 80G was also restored to the CIT for reconsideration based on the outcome of the registration application under section 12A. The Tribunal emphasized the importance of a fair hearing and the consideration of all relevant evidence before making a determination.