2017 (10) TMI 1514 - AT - Income Tax

Tribunal grants 12AA registration to charitable society after addressing concerns

M/s Mandir Shree Mahakali Sabha Versus The CIT (Exemptions), Chandigarh

M/s Mandir Shree Mahakali Sabha Versus The CIT (Exemptions), Chandigarh - TMI Issues Involved:1. Denial of registration under section 12AA of the Income-tax Act, 1961.2. Ownership and use of property for charitable purposes.3. Evidence of charitable activities.4. Inclusion of dissolution clause in the society's memorandum.5. Examination of accounts and application of income.Detailed Analysis:1. Denial of Registration under Section 12AA of the Income-tax Act, 1961:The assessee society appealed against the order of the Commissioner of Income Tax (Exemptions) [CIT(E)], Chandigarh, which denied registration under section 12AA of the Income-tax Act, 1961. The CIT(E) had rejected the application on several grounds, including the lack of ownership of the property, insufficient evidence of charitable activities, and the absence of a dissolution clause in the society’s memorandum.2. Ownership and Use of Property for Charitable Purposes:The CIT(E) noted that the land and complex used by the society belonged to the government, and no evidence was provided to show that the government had bestowed rights to the society for using the property. The tribunal, however, found this reasoning unconvincing. It was observed that the property was a public Mandir complex, and the society was maintaining and developing it for public use without claiming ownership. The tribunal held that the society’s activities, such as constructing buildings and community halls for public use, were charitable in nature, even though the property was not owned by the society.3. Evidence of Charitable Activities:The CIT(E) argued that the society did not provide reliable evidence of its charitable activities and that its activities were primarily religious. The tribunal disagreed, noting that the society had provided substantial evidence, including request letters from various social and religious organizations, showing that the community hall was used for a variety of charitable activities such as blood donation camps, medical camps, and social awareness programs. The tribunal found that the society’s activities were not restricted to any particular caste, community, or religion, and thus were charitable in nature.4. Inclusion of Dissolution Clause in the Society's Memorandum:The CIT(E) pointed out the absence of a dissolution clause in the society’s memorandum, which could lead to the presumption that the assets would be distributed among members if the society were dissolved. The tribunal noted that the society had passed a resolution stating that in the event of dissolution, the assets would be transferred to another trust with similar objectives. The tribunal accepted this resolution, noting that it addressed the CIT(E)’s concerns.5. Examination of Accounts and Application of Income:The CIT(E) highlighted discrepancies in the society’s accounts, particularly a liability shown in one year but not in subsequent years. The tribunal clarified that the detailed examination of accounts and the application of income should be considered at the time of granting exemption under section 11 of the Act, not during the registration process under section 12AA. The tribunal emphasized that the focus should be on whether the society’s objects are charitable or religious and whether its activities further those objects.Conclusion:The tribunal directed the CIT(E) to grant registration under section 12AA of the Income-tax Act, 1961, to the assessee society, finding that the society’s objects and activities were charitable and religious in nature and that the concerns raised by the CIT(E) had been adequately addressed. The appeal of the assessee was allowed, and the order was pronounced in the open court on 11.10.2017.