2017 (11) TMI 1006 - AT - Income Tax

Tribunal emphasizes genuine society objects over charitable activities for Income Tax Act registration.

The tribunal overturned the rejection of registration under section 12AA of the Income Tax Act, emphasizing that the focus should be on the genuineness of ... Denial of registration u/s 12 AA - Application for grant of approval of the assessee u/s 80G rejected - proof of charitable activities - whether trust or institution which is yet to start any charitable activity cannot be granted registration u/s 12AA? - Held that:- At the time of grant of registration it is not proper to insist on charitable activity having been already carried out by the society or charitable institution seeking registration. See D.I.T. vs Foundation of Opthalmic & Optometry Research Foundation Centre [2012 (8) TMI 777 - DELHI HIGH COURT] In the order of CIT(E) the denial of registration u/s 12 AA of the Act to the assessee cannot be sustained. The registration u/s 12AA of the Act is therefore directed to be allowed to the assessee. Since the registration u/s 12 AA of the Act is allowed to the assessee and since the only reason for the CIT(E) to deny grant of approval to the Assessee u/s 80G of the Act was that there is no registration u/s 12AA granted to the assessee, the approval u/s.80G of the Act is also directed to be granted to the assessee. - Decided in favour of assessee. Issues Involved:1. Rejection of application for grant of registration under section 12AA of the Income Tax Act, 1961.2. Rejection of application for grant of approval under section 80G of the Income Tax Act, 1961.Detailed Analysis:1. Rejection of Application for Grant of Registration under Section 12AA of the Income Tax Act, 1961:The Assessee, a society registered under the West Bengal Society Registration Act, 1961, applied for registration under section 12AA of the Income Tax Act, 1961. The Commissioner of Income Tax (Exemption), Kolkata, rejected the application on the basis that the society had not yet commenced any charitable activities. The CIT(E) referred to the decision of the Kerala High Court in the case of Self Employers Service Society vs CIT, which stated that a society must have conducted some charitable work to be eligible for registration under section 12AA. The CIT(E) concluded that in the absence of proof of activity, registration under section 12AA could not be granted.The tribunal noted that the CIT(E) was satisfied with the charitable nature of the objects of the assessee but had concerns about the genuineness of activities due to the fact that the society had not yet started its charitable work. The tribunal also highlighted that the payments made by another charitable trust, M/s Bimla Devi Bhutoria Charitable Trust, directly to doctors and for spectacles, were accounted as donations by the assessee. The CIT(E) was concerned that this could lead to double benefits for the same expenditure.However, the tribunal referred to several High Court decisions, including those from the Delhi High Court and Allahabad High Court, which held that at the time of granting registration under section 12AA, it is not necessary for the society to have already commenced charitable activities. The tribunal emphasized that the focus should be on the genuineness of the objects rather than the activities, especially if the activities have not yet started.2. Rejection of Application for Grant of Approval under Section 80G of the Income Tax Act, 1961:The CIT(E) also rejected the application for approval under section 80G of the Income Tax Act, 1961, on the grounds that the registration under section 12AA had been denied. Since the registration under section 12AA is a prerequisite for approval under section 80G, the rejection of the former automatically led to the rejection of the latter.Tribunal's Decision:The tribunal found that the CIT(E)'s reasoning for rejecting the registration under section 12AA was contrary to the law as laid down by various High Courts. The tribunal held that the CIT(E) should have focused on the genuineness of the objects of the society rather than the commencement of activities. Consequently, the tribunal directed that the registration under section 12AA be granted to the assessee.Since the registration under section 12AA was granted, the tribunal also directed that the approval under section 80G be granted to the assessee. The tribunal allowed both appeals of the assessee.Order Pronounced:The order was pronounced in the court on 17.11.2017.