2021 (4) TMI 1199 - AT - Income Tax

Appeal allowed for charitable institution's registration under Income Tax Act SS12A. Compliance emphasized.

The ITAT allowed the appeal, emphasizing the importance of considering the charitable nature of the institution's activities for registration under ... Refusal for grant of registration u/s 12A - Charitable activity u/s 2(15) - HELD THAT:- Though the assessee university was formed in 2008, till the A.Y 2014, it was not required to file any return of income and therefore, the assessee’s contention that it was not aware of the requirement of filing returns of income appears to be bonafide - the assessee has made an application for registration only w.e.f. A.Y 2019-20 onwards. In such circumstances, the requirement of law is that the CIT (E) has to consider whether the objectives of the assessee were charitable in nature and if the activities have already begun, then whether the assessee is carrying on its activities in accordance with such objectives. Therefore, we agree with the learned Counsel for the assessee that the CIT (E) has not looked into the objectives of this University while considering its application for registration u/s 12A of the Act. Further, from the very next A.Y i.e. 2020-21 onwards, the assessee has been granted registration u/s 12A - it is evident that the CIT (E) while granting the registration, was satisfied about the charitable nature of assessee’s activities. In view of the same, we deem it fit and proper to remand the issue to the file of the CIT (E) with a direction to grant registration u/s 12A if the objectives and activities of the assessee are the same as were considered by the CIT (E) while granting registration u/s 12A of the Act for the A.Y 2020-21 onwards - Assessee’s appeal is treated as allowed for statistical purposes. Issues:1. Denial of registration u/s 12A of the Income Tax Act by the CIT (Exemptions), Hyderabad.2. Violation of provisions of the Income Tax Act by the assessee.3. Consideration of charitable objects of the Institution for registration u/s 12A.4. Compliance with the law for registration u/s 12A.Issue 1: Denial of registration u/s 12A:The appeal was against the order of the CIT (Exemptions), Hyderabad, rejecting the assessee's application for registration u/s 12A of the Income Tax Act. The CIT (E) observed that the assessee failed to file audited accounts and returns of income for previous years, which led to the denial of registration. Additionally, the CIT (E) noted that the assessee spent funds outside India, made a false claim of benefit u/s 11, and violated provisions of the Act.Issue 2: Violation of provisions of the Income Tax Act:The CIT (E) found that the assessee failed to file returns of income for previous assessment years, claimed benefits under section 11 without obtaining registration u/s 12A, and spent a significant amount outside India. These violations were key reasons for denying registration u/s 12A to the assessee.Issue 3: Consideration of charitable objects for registration u/s 12A:The learned Counsel for the assessee argued that the institution's charitable objects should have been the primary consideration for granting registration u/s 12A. The counsel emphasized that the institution was engaged in educational activities, strictly in accordance with its objectives, and should have been granted registration based on its charitable nature.Issue 4: Compliance with the law for registration u/s 12A:The ITAT found that the assessee, an educational institution funded by the government, was carrying out charitable activities. The ITAT highlighted relevant sections and rules regarding the taxability of such institutions. It was noted that the CIT (E) did not adequately consider the charitable nature of the institution's activities while denying registration. The ITAT remanded the issue back to the CIT (E) for reconsideration, directing to grant registration if the objectives and activities align with those considered for subsequent years.In conclusion, the ITAT allowed the assessee's appeal for statistical purposes, emphasizing the importance of considering the charitable nature of the institution's activities while granting registration u/s 12A of the Income Tax Act. The judgment highlighted the need for compliance with the law and proper assessment of objectives for registration purposes.