2021 (10) TMI 415 - AT - Income Tax

Case Remanded for Registration: University's Objectives Must Align

Kakatiya University Versus The Commissioner of Income Tax (Exemptions), Hyderabad.

The Tribunal remanded the case to the CIT(E) for reconsideration, directing that registration under Section 12A should be granted if the university's ... Denying the registration u/s 12A vide order u/s 12AA(1)(b)(ii) - assessee is a university imparting education within its territorial jurisdiction and it is totally funded by the Government - HELD THAT:- We find that the assessee is also state funded university as in the case of Jawaharlal Nehru Technological University (JNTU) [2021 (4) TMI 1199 - ITAT HYDERABAD] and in the case of JNTU, the registration was denied to the assessee therein on similar points and after considering the issue in detail and also the fact that the JNTU was granted registration from the next year i.e., 2020-21, the issue was set aside to the file of CIT(E) for re-consideration. We deem it fit and proper to remand the issue to the file of the CIT(E) for reconsideration of the issue and in accordance with the directions of the Tribunal in the case of JNTU - Assessee’s appeal is treated as allowed for statistical purposes. Issues Involved:1. Denial of registration under Section 12A of the Income Tax Act.2. Requirement of filing returns of income for granting registration under Section 12AA.3. Compliance with statutory audit timelines.4. Evaluation of the genuineness of the university's activities.5. Application of legal precedents and legislative intent regarding Section 12A and 12AA.Detailed Analysis:1. Denial of registration under Section 12A of the Income Tax Act:The primary issue is the denial of registration under Section 12A of the Income Tax Act by the CIT (Exemption), Hyderabad. The assessee, a state-funded university, applied for registration under Section 12A on 31.03.2019. The CIT(E) denied the registration on the grounds that the university had not filed its return of income for the relevant year and had audited its accounts for FY 2016-17 and 2015-16 beyond the statutory time limit. The CIT(E) observed that compliance with the law by a trust is mandatory as per the amended Act effective from 01.04.2019, and thus, the university was deemed ineligible for registration under Section 12A.2. Requirement of filing returns of income for granting registration under Section 12AA:The CIT(E) rejected the university's application for registration under Section 12AA on the premise that the university had not filed its returns of income. The assessee argued that it was under the impression that it was not required to file returns of income due to its status as a government-funded institution and that it complied with the requirements once it became aware of the law. The Tribunal noted that similar issues had been addressed in the case of Jawaharlal Nehru Technological University (JNTU), where the Tribunal directed the CIT(E) to grant registration if the objects and activities of the assessee were charitable in nature.3. Compliance with statutory audit timelines:The CIT(E) also rejected the application based on the delayed completion of audits for FY 2016-17 and 2015-16 and the non-furnishing of audit reports for FY 2017-18 and FY 2018-19. The assessee contended that the delay in audits and the non-filing of returns should not be grounds for denying registration under Section 12AA, especially since the university is a statutory body established under the Kakatiya University Act 1976 and is audited annually by state auditors.4. Evaluation of the genuineness of the university's activities:The CIT(E) questioned the genuineness of the university's activities, stating that the university had not produced its books of accounts and that its objects were not genuine. The assessee countered that the university's activities were genuine and aligned with its statutory objectives of imparting education. The Tribunal found that the CIT(E) had not verified the books of accounts produced by the university and had returned them without examination.5. Application of legal precedents and legislative intent regarding Section 12A and 12AA:The assessee cited various judicial precedents stating that the filing of returns of income is not essential for the grant of recognition under Section 12AA. The Tribunal referred to the case of JNTU, where it was held that the CIT(E) should consider the objectives and activities of the university while granting registration under Section 12A. The Tribunal emphasized that the CIT(E) should grant registration if the objectives and activities of the university are charitable in nature, as was done for JNTU for the subsequent assessment year.Conclusion:The Tribunal remanded the issue to the CIT(E) for reconsideration, directing that registration under Section 12A should be granted if the objectives and activities of the university are the same as those considered for granting registration for the subsequent assessment year. The appeal was treated as allowed for statistical purposes.Order Pronounced:The order was pronounced in the Open Court on 07th October, 2021.