TaxTMI 
TaxTMI 
2016 (2) TMI 1091
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.... BECAUSE the learned CIT has termed the unsecured loans and general donations as non-genuine and dubious without any basis and material on record. 4. BECAUSE the conclusion of the learned CIT that the unsecured loans and general donations are non-genuine and dubious are against the general principles of taxation. 5. BECAUSE the interpretation of the learned CIT that the donations have been received n cash and the Society could supply address of 130 donors out of 231 donors is wrong as the time given to the society was only 2 days to collect this information, that too, when the donors were scattered throughout India. 6. BECAUSE the interpretation of the learned CIT in respect of unsecured loans that they are bogus is also wrong as all the persons are income tax payee, have filed their own income tax return in time and all transactions are through banking channels. 7. BECAUSE the learned CIT has failed to take into consideration that at this time, only object of the Entry and its related activities have to be taken into consideration but learned CIT has worked like an Assessing Officer only. 8. BECAUSE the learned CIT has failed to take in....
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....ssessee society had raised significant funds through donation but had failed to carry out any worthwhile charitable activity and therefore the inescapable conclusion was that the assessee was not carrying out any educational or other charitable activity for achieving its stated objects. In such circumstances the genuineness of the activity of the assessee society could neither be inquired into nor could be said to be in consonance with its said objects. Therefore for lack of activities the Ld. CIT rejected the application for grant of registration under section 12AA. 4. Aggrieved by the same the assessee filed the present appeal before us. 5. Before us the Ld. AR stated that the issue of genuineness or otherwise of donation and unsecured loans taken by the assessee was not a matter to be considered for the purpose of granting registration under section 12AA. Ld. AR stated that these are matters to be examined during assessment proceedings by the concerned AO and for taking necessary action thereon at that stage. Ld. AR stated that the Ld. CIT had only to look into the genuineness of the object and the activity being carried out by the assessee trust and it is only for non ful....
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..... It is settled law that for the purpose of grant of registration under section 12AA, the CIT has to only look into the genuineness of the objects and the genuineness of the activity being carried on by the society. In the present case, we find that the objects of the assessee society had been duly examined by the Ld. CIT from the Memorandum of the society and it was found that the same included setting up and operation of educational institutes, distribution of educational items to poor and deserving students, protection and conservation of environment, medical assistance to poor, old and disabled and other similar objects. A perusal of the same reveals that all the objects are charitable as per the definition of charity under section 2(15) of the Act. Ld. CIT we find has also not commented adversely on the objects of the assessee society. Therefore as far as the genuineness of the object of the assessee society are concerned, they are held to be genuine. Coming to the genuineness of the activity carried out by the assessee society Ld. CIT has doubted the same for the reason that the unsecured loans and donation taken by assessee society appears to be in genuine. Ld. CIT ....
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....if in the garb of carrying out its stated charitable objects the assessee was conducting some other activities it could be held that the activity of the assessee society were not genuine. This we find is not the matter. The genuineness of loans taken and the donation received are matters to be examined during the assessment proceedings after grant of registration and necessary action relating to the same can be taken during the assessment proceeding for which there are specific provision of law in this regard. It must be remembered that the purpose of granting registration under section 12AA of the Income Tax Act is only to ensure that the assessee society has been formed for the purpose of carrying out charitable activity and is also actually carrying out the same so as to make it eligible to claim exemption under section 11 of the Act. As long as the said objects of an assessee society are found to be charitable and genuine and as long as the assessee society is carrying out the said objectives genuinely the registration under section 12AA cannot be denied. The Hon'ble Allahabad High Court in the case of CIT vs. Red Rose School (2007), 212 CTR 394, has dealt exhaustively with the....
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....ose or such institution is earning profit. The language used in the section only requires that activities of the trust or the institution must be genuine, which accordingly would mean, they are in consonance with the objects of the trust/institution, and are not mere camouflage but are real, pure and sincere, nor against the proposed objects. The profit earning or misuse of the income derived by charitable institution from its charitable activities, may be a ground for refusing exemption only with respect to that part of the income but cannot be taken to be a synonym to the genuineness of the activities of the trust or the institution. It is significant to mention that registration under s. 12AA does not necessarily entitle the assessee to get the income excluded from the income of the previous year for the purpose of determination of tax liability but it only entitles the assessee to claim such exemption, which otherwise could not be claimed in the absence of registration. The enquiry by the CIT shall remain restricted to the examination, as to whether the assessee, who has moved the application for registration under s. 12A, is actually in the activities which are genuine. Genuin....