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2017 (12) TMI 1218 - AT - Income TaxDenial of exemption u/s 11 - cancellation of registration u/s 12AA(3) - proof of charitable activity - assessee is advancing loans to the poor and needy - micro finance activity of borrowing and lending to the poor people - Held that:- Since the assessee is in the micro finance activity, the activity itself is a charitable activity as held by ITAT, Visakhapatnam in the case of Spandana (Rural and Urban Development Organization) Vs. ACIT (ITAT-VSP) (2010 (2) TMI 1166 - ITAT VISAKHAPATNAM) and Income-tax Officer, Ward-2, Rishikesh v. Swami Omkarnanda Saraswati Charitable Trust [2017 (12) TMI 1177 - ITAT DELHI] On going through the applications, we observe that the applicants are rural poor with the meagre income of ₹ 10,000 to ₹ 20,000/- per annum. The applications placed before us establish that the advances were made to the rural poor. The DR could not controvert the above facts. Therefore, on this ground, the observation of the CIT, that the assessee failed to prove the advances and loans to the poor is without any foundation, hence unsustainable. The next objection of the CIT on violation of section 13(1)(c) the assessee has given a sum of ₹ 25,67,128/- to Sri V. Prabhu Das, the founder of the society and the assessee explained that the surplus funds were given as advance with interest and the entire sum was collected by the society. Though the Ld.AR argued that there was no violation u/s 13(1)(c), we are unable to accept the contention of the Ld.AR and following the decision in the case of Aggarwal Mitra Mandal Trust vs. DIT [2006 (9) TMI 214 - ITAT DELHI-A] direct the AO to restrict the disallowance to the extent of violation but not on total income. Assessee is not registered u/s 25 of the Company’s Act as envisaged u/s 11 to 13 - Held that:- We have considered the order of the Ld.CIT and gone through the section 11 to 13 and we find that there is no requirement for section 11 to 13 that the institution should necessarily registered with Registrar of Company’s Act. The society is registered under Societies Act, also eligible for grant of registration u/s 12AA of I.T.Act. The assesse society was already granted registration and the same was cancelled by the Ld.CIT. The Ld. DR during the appeal hearing did not place any case law supporting the contention of the CIT. CIT has not proved that there is no charitable activity and the society is not genuine and is running on commercial activity with tangible evidence. As per the discussion in the preceding paragraphs the society is carrying on charitable activities as per the objects. Therefore we hold that the cancellation of registration u/s 12AA of the Act is unsustainable and we set aside the order of the Ld. CIT and allow the registration already granted to be continued. However, we direct the AO to restrict the exemption u/s 11 with regard to the violation of section 13(1)(c) to the extent of the violation. Appeal of the assessee is partly allowed
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