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2020 (9) TMI 140 - AT - Income TaxExemption u/s 11 - entitlement for registration u/s 12AA rejected - income/funds of the society have been diverted for the benefit of interested parties i.e. the members and not for the charitable activities for public at large and attract proviso to section 13(1)(c) - CIT(E) has rejected the application purely on the ground that certain payments on account of salary, vehicle rent, house rent were made by the assessee society to the specified persons - HELD THAT:- There is no prohibition under the law to hire services of related persons. But under the guise of hiring services the funds of society should not be diverted. It would be incumbent upon the Ld. CIT(E), while considering the application for registration under section 12AA of the Act to make such enquiries to satisfy himself regarding genuineness of activity of the trust, whether the activity so carried out are as per objective of trust and such activity is in conformity with provision of law. In the case in hand ld. CIT(E) had not given any finding regarding activity of the society. Benefit of section 11 & 12 would not be available if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied directly indirectly for the benefit of any person referred to sub-section (3) of section 13 of the Act. It is therefore, can be safely construed that where the revenue authority finds that during the previous year, the assessee has applied any part of its income or any property of the trust or the institution directly or indirectly for the benefit of any person referred to in sub-section (3). It can decline the assessee society benefit of section 11 & 12 of the Act Considering the submissions of the assessee material placed on record and respectfully following the decision of MODERN DEFENCE SHIKSHAN SANSTHAN [2007 (2) TMI 255 - ITAT JODHPUR]. We set aside the impugned order of Ld. CIT(E) and restore the application for seeking registration u/s 12AA to the file of Ld. CIT(E) considered in the light of the case laws as relied by the assessee. Appeal filed by the assessee is allowed for statistical purposes.
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