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2016 (1) TMI 1304 - ITAT CHANDIGARH

2016 (1) TMI 1304 - ITAT CHANDIGARH - Tmi - Refusing to grant registration to the assessee u/s 12AA - Society had not carried out charitable activities and had also not applied its accumulated income as laid down in section 11 of the Act - Held that:- Commissioner of Income Tax could not have refused grant registration u/s 12A / 12AA of the Act to the assessee society for the reason that it had not carried out any charitable activities. - Further we find that the Ld. CIT had refused registra .....

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charitable or not and the activities are genuine. The purpose being to establish the identity of the Trust to enable it to claim the benefits u/s 11 & 12 of the Act. The fulfillment of conditions of section 11 is a separate issue which is to be considered when return is filed by the assessee and examined by the AO. CIT could not have refused registration to the assessee u/s 12A for not complying with the condition of application / accumulation of income as specified in section 11 of the Act. .....

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UNTANT MEMBER For The Appellant : Sh. K.R. Chhabra For The Respondent : Sh. Manoj Mishra ORDER PER ANNAPURNA MEHROTRA A.M. This appeal has been filed by the assessee against the order passed by CIT (Exemptions), Chandigarh dated 16.02.2015, refusing to grant registration to the assessee u/s 12AA. 2. Brief facts of the case are that the assessee trust was created and registered on 20.06.2013 vide Registration No. 2069 of 2013-14. An application for grant of approval u/s 12AA was filed in the offi .....

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come Tax Act. Further, Ld. CIT stated that a report had been called from the Income Tax Officer (Exemptions), who had not recommended granting registration since the assessee trust had failed to furnish information / documents as desired. Therefore, Ld. CIT held that the assessee was not eligible for registration u/s 12A of the Act. 3. Before us Ld. AR argued that the Ld. CIT could not have refused registration for the reasons stated. Ld. AR submitted that the application for registration is req .....

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er the objects of the assessee trust were genuine or not. Ld. AR stated that as per section 12A and the interpretation of the same by various Courts, Ld. CIT could not refuse registration for any reasons other than that stated in section 12A. Ld. AR placed reliance on the order of the Jurisdictional High Court in the case of Surya Educational & Charitable Trust (2013) 355 ITR 280, to strengthen his argument. Ld. AR further stated that no adverse observations have been made by the Ld. CIT reg .....

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.O. to check during assessment proceedings and could not be a considered by the CIT while granting registration u/s 12A. The Ld. AR also stated that registration could not be refused on the recommendation of the Assessing Officer without disclosing the contents of the report confronting the same to the assessee. Thus the Ld. AR stated that the Ld. CIT had erred in not granting registration to the assessee trust. 4. Ld. DR on the other hand relied upon the order of the Ld. CIT and stated that sin .....

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of the Commissioner in refusing to grant registration to the society u/s 12A of the Act is that the Society had not carried out charitable activities and had also not applied its accumulated income as laid down in section 11 of the Act and further the Assessing Officer had not recommended grant of registration since the assessee trust had failed to furnish documents / information desired. Undisputedly the application for registration has been filed by the assessee trust in the first year of its .....

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on 12A(1) (aa) of the Act was moved on 19.7.2010 and the same was rejected on 26.11.2010. This Court in ITA No.710 of 2010-Commissioner of Income Tax-II, Chandigarh Vs. M/s Surya Educational & Charitable Trust, decided on 5.10.2011 has held that the application for registration is required to be made within one year of the creation of the Trust and there is no requirement that the Trust or the institution should have started all its envisaged activities in the first year itself. Under Sectio .....

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of creation of the Trust or the Establishment of such Institution. The procedure for registration of the Trust or Institution is prescribed under Section 12AA of the Act. In terms of Clause (a) of Section 12AA of the Act, the Commissioner is to satisfy himself about the genuineness of the activities of the Trust on such inquiries as he may deem necessary. Sub-section (1A) and (2) of Section 12AA of the Act, are procedural in nature, whereas Sub-section (3) of Section 12AA of the Act, empowers th .....

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es, whereas Section 12 of the Act, deals with the contributions received by the Trust or an Institution, established for charitable and religious purposes, receiving contribution, shall not be an income in terms of Section 11 of the Act. The benefit of Sections 11 and 12 of the Act, are available only if such Trust or Institution is registered under Section 12AA of the Act. On the other hand, Section 10(23C) of the Act are the provisions of the Act in substitution of the earlier provisions of Se .....

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t or Institution shall not be entitled to exclude from its total income, deductions or contributions or from other sources. Therefore, the principles laid down for excluding the income from consideration under Section 10(22) now 10(23)(C) or Sections 11 and 12 are not applicable while considering the application for registration under Section 12AA of the Act. The application for registration is required to be made within one year of the creation of the Trust. Section 12AA of the Act, requires sa .....

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ss of the objects of the Trust, but not the income of the Trust for charitable or religious purposes. The stage for application of income is yet to arrive i.e. when such Trust or Institution files its return. Therefore, we find that the judgments referred to by the learned counsel for the appellant are not applicable to the facts of the present case arising out of the question of registration of the Trust and not of assessment. In view of the above, we do not find that any substantial question o .....

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furthering the projects and activities pertaining to education, the Tribunal rightly directed that registration should be granted to the respondent-society with the rider that the same could always be cancelled if it came to the notice of the CIT that the society was not carrying on the activities as per its objects. The Commissioner while processing the application under Section 12AA of the Act was not to act as an Assessing Authority and thus, the Tribunal has rightly allowed the appeal filed .....

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wards its objects. No error could be pointed out in the order of the Tribunal warranting interference by this Court. Accordingly, no substantial question of law arises for determination by this Court and consequently, the appeal is dismissed. From the above, it is clear that the objects of Section 12AA is to examine the genuineness of the objects of the Trust or Society, but not the total income or the Trust or Society available for charitable purposes. Application of income has to be seen at th .....

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. Respectfully, following the judgement of Hon'ble Jurisdictional High Court in the case of CIT v B.K.K. Memorial Trust (supra), we hold that the Commissioner of Income Tax could not have refused grant registration u/s 12A / 12AA of the Act to the assessee society for the reason that it had not carried out any charitable activities. Further we find that the Ld. CIT had refused registration also for the reason that the assessee had not applied 85% of its receipts for charitable purpose nor ac .....

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ble it to claim the benefits u/s 11 & 12 of the Act. The fulfillment of conditions of section 11 is a separate issue which is to be considered when return is filed by the assessee and examined by the AO. The Hon ble Allahabad High Court in the case of Hardayal Charitable & Educational Trust Vs. CIT(2013) 355 ITR 534 held that the question of exemption of application of income was an issue to be considered on examining the claim of the assessee in the return filed, and could not be a cons .....

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e examined at the time of examining the return. Similar view has also been held by the Rajasthan High Court in the case of CIT Vs. Vijay Vargiya Vani Charitable Trust (2014) 369 ITR 360 (Raj) wherein it held as follows: 8. In our view, the object of Section 12AA is to examine genuineness of the objects of the trust but not the income of the trust for charitable or religious purpose. The Commissioner cannot sit in the chair of Assessing Officer to look into amount spent on charitable activities a .....

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