Case Law Details
B.S.A. College Vs CIT (ITAT Agra)
Under section 12AA, CIT (E) was entitled to see as to whether objects of assessee were charitable in nature, and also whether activities were genuine or not. Examination of genuineness of activities would mean to see that activities were not by way of camouflage or bogus or artificial and whether same were in accordance with objects of the institution. However, scope of such enquiry did not extend beyond that point and filing or non-filing of books and vouchers had nothing to do with genuineness of activities.
Under section 12AA of the Act, the Commissioner is entitled to see as to whether the objects are charitable in nature, and also to see whether the activities are genuine or not. Examination of the genuineness of the activities would mean to see that the activities are not by way of camouflage or bogus or artificial and whether these are in accordance with the objects of the institution. The scope of such enquiry does not extend beyond that point. On the other hand, the registration granted by the Commissioner does not extend any exemption to an institution under section 11, except to the fact that such registration is mandatory for claiming exemption under section 11. Meaning thereby, exemption under section 11 can be availed of by institutions which are genuinely engaged in ‘charitable activities’. However, benefit of section 11 is subject to application of income for charitable activities and the Assessing Officer is well entitled to see whether such application has been done and the other conditions of section 11 have been complied. The Assessing Officer has to see whether exemption under section 11 is barred by application of section 13. An institute, though registered under section 12AA, would still be taxed on the income which has not been applied in accordance with section 11, or in respect of which section 13 comes into play. Even in respect of income hit by section 13, other provisions of the Act regarding levy of tax on maximum marginal rate would come into play. Thus, the registration under section 12AA is only fait accompli to the objects of the institution [‘ACIT vs. Surat City Gymkhana’, (2008) 300 ITR 214 (SC)]. The activities of an institution, though genuine at the time of grant of registration, may not remain so during its life-span and the registration granted to it cannot be a life-time guarantee that it would remain so. That is why the law itself prescribes a procedure for withdrawal of the registration granted, in appropriate cases.
Therefore, CIT (E) erred in rejecting assessee’s application for registration under section 12AA.
FULL TEXT OF THE ITAT JUDGMENT
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