Jito Bhavnagar Chapter Foundation Vs CIT (Exemption) (ITAT Ahmedabad)
ITAT Ahmedabad held that the applicability of Section 13 of the Income Tax Act should only be examined during assessment and not at the registration stage under Section 12A of the Income Tax Act. Accordingly, CIT(E) directed to evaluate the application afresh.
Facts- The assessee, a company registered u/s. 8 of the Companies Act, 2013, was provisionally registered u/s. 12(1)(ac)(vi) w.e.f. 02-10-2021according to which the provisional registration was approved from A.Y. 2022-23 to A.Y. 2024-25. The assessee filed an application for registration u/s 12A(1)(ac)(iii) of the Act on 27-06-2023.
Upon examining the assessee’s objectives and activities as described in its Memorandum of Association (MOA), the CIT(E) noted that many activities were focused on the welfare of the members of the association rather than the public at large. Therefore the CIT(E) concluded that the assessee was not functioning as a public charity but as a service provider for its members. Thus, the CIT(E) rejected the application for registration u/s. 12A of the Act and also cancelled the provisional registration that had been previously granted. Being aggrieved, the present appeal is filed.
Conclusion- In the present case, the CIT(E) prematurely invoked the provisions of Section 13(1)(c) of the Act without giving due consideration to the charitable objects of the assessee. The Hon’ble Gujarat High Court in CIT(E) vs. Bayath Kutchhi Dasha Oswal Jain Mahajan Trust [2016] 74 taxmann.com 199 (Guj), further confirmed this principle, holding that Section 13 would only be applicable at the time of assessment, not during the registration stage.
