Aruva Foundation Vs CIT (ITAT Indore)
Conclusion: CIT(E) was not justified in denying assessee’s applications for final registration u/s 12AB / final approval u/s 80G as assessee had done only charitable activities till now and not undertaken any activity contemplated by object No. 2 & 3. Therefore, as and when the activity of Object No. 2 & 3 was actually undertaken by assessee in future, it would be a prerogative of Assessing Authority in that particular year, to ascertain the quantum of exemption u/s 11/12 available to assessee.
Held: Assessee-company was incorporated u/s 8 of the Companies Act, 2013 claiming to be for charitable purpose, applied to CPC for grant of provisional registration u/s 12AB and provisional approval u/s 80G, which were granted by CPC. Subsequently, assessee applied to CIT(E) for grant of final registration u/s 12AB and final approval u/s 80G but CIT(E) rejected assessee’s applications for final registration u/s 12AB / final approval u/s 80G and also cancelled provisional registration u/s 12AB / provisional approval u/s 80G vide two separate orders as mentioned above. Aggrieved, assessee had come in these appeals. It was held that admittedly, CIT(E) had analysed object No. 2 & 3 of assessee and observed “the above referred objects clearly showed that the intention of the assessee was to carry out various commercial activities and also to engage in trading of various products as mentioned in the objects of the assessee”. On this limited basis, CIT(E) had denied registration to assessee. It was important to note that the section 13(8) also provides that the exemption u/s 11/12 shall be denied in that previous year only in which the proviso to section 2(15) is violated. Therefore, these provisions of law clearly show that even if any object or activity of assessee, out of various multiple objects and activities, has element of commerciality, that would result in denial of exemption u/s 11/12 to that extent and in that particular previous year only but CIT(E) in exercise of power u/s 12AB, could not deny registration to assessee. It also remained a fact, as shown by assessee that assessee had done only charitable activities till now and not undertaken any activity contemplated by object No. 2 & 3. Therefore, as and when the activity of Object No. 2 & 3 was actually undertaken by assessee in future, it would be a prerogative of Assessing Authority in that particular year, to ascertain the quantum of exemption u/s 11/12 available to assessee. Being so, CIT(E) was not justified in denying registration to assessee on the footing that by means of object No. 2 & 3, the assessee had intention to carry out commercial activity. Consequently, CIT(E) was directed to grant registration u/s 12AB to assessee as applied.
