The Income Tax Appellate Tribunal (ITAT), Jaipur Bench, has recently, in an appeal filed before it, held that income tax registration u/s 12AB cannot be denied to trust, after supplying all desired information as per query letter.
The aforesaid was made by the Jaipur ITAT, when an was appeal before it by the assessee Keeday Makauday Foundation, as directed against the order of the CIT(Exemption), Jaipur, dated 28-09-2022, for the assessment year 2022-23, in the matter of registration u/s 12AB of the Income Tax Act, 1961.
The grounds of the assessee’s appeal being that the CIT(Exemption) erred in law and on facts, in rejecting the application for registration u/s 12A of the Income Tax Act, and further that the CIT(Exemption) erred in law and on facts ,in considering the objects of the assessee as non-charitable without considering the para 5 of Memorandum of Association and Licence u/s 8(a) of the Companies Act, 2013, the brief facts of the case were that the assessee foundation filed its application online, dated 31-03-2022, in Form No. 10AB ,seeking registration u/s 12AB of the Income Tax Act, for which the assessee trust was issued a letter/notice No. ITBA/EXM/F/EXM43/2022- 23/104478325 (1), dated 18-08-2022 asking therein to submit certain documents/ explanation by 12-09-2022.
In response to this letter, the assessee submitted certain documents having only part details. However, not being satisfied with the part submission/ documents filed by the assessee foundation, the CIT(E), vide his letter dated 19- 09-2022, desired from the assessee certain details/information/clarification, to clarify how its objects were charitable objects in the light of section 2(15), and also to explain as to why the application filed by it should not be rejected.
The CIT(E), having noted that the assessee foundation furnished the reply in response to the show cause notice, he examined the record and proceeded to decide the case of the assessee, based on the materials available on record, taking into account, the genuineness of the activities as well as the compliance of such requirements of any other law for the time being in force by the trust or institution ,as are material for the purpose of achieving its objects, with regard to the granting of registration u/s 12AB of the Income Tax Act.
And, from the submissions/ documents filed by the assessee foundation, the CIT(E) having noted that the assessee trust does not perform the activity of charitable nature but that business activities were visible, instead, the CIT(E) rejected the application of the assessee f seeking registration u/s 12AB by recording his observation to that effect, thus leaving the assessee to prefer the instant appeal before the ITAT Bench.
With Shri Vivek Bhargava, the AR of the assessee praying that the CIT(E) has erred in rejecting the registration of assessee trust u/s 12AB of the Income Tax Act, while the assessee trust is a charitable trust and thus placed his submissions to that effect, Shri Ajay Malik, the CIT -DR, on the other hand, supported the order of the CIT(E), thereby submitting that the reply of the assessee was cryptic.
Hearing the opposing contentions of either sides and perusing the materials available on record the ITAT Panel consisting of Dr. S. Seethalakshmi, the Judicial Member, along with Rathod Kamlesh Jayantbhai, the Accountant Member, observed:
“It is also noteworthy to mention that the assessee trust was granted provisional registration vide order dated 22-11-2021 by the Ld. CIT (E). As regards the rejection of registration u/s 12AB of the Act by ld. CIT(E), it is noted from the available records that the assessee foundation has furnished all the details desired by the ld. CIT(E) vide paper book pages 12,13,14-24, 24,31-76 and 81-83. It is also noted that the assessee trust tried to submit all the details/documents during the course of proceedings before the ld. CIT(E).”
“It is further noted from the order of the ld. CIT(E) in first para that only part of the details were submitted by the applicant. However, we find that ld. CIT(E) did not mention in his order as to which details called out were not submitted by the assessee foundation. The Bench during the course of hearing finds that the assessee foundation has been granted Licence under section 8(1) of the Companies Act, 2013”, the ITAT Bench added.
Taking into consideration, the Memorandum of Association of the assessee foundation, the ITAT Panel further observed:
“The activities undertaken by the assessee trust are interconnected with the object of the foundation undertaken. It is also mentioned in the Memorandum of Association that the objects of the company extend to the whole of India which are not of profit motive. The profits, if any, or other income and property of the company, whensoever derived, shall be applied, solely for the promotion of its objects as set forth in this memorandum as is mentioned in the Memorandum of Association of Keeday Makauday Foundation filed under the Companies Act, 2013 who has granted Licence under Section 8(1) of the Companies Act, 2013.”
Thus, allowing the assessee’s appeal the Jaipur ITAT held:
“From the entire conspectus of the issue in question, we feel that the ld. CIT (E) is not justified in denying the registration 12AB of the Act when the assessee foundation/ trust has supplied all the desired information as per his query letter and he did not controvert them which indicates that the order passed by the ld. CIT(E)suffers from infirmity which cannot be sustained. Thus, appeal of the assessee foundation is allowed.”
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