S. 12AA Registration can’t be denied merely because Assessee established to comply with CSR obligations: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the registration under Section 12AA of the Income Tax Act, 1961 cannot be denied to the applicant merely because it was established to comply with the Corporate Social Responsibility ( CSR ) obligations.

The assessee-Company made an application to obtain registration under section 12AA of the Income Tax Acr, 1961. However, the authorities rejected the application on the ground that the applicant company has been constituted as a captive company by the Escorts Limited in order to redeem their CSR obligation. It was also alleged that there is a close arrangement vide which corporate entity is not only able to redeem its CSR obligation but also at the same time able to control the finances of the applicant company.

The Tribunal noted that it is a settled principle of law and fact that CSR activities are public charitable activities per se, which fact is also evident from section 8 of the Companies Act, 2013.

“At the same time, when we examine the aims and objects of the applicant company in totality, the same are to establish and run educational institution like school, colleges, apprentice training, practical training classes, vocational training, boarding facilities, NGO, gurukuls, teaching classes, etc. in India and abroad which certainly falls under the charitable activities u/s 2(15) of the Act,” the Tribunal observed.

“Merely because of the fact that the applicant company has been established to comply with the CSR obligations, the registration u/s 12AA of the Act cannot be denied, particularly when CSR activities are also charitable activities as defined under the Act,” the Tribunal said.

Allowing the appeal by the assessee, the Tribunal added that “Ld. CIT (E) was only required to firstly satisfy himself if the trust has been established for charitable activities and its activities are genuine for the purpose of grant of registration u/s 12AA of the Act, rest of the suspicion and apprehensions raised by the ld. CIT (E) can be taken care of by the Revenue at the time of framing assessment. Moreover, the ld. CIT (E) declined the registration merely on the basis of assumptions and presumptions.”