×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
This appeal by the assessee is directed against order of the CIT(Exemption), Bhopal dated 27.4.2018. The assessee has raised following grounds of appeal:-
1. “That the order dated 27.4.2018 passed by the Ld. CIT declining registration u/s 12AA to the appellant is vitiated in law and on facts.
2. That the order of Ld. CIT is perverse on account of consideration of facts which are not relevant for deciding an application u/s 12AA and also vitiated on account of non-consideration of vital information given by the appellant.
3. That on the facts and circumstances of the case and in the law, the Commissioner (Exemption) has grossly erred in denying registration to the assessee society under section 12AA of the Income Tax Act, 1961 (‘the Act’) as claimed. As the stage of grant of registration under section 12A, learned Commissioner is supposed to examine only the objects of the society/trust and it is not appropriate on the part of the Commissioner to examine the aspect of application of income at the stage of granting registration under section 12AA, which is to be examined by the assessing officer on a year to year basis at the time of claiming exemptions under section 11 of the Income Tax Act.
4. That section 2(15) defines the term ‘charitable purpose’ in an inclusive manner and includes within its ambit relief of poor, education, medical relief and advancement of any other object of general public utility. Education per se is a charitable purpose just like relief of poor or medical relief and the appellant university also does not exist for profit as there is no clause for distribution of profits or net assets in case of dissolution to members as it is fully government owned. Thus the emphasis of the Ld CIT on profits and FDR’s was misplaced both on facts and in law in o far as deciding the application u/s 12AA was concerned.
5. That the Ld Commissioner has picked up objects at s.no.(c)(d) and(e) from the object clause to arrive at the conclusion that the objects are not charitable. These objects (c),(d) and (e) are merely incidental objects and are well connected with the main object of providing technical education. The concentration of the Ld. CIT on incidental objects is contrary to the ratio in Surat Art Silk’s wherein the Supreme Court has that if the primary or dominant purpose of a trust is charitable another object which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent it from being valid charity.
6. That the test which has to be applied is whether the object which is said to be non charitable is the main or primary object of the trust or institution or its is ancillary or incidental to the dominant or primary object which is charitable and in the case of the appellant university the main object is clearly education which is charitable object as per section 2(15) of the Income Tax Act, 1961.”
2. The facts giving rise to the present appeal are that an application for registration u/s 12AA of the Income Tax Act, 1961 (hereinafter called as ‘the Act’) in form No.10A was submitted on 3.10.2017 to the Office of the Ld. Commissioner of Income Tax (Exemption). The said application was rejected by the Ld. CIT after giving opportunity to the assessee of hearing and considering the submission of the assessee. Ld. CIT rejected the application on the basis that act vity of the assessee cannot be termed as charitable as it has been systematic generating surplus from year to year and the amount has not been applied for its objectives. Further, the accounts are not audited and higher interest income has been earned from the surplus so generated, etc.
3. The effective ground of appeal is against rejection of application by the Ld. CIT(Exemption). The Ld. Counsel for the assessee submitted that the reasoning for rejection of the application is contrary to the settled law. He submitted that the order is ex-facie perverse and contrary to the records. Ld. Counsel for the assessee vehemently argued that at the stage of registration u/s 12AA of the Act, the application of fund by the assessee or generation of the fund by the assessee should not be the ground for allowing or rejecting of the application. Ld. Counsel for the assessee submitted that the Ld. CIT(Exemption) has not given any finding on the objectives of the assessee. He submitted that merely because the assessee is generating surplus should not be a ground for rejection of application and it cannot be the basis for inferring that assessee is not carrying out activities for charitable purposes. Ld. Sr. Counsel in support of the arguments relied upon various judgements, more particularly, judgement of the Hon'ble M.P. High Court rendered in the case of CIT Vs. DPR Charitable Trust (2011) 61 DTR (M.P.) (410). He submitted