No requirement to file Form-10B at the time of registration u/s 12AA. Audit Report in Form 10B is to be filed along with return of income. Rejection application for Registration saying that mere recital of objects or activities without cogent or corroborative evidence not sufficient was wrong when balance sheet and income and expenditure account were filed establishing the running of a school-ITAT
ABCAUS Case Law Citation:
ABCAUS 2174 (2018) (01) ITAT
Brief Facts of the Case:
The appellant assessee society was running a school and had been claiming exemption u/s 10(23C)(iii) of the Income Tax Act, 1961. The assessee had applied for registration u/s 12AA which the CIT (Exemptions) refused relying on the provisions of section 13(1)(c) of the Act. CIT (Exemptions) held that mere recital of objects or activities without cogent or corroborative evidence is not sufficient by themselves to enable a registering authority to grant registration.
Contention made on behalf of the Appellant Assessee:
It was submitted that at the time of registration u/s 12AA the only aspect which CIT (Exemptions) is expected to examine is object of the assessee and genuineness of the activities of the assessee for achieving of these objects.
It was submitted that assessee had filed copies of balance sheet and income and expenditure along with income tax return which itself proves that the assessee was running a school which was in consonance with the objects of the society.
It was further submitted that Audit report from chartered accountant in Form 10B has to be submitted at the time of filing of return and at the time of claiming the exemption u/s 11 & 12 of the Act and it is not required to be filed at the time of registration.
Observations made by the Tribunal:
The ITAT observed that the objects of the society, as mentioned in the bye-laws were charitable in nature which was not doubted by the CIT (Exemptions).However he rejected the application by holding that there was no cogent or corroborative evidence to prove the genuineness of activities despite the fact that the assessee had filed copies of balance sheet and income/expenditure account /copies of income tax return clearly establishing that assessee was running a school.
The ITAT also concurred with the submissions of the assessee that there is no requirement under the law to file Form-10B at the time of registration.
The ITAT noted that the Allahabad High Court has exhaustively examined the provisions of section 12AA of the Act and has held that CIT (Exemptions) has to satisfy himself about the genuineness of the activities of the trust and also the objects of the trust or institution. The Hon’ble court further held that CIT (Exemptions) is empowered to make inquiries, as he thinks fit, to verify as to whether the activities are genuine or not but on mere presumption and surmises that income derived by the trust or institution will be misused or that there is some apprehension that the same would not be used in a proper manner, cannot be made a basis for rejection of registration.
The Hon’ble court has further held that the genuineness of the activities of trust or institution has to be seen keeping in mind the objects thereof which necessarily means that the CIT (Exemptions) shall satisfy himself about the fact that the activities are genuine and in consonance with the objects of the trust or institution.
The Tribunal opined that undoubtedly the objects of the assessee were charitable in nature and the assessee was running a school for achievement of its objects as given in the bye-laws. Therefore, the registration cannot be denied by holding that the activities of the assessee were not genuine.
The CIT (Exemptions) was directed to grant registration to the assessee u/s 12AA of the Act.
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