By TIOL News Service

NEW DELHI, DEC 22, 2017: THE issue is - Whether Director (Exemption) is not required to examine the books of the assessee-trust at the time of application for registration u/s 12A. YES is the answer.

Facts of the case:

The Assessee, a society engaged into running certain schools and colleges, filed an application for registration u/s 12A(1) before the CIT alongwith a copy of MoU. The Assessee was asked to produce the books and vouchers in respect of expenses claimed by the Assessee for verification of the Assessee's activities. However, the Assessee fails to provide the said compliance therefore, the CIT held that the Assessee was not carrying out any charitable activities and hence, the genuineness of its activities could not be verified. The CIT believed that as per the provisions of section 12AA(1)(b), two factors namely, the object of charitable purpose and genuineness of activities had to be proved before granting the registration. Relying on various decisions, the CIT rejected the claim of registration sought by the Assessee u/s 12A(1).

the Tribunal held that,

++ it is the submission of the counsel for the Assessee that at the time of granting of registration the CIT is required only to examine the objects of the trust and is not required to examine the books of account of the trust and it is only during the claim of exemption u/s 11 the AO will examine the same and allow or disallow the same as the case may be;

++ various courts have held that while granting registration u/s 12A the CIT is required to see only the objects of the Assessee trust/society and not to examine the application of income. He is not required to examine whether the income derived by the trust is being spent for charitable purposes or the trust is earning profit while granting registration. He is only required to examine the objects of the trust. The various other decisions relied on by the counsel for the Assessee in the paper book also support his case. Therefore, the CIT was not justified in rejecting the claim of registration u/s 12A. We, therefore, set-aside the order of the CIT and direct him to allow registration u/s 12A.

(See 2017-TIOL-1792-ITAT-DEL)