- (1.) The appeal by the revenue under Section 260A of the Income-tax Act, 1961 arises from a judgment of the Income Tax Appellate Tribunal, Lucknow Bench dated 7 August 2013. The assessee had challenged before the Tribunal an order of the Commissioner of Income-tax-II, Lucknow dated 6 September 2012 declining to grant registration under Section 12AA of the Income-tax Act, 1961. The only ground on which the CIT rejected the application for registration was that though the society was established in August 2011 with a dominant object of imparting higher medical education by establishing Medical Colleges, Hospitals and Research Centres, such charitable activities had not still been commenced. The provisions of Section 12AA have been construed in the judgments of several High Courts which have been relied upon in a judgment of a Division Bench in Hardayal Charitable & Educational Trust v. CIT, 2013 355 ITR 534. While following the view which was taken by the High Courts of Karnataka, Delhi and Punjab and Haryana, the Division Bench has held as follows: The preponderance of the judicial opinion of all the High Courts including this court is that at the time of registration under section 12AA of the Income-tax Act, which is necessary for claiming exemption under sections 11 and 12 of the Act, the Commissioner of Income-tax is not required to look into the activities, where such activities have not or are in the process of its initiation. Where a trust, set up to achieve its objects of establishing educational institution, is in the process of establishing such institutions, and receives donations, the registration under section 12AA cannot be refused, on the ground that the trust has not yet commenced the charitable or religious activity. Any enquiry of the nature would amount to putting the cart before the horse. At this stage, only the genuineness of the objects has to be tested and not the activities, which have not commenced. The enquiry of the Commissioner of Income-tax at such preliminary stage should be restricted to the genuineness of the objects and not the activities unless such activities have commenced. The trust or society cannot claim exemption, unless it is registered under section 12AA of the Act and thus at that such initial stage the test of the genuineness of the activity cannot be a ground on which the registration may be refused.
(2.) The ITAT has held that in view of the judgment of the Division Bench of this Court in Hardayal Charitable & Educational Trust case , the order of rejection by the Commissioner was contrary to the law as laid down. Moreover, the Commissioner did not raise any issue about the objects of the trust which the Tribunal found are clearly charitable in nature. Thus, the only ground which weighed with the Commissioner in declining to grant registration has been found to be contrary to law. The Tribunal has in the circumstance while allowing the appeal directed the Commissioner to grant registration under Section 12AA. The view of the Tribunal is based on the judgment of a Division Bench of this Court which follows the consistent body of law.
(3.) The learned counsel appearing on behalf of the revenue has also relied upon a judgment of the Kerala High Court in the case of Self Employers Service Society v. CIT, 2001 247 ITR 18. The facts in that case are clearly distinguishable. The proposal to start a technical educational institution was made only after the rejection of the application by the Commissioner. Moreover, it was held by the Kerala High Court that the society had not done any charitable work and its activities on the contrary had been carried out only for the purpose of generating incomes for its members.;