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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAMIT KOCHAR
This appeal is directed against the order dated 26th June 2014, of learned Director of Income Tax (Exemption) [for short “the learned DIT(E)]”, Mumbai, rejecting assessee’s application for grant of registration under section 12A of the Income Tax Act, 1961 (for short "the Act").
Briefly stated the facts are, assessee is a company incorporated under Indian Companies Act, 1956, and registered with Registrar of 2 The Euro India Centre (India) Companies, Mumbai. The appellant made an application in the prescribed manner seeking registration under section 12A of the Act. After receiving the application, the learned DIT(E), issued a notice to the assessee requiring it to furnish certain details / documents like PAN , copy of bank account, no objection certificate in respect of office premise, certificate of registration issued by the Charity Commissioner, copy of audited accounts and note on activities undertaken by it. Subsequently, learned DIT(E) noticing that both the directors of the company are non–residents called upon the assessee to explain why its application for registration should not be rejected. Though, assessee submitted a detailed explanation objecting to the proposed action of the learned DIT(E) but rejecting the submissions of the assessee, he passed the impugned order refusing to grant registration under section 12A of the Act. While doing so, learned DIT(E) observed as under:–
“4. I have carefully perused the submissions made by the applicant company but the same are not acceptable as two of its directors viz. Mrs. Colette Mathur and Mr. Michel Sabatier are Non–Residents/foreign Nationals/Not Indian Citizens. It is pertinent to mention that the assessee of any charitable company or for that matter a director of a Section 25 company lies in its characteristic of permanency of the residential status / availability of at all times of its director. The possibility of such a company cannot be conceived wherein the tenure / residency of its director does not exist / is not predicable. Furthermore, the director of a charitable company is a holder of a property. Therefore, his capacity to be a director they will depend upon the law as to whether an alien / director can hold property in 3 The Euro India Centre (India) India. In India there are restrictions for non-citizens to hold property. In this connection, it would not be out of place to mention that the applicant company is a Section 25 Company, a Company which has a charitable entity as that of a Public Charitable Trust under the B.P.T. Act, 1950. Even in case of Public Charitable Trust non-resident trustees are barred from becoming trustees under the provisions of Section 47(1)(b) & (c) of the B.P.T. Act, 1950 taking into consideration their residential status / availability for performance of charitable duties. Therefore, the company does not qualify for grant of registration u/s 12A of the I.T. Act.”
Learned Authorised Representative submitted, assessee is a section 25 company under Companies Act, 1956, therefore, it is entitled for registration under section 12A. He submitted, only because the directors of company are non–residents, it cannot be a reason on the deny registration under section 12AA. He, therefore, submitted as the ground on which the learned DIT(E) has refused to grant registration is an invalid ground, the order should be set aside with a direction to grant registration under section 12AA.
Learned Departmental Representative, however, justified the action of the learned DIT(E).
We have considered the submissions of the parties and perused the material available on record. There is no dispute to the fact that assessee is a section 25 company incorporated under Companies Act, 1956, and has been registered with Registrar of Companies. Therefore, for all intent and purpose, the appellant is a resident of India. That 4 The Euro India Centre (India) being the case, only because the directors of the company are non– residents, as alleged by the learned DIT(E), on that basis alone, registration under section 12AA cannot be refused to the company as it is the company which is seeking registration under section 12A. Moreover, on a careful reading of section 12AA of the Act, it is evident that the registering authority at the time of grant of registration has to be satisfied with two conditions, viz. objects of the trust and genuineness of its activities. If the objects of the trust are of charitable nature and its activities are genuine, then the registering authority has to grant registration under section 12AA. On a perusal of the impugned order of the learned DIT(E), it is evident that he has not whispered a word either about the object of the assessee company or the genuineness of its activities. It is not forthcoming whether the learned DIT(E) has at all examined these two aspects which are the primary conditions for grant of registration under section 12AA. On the contrary, he has refused registration on the ground that two of the directors are non–residents. In our view, the reasons shown for refusing registration are not at all valid reasons, hence, cannot be supported. However, considering the fact that learned DIT(E) has not examined application of the assessee the Assessing Officer in terms of section 12AA by verifying the objects of the society and genuineness of its activities, we are inclined to set aside the impugned order of the 5 The Euro India Centre (India) learned DIT(E) and restore the matter back to his file for deciding afresh after due opportunity of being heard to the assessee. We make it clear, if it is established that assessee’s objects are of charitable nature and its activities are genuine, then the learned DIT(E) must grant registration in terms of section 12AA of the Act.
In the result, appeal is allowed for statistical purposes. Order pronounced in the open Court on 16.03.2016