Society Receiving Grant From Foreign Entity Can't Be Denied Section 12A Registration: ITAT

The assessee/appellant is a society named "Share India". On 11.02.2019, the assessee filed an application on Form No. 10A to the CIT (E) for a grant of registration under section 12A of the Income Tax Act. On 05.07.2019, the CIT (E) issued a notice calling for a Memorandum of Association and certain clarifications, which were supplied by the assessee. Thereafter, the representatives of the assessee also appeared before the CIT (E). However, the CIT (E) was not satisfied with the submissions of the assessee and rejected the assessee's application.

The CIT (E) noted that the assessee received grants from Share USA, the Center for Disease Control USA, and other entities. Thus, the activity of the assessee is to execute the work mentioned in the agreements entered with funding agencies for which the assessee is paid. Thus, the activity of the assessee is nothing but the execution of the contract for payment. Therefore, this cannot be a charitable activity as defined in Section 2(15) of the Act.

The assessee has filed an appeal with the Tribunal after being dissatisfied with the CIT (E) ruling. The assessee claimed that the CIT (E) incorrectly denied the assessee's application for registration under section 12A.

The department contended that the assessee receives most of the funds from a USA-based entity called "Share USA". The assessee's office is claimed to be situated in the premises of a medical college located in Medchal Mandal, Rangareddy District, run by "Share Medical Care", but the assessee has not produced any documents. The office bearer of the assessee is receiving a salary from "Share Medical Care" and therefore the genuineness of the activity is in doubt. The assessee has received grants from "Share USA", "Centre for Disease Control USA" and "Other entities" in terms of agreements entered with them, which show that the assessee is engaged in the execution of work contract.

The ITAT noted that the order passed by the CIT (E) nowhere raises any objection to the nature and characteristics of the objects or activities pursued or undertaken by the assessee.

"The CIT(E) has nowhere observed in his order that any of the object or activity undertaken by the assessee is ingenuine or against the prescription of section 2(15) of the act. Therefore the refusal of the registration by CIT (E) is not on sustainable ground," the ITAT observed.

Case Title: M/s. Share India Versus CIT(E)

Citation: ITA No.1589/Hyd/2019

Dated: 13.05.2022

Counsel For Appellant: None

Counsel For Respondent: Rajendra Kumar

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