2010 (11) TMI 933 - AT - Income Tax

Renewal of Exemption u/s 80G - Charitable institution/Status - reason for declining such request is that the assessee has received income under the head Advertisements and golf tournaments income and it has also incurred substantial expenditure on this activity only - HELD THAT - The certificate granted to the assessee u/s 12A treating it as charitable institution is subsisting and has not been shown to have been withdrawn till date. If it is so then renewal of exemption u/s 80G(5) could not be denied to the assessee. Therefore there are no justification in rejection of the claim of the assessee unless it is shown that the charitable status granted to the assessee by the certificate issued u/s 12A has been withdrawn. The Ld. DIT (E) is directed to grant the renewal to the assessee u/s 80G - appeal filed by the assessee is allowed.

Summary

Issues:
1. Rejection of application for renewal of exemption u/s 80G
2. Classification of activities as charitable or commercial
3. Interpretation of Section 2(15) of the Income Tax Act, 1961

Issue 1: Rejection of application for renewal of exemption u/s 80G
The appeal was filed against the order rejecting the application for renewal of exemption u/s 80G. The appellant, a registered society engaged in charitable activities, sought renewal of exemption which was denied by the Director of Income-tax (Exemptions) based on the grounds that the appellant was involved in commercial activities, specifically related to advertisements and golf tournaments. The Director concluded that the appellant's activities did not fall under the charitable head, leading to the denial of exemption.

Issue 2: Classification of activities as charitable or commercial
The appellant contended that its main objective was to encourage education, falling within the definition of Section 2(15) of the Income Tax Act. Reference was made to judicial decisions supporting the view that as long as the use of funds is charitable, income generation does not disqualify an entity from claiming exemptions. The appellant also argued that the donation made for educational purposes further demonstrated its commitment to charitable activities.

Issue 3: Interpretation of Section 2(15) of the Income Tax Act, 1961
The appellant relied on Circular No.395 to argue that activities for general public utility, including the promotion of sports and games, can be considered charitable. Legal precedents were cited to support the claim that registration under section 12AA and fulfillment of conditions under section 80G(5)(vi) make an entity eligible for exemption, irrespective of charging fees for services. The Tribunal found that as the charitable status granted under section 12A was not withdrawn, there was no justification for denying the renewal of exemption u/s 80G(5).

In conclusion, the Tribunal allowed the appeal, directing the grant of renewal of exemption u/s 80G to the appellant. The judgment emphasized the importance of maintaining charitable status and fulfilling legal requirements for claiming tax exemptions, highlighting the significance of judicial precedents in interpreting tax laws and exemptions.