2014 (4) TMI 1073 - AT - Income Tax

Application for registration u/s 12A rejected - CIT observed that the main activity of the assessee is running a training institute for stitching and embroidery for women, accordingly giving training of stitching etc. is an occupational training which cannot be termed as educational training, thus held that as per provisions of section 2(15) of the Act, the activity being carried out by the assessee are commercial activity which are not of charitable nature - Held that - The assessee-trust is giving sewing training class at Ramania, Tal. Mundra-Kutch for women staying in rural areas to give them full training of preparing various clothes/garments so that they themselves can earn their own. The trust had provided raw materials like cloth, threads and other items free of charge to all the 80 mahilas who had participated in the project. By giving training in stitching and embroidery to rural women, the sole purpose of the assessee-trust is to uplift them so that they can become independent. Though the assessee-trust is also charging meager fee, the income & expenditure accounts it shows the stitching training income of ₹ 192668/- whereas expenses incurred for such activities amounting to ₹ 231756, thus resulted to deficit of ₹ 39088/-. The Hon ble Delhi High Court in the case of Institute of Chartered Accountants of India vs. DGIT(E) (2013 (7) TMI 205 - DELHI HIGH COURT), held that where dominant objective of ICAI was to regulate profession of Chartered Accountancy in India, it was a charitable institution and conducting coaching classes and campus placements for a fee could not be held as business as per section 2(15) of the Income-tax Act. In view of the ratio of decision of Hon ble Delhi High Court, just by charging nominal fee for providing training in stitching and embroidery for rural women, the dominant purpose of the assesseetrust is to uplift the status of rural women which is charitable activity within the meaning of Section 2(15) of the Income-tax Act. Therefore, set aside the impugned order of ld. Commissioner of Income-tax, Rajkot-I, Rajkot and direct to grant the registration u/s 12A of the Income-tax Act, 1961. - Decided in favour of assessee.

Summary

Issues:
- Rejection of application for registration u/s 12A of the Income-tax Act, 1961 by the Commissioner of Income-tax, Rajkot
- Classification of training activities as commercial rather than charitable
- Interpretation of section 2(15) of the Income-tax Act, 1961

Issue 1: Rejection of application for registration u/s 12A

The appeal was filed against the order of the Commissioner of Income-tax, Rajkot, rejecting the application of the assessee for registration u/s 12A of the Income-tax Act, 1961. The Commissioner observed that the main activity of the assessee, a rural development institute, was running a training institute for stitching and embroidery for women. The Commissioner deemed this activity as commercial rather than charitable, leading to the rejection of the registration application.

Issue 2: Classification of training activities

The Commissioner based the rejection on the premise that providing training for stitching and embroidery was considered occupational rather than educational training. The Commissioner cited section 2(15) of the Act, stating that activities in the nature of trade, commerce, or business are not of charitable nature. The assessee argued that the training provided aimed to uplift rural women, making it a charitable activity within the meaning of the Act.

Issue 3: Interpretation of section 2(15) of the Income-tax Act, 1961

The assessee contended that the rejection failed to consider the charitable nature of the activities as defined in section 2(15) of the Act. The assessee referenced legal precedents, including a decision by the Delhi High Court, to support the argument that charging a nominal fee for charitable activities does not negate their charitable nature. The Tribunal, after considering the purpose of the training provided and the financial details, concluded that the dominant objective of uplifting rural women qualified as a charitable activity under section 2(15) of the Act.

In conclusion, the Appellate Tribunal ITAT Rajkot allowed the appeal, setting aside the Commissioner's order and directing the grant of registration u/s 12A of the Income-tax Act, 1961 to the assessee. The Tribunal emphasized the charitable nature of the activities aimed at empowering rural women, in line with the provisions of the Act and legal interpretations provided by previous court decisions.