2009 (6) TMI 982 - HC - Income Tax

Application for Registration u/s 12AA - activity for charitable purpose in terms of Section 2(15) - charitable purpose charity is soul of the expression - CIT after examine the copies of the accounts and expenditure, held that assessee society is not carrying any charitable activity u/s 2(15), as it was in a profit making business and rejected the application - ITAT allowed the said application. HELD THAT - Clause (a) of sub- section (1) of Section 12 AA , makes it clear that the CIT is not supposed to allow the registration with blind eyes. We agree with the argument advanced on behalf of the appellant that mere imparting education for primary purpose of earning profits cannot be said to be charitable activity as interpreted by the Apex Court in MCD Vs. Children Book Trust 1992 (4) TMI 237 - SUPREME COURT , we are unable to agree with the ITAT that since word education is not qualified in Section 2(15), as such, every application received by a society, who is engaged in the business of imparting education is bound to be registered under Section 12 AA. If that view is accepted in that case, CIT will be failing in its duty to comply the provision of law contained in clause (a) of sub-section (1) of Section 12 AA. In expression charitable purpose charity is soul of the expression. Mere trade and commerce in education cannot be said to be a charitable purpose. Thus, Appeal is allowed. The order passed by ITAT is hereby set aside and order passed by CIT is restored.

Summary

Issues:
Whether the Income Tax Appellate Tribunal erred in law in holding that the assessee carried on activity for charitable purpose in terms of Section 2(15) and directing the Commissioner of Income Tax to grant registration under Section 12-AA to the assessee society.

Analysis:

1. Background:
The case involves an appeal under Section 260-A of the Income Tax Act, 1961 against the order passed by the Income Tax Appellate Tribunal, Delhi Bench, where the National Institute of Aeronautical Engineering Educational Society was granted registration under Section 12AA of the Act.

2. Question of Law:
The main issue revolves around whether the society was carrying out charitable activities as defined in Section 2(15) of the Act, specifically focusing on the aspect of imparting education for profit-making purposes.

3. Facts of the Case:
The society applied for registration under Section 12AA, but the Commissioner of Income Tax rejected the application citing profit-making activities. The Income Tax Appellate Tribunal later allowed the appeal, leading to the current challenge.

4. Legal Provisions:
Section 2(15) defines "charitable purpose," including education without qualification. However, Section 12AA empowers the Commissioner to scrutinize the genuineness of activities to ensure they align with charitable objectives.

5. Court's Analysis:
The Court highlighted that the mere act of imparting education for profit does not qualify as a charitable activity, as per the precedent set by the Supreme Court in a similar case. The Court disagreed with the Tribunal's broad interpretation that all education-related societies should be registered under Section 12AA.

6. Decision:
Ultimately, the Court allowed the appeal, setting aside the Tribunal's order and restoring the Commissioner's decision to reject the society's registration under Section 12AA. The Court emphasized that charity should be the essence of any charitable purpose, distinguishing it from commercial activities like education for profit.

7. Conclusion:
In conclusion, the judgment clarifies the distinction between charitable activities and profit-making ventures, emphasizing the importance of genuine charitable intent when seeking registration under Section 12AA of the Income Tax Act, 1961.