2010 (11) TMI 524 - AT - Income Tax

Registration - u/s 12AA(1)(b)(ii) - Benefit u/s 11 and 12 - Application for registration under the Income-tax Act was filed on March 26, 2009 - It was submitted that the registration was required with effect from the financial year 2008-09. On perusal of the objects of the society, it was found that it contained a clause regarding running any kind of business house for the betterment of the society - assessee submitted that the offending clause has been omitted on September 17, 2009 and intimation to this effect has been given to the Registrar of Societies - The society has never conducted any business in pursuance of the aforesaid object - Accordingly, directed to grant registration with effect from September 17, 2009 - The result would be that the assessee would be entitled to the benefit of sections 11 and 12 for the assessment year 2010-11 and subsequent years - Decided in favour of assessee.

Summary

Issues:
1. Registration under section 12A(a) of the Income-tax Act, 1961.
2. Existence of society solely for charitable purposes.
3. Omission of offending clause from society's objects.
4. Grant of registration to the society.

Analysis:
The appeal before the ITAT, Delhi stemmed from the Commissioner of Income-tax (Central) Ludhiana's order rejecting the assessee's application for registration under section 12A(a) of the Income-tax Act, 1961. The primary contention was that the society was formed solely for charitable educational purposes, without any profit-oriented business activities. The society had applied for registration on March 26, 2009, but the Commissioner raised concerns regarding an object clause allowing the running of a business house for societal betterment. The Commissioner refused registration, citing the existence of this clause during the financial year 2008-09, which contradicted the claim of charitable existence.

During the proceedings, the assessee clarified that the offending clause had been removed on September 17, 2009, and no business activities had been undertaken based on that clause. The Departmental representative argued that the existence of the clause precluded registration for charitable purposes. The ITAT noted that the clause was indeed omitted on September 17, 2009, and no other defects were found in the society's objects or activities. Consequently, the ITAT directed the Commissioner to grant registration from September 17, 2009, enabling the society to avail benefits under sections 11 and 12 for the assessment year 2010-11 onwards.

In conclusion, the ITAT allowed the appeal, emphasizing the removal of the offending clause and the genuine charitable nature of the society. The judgment highlighted the importance of aligning the society's objects with its charitable purpose to qualify for registration under the Income-tax Act, ensuring eligibility for tax benefits in subsequent assessment years.