2010 (1) TMI 723 - AT - Income Tax

Rejection of renewal of recognition u/s 80G - Assessee publishing a low cost books and making them available to poor students all over the country - details of Income and Expenditure account as placed by the learned AR in the form of paper book reveals that the assessee was not engaged in the business activity at all - Held that - assessee is entitled for renewal of registration u/s 80G of the IT Act, appeal filed by the assessee allowed.

Issues Involved:
1. Rejection of renewal of recognition under Section 80G of the IT Act.
2. Classification of the Trust's activities under the definition of 'charitable purpose' in Section 2(15) of the IT Act.
3. Applicability of the Supreme Court's decision in the case of Assam State Text Book Production and Publication Corporation Ltd. vs CIT.

Issue-wise Detailed Analysis:

1. Rejection of Renewal of Recognition under Section 80G:
The appeal was filed by the assessee against the rejection of renewal of recognition under Section 80G. The assessee, a Trust formed on 01-01-2004, applied for renewal on 31-07-2008. The DIT(Exe.) rejected the application, observing that the Trust's activities did not qualify under the 'education' limb of the definition of charitable purpose in Section 2(15) of the IT Act. The DIT(Exe.) argued that the Trust's activities involved trade/commerce/business, which does not constitute a charitable purpose under the proviso to Section 2(15).

2. Classification of the Trust's Activities under the Definition of 'Charitable Purpose' in Section 2(15):
The DIT(Exe.) contended that the Trust's activities, which included publishing and selling books, fell under 'general public utility' rather than 'education.' The proviso to Section 2(15) states that any activity in the nature of trade, commerce, or business, or any service related to such activities, does not qualify as a charitable purpose if it involves any consideration. The assessee argued that the Trust was engaged in charitable activities by providing low-cost books to needy children, funded by donations. The Trust's aim was to provide high-quality, affordable books to children, publish books in multiple Indian languages, and create a platform for authors and illustrators.

3. Applicability of the Supreme Court's Decision in Assam State Text Book Production and Publication Corporation Ltd. vs CIT:
The assessee relied on the Supreme Court's decision in Assam State Text Book Production and Publication Corporation Ltd. vs CIT, where the Court held that the Corporation's activities of research, printing, and publishing of textbooks for school students qualified as an 'educational institution' under Section 10(22) of the IT Act. The Court reversed the High Court's decision, stating that the Corporation was entitled to exemption as it was controlled by the State and performed activities similar to those of the assessee. The Tribunal found that the Trust's activities were similar to those in the Assam State Text Book case, as the Trust was engaged in publishing low-cost books for poor students without earning profit.

Conclusion:
After reviewing the submissions and material on record, the Tribunal concluded that the Trust's activities were charitable in nature, aimed at providing affordable books to needy students. The Tribunal noted that the Trust was not engaged in profit-making but in facilitating education for poor students. The Tribunal directed the DIT(E) to grant the renewal of recognition under Section 80G of the IT Act, allowing the appeal filed by the assessee. The Tribunal emphasized the importance of donations for the Trust's activities and the adverse impact of denying the renewal on the Trust's ability to continue its charitable work.

Order:
The appeal filed by the assessee is allowed, and the DIT(E) is directed to grant the renewal of recognition under Section 80G of the IT Act. The order was pronounced in the open court on the date of the hearing.

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