2011 (3) TMI 921 - HC - Income Tax

Registration u/s 12A - The assessee is a Company registered under section 25 of the Companies Act - since the assessee was registered 5 years back it would be beneficial to find out from the assessee as well as from the Department as to whether the assessee was engaged in any charitable activity including production of television and radio programmes and telecasting and broadcasting of such programmes, for which the assessee is formed - the activities of the assessee stated i.e., undertaking to telecast and broadcast programmes and to act as an agent, broker, liasioner etc., will not make the object clause charitable - assessee has not produced the amendment made to the Memorandum of Association of the Company neither before the Commissioner nor before the Tribunal - the assessee has not explained as to why the object clause specifically provides that the benefit of the foundation goes to the members in a narrow sense So far as the extra territorial operation and activities of the Company as evident from the object clause is concerned, the assessee s counsel also submitted that telecasting and broadcasting will be limited within India - assessee has admitted that it has not undertaken any of such activities for the last 5 years and still remains a paper company - Decided against the assessee

Summary

Issues:
- Registration of respondent-company as a Charitable Institution under section 12A of the Income-tax Act.

Detailed Analysis:
1. The appellant revenue challenged the order of the Income-tax Appellate Tribunal directing the Commissioner of Income-tax to grant registration to the respondent-company as a Charitable Institution under section 12A of the Income-tax Act. The respondent, a Company registered under section 25 of the Companies Act, claimed to be formed for the advancement of general public utility, a charitable purpose under section 2(15) of the Act, seeking registration under section 12A. The Commissioner initially denied registration citing reasons like benefits going to members, business activities not serving public benefit, and extra-territorial operations.

2. The respondent contended before the Commissioner that amendments were made in the Memorandum and Articles of Association to remove clauses benefiting members and clarified that operations would be limited to India. However, the respondent failed to provide evidence of these amendments. The respondent argued that the company's activities, such as producing television and radio programs for social and spiritual upliftment, qualified as charitable. The Commissioner rejected the claim, stating the respondent did not serve general public utility.

3. The respondent appealed to the Tribunal, reiterating their arguments. The Tribunal accepted that broadcasting activities could uplift society spiritually and socially, considering objections as "innocuous expressions" in the object clause, and granted the appeal. The revenue appealed this decision. During the hearing, it was revealed that the respondent had not engaged in any charitable activities in the past five years, remaining a paper company. The main object clause of the company involved commercial activities like broadcasting programs and acting as an agent, not exclusively for public utility.

4. The High Court analyzed the object clause and activities of the respondent. It was observed that commercial activities, even if beneficial, did not inherently serve general public utility. While the respondent argued that broadcasting programs could aid social and spiritual development, the Court disagreed, citing precedents and distinguishing between commercial and charitable activities. The Court also addressed the amendment removing member benefits, noting it was certified after the registration application period.

5. The Court found that the object clause did not qualify as charitable, focusing on the nature of activities and lack of exclusive public utility. The respondent's failure to engage in charitable activities and the commercial nature of proposed operations led the Court to reverse the Tribunal's decision, upholding the Commissioner's denial of registration under section 12A of the Act.