2011 (4) TMI 864 - AT - Income Tax

Registration u/s 12A(a) and approval u/s 80G - cancellation of registration indulging in commercial activity - Held that - It has been clearly brought out in the order passed by the DIT (E) that the only activity which has been performed by the assessee during the initial year is holding an exhibition from 1st March 2008 to 4th March 2008 in which 230 exporters had participated - No document or evidence has been placed on record by the assessee to show that any activity of such nature has been carried out by the assessee which is in the fulfilment of the objects of the society for which it has been formed - Assessee has not applied any part of its net income on the objectives stated in the memorandum of association which are claimed to be of charitable purpose which are in advancement of any other object of general public utility . Though technically the objects of the assessee may fall within the ambit of advancement of any other object of general public utility as described in section 2(15) as it existed prior to assessment year 2009-10 but its claim even for assessment year 2008-09 is premature as it did not start its charitable activity in that year - it is held that for assessment year 2008-09 and for subsequent years in which the assessee does not carry out charitable activity the assessee has been rightly refused to get benefit of registration as charitable institution - The only activity which has been carried out is for the purpose of generating income which is not a charitable activity in itself - Decided against the assessee

Summary

Issues Involved:
1. Refusal of registration under section 12A(a) of the IT Act, 1961.
2. Refusal of exemption under section 80G of the IT Act, 1961.
3. Consolidated order passed under sections 12AA(1)(b) and 80G.

Issue-wise Detailed Analysis:

1. Refusal of registration under section 12A(a) of the IT Act, 1961:
The assessee, a society formed under the Societies Registration Act, sought registration under section 12A(a) and exemption under section 80G. The Director of Income-tax (Exemptions) [DIT (E)] rejected the request, stating that the assessee's activities were commercial in nature, not charitable. The assessee argued that its activities, including organizing exhibitions for exporters, were charitable as they aimed to promote exports of Indian handicrafts, which falls under "advancement of any other object of general public utility" as per section 2(15) of the Act. However, the DIT (E) found that the only activity performed by the assessee was organizing exhibitions, which involved systematic and organized commercial activities, such as renting space and charging participants. The Tribunal upheld the DIT (E)'s decision, noting that the assessee had not demonstrated any application of income towards charitable activities as per its Memorandum of Association. The Tribunal emphasized that the concerned authority must ensure the genuineness of the activities and not merely rely on the stated objects of the society.

2. Refusal of exemption under section 80G of the IT Act, 1961:
The assessee also sought exemption under section 80G, which was denied by the DIT (E). The Tribunal noted that for an institution to qualify for exemption under section 80G, it must fulfill specific conditions, including the application of income towards charitable purposes. The assessee argued that it met all criteria, but the DIT (E) found that the assessee's activities were commercial and not charitable. The Tribunal upheld the DIT (E)'s decision, stating that the assessee had not demonstrated any charitable activities and had only engaged in commercial activities to generate income. The Tribunal concluded that the assessee did not fulfill the criteria for exemption under section 80G.

3. Consolidated order passed under sections 12AA(1)(b) and 80G:
The assessee contended that the DIT (E) should have passed separate orders for registration under section 12A and exemption under section 80G, rather than a consolidated order. The Tribunal did not find merit in this argument, as the DIT (E)'s decision was based on the nature of the assessee's activities, which were found to be commercial rather than charitable. The Tribunal upheld the DIT (E)'s consolidated order, emphasizing that the assessee had not demonstrated any charitable activities to warrant separate consideration for registration and exemption.

Conclusion:
The Tribunal upheld the DIT (E)'s decision to refuse registration under section 12A and exemption under section 80G, finding that the assessee's activities were commercial and not charitable. The Tribunal also upheld the consolidated order, noting that the assessee had not demonstrated any application of income towards charitable purposes. The appeals filed by the assessee were dismissed, but the Tribunal allowed the assessee to reapply for registration and exemption if it starts applying its income towards charitable activities in the future.