2011 (12) TMI 246 - HC - Income Tax

Charitable Society - registration u/s 12AA and approval u/s 80G granted by Tribunal Revenue contesting such approval on ground that objects of society are not charitable Held that - Clauses of the deed clearly state that the object of the Society is to propagate Non-violence and Tenets of Truth and to encourage universal spiritual uplifment. What is stated about the settlement of dispute is only incidental thereto and cannot be stated to be commercial in nature Decided against the Revenue.

Summary

Issues:
1. Registration under Section 12AA and approval under Section 80G of the Income Tax Act.

Analysis:
The High Court of Madras heard tax case appeals challenging the rejection of registration under Section 12AA and approval under Section 80G of the Income Tax Act by the Income Tax Appellate Tribunal. The main question raised was whether the Tribunal was correct in directing to grant registration and approval. The Director of Income Tax had rejected the application, citing provisions in the deed related to domestic and overseas markets and arbitration, deeming the object non-charitable and commercial. However, the Tribunal disagreed, stating that the object was indeed charitable. The Court noted that the Director failed to assess the genuineness of the Society, a crucial aspect at the initial stage as per Section 12AA. The Court highlighted that the Director misinterpreted Section 2(15) regarding charitable purpose and emphasized that the object of the Society was to propagate non-violence and truth, with dispute settlement being incidental and not commercial. Consequently, the Court dismissed the appeals, stating that no substantial question of law arose, and no costs were awarded.

This judgment delves into the interpretation of the Income Tax Act regarding charitable purposes and the genuineness of Society activities under Section 12AA. It emphasizes the importance of assessing the actual objectives of an organization to determine its eligibility for registration and approval under the Act. The Court scrutinized the provisions of the deed in question, particularly clauses related to markets and arbitration, to ascertain the nature of the Society's activities. It clarified that the primary aim of propagating non-violence and truth aligned with charitable purposes, while dispute settlement was deemed ancillary and not indicative of a commercial nature. By highlighting the procedural obligations of the authority and the misinterpretation of relevant sections, the Court underscored the need for a thorough examination of the Society's objectives before rejecting registration applications. The judgment serves as a reminder of the legal nuances involved in determining the charitable status of organizations under the Income Tax Act and the significance of upholding the core principles of charity in such assessments.