2011 (12) TMI 287 - AT - Income Tax

Registration under trust - non charitable objectives - Held That - In view of Surat Art Silk Cloth Manufacturers Association (1979 - TMI - 5217 - SUPREME Court), registration granted. Voluntary Contribution forming part of corpus - Held That - While granting registration issue of voluntary contributions are not to be consider such matter to be decided at the time of assessment. Decided in favour of assessee.

Issues Involved:

1. Legality of the Commissioner of Income-tax's refusal to register the society.
2. Opportunity of being heard before refusing registration.
3. Fulfillment of conditions under Section 12A of the Income-tax Act, 1961.
4. Charitable nature of the society's objectives.
5. Non-violation of provisions and activities of the society.
6. Registration with the Addl. Registrar of Societies.
7. Charitable purposes within the meaning of Section 2(15) of the Income-tax Act, 1961.
8. Retrospective application of amendments.
9. Taxability of voluntary contributions forming part of the corpus.

Detailed Analysis:

1. Legality of the Commissioner of Income-tax's refusal to register the society:
The Commissioner of Income-tax (CIT) declined registration under Section 12AA of the Income-tax Act, 1961, citing the presence of a non-charitable object in the society's memorandum. The CIT relied on the Supreme Court decisions in Yogiraj Charity Trust v. CIT and East India Industries (Madras) (P.) Ltd. v. CIT. However, the Tribunal found that the object in question was never implemented and was subsequently deleted. The Tribunal emphasized that the real activities of the society were charitable in nature, primarily focused on imparting education.

2. Opportunity of being heard before refusing registration:
The assessee argued that they were not given a reasonable opportunity to be heard before the refusal of registration. The Tribunal noted that the CIT did not appreciate the genuine charitable activities undertaken by the society and failed to consider the deletion of the contentious object clause.

3. Fulfillment of conditions under Section 12A of the Income-tax Act, 1961:
The Tribunal observed that the assessee had duly complied with the statutory formalities for registration under Section 12A. The applications were filed in the prescribed form, and the societies were registered under the Societies Registration Act, 1860. The Tribunal found no evidence of non-compliance with the conditions laid down under Section 12A.

4. Charitable nature of the society's objectives:
The Tribunal highlighted that the main objectives of the society were to promote education, vocational training, and social welfare activities. The society had undertaken significant activities, such as purchasing land and constructing buildings for educational institutions, which were in line with its charitable objectives. The Tribunal emphasized that the activities were genuine and aimed at achieving the primary objective of imparting education.

5. Non-violation of provisions and activities of the society:
The Tribunal noted that the society had not carried out any non-charitable activities during the year under consideration. The society's activities were focused on establishing educational institutions, and there was no evidence of any violation of the provisions of the Income-tax Act.

6. Registration with the Addl. Registrar of Societies:
The Tribunal acknowledged that the society was duly registered with the Additional Registrar of Societies. The registration under the Societies Registration Act, 1860, was not in dispute, and the society had fulfilled all the conditions laid down under Section 12A.

7. Charitable purposes within the meaning of Section 2(15) of the Income-tax Act, 1961:
The Tribunal referred to the definition of "charitable purpose" under Section 2(15) and noted that the society's activities fell within the scope of this definition. The Tribunal emphasized that the proviso to Section 2(15), inserted by the Finance Act, 2008, was not applicable to the first three limbs of the definition, which included education. The society's activities were primarily focused on imparting education, and the contentious object clause had been deleted.

8. Retrospective application of amendments:
The Tribunal observed that the CIT did not appreciate the retrospective applicability of the amendments to the definition of "charitable purpose." The Tribunal emphasized that the amended provisions were not applicable to the society's activities, as they were focused on education, which is a recognized charitable purpose.

9. Taxability of voluntary contributions forming part of the corpus:
The Tribunal clarified that the issue of taxability of voluntary contributions forming part of the corpus was not within the contemplation of Section 12A read with Section 12AA. This issue was to be considered by the Assessing Officer at the time of assessment, and the CIT was not competent to adjudicate this matter while considering the registration application.

Conclusion:
The Tribunal set aside the CIT's order and directed that registration under Section 12AA be granted to the assessee societies. The Tribunal concluded that the societies had carried out genuine charitable activities, primarily focused on education, and the contentious object clause had been deleted. The Tribunal emphasized that the real activities of the societies were charitable in nature and aligned with the objectives of imparting education.

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