2011 (12) TMI 317 - HC - Income Tax

Registration u/s 12AA - the application filed by the assessee for registration under Section 12AA of the Income Tax Act has been rejected at the threshold itself holding that one of the object clauses namely clause No.16 speaks about publishing newspapers in regional national and English language - A plain reading of the above would show that the term charitable includes the word education also - Supreme Court in the case in Sole Trustee Loka Shikshana Trust v. CIT 1975 (8) TMI 1 - SUPREME Court wherein it was held that the word education should be construed with wider connotation (sic) As far as the amendment made to the trust deed is concerned it is not the concern of the assessing authority and only the civil Court is empowered to decide the said issue and in any event that cannot be the reason for denying the charitable nature of the institution if it is otherwise charitable - Appeal is dismissed

Summary

Issues:
1. Registration under Section 12AA on violation of Sec.2(15) of the I.T. Act
2. Approval under Section 80G in violation of Rule 11AA of the IT Act

Analysis:
1. The primary issue in this case revolves around the rejection of the application for registration under Section 12AA of the Income Tax Act by the Director of Income Tax (Exemptions). The rejection was based on the amendment of the trust deed, specifically clause No.16 related to publishing newspapers. The assessing officer cited this amendment as grounds for rejection, along with the violation of Sec.2(15) of the Act. However, the Tribunal disagreed with this decision, stating that the trust deed can be amended and that publishing newspapers does not automatically constitute a commercial activity. The Tribunal allowed the appeals filed by the assessee, leading to the Department filing appeals based on substantial questions of law.

2. Section 12AA of the Act empowers the Commissioner to call for information to ascertain the genuineness of the trust or institution's activities before granting registration. The Director of Income Tax (Exemptions) did not question the trust's genuineness but focused on the commercial nature of publishing activities. The relevant provision of Sec.2(15) defines charitable purposes, including education, with a restriction on activities resembling trade, commerce, or business. The interpretation of 'education' was discussed in a Supreme Court case, emphasizing formal schooling and character development as essential components.

3. The judgment highlights that the civil court, not the assessing authority, is responsible for deciding issues related to trust deed amendments. The Kerala High Court's judgment cited by the appellant concerning Section 11 of the Act was deemed irrelevant to the present case, where the registration application under Section 12AA was rejected at the outset. Ultimately, the High Court concluded that there was no legal basis to overturn the Tribunal's decision, dismissing the tax case appeals and closing the connected miscellaneous petition without costs.