2012 (6) TMI 327 - AT - Income Tax

Registration u/s 12A and 80-G - denial on ground that there was extravagance of expenses by holding conference of Doctors at five star hotel and there is no benefit to the common public, also, donors are pharmaceutical companies and some of them have deducted TDS - assessee, registered charitable trust, created by eminent cardiologists with object of research in the field of medicines in general and cardiac medicines - Held that - If the objects of the trust are duly incorporated and charitable in nature and conform to the various rules and regulations; the assessee trust maintains its books of account and the genuineness of the account is established by the society, in normal circumstances the registration should be granted to the Trust u/s 12AA and 80-G. In the given facts and circumstances the conference organized by the assessee is authorized by the objects of the Trust; there is no ban or embargo whether conference can be held in five star hotel or not. Therefore, the adverse inference drawn by the DIT(E) is not proper inasmuch as the trustees will have a discretion to organize the conference at a place and in the manner which is befitting into the participants and objects. Donations presumed as Commercial receipt - Held that - Only because donors are pharmaceutical companies and they deducted TDS, will not convert a donation into a commercial receipt on the basis of presumptive inferences. As long as the assessee has credited the amount as donations and issued donation receipts, in our view, the same cannot be held to be commercial receipt. We hold that the assessee is eligible for registration u/s 12AA and 80-G, which is granted - Decided in favor of assessee.

Issues Involved:
1. Refusal of registration under Section 12AA of the Income-tax Act.
2. Refusal of approval under Section 80G of the Income-tax Act.
3. Charitable nature of the trust's activities.
4. Validity of donations received from pharmaceutical companies.
5. Expenditure on organizing a conference at a five-star hotel.
6. Deduction of TDS by donors.
7. Application of Section 2(15) of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Refusal of registration under Section 12AA of the Income-tax Act:
The assessee, a registered charitable trust, applied for registration under Section 12AA. The Director of Income-tax (Exemptions) [DIT(E)] refused the registration, questioning the charitable nature of the trust's activities, particularly focusing on a conference organized by the trust. The tribunal held that the trust's objects, as per the trust deed, were charitable, including medical research, public awareness, and training programs. The tribunal found no non-charitable objects and noted that the trust maintained proper books of accounts. Therefore, the refusal of registration was deemed improper, and the trust was granted registration under Section 12AA.

2. Refusal of approval under Section 80G of the Income-tax Act:
The assessee also applied for approval under Section 80G, which was similarly refused by the DIT(E). The tribunal found that the trust's activities and objects were charitable, and the refusal was based on incorrect presumptions about the nature of donations and the conference. Consequently, the tribunal reversed the DIT(E)'s decision and granted approval under Section 80G.

3. Charitable nature of the trust's activities:
The DIT(E) questioned the charitable nature of a conference organized by the trust, held at a five-star hotel, and attended by doctors. The tribunal clarified that the conference aimed to build awareness among medical professionals about cardiac rhythm disorders, which aligns with the trust's charitable objects. The tribunal emphasized that the trust's objects included holding scientific meetings and workshops, which are integral to its charitable mission.

4. Validity of donations received from pharmaceutical companies:
The DIT(E) argued that donations from pharmaceutical companies were commercial receipts, not donations, partly because TDS was deducted. The tribunal disagreed, stating that the trust issued donation receipts and utilized the funds for its charitable purposes. The tribunal held that the nature of the donor or the deduction of TDS does not convert a donation into a commercial receipt.

5. Expenditure on organizing a conference at a five-star hotel:
The DIT(E) viewed the expenditure on the conference as extravagant and not benefiting the common public. The tribunal found no legal prohibition against holding a conference at a five-star hotel and noted that the trust's discretion in organizing the conference was within its charitable objects. The tribunal did not draw any adverse inference from the choice of venue.

6. Deduction of TDS by donors:
The DIT(E) used the deduction of TDS by donors to argue that the receipts were commercial. The tribunal clarified that the deduction of TDS does not change the nature of the donation. The trust received the donation amount and the TDS certificate, which could be claimed as a refund. The tribunal held that this did not affect the charitable nature of the receipts.

7. Application of Section 2(15) of the Income-tax Act:
The DIT(E) applied the proviso to Section 2(15), which restricts the benefits of exemption if the trust engages in commercial activities. The tribunal found that the trust did not charge any fee for the conference and that the activities were in line with its charitable objects. The tribunal held that the trust's activities did not contravene Section 2(15) and were not commercial in nature.

Conclusion:
The tribunal concluded that the assessee trust is eligible for registration under Section 12AA and approval under Section 80G. The orders of the DIT(E) were reversed, and both appeals filed by the assessee were allowed.

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