2013 (5) TMI 470 - HC - Income Tax

Entitlement for Registration under Section 12AA - denial of claim as per DIT(Exemptions) all the income and expenditure relatable to the maintenance of Kalyana Mandapam and shops are not in conformity with the definition of charitable objects u/s 2(15) - Tribunal noted the Article set out in the Scheme award relating to the running of the choultry alone and the objects are targeted towards a particular community alone - Held that - Objects of the assessee society as incorporated stated as to provide accommodation and facilities to the poor and needy for the purpose of functions and ceremonies and for temporary shelter and to undertake Annadanam to public and other forms of poor feeding, to work for the development of any games or sports activities, to help poor students for their education based on merits by way of scholarships,etc., to undertake and provide medical care to the poor and the needy. Being governed by the Scheme Award, the expansion of objects and activities has to be approved by the Court, which framed the Scheme Award. In fact, the assessee has moved an Interlocutory Application in the Court of Principal District Judge at Tiruvallur in Scheme to permit the Assessee - Gowri Ashram to expand the new objects pertaining to distribution of scholarships, celebration of other festivals, conducting sports and cultural activities, helping poor and destitute people from the weaker sections of the community/society and to help the needy people. The said Interlocutory Application filed before the District Court, Tiruvallur is stated to be pending. Unless expanded objects of the assessee are approved and incorporated in the Scheme Award, the assessee cannot claim to be the Trust with charitable purpose. Since the object of the assessee society is only to benefit a particular community, primarily, Telugu Beri Vysia community and for performance of similar functions by other Hindus, the Tribunal rightly dismissed the appeal and we do not find any substantial question involved in this appeal. Against assessee.

Summary

Issues:
1. Eligibility for registration under Section 12AA of the Income Tax Act based on the charitable purpose of the society.

Analysis:
The case involves an appeal against the rejection of an application for registration under Section 12AA of the Income Tax Act by the Income Tax Appellate Tribunal. The assessee society, governed by a Scheme Award, had sought registration claiming to provide accommodation and facilities to the poor and needy for functions and ceremonies. However, the Director of Income-tax (Exemptions) found that the society was also involved in commercial activities like renting out shops and managing a Kalyana Mandapam. The Tribunal dismissed the appeal, stating that the society's objects did not align with charitable purposes under Section 2(15) of the Act.

The main contention raised by the appellant was that the Tribunal erred in concluding that the society's activities were not charitable. The appellant argued that the society's bye-laws indicated a broader charitable scope, including relief to the poor, which the Tribunal failed to consider. The revenue's counsel, on the other hand, highlighted Clause 18 of the Scheme award, emphasizing the society's focus on providing accommodation for marriage functions of a specific community, which they argued did not meet the definition of charitable purpose.

The Scheme Award governing the society specified the administration of the choultry known as Gowri Ashram and outlined its objectives, primarily catering to the Telugu Beri Vysia Community for marriage functions and other auspicious events. The Tribunal and Commissioner of Income-tax concurred that these activities did not qualify as charitable under Section 2(15) of the Act. The appellant's argument that the Tribunal misinterpreted the Scheme Award was dismissed, emphasizing that the society's activities were primarily community-centric and not broadly charitable.

Furthermore, the judgment highlighted the society's attempts to expand its charitable activities, seeking approval from the Court that framed the Scheme Award. Until these expanded objectives were approved and incorporated, the society could not claim charitable status beyond its current community-focused activities. The appeal was ultimately dismissed, with the option for the society to reapply once its expanded objectives received court approval.

In conclusion, the judgment underscores the importance of aligning a society's activities with the definition of charitable purpose under the Income Tax Act for registration under Section 12AA. It emphasizes the need for clear and approved objectives that serve broader charitable causes beyond specific community interests to qualify for tax-exempt status.