2014 (11) TMI 16 - HC - Income Tax

Rejection of application of registration u/s 12AA - whether paying pension to the employees of the GCDA comes under the scope of charitable purpose or not u/s 2(15) Held that - The object of the Trust is to pay pension to the employees of the GCDA or their dependents from out of the corpus collected from the beneficiaries - the employees of the GCDA are contributing and from out of that contribution, they or their dependents are getting pension - Such an object implemented by the appellant-Trust cannot be said to be an object of general public utility attracting Section 2 (15) of the Act - The eligibility for registration depends upon the object of each of those Trusts - Such objects are not present in the case of the present Trust thus, the order of the Tribunal is upheld Decided against assessee.

Summary

Issues:
1. Registration under Section 12AA of the Income-tax Act - Charitable purpose determination.

Analysis:
The High Court of Kerala heard an appeal against the Income-tax Appellate Tribunal's decision rejecting an application for registration under Section 12AA of the Income-tax Act. The appellant, a Trust, aimed to provide pensions to employees of the Greater Cochin Development Authority (GCDA) from contributions made by the employees themselves. The Court examined whether this objective qualified as a charitable purpose under Section 2(15) of the Act, which is a prerequisite for registration. The Tribunal had denied registration based on the view that the Trust's objective did not meet the charitable purpose criteria.

The appellant's Senior Counsel argued that despite the pension distribution being limited to GCDA employees, the Trust's activity served general public utility, making it eligible for registration under Section 12AA. The Counsel cited various judgments to support this contention, emphasizing that the Trust's purpose aligned with the principles established in those cases. However, the Court noted that the cited cases involved beneficiaries distinct from the contributors, unlike the current scenario where GCDA employees themselves funded the pensions. The Court also highlighted that the Trust's object did not fall under general public utility as per Section 2(15) of the Act, given the direct correlation between contributors and pension recipients.

Ultimately, the Court upheld the Tribunal's decision, concluding that the Trust's objective did not meet the criteria for registration under Section 12AA. The Court emphasized that the Trust's specific structure, where contributors directly benefited from their contributions, did not align with the charitable purpose standards outlined in the Act. Consequently, the Income-tax Appeal was dismissed, affirming the Tribunal's ruling on the registration application.