2014 (11) TMI 186 - HC - Income Tax

Rejection of application of registration u/s 12AA Object of Trust charitable or not u/s 2(15) - Receipt of capitation fee for admission of students found during search Held that - The fact that capitation fee was being collected was admitted by the Treasurer of the Trust Shri. Shajahan - the object of the trust was not charitable and it was therefore that the registration u/s 12AA of the Act was rejected - the rejection of the application made was for the reason that they were collecting capitation fee for admission and not on the ground that the funds of the trust were not applied for charitable purpose Decided against assessee.

Summary

Issues:
1. Registration under Section 12AA of the Income Tax Act, 1961 denied due to non-charitable activities.

Analysis:
The judgment by the High Court of Kerala dealt with an appeal against the order of the Income Tax Appellate Tribunal regarding the denial of registration under Section 12AA of the Income Tax Act, 1961 to a society registered under the Travancore - Cochin Literary, Science and Charitable Trust Act, 1955. The society in question had established an engineering college and during a search operation, incriminating materials were found indicating the collection of capitation fee for student admissions, which was not in line with charitable activities. The Treasurer and Secretary of the trust admitted to collecting capitation fees, leading to the rejection of the registration application. The court concurred with the Tribunal's decision that the trust was not engaged in charitable activities deserving registration under Section 12AA.

The appellant attempted to present affidavits retracting previous statements, but the court found these attempts unsubstantiated and not improving the case. The appellant also cited legal precedents to argue against the rejection, claiming the Commissioner was not required to examine the trust's income application. However, the court clarified that the rejection was based on the capitation fee collection for admissions, not on the misapplication of trust funds for charitable purposes. As a result, the court dismissed the Income Tax Appeal, upholding the denial of registration under Section 12AA due to non-charitable activities, specifically the collection of capitation fees.