2015 (9) TMI 1043 - AT - Income Tax

Grant of registration u/s. 12AA rejected - as per CIT(A) assessee is providing services in lieu of fee - assessee Board has been established for regulating employment of Private Security Guards employed in factories and establishment - Held that - As decided in Nashik District Security Guards Board Vs. CIT case 2015 (6) TMI 752 - ITAT PUNE As per the provisions of the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1981 that the said legislation is intended to regulate the employment of private security guards employed in factories and establishments in the State of Maharashtra for making better provisions in the terms and conditions of their employment and welfare through the establishment of the Boards. We are enumerating the clauses of the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1981 only to point out that the legislature has enacted the aforesaid statute not with the purpose of carrying out of any trade, commerce or business or any activity of rendering any services in relation to any trade, commerce or business. Ostensibly, the said objectives are for regulating the employment of private security guards employed in factories and establishments in the State of Maharashtra and for making better provision for terms and conditions of their employment and welfare. Clearly, it is a welfare measure of the Government of Maharashtra and in our view, the activities of the Board cannot be said to be falling foul of the proviso to section 2(15) of the Act, as contended by the Commissioner. The objections raised by the Commissioner are not germane to reject the assessee s plea for registration u/s 12A(1)(a) of the Act.- Decided in favour of assessee.

Summary

Issues:
1. Rejection of application for grant of registration u/s. 12AA of the Income Tax Act, 1961.
2. Classification of activities under 'general public utility' and 'charitable purpose'.
3. Interpretation of the proviso to section 2(15) of the Act regarding fee collection for services.
4. Comparison with similar cases for registration under section 12AA.

Analysis:
The judgment by Appellate Tribunal ITAT Pune dealt with the appeal of an assessee against the rejection of their application for registration under section 12AA of the Income Tax Act, 1961. The Tribunal noted that the assessee, a Board established to regulate employment of Private Security Guards, aimed to improve their terms and conditions of employment and welfare. The Commissioner of Income Tax rejected the application citing that the activities did not qualify as charity due to fee collection for services rendered. The Tribunal observed that the activities of the assessee were for the welfare of security guards and fell under 'general public utility.' The Tribunal referenced a similar case where even nominal fee collection did not disqualify an organization for registration under section 12AA.

Furthermore, the Tribunal analyzed the proviso to section 2(15) of the Act, inserted by the Finance Act, 2009, which stated that activities involving trade, commerce, or fee collection for services might not be considered charitable purposes. However, the Tribunal found that the activities of the Board, established under the Maharashtra Private Security Guards Act, were primarily for welfare measures and not for commercial purposes. The Tribunal highlighted the legislative intent behind the Act, emphasizing the welfare provisions for security guards and the regulatory framework, which did not align with commercial activities.

Moreover, the Tribunal considered the comparison with similar cases under different Acts in Maharashtra, where Boards were granted registration despite fee collection for services. The Tribunal concluded that the objections raised by the Commissioner were not relevant to reject the assessee's registration plea under section 12AA of the Act. Therefore, the Tribunal set aside the Commissioner's order and directed the grant of registration to the assessee. The decision was based on the precedent set by the Nashik District Security Guards Board case, where registration was allowed under similar circumstances.

In conclusion, the Tribunal allowed the appeal, directing the Commissioner to grant registration to the assessee under section 12AA of the Act. The judgment highlighted the importance of considering the nature and purpose of activities in determining charitable status, especially in cases where nominal fees are charged for services rendered.