2015 (10) TMI 1478 - AT - Income Tax

Registration under sections 80G and 12AA denied - Held that - It has come on record that the assessee's main objects are covered by the charitable purposes education under section 2(15) of the Act. The Commissioner of Income-tax holds that the Assessing Officer has made certain queries and the assessee is found running a preschool for tiny tots, classes by collecting fees and imparting education. The hon'ble jurisdictional High Court, in the case of DIT v. Seervi Samaj Tambaram Trust 2014 (2) TMI 32 - MADRAS HIGH COURT holds that initiation of charitable activity does not form subject of section 12AA registration issue. The Revenue fails to bring any distinction on facts. Therefore, we hold that the assessee's objects are covered by the charitable purposes education . It is held entitled for section 12AA registration. Rest of the issues of carrying on of charitable activities, application of income etc., are left to be considered in appropriate proceedings. The assessee's appeal seeking section 12AA registration succeeds. Challenging the Commissioner's order refusing section 80G registration is remitted back for decision afresh, as per law. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Denial of registration under sections 80G and 12AA of the Income-tax Act, 1961.
2. Interpretation of charitable activities for registration under section 12AA.
3. Rejection of section 80G registration.

Analysis:

Issue 1: Denial of Registration under Sections 80G and 12AA
The appeals arose from orders denying registration under sections 80G and 12AA of the Income-tax Act, 1961. The trust was created by a registered deed followed by a supplementary deed. The Commissioner rejected the registration citing lack of charitable activities beyond running a preschool. The trust failed to provide evidence of charitable activities as per its stated objectives. The Assessing Officer found the trust only running a pre-school, collecting fees without any charitable expenditure. Despite having charitable objectives, the trust did not engage in substantial charitable activities since its creation, leading to the denial of registration under section 12AA.

Issue 2: Interpretation of Charitable Activities for Registration under Section 12AA
The Tribunal held that the trust's main objects fell under the charitable purpose of "education" as per section 2(15) of the Act. Referring to a relevant High Court case, the Tribunal emphasized that the initiation of charitable activities does not determine eligibility for section 12AA registration. The Tribunal found that the trust's objects aligned with charitable purposes related to education, entitling it to section 12AA registration. However, other aspects such as carrying out charitable activities and income application were left for future consideration. Consequently, the appeal seeking section 12AA registration was successful.

Issue 3: Rejection of Section 80G Registration
The Tribunal remitted the appeal challenging the Commissioner's denial of section 80G registration for reconsideration in accordance with the law. The decision to remit the case back for fresh consideration indicates that the issue of section 80G registration requires further examination. The appeal was allowed for statistical purposes, indicating a procedural victory rather than a substantive decision on the section 80G registration issue.

In conclusion, the Tribunal allowed the appeal for section 12AA registration while remitting the section 80G registration issue for fresh consideration. The judgment highlighted the importance of engaging in substantial charitable activities to qualify for registration under the Income-tax Act, 1961.