2015 (10) TMI 2417 - AT - Income Tax

Registration u/s. 12A(1)(aa) rejected - applicant-company is incorporated u/s. 25 of the Companies Act - Held that - The decision of the Tribunal, Mumbai Bench in the case of CEO Clubs India Vs DIT 2012 (10) TMI 895 - ITAT MUMBAI is worth mentioning wherein the assessee was incorporated as a Pvt. Ltd. Company u/s. 25 of the Companies Act. The assessee submitted that it was a non-profit association registered as such u/s. 25 of the Companies Act for a charitable purpose. In that case also the DIT was not satisfied with the claim of the assessee holding that the objects as spelled out were clearly not for the benefit of public as a whole but rather are confined to specific members only and the Tribunal at para-9 of its order following the decision of the Hon ble Supreme Court in the case of Surat Art Silk Cloth Manufacturers Association (1979 (11) TMI 1 - SUPREME Court) has held that object which seeks to promote or protect the interest of a particular trade or industry are object of public utility and finally held that the objection of the DIT for denying registration on this ground is therefore found to be without any basis. Considering the similarity in the facts of the case in hand with the facts of the judicial decisions referred to hereinabove, we are of the considered opinion that the DIT (Exem) have grossly erred in rejecting the application of registration. We, therefore, set aside the order of the DIT (Exem.) and direct him to grant registration to the applicant company. - Decided in favour of assessee.

Summary

Issues:
Application for registration u/s. 12A(1)(aa) of the Act rejected by DIT (Exemption) - Whether company's objects are non-charitable/commercial - Whether application for registration should be granted.

Analysis:
The appeal was filed against the DIT (Exemption) order rejecting the application for registration u/s. 12A(1)(aa) of the Act. The company, a non-profit making institution, applied for registration u/s. 12A on 26.3.2013. The DIT observed the company's main object was for the benefit of its members only, having non-charitable/commercial objects. The company's submission was rejected by the DIT, leading to the appeal.

The Ld. Counsel argued that the DIT misunderstood the company's objects, emphasizing the company's incorporation u/s. 25 of the Companies Act for non-profit institutions. The Counsel cited Supreme Court decisions supporting the company's position. The Ld. Departmental Representative supported the DIT's decision.

The Tribunal analyzed the company's objects, noting the restriction on commercial activities in the Memorandum of Association and the Articles of Association's clause on profit application. Referring to Supreme Court cases, the Tribunal highlighted that promoting trade, commerce, and industry benefits the community, not just members. The Tribunal cited precedents where similar rejections were overturned, directing the DIT to grant registration to the company.

In conclusion, the Tribunal allowed the appeal, setting aside the DIT's order and instructing the grant of registration to the applicant company. The decision was pronounced in open court on 9th September 2015.