2016 (3) TMI 183 - HC - Income Tax

Denial of registration under Section 12A and recognition under Section 80G - Held that - To ascertain the true nature/purpose of the Trust, the objectives have to be considered as a whole, not in isolation. The Tribunal cannot pick and choose certain objectives ignoring the main objectives. It appears that the respondent and the Tribunal are influenced by the preamble in the Trust Deed. Preamble cannot control the main objectives of the Trust. Section 2 15 of the Act contemplates charitable purpose . Charitable purpose includes relief of the poor, education, medical relief and the advancement of any other object of general public utility. The phrase any other object of general public utility if, examined in the light of the Judgment in the case of AHMEDABAD RANA CASTE ASSOCIATION 1971 (9) TMI 8 - SUPREME Court , it is not necessary that the object should be to benefit of the whole of mankind or of persons in a Country or State. If it is distinguished from a specified individual and if it is to the benefit of section of the public, it has to be construed as charitable purpose. As such, the Order passed by the Tribunal is unsustainable. The matter deserves to be reconsidered by the Tribunal regarding the purpose and objectives of the Trust in the light of the Trust Deed and any other documents to be furnished by the Assessee.

Summary

Issues:
1. Challenge to denial of registration under Section 12A and recognition under Section 80G of the Income Tax Act.
2. Interpretation of the charitable nature of the trust.
3. Consideration of main objectives versus additional objectives of the trust.

Analysis:
1. The appellant, a Trust, challenged the denial of registration under Section 12A and recognition under Section 80G by the Income Tax Appellate Tribunal. The Tribunal held that the Trust primarily benefits its members involved in a specific commercial activity, rather than the general public. The Tribunal emphasized the mutuality concept and lack of enduring benefit to the public in dismissing the appeals.

2. The Tribunal examined the main objectives of the Trust, which included various charitable activities benefiting the public at large. However, it also considered additional objectives focusing on providing services to milk producers and their families. The Tribunal's decision was influenced by the preamble of the Trust Deed, emphasizing the interests of milk producers and employees.

3. The High Court analyzed the Trust's objectives in their entirety, emphasizing that the preamble should not override the main charitable objectives. Referring to the Ahmedabad Rana Caste Association case, the Court highlighted that benefiting a section of the public qualifies as a charitable purpose. The Court stressed that the Trust's primary charitable objectives should not be disregarded based on secondary objectives benefiting specific groups.

4. Section 2(15) of the Income Tax Act defines charitable purpose, including relief of the poor, education, medical relief, and general public utility. Citing the Ahmedabad Rana Caste Association case, the Court reiterated that benefiting a section of the public constitutes a charitable purpose. Consequently, the Court found the Tribunal's decision unsustainable and remanded the matter for reconsideration based on the Trust Deed and relevant documents.

5. The Court allowed the appeals, directing the Tribunal to reassess the Trust's purpose and objectives in light of the observations provided. The Court left all contentions open for further consideration, emphasizing the need to evaluate the Trust's charitable nature comprehensively.