2017 (3) TMI 1793 - AT - Income Tax

Refusal of registration sought u/s 12AA of the Income Tax Act, 1961 - general public utility - HELD THAT - Learned Departmental Representative invites our attention to another coordinate bench decision in Panoli Industrial Infrastructure Projects Ltd. vs. CIT 2016 (10) TMI 363 - ITAT AHMEDABAD denying Section 12AA registration on the very analogy that the real benefits of the charitable activity in question were intended for the benefit of members only. The assessee s object clauses which form the foundation of Section 12AA registration claim are not on a similar footing as facts of the instant case wherein there is clear cut stipulation that assessee s income before or after dissolution would in no manner devolve upon its member. It is accordingly concluded that the assessee s principal object seeking to promote and develop, plan, survey, design , study, conceive, evaluate and to carry out all steps, process, techniques and method for setting and developing up of all types of infrastructure facilities comes well within general public utility limb of Section 2(15) of the Act. Learned DIT(E), Ahmedabad is directed to grant it Section 12AA registration in question - appeal of asssessee allowed.

Summary

Issues involved:
1. Registration under Section 12AA of the Income Tax Act, 1961 denied by DIT(E).
2. Interpretation of the nature of the company as a mutual company.
3. Determination of whether the company's activities fall under the "general public utility" as per Section 2(15) of the Act.

Issue 1: Registration under Section 12AA denied by DIT(E)
The appellant, a "Section 25" company, filed for registration under Section 12AA of the Income Tax Act, 1961. The DIT(E) refused registration, citing that the company's main object clause aimed to benefit its members only and did not serve the general public utility as required by the Act. The appellant challenged this decision.

Issue 2: Interpretation of the nature of the company as a mutual company
The DIT(E) observed that the company appeared to function more as a mutual company for foundry and engineering industries, with benefits primarily for its members. The appellant contended that its objects clearly stated that no income or assets would be transferred to its members directly or indirectly, emphasizing that the company's dissolution clause ensured assets would be given to another company with similar objectives, not to its members.

Issue 3: Determination of activities falling under "general public utility"
During the hearing, the appellant presented a coordinate bench decision supporting a similar registration claim based on the objective to set up anti-pollution measures. This decision distinguished previous case law cited by the DIT(E) and concluded that no public cause was served in those cases. Other coordinate bench decisions were also referenced, highlighting instances where Section 12AA registration was granted based on the charitable nature of the activities. The tribunal ultimately found that the appellant's activities aimed at promoting and developing infrastructure facilities fell within the general public utility limb of Section 2(15) of the Act. Consequently, the tribunal directed the DIT(E) to grant the appellant the Section 12AA registration sought.

In conclusion, the tribunal allowed the appellant's appeal, emphasizing that the company's objectives aligned with the requirements for registration under Section 12AA. The judgment was pronounced on March 10, 2017, directing the DIT(E) to grant the appellant the registration in question.