2011 (6) TMI 1006 - AT - Income Tax

Summary

Issues involved: Appeal against rejection of registration under section 12AA of the Income-tax Act, 1961 for being a charitable institution.

Summary:
The appeal was filed by the assessee against the order of the Commissioner of Income-tax rejecting the application for registration as a charitable institution. The Commissioner alleged that the assessee was motivated by earning profits, citing judgments from the Hon'ble Uttaranchal High Court and the Hon'ble Supreme Court. The Commissioner specifically pointed out the provision of free bus service to students in Tamil medium and the establishment of a teachers training institute as indicators of profit-making motives. However, the Tribunal found no concrete evidence to support the profit-making allegation. The Tribunal noted that running a Tamil medium school was commendable and providing free bus service was to attract students, not for profit. The excess income over expenditure was deemed necessary for improving school facilities. The Tribunal also dismissed the concern regarding the limited number of trustees involved in administration, stating it was a common practice for efficient management. The Tribunal directed the Commissioner to grant registration to the assessee trust under section 12AA, as the reasons provided by the Commissioner were deemed legally unsustainable. The appeal was allowed in favor of the assessee.

The judgment was delivered by Dr. O.K. Narayanan and Shri Hari Om Maratha, JJ. The order was pronounced in an open court on June 9, 2011, in Chennai.