2016 (5) TMI 1264 - HC - Income Tax

Registration under Section 12AA cancelled - existence of Charitable purpose - Held that - Charitable purpose, under Section 2(15) of the Act, is defined to include education. The order of the D.I.T.(E) records that the Society has been sponsoring diploma course in banking sections with the Osmania University and full-fledged post-graduate course-M.Tech. (Information Technology) with specialisation in banking technology and information security with costs with the University of Hyderabad. Sponsoring educational courses would fall within the ambit of education as defined under Section 2(15) of the Act. Merely because education is provided at cost does not result in the Society ceasing to carry on its activities for a charitable purpose. There is no material on record, nor has any finding been recorded by the D.I.T (E) referring to particular instances, to hold that the respondent-assessee was carrying on its educational activities with a profit motive or on commercial lines. The Tribunal has rightly held that the reasons assigned by the D.I.T.(E), in cancelling registration of the respondent-assessee, was vague and without reference to any particular instance.

Issues involved:
1. Registration of a charitable institution under Section 12AA of the Income-Tax Act, 1961.
2. Validity of cancellation of registration by the Director of Income Tax (Exemptions).
3. Interpretation of Section 2(15) of the Act regarding charitable activities.
4. Jurisdiction of the Tribunal in reviewing decisions of the Director of Income Tax.

Detailed Analysis:
1. The appeal was filed by the revenue against the order of the Income Tax Appellate Tribunal regarding the registration of a charitable institution under Section 12AA of the Income-Tax Act, 1961. The Tribunal found that the assessee had applied for registration in 1997, but the registration was granted only from 2004. The Tribunal further noted that there were no specific instances to suggest that the assessee was not genuine or not operating in accordance with its charitable objectives. The Tribunal held that the cancellation of registration by the Director of Income Tax was unjustified and annulled the order.

2. The Director of Income Tax had cancelled the registration of the respondent-assessee based on the grounds that the institution was engaging in commercial activities and not solely charitable endeavors. However, the Tribunal found that the activities of the institution, such as sponsoring educational courses and conducting research, fell within the ambit of charitable purposes as defined in Section 2(15) of the Act. The Tribunal concluded that the reasons given by the Director for cancellation were vague and lacked specific instances to support the decision.

3. The respondent-assessee argued that their educational institution was established to promote Information Technology studies and research in the banking sector, with a focus on charitable objectives. The Tribunal agreed with the respondent's position and emphasized that providing education, even at a cost, did not negate the charitable nature of the institution's activities. The Tribunal highlighted that there was no evidence to suggest profit motives or commercial operations in the educational endeavors of the institution.

4. The High Court, in its judgment, reiterated the principle that the Tribunal is the final authority on facts, and interference is warranted only in cases of perverse findings or lack of evidence. The Court found no substantial question of law arising from the appeal and dismissed it accordingly. The Court did not delve into the scope of the amended Section 2(15) of the Income Tax Act or its provisos, as it deemed unnecessary based on the facts of the case.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing the charitable nature of the institution's activities and dismissing the appeal against the cancellation of registration by the Director of Income Tax.

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