2016 (10) TMI 849 - AT - Income Tax

Registration u/s 12AA and exemption u/s 80G denied - non charitable activities - To Promote safety and the prevention of accidents in all areas of life at work at leisure on the road, in the home and through safety education in schools, institutions work places and all other locations - Held that - DIT(E) has to satisfy himself about the object of the trust and the genuineness of its activities. From the order passed by ld. DIT(E) it is evident that she is not disputing that objects of the society are charitable in nature as she herself has said that the activities carried out by assessee were covered under fourth limb of section 2(15) viz. advancement of any other object of general public utility. At this juncture we may observe that we are not recording any findings as to under which limb of section 2(15) the assessee s activities fell, because at this juncture we have only to examine whether the activities carried on by assessee are charitable in nature or not. This is not disputed by ld. DIT(Exemption). We may also clarify that as far as ld. DIT(E) s finding regarding applicability of proviso to section 2(15) is concerned, we are not inclined to accept the same for the simple reason that assessee had received service charges from various organizations for conducting the programme and this cannot par take the character of business by any stretch of reasoning. Be that as it may, this cannot be basis for denying registration as it is nowhere so contemplated in the Act. Aassessee has filed copy of ledger account of service charges received. These service charges were mainly from big companies and, therefore, when these companies have contributed towards the programme carried out by assessee, it cannot be said that activities of assessee-society were not genuine. These companies must have sponsored only after considering their social responsibilities towards public at large. Further, we find that in paper book, assessee has also annexed various reports on its activities, which have not adversely been commented by ld. DIT(E). Photographs annexed in paper book show that various programmes were being conducted and people were listening to various speakers. Therefore, the assessee-society was carrying out the activities for which it was incorporated. Hence, genuineness of activities stands established. Thus, twin ingredients of section 12AA being satisfied, we do not find any basis for denying registration to the society and, therefore, we direct ld. DIT(E) to grant registration as the assessee fulfills the basic requirements for grant of registration u/s 12AA of the Act. As we have directed for grant of exemption u/s 12AA, we also direct for grant of registration u/s 80G as the sole basis for denying the exemption u/s 80G was not granting of registration u/s 12AA - Decided in favour of assessee

Summary

Issues involved:
Appeal against denial of registration under section 12AA and exemption under section 80G of the Income Tax Act.

Detailed Analysis:

Issue 1: Denial of registration under section 12AA and exemption under section 80G
The appellant raised 9 grounds of appeal against the order of the Director of Income Tax (E) denying registration under section 12AA and exemption under section 80G. The appellant society applied for registration under section 12A and section 80G, but the Director of Income Tax (E) required further details and documents to support the claim. The Director noted that the society was involved in activities related to road safety and fleet management. The Director observed that the society was charging fees for professional and technical services, leading to doubts about the charitable nature of the activities.

Issue 2: Nature of activities and applicability of proviso to section 2(15)
The Director rejected the claim of registration under section 12A, stating that the society failed to provide evidence of the nature of training programs conducted and the target groups. The Director relied on the decision of the Supreme Court and the Gujarat High Court to reject the claim of education and charitable activities. The Director concluded that the society's activities were in the nature of business, and the proviso to section 2(15) was attracted, leading to the rejection of the registration application.

Issue 3: Appeal and submissions
The appellant's counsel argued that the activities were charitable and educational in nature, benefiting the public at large. The counsel cited relevant case law to support the contention that the activities should be considered as education. The respondent argued that the activities did not meet the criteria of imparting education as the knowledge was not utilized by the educated individuals.

Issue 4: Tribunal's decision
The Tribunal analyzed the requirements of section 12AA, emphasizing the need for the Commissioner to satisfy himself about the genuineness of the trust's activities. The Tribunal noted that the Director did not dispute the charitable nature of the society's activities but raised concerns about the genuineness. The Tribunal disagreed with the Director's finding regarding the proviso to section 2(15) and found the activities to be genuine based on the participation of big companies and reports on the society's activities. The Tribunal directed the Director to grant registration under section 12AA and exemption under section 80G, as the society fulfilled the basic requirements.

In conclusion, the Tribunal allowed the appellant's appeal, directing the grant of registration under section 12AA and exemption under section 80G.