2017 (3) TMI 323 - AT - Income Tax

Registration u/s 12AA - proof of charitable activities u/s 2(15) - assessee society organizes workshop/various courses in its Institute for imparting training to the officials large in number - Held that - The objective of the assessee institute of imparting correctional administration training only serves to strengthen the criminal justice system in the country and make it more effective. By imparting training to concerned officers in correct administration, it ensures besides other thing that convicts when released are equipped to merge themselves in the main stream of the society and become contributing members rather than disturbing elements. This for all purpose serves the larger interest of the society/general public and can be nothing else but a public utility service. The fact that people have been awarded the Ramon Magsaysay award for government service including human prison reforms outlines the public utility of correctional system. The assessee, therefore, rightly contended that the holistic intervention implies comprehensive understanding of the root cause of criminality and corresponding mode of treatment leading to provision of after care for rehabilitation. The prisoner coming to main stream of society is relevant and benefit of general public and society. The imparting of training in Correctional Administration to all officials of prison/police/judicial department would ultimately benefit the prisoners to change their attitude and behaviour so that they can be re-habilitated in society on completion of their sentence. Ultimately, the consumer of this training provided to the officers of Correctional Administration would be initially the prisoners who are part of the society and ultimately general public of society. The training would promote the welfare of general public. The objects of the assessee are to promote welfare of general public which would be charitable in nature. Therefore, the primary purpose and the predominant object of assessee society are to promote the welfare of general public, the purpose would be charitable purpose. Assessee is entitled for registration under section 12AA of the Act. - Decided in favour of assessee.

Summary

Issues Involved:
1. Rejection of the application for registration under section 12AA of the Income Tax Act.
2. Assessment of income and treatment of grants received from the Ministry of Home Affairs.

Issue-wise Detailed Analysis:

1. Rejection of the application for registration under section 12AA of the Income Tax Act:

The assessee society filed an application for registration under section 12A of the Income Tax Act on 01.04.2013, which was rejected by the CIT-II, Chandigarh. The CIT's main contention was that the society's activities, which involved imparting training to government officers, did not qualify as charitable activities under section 2(15) of the Act. The CIT held that the society's activities could not be categorized as an object of general public utility since they were aimed at government officials performing their official duties, and thus, no charity was involved.

The assessee argued that its activities were of general public utility as they aimed to improve the correctional administration and rehabilitation of prisoners, which ultimately benefited society. The society's objectives included training in correctional administration, promoting the study of correctional administration, and cooperating with approved institutions for the cause of correctional administration.

The Tribunal noted that the genuineness of the assessee's activities was not doubted by the CIT. The Tribunal emphasized that the term "general public utility" is broad and includes activities that benefit a section of the public. The Tribunal referred to various judicial precedents, including the Supreme Court's interpretation of "general public utility," and concluded that the assessee's activities fell within the ambit of this term. The Tribunal also noted that similar institutions, like the Technical Teachers Training Institute, had been granted registration under section 12AA.

The Tribunal held that the objects of the assessee society were charitable in nature and for the advancement of any other object of general public utility as defined under section 2(15) of the Act. Consequently, the Tribunal directed the CIT to grant registration to the assessee under section 12A/12AA from the date the application was filed or any earlier date as per law.

2. Assessment of income and treatment of grants received from the Ministry of Home Affairs:

The assessee appealed against the order of the CIT(A), Chandigarh, for the assessment year 2010-11, challenging the assessment of income at ?1,04,78,183/- instead of ?38,33,687/- as per the Income & Expenditure Account. The assessee contended that the grants received from the Ministry of Home Affairs were not voluntary contributions but were provided for specific projects, and thus, should not be considered as income.

The CIT(A) accepted the assessee's contention and held that the assessable income should be the excess amount of income over expenditure, which was ?38,33,687/-. However, since the assessee did not have an effective registration under section 12AA for the assessment year in question, the Assessing Officer did not grant exemption under section 11 of the Income Tax Act.

The Tribunal noted that the issue required reconsideration at the level of the Assessing Officer, especially in light of the fact that the registration under section 12AA was granted from a later date. The Tribunal set aside the orders of the authorities below and remanded the matter to the Assessing Officer to reconsider the grounds raised by the assessee, giving reasonable opportunity of being heard.

Conclusion:

The Tribunal allowed the appeal regarding the registration under section 12AA, directing the CIT to grant registration from the date of application or any earlier date as per law. The issue of assessment of income and treatment of grants was remanded to the Assessing Officer for reconsideration, allowing the assessee an opportunity to present its case.