2009 (7) TMI 94 - HC - Income Tax

Charitable Purpose Registration u/s 12AA ITAT held that the assessee carded on activity for charitable purpose in terms of section 2(15) and directed the Commissioner of Income-tax to grant registration under section 12AA of the Act to the assessee society Held that - that mere imparting education for primary purpose of earning profits cannot be said to be a charitable activity - , in the expression charitable purpose , charity is the soul of the expression - Mere trade or commerce in the name of education cannot be said to be a charitable purpose. And the Commissioner Income-tax has to satisfy himself as provided under sect 12AA of the Act before allowing the registration order of ITAT is not correct decided in favor of revenue.

Summary

Issues:
1. Review/recall of ex parte order
2. Interpretation of charitable purpose under section 2(15) of the Income-tax Act, 1961
3. Registration of society under section 12AA of the Act

Issue 1: Review/recall of ex parte order
The court allowed the application for review/recall of the ex parte order dated June 12, 2009, as the respondent claimed no knowledge of the restoration of the appeal after it was dismissed on December 3, 2008, for non-prosecution. The court heard both parties at length after recalling the ex parte order.

Issue 2: Interpretation of charitable purpose under section 2(15) of the Income-tax Act, 1961
The appeal questioned whether the Income-tax Appellate Tribunal erred in holding that the assessee carried on charitable activities under section 2(15) and directing the Commissioner of Income-tax to grant registration under section 12AA of the Act. The court analyzed the definition of "charitable purpose," including relief of the poor, education, medical relief, and advancement of general public utility. The court discussed relevant case law to determine that mere commercial activity in the name of education does not necessarily qualify as a charitable purpose.

Issue 3: Registration of society under section 12AA of the Act
The court examined the procedure for registration under section 12AA, emphasizing that the Commissioner of Income-tax must ensure the genuineness of the activities of the trust or institution seeking registration. The court held that imparting education solely for profit does not constitute a charitable activity. The court emphasized that the essence of "charitable purpose" lies in charity itself and not in commercial endeavors. Therefore, the court allowed the appeal, setting aside the Tribunal's order and restoring the Commissioner of Income-tax's decision to reject the registration of the society.

In conclusion, the court's judgment focused on the interpretation of charitable purpose under the Income-tax Act, emphasizing the need for genuine charitable activities for registration under section 12AA. The court highlighted that commercial activities in the name of education do not automatically qualify as charitable and upheld the decision to reject the society's registration based on profit-making activities.