2018 (2) TMI 600 - AT - Income Tax

Registration u/s 12AA denial - assessee authority is not an institution working for charitable purpose, since it was carrying on activities of commercial nature with the motive to make profit - Held that - The activities of the authority were carried out with profit motive but not with the pre-dominant object of welfare of the people at large within the meaning of newly introduced proviso to section 2(15) hence not applicable to the present case i.e. the assessee authority. We hold that the assessee authority has been created with the object of general public utility which is a charitable object within the meaning of Section 2(15) and the proviso to Section 2(15) is not applicable because assessee authority is not carrying out activities with any profit motive but the pre-dominant object is welfare of the people at large. Therefore, the CIT is directed to grant registration u/s 12AA of the Act to the assessee authority. - Decided in favour of assessee

Issues Involved:
1. Condonation of Delay in Filing Appeal
2. Interpretation of Section 2(15) of the Income Tax Act, 1961
3. Eligibility for Registration under Section 12A of the Income Tax Act, 1961

Detailed Analysis:

1. Condonation of Delay in Filing Appeal:
The assessee requested for condonation of a 70-day delay in filing the appeal. The delay was attributed to an error in the office of the tax consultant, who misplaced the appeal documents due to being occupied with a family function and the concurrent filing of income tax returns. The tribunal found the reasons for the delay satisfactory and condoned the delay, admitting the appeal for disposal on merits.

2. Interpretation of Section 2(15) of the Income Tax Act, 1961:
The CIT(A) rejected the application for registration under Section 12A based on the proviso inserted to Section 2(15) by the Finance Act, 2008. The CIT(A) concluded that the assessee's activities were commercial in nature with a profit motive, which did not qualify as charitable purposes under the amended definition. The tribunal, however, referred to various judicial pronouncements and the CBDT Circular No. 11/2008, clarifying that merely charging fees does not invoke the proviso to Section 2(15). The tribunal emphasized that the intention behind the activities should not be profit-oriented but philanthropic.

3. Eligibility for Registration under Section 12A of the Income Tax Act, 1961:
The tribunal examined whether the assessee authority, constituted under the U.P. Urban Planning and Development Act, 1973, could be considered an institution created wholly for charitable purposes. The tribunal noted that similar development authorities had been granted registration under Section 12A. The tribunal found that the assessee's activities primarily aimed at public welfare, such as providing housing and developing infrastructure, aligned with the definition of "charitable purpose" under Section 2(15). The tribunal cited the Allahabad High Court's decision in the case of Lucknow Development Authority, which held that statutory bodies with objectives of public utility could be treated as charitable institutions.

The tribunal concluded that the assessee authority was created with the object of general public utility, which is a charitable object within the meaning of Section 2(15). The proviso to Section 2(15) was deemed inapplicable as the assessee's activities were not profit-motivated but aimed at public welfare. Consequently, the tribunal directed the CIT to grant registration under Section 12AA to the assessee authority.

Conclusion:
The appeal was allowed, and the tribunal directed the CIT to grant registration under Section 12AA of the Income Tax Act, 1961, to the assessee authority. The judgment emphasized the importance of the intention behind the activities and the alignment with public welfare objectives in determining eligibility for charitable status.

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