2018 (9) TMI 1097 - HC - Income Tax

Registration u/s 12AA denied - assessee trust is not a charitable organization, as the Trust has not fulfilled the conditions laid down for registration in Section 12AA - ITAT allowed claim - Held that - We are in broad agreement with the view of the Tribunal. We have noted existing objects as well as those which were added by an amendment in the trust deed. The objects in the original trust deed were sufficiently wide and cover range of charitable activities relateable to education, medical aid and help to poor in times of calamities. The existing objects would have enabled the Trust to support the diagnostic center as long as it was done for charitable purpose. The amended objects clarify that such center would be run on no charge, or at any rate on no profit basis. It is difficult to see how the Commissioner thought such center would be a commercial venture. - Decided against revenue

Summary

Issues:

1. Registration of a trust under Section 12AA of the Income Tax Act, 1961.
2. Validity of amendments made to the trust deed.
3. Interpretation of charitable objects of the trust.
4. Consideration of running a diagnostic center as a charitable activity.

Analysis:

1. The respondent, a registered public trust, applied for and obtained registration under Section 12A of the Income Tax Act, 1961. The Commissioner proposed to cancel the registration, citing that the trust had not fulfilled the conditions laid down for registration in Section 12AA of the Act. The Commissioner believed that the trust's objects had been mutilated by amendments made to the trust deed, specifically to include provisions for running a medical diagnostic center.

2. The trust deed initially had eleven clauses covering various charitable activities such as education, research, relief to the poor, and medical aid. The trust deed allowed for amendments as long as they were for public charitable purposes. Subsequent amendments included provisions for providing medical, diagnostic, family welfare, and general health facilities without discrimination, and for acquiring medical equipment to run a diagnostic treatment center. The Commissioner contended that these amendments deviated from the original charitable objects.

3. The Tribunal, in appeal, disagreed with the Commissioner's assessment. They considered the non-communication of the trust deed amendments as a mere irregularity not warranting cancellation of registration. The Tribunal held that the existing objects of the trust were broad enough to encompass the purpose of running a diagnostic center for charitable reasons. They also emphasized that the trust's intention to operate the center on a no-charge or no-profit basis aligned with charitable objectives.

4. The High Court concurred with the Tribunal's view, noting that the original trust deed's objects already covered a wide range of charitable activities related to education, medical aid, and disaster relief. The Court found that the amendments did not alter the charitable nature of the trust's activities but rather clarified the provision of medical services on a charitable basis. The Court dismissed the Tax Appeal, affirming the Tribunal's decision to uphold the trust's registration and charitable status.