2019 (2) TMI 648 - HC - Income Tax

Charitable activity - Entitlement to the benefits available under Section 12AA and Section 80G contrary to the proviso of Section 2(15) - reference to expression otherwise - Held that - Tribunal has set aside the order passed by the DIT (Exemptions) dated 30.09.2010 rejecting the claim made by the assessee for registration under Section 12AA on the ground that the activities of the assessee as contained in the Memorandum cannot be called as charitable in nature as defined under Section 2(15) of the Act. DIT in the order dated 30.09.2010 came to such a conclusion solely based on Clause xvi of the Rules and Regulations of the respondent and held that it speaks about conducting programmes for raising funds or otherwise. DIT observed that the term otherwise is vague and cannot be called as charitable purpose. Tribunal while deciding the correctness of the said order, in our considered view, rightly held that the expression otherwise has to be read along with the objects enumerated in the Rules and Regulations of the Assessee, which was found to be charitable in nature and of public cause. It would be well open to the AO to take note of the same while completing the assessment. Thus, in our considered view, the order passed by the Tribunal is perfectly legal and valid. - Decided against revenue.

Summary

Issues:
Appeal against order under Income Tax Act - Entitlement to benefits under Section 12AA and Section 80G - Interpretation of Section 2(15) of the Act.

Analysis:
The case involved appeals by the Revenue against the order of the Income Tax Appellate Tribunal regarding the entitlement of the assessee to benefits under Section 12AA and Section 80G of the Income Tax Act for the assessment year 2009-10. The substantial question of law revolved around whether the Tribunal was correct in finding that the assessee is entitled to these benefits despite the proviso of Section 2(15) of the Act. The Tribunal had set aside the order of the Director of Income Tax (Exemptions) who rejected the claim for registration under Section 12AA, citing that the activities of the assessee were not charitable as per Section 2(15) of the Act. The Director's decision was based on the clause in the Rules and Regulations of the respondent regarding fundraising activities. However, the Tribunal, after considering the charitable nature of the objects enumerated in the Rules and Regulations of the Assessee, concluded that the activities were indeed charitable and of public cause. The Tribunal's decision was deemed legally valid as the expression 'otherwise' in the clause had to be read in conjunction with the charitable objects of the assessee.

The High Court, after hearing arguments from both parties, upheld the Tribunal's decision and dismissed the appeals filed by the Revenue. The Court found that the Tribunal's interpretation of the term 'otherwise' in the context of the charitable nature of the assessee's activities was appropriate. The Court emphasized that the Assessing Officer could consider the charitable nature of the activities while completing the assessment. Consequently, the order passed by the Tribunal was deemed legally sound, and the appeals by the Revenue were rejected. The substantial question of law was answered against the Revenue, and no costs were awarded in the case.