2019 (5) TMI 770 - AT - Income Tax

Exemption u/s 11 - Registration and approval u/s 12AA and 80G denied - applicant company has been established to comply with the CSR obligations thus no charitable activities u/s 2(15) - HELD THAT - Merely because of the fact that the applicant company has been established to comply with the CSR obligations, the registration u/s 12AA cannot be denied, particularly when CSR activities are also charitable activities as defined under the Act. See PROCESS-CUM-PRODUCT DEVELOPMENT CENTRE, MEERUT VERSUS ADDL. CIT, CIRCLE 2, MEERUT 2019 (2) TMI 1129 - ITAT DELHI Following the decision in case cited as Nanak Chand Jain Charitable Trust vs. CIT (2018) 2018 (2) TMI 874 - ITAT DELHI and CIT vs. IILM Foundation Academy 2016 (9) TMI 920 - PUNJAB AND HARYANA HIGH COURT we are of the considered view that imparting skill development training , by the applicant company which is also a flagship project of the Government of India for sustaining its growth rate and to create the pool of skill worker to further enhance its growth and development is a charitable activity following within the definition education u/s 2(15) entitling the applicant company for registration u/s 12AA of the Act and consequent approval u/s 80G of the Act, hence both the appeals filed by the applicant company are allowed directing the CIT (E) to provide registration u/s 12AA to the assessee and grant consequent approval u/s 80G of the Act. - Decided in favour of assessee.

Issues Involved:
1. Rejection of application for registration under Section 12A of the Income-tax Act, 1961.
2. Rejection of application for approval under Section 80G of the Income-tax Act, 1961.

Detailed Analysis:

Issue 1: Rejection of Application for Registration under Section 12A

The appellant, a company registered under Section 8 of the Companies Act, 2013, sought registration under Section 12AA of the Income-tax Act, 1961. The Commissioner of Income-tax (Exemptions) [CIT (E)] rejected the application on the grounds that the company was formed primarily to fulfill the Corporate Social Responsibility (CSR) obligations of its parent company and that its activities did not qualify as public charitable activities. The CIT (E) argued that the company’s activities were restricted to the benefit of the parent company and did not extend to the general public, thus not meeting the criteria for a public charitable company.

The Tribunal observed that the applicant company was established with charitable objects, such as providing vocational training, which falls under the definition of charitable activities under Section 2(15) of the Income-tax Act. The Tribunal noted that the company had been actively involved in skill development programs, partnering with National Small Industry Corporation, and had trained and certified numerous trainees. The Tribunal emphasized that CSR activities are recognized as public charitable activities and that the mere fact that the company was fulfilling CSR obligations did not disqualify it from being granted registration under Section 12AA.

The Tribunal concluded that the CIT (E) had erred in rejecting the application based on assumptions and presumptions without appreciating the genuine charitable activities conducted by the appellant. The Tribunal directed the CIT (E) to grant registration under Section 12AA to the appellant company.

Issue 2: Rejection of Application for Approval under Section 80G

The appellant also sought approval under Section 80G of the Income-tax Act, which provides tax benefits for donations made to charitable institutions. The CIT (E) rejected this application as well, citing the same reasons for rejecting the Section 12AA registration. The CIT (E) contended that the company’s activities were primarily aimed at fulfilling the CSR obligations of its parent company and did not qualify for further tax exemptions.

The Tribunal reiterated that the appellant’s activities, including vocational training and skill development, were charitable in nature and aligned with the objectives defined under Section 2(15) of the Income-tax Act. The Tribunal referenced previous decisions, including those of the High Court of Punjab & Haryana and other Tribunal rulings, which supported the view that skill development training constitutes charitable activities.

The Tribunal held that the CIT (E) had failed to appreciate the factual and legal position regarding the appellant’s activities and had wrongly rejected the application for approval under Section 80G. The Tribunal directed the CIT (E) to grant the approval under Section 80G to the appellant company.

Conclusion:

The Tribunal allowed both appeals filed by the appellant company, directing the CIT (E) to grant registration under Section 12AA and approval under Section 80G of the Income-tax Act. The Tribunal underscored that CSR activities are inherently charitable and that the appellant’s vocational training programs qualified as charitable activities deserving of the requested tax exemptions.

← Previous Next →