2019 (12) TMI 1115 - HC - Income Tax

Exemption u/s 11 - Entitled to the registration u/s 12AA - claim of assessee that it was an alumni association of a school and was set up for charitable purposes and was therefore entitled to the exemption under Section 12AA - assessee placed on record an order under Section 12 A(a) in respect of the main school which had been granted about 15 years ago - HELD THAT - Arguments of both counsel are too extreme. It cannot be said that the certification in favour of the school is entirely irrelevant nor can it be said that merely because the school got a certificate under Section 12A(a) the alumni association would also be entitled to exemption as of right. In the circumstances, what the Tribunal has done cannot be said to be illegal. The Tribunal has not reversed any finding of the Commissioner but has merely asked the Commissioner to consider another document, the relevancy and importance of which would be determined by the Commissioner himself. Moreover, it is also not disputed that when the original application was filed by the respondent it was a fledgling organization. Today another 2-3 years have passed and therefore, the Commissioner would have the benefit of seeing the records of the respondent to verify whether it does indeed meet the test of Section 12AA or not. In sum and substance, therefore, we do not deem it appropriate to interfere with the order.

Summary

Issues:
Interpretation of Section 12AA for exemption eligibility based on charitable purposes.

Analysis:
The appeal under Section 260A of the Income Tax Act, 1961 was filed against the order of the Income Tax Appellate Tribunal. The respondent, an alumni association of a school, claimed exemption under Section 12AA for charitable purposes. The Commissioner initially rejected the application, but the Tribunal sent the case back for reconsideration based on an order under Section 12A(a) for the main school. The appellant argued that the Commissioner's order was legal and the school's certification was irrelevant, while the respondent contended that the alumni association should be entitled to exemption due to the school's charitable status.

The High Court opined that both arguments were extreme. It was acknowledged that the school's certification was not entirely irrelevant, but it did not automatically entitle the alumni association to exemption. The Tribunal's action of requesting the Commissioner to re-examine the case was deemed legal. The Court noted that the Commissioner could now assess the respondent's records to determine compliance with Section 12AA, considering the organization's growth since the initial application. Ultimately, the Court decided not to interfere with the Tribunal's order and dismissed the appeal, leading to the disposal of any pending applications related to the case.