2020 (12) TMI 563 - AT - Income Tax

Application of registration u/s.12AA rejected - charitable activity u/s 2(15) - without providing proper opportunity of hearing to the assessee and on the ground that the activities are commercial in nature - HELD THAT - Assessee filed application in Form No.10A, for registration u/s.12AA - CIT(E) has issued notices to the assessee to produce its original memorandum of association/trust deed for verification, in response to which, the assessee has filed reply on 3.9.2019. Later on also the case was posted for hearing on 11.9.2019 and ld A.R. of the assessee attended the hearing and the matter was discussed. From the above, it cannot be inferred that the assessee was not provided proper opportunity of hearing. Section 2(15) of the Income-tax Act defines charitable purpose for the purpose of the Act and includes relief of the poor education, medical relief and the advancement of any other object of general public utility. But in the present case, the assessee trust is collecting fees from different organisations towards training programme and also received rent for letting out the part premises. Nowhere, the assessee has done the work, which can be treated as charitable purposes. Hence, we dismiss the appeal of the assessee.

Summary

Issues:
Appeal against rejection of registration u/s.12AA(1)(b)(ii) of the Income tax Act, 1961 by CIT(E) on the grounds of activities being commercial in nature.

Analysis:
The appeal was filed by the assessee against the rejection of registration u/s.12AA of the Act by the CIT(E) on the basis that the activities of the assessee trust were deemed commercial. The assessee conducted various training programs for engineers, students, and unemployed youths, charging nominal fees from sponsors. The CIT(E) found that the trust collected fees for training programs and rented out premises, indicating commercial activities not aligned with charitable purposes as per the trust deed.

During the hearing, the assessee argued that proper hearing opportunities were not provided and that the training programs were conducted as per government syllabus, justifying the nominal fees charged. The CIT DR contended that adequate opportunities were given, and the trust's activities, including fee collection and renting out premises, were commercial in nature, not charitable.

The Tribunal noted that the CIT(E) had issued notices, received responses, and held hearings, providing sufficient opportunity for the assessee. The CIT(E) concluded that the trust's activities were commercial, favoring the trustee's company, and not in line with the charitable objects specified in the trust deed. The correspondence with organizations showed fee collection for training and rent received for premises, supporting the CIT(E)'s decision.

Section 2(15) of the Income-tax Act defines charitable purposes, including relief of the poor and education. However, the trust's fee collection for training and rental income did not align with charitable purposes. Consequently, the Tribunal upheld the CIT(E)'s decision to reject the registration application, dismissing the appeal of the assessee.

In conclusion, the Tribunal affirmed the rejection of registration u/s.12AA of the Act due to the trust's activities being deemed commercial, not charitable, as evidenced by fee collection for training programs and rental income. The decision was based on the inconsistency between the trust's actions and the charitable objects specified in the trust deed.