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2021 (5) TMI 661 - AT - Income TaxDenial of registration u/s 12A(a) - proof of charitable activity u/s 2(15) - CIT(E) rejected the claim of the assessee is mainly that the purpose for which the society was formed is for the benefit of specific group of professionals and to carter their specific purpose which do not come under the definition of section 2(15) - whether the ld.CIT(E) is correct in rejecting the application of the assessee-society seeking registration under section 12AA of the Income Tax Act 1961 ? - HELD THAT - While going through the contents of bye-laws of the society filed by the assessee it interalia provide that the society was established for the welfare construction and allotment of chambers in the District Court Complex Barnala for the members District Bar Association Barnala. It further provides that all the incomes earnings whatsoever derived shall be solely utilized and applied towards the promotion of its aims and objectives only as set forth in the memorandum of association and that the society will work on no profit and no loss basis. Bye-laws also provide social welfare activities such as growing of trees for environments de-addiction drug campaign welfare of girl child and also provide legal awareness among the general public. The dominant purpose of assessee-society is to provide infrastructure facilities to its members which are necessary to ensure quality service of lawyers to the litigating public to spread legal literacy promote law reforms and provide legal assistance to the litigants. While considering the application of the assessee for grant of registration it appears that the ld.CIT(E) has not appreciated these very vital objects. He simply carried by the assumption that since society was formed for construction of building for its members benefits of which only restricted to the members and not to the general public at large. It is settled proposition of law that for the purpose of registration u/s 12AA of the Act the threshold condition i.e. genuineness of the activities is to be decided with the object clause of institution. Hon ble Apex Court in case of CIT vs. Andhra Chamber of Commerce 1964 (10) TMI 19 - SUPREME COURT held that an object beneficial to a section of the public was an object of general public utility as in the case of assessee which is working to control supervise and regulate a profession for the benefit of lawyers community at large. Thus it is clear that the primary or dominant purpose of an institution like the assessee society is in the form of advancement of the object of general public utility within the meaning of s. 2(15) of the Act and as such the assessee society would be entitled to registration under section 12AA of the Act. We direct the ld.CIT(E) to grant registration to the assessee under section 12AA - Decided in favour of assessee.
Issues Involved:
1. Whether the CIT (Exemptions) was correct in rejecting the application filed by the assessee seeking registration under section 12A(a) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Rejection of Application for Registration under Section 12A(a): The assessee, a society formed by lawyers of the District Bar Association, Barnala, sought registration under section 12AA of the Income Tax Act, 1961. The society's objectives included constructing chambers for its members, environmental protection, drug addiction prevention, girl child education, and spreading legal awareness among the public. The application was filed in Form No. 10A on 12.1.2019. The CIT (Exemptions) requested various information to verify the genuineness of the activities as per section 12AA. Upon review, the CIT (Exemptions) concluded that the society's main activity was constructing and allotting chambers to its members, benefiting only the members of the District Bar Association and not the general public. Additionally, no expenditure on charitable activities was recorded for the year ending 31.3.2019. Consequently, the CIT (Exemptions) rejected the application, holding that the genuineness of the activities could not be established and that no expenditure was incurred for activities of general public importance. 2. Assessee's Argument: The assessee's counsel argued that the society's activities fell under the "advancement of any other general public utility" as per section 2(15) of the Act. The society aimed to provide better infrastructure for lawyers, maintain court facilities, promote environmental protection, conduct drug de-addiction campaigns, educate needy girl children, and spread legal awareness. The counsel cited the ITAT Delhi Bench's decision in Advocate Welfare Fund Trustee Committee Vs. CIT (Exemption) and the Hon'ble Apex Court's decision in Ahmedabad Rana Caste Association Vs. CIT, asserting that safeguarding the rights and interests of advocates amounted to the advancement of general public utility. The society operated on a no-profit, no-loss basis, and the CIT (Exemptions) erred in ignoring these vital factors. 3. Revenue's Argument: The Revenue's representative supported the CIT (Exemptions)'s order, arguing that the society was formed for the benefit of a specific group of professionals and did not fall within the scope of "advancement of any other objects of general public utility." Therefore, the society was not entitled to registration under section 12AA. 4. Tribunal's Analysis: The Tribunal considered the rival submissions and reviewed the records and case laws. It emphasized the importance of understanding the scheme of the Income Tax Act for charitable institutions, particularly sections 2(15) and 12AA. Section 2(15) defines "charitable purpose" and includes the advancement of any other object of general public utility, provided it does not involve trade, commerce, or business for profit. Section 12AA outlines the procedure for granting registration, requiring the Commissioner to verify the genuineness of the activities and compliance with relevant laws. 5. Tribunal's Conclusion: The Tribunal noted that the CIT (Exemptions) rejected the application based on the society's benefit to a specific group of professionals. However, the society's bye-laws indicated broader objectives, including legal literacy, law reforms, and legal assistance to the public. The Tribunal cited the Hon'ble Apex Court's decision in CIT vs. Andhra Chamber of Commerce, which held that an object beneficial to a section of the public was an object of general public utility. The Tribunal also referenced the Hon'ble Kerala High Court's decision in Sree Anjaneya Medical Trust vs. CIT, emphasizing that the relevance of the objects and application of funds should be considered at the assessment stage. The Tribunal concluded that the CIT (Exemptions) failed to appreciate the society's vital objects and misconstrued its purpose. The primary purpose of the society was the advancement of general public utility, entitling it to registration under section 12AA. 6. Final Decision: The Tribunal directed the CIT (Exemptions) to grant registration to the assessee under section 12AA of the Income Tax Act, 1961. The appeal of the assessee was allowed. Order Pronounced: The order was pronounced in the Court on 18th May 2021 at Chandigarh.
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