2003 (1) TMI 263 - AT - Income Tax

Summary

Issues Involved:
1. Whether the assessee society's application for registration u/s 12A(a) of the Income-tax Act, 1961, as a charitable institution, was rightly rejected.
2. Whether the activities of the assessee society were genuinely of charitable nature.
3. Applicability of section 12AA of the Income-tax Act to the assessee's application for registration.

Summary:

Issue 1: Rejection of Application for Registration u/s 12A(a)
The assessee society's application for registration u/s 12A(a) was initially filed on 26-6-1973 and remained pending. The Commissioner of Income-tax (CIT) Haldwani rejected the application on the grounds that the society's activities were not genuinely charitable. The CIT noted that the society was primarily involved in renting out properties to educational institutions and spending the income on building extensions, repairs, and renovations, rather than on direct charitable activities.

Issue 2: Charitable Nature of Activities
The CIT observed that the society's income was mainly derived from renting properties and that only a negligible amount was spent on charity. The assessee contended that providing infrastructure to educational institutions at nominal rent and spending the income on upgrading facilities constituted charitable activities. The assessee also cited relief efforts, such as donations to Gujarat Earthquake victims, as evidence of its charitable nature. The Tribunal found that the assessee's activities, including supporting educational institutions and spending on infrastructure improvements, were indeed charitable. The Tribunal referenced case laws, including Agarwal Shiksha Samiti Trust v. CIT and Aditanar Educational Institution v. Addl. CIT, to support the view that supporting educational institutions is a charitable purpose.

Issue 3: Applicability of Section 12AA
The Tribunal concluded that the provisions of section 12AA, which came into effect from 1-4-1997, were applicable to the assessee's application. The Tribunal noted that procedural laws generally apply to pending cases, as established by the Supreme Court in CWT v. Sharvan Kumar Swarup & Sons. The Tribunal held that the CIT was justified in verifying the genuineness of the assessee's activities under section 12AA. However, the Tribunal found that the CIT had not disputed the genuineness of the assessee's objects but had only doubted the genuineness of its activities. The Tribunal determined that the assessee's activities were charitable and that the CIT should have granted registration.

Conclusion:
The Tribunal reversed the CIT's order and held that the assessee was entitled to registration u/s 12A of the Income-tax Act. The appeal was allowed, recognizing the assessee's activities as genuinely charitable and in line with its stated objects.