2025 (1) TMI 872 - AT - Income Tax

Rejection of application for grant of 12A(1)(ac)(iii) and also cancelled the provisional registration - no Charitable activity undertaken - HELD THAT - It is pertinent to note that from the perusal of the objects, it is clear that the applicant/appellant is not working for the benefit of general public at large but to the specific section of the society. The objects as per memorandum of association of the Ahmedabad Engineering Manufacturing Association submitted by the applicant/appellant. CIT(E) has rightly rejected the registration u/s.12AB of the Act. Beside this, the decision submitted by the applicant are also not identical to the present applicant s/appellant s case as in all the other cases, there was a specific object for working towards the welfare of the general public but the same is absent in the clause of the present applicant. A.R. s contention that the proviso to section 2(15) was not invoked by the CIT(A) is not proper as section 2(15) and proviso thereto is a definition clause/section and thus the same get imbibed while deciding the application for registration u/s.12AB as the charitable purpose is the definition and how to deal with the charitable institute has to be determined by section 12AB and registration of the said trust accordingly. The decision relied by the DR in case of Truck Operators Association 2010 (8) TMI 210 - PUNJAB AND HARYANA HIGH COURT is relevant to that effect. Thus, the appeal of the assessee is dismissed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the rejection of the application for registration under Section 12AB of the Income Tax Act by the CIT(Exemption) was justified.
Whether the activities and objectives of the appellant trust qualify as charitable under Section 2(15) of the Income Tax Act.
Whether the appellant trust's activities are for the benefit of the general public or limited to its members and employees.
Whether the delay in filing the appeal should be condoned due to medical exigency.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification of Rejection of Registration under Section 12AB

Relevant legal framework and precedents: The legal framework involves Section 12AB of the Income Tax Act, which pertains to the registration of charitable trusts. The precedent cited includes the decision in CIT vs. Truck Operators Association.
Court's interpretation and reasoning: The court interpreted the objectives of the appellant trust as not serving the general public but rather a specific section of society, namely its members and employees.
Key evidence and findings: The CIT(E) found that the trust's activities were primarily for the benefit of its members, not the public at large.
Application of law to facts: The court applied Section 12AB and Section 2(15) of the Income Tax Act, concluding that the trust did not meet the criteria for charitable status as its activities were not for the general public utility.
Treatment of competing arguments: The appellant argued that their activities were for the advancement of public utility, citing the decision in CIT vs. Ahmedabad Rana Caste Association. However, the court found this case not analogous to the appellant's situation.
Conclusions: The rejection of the registration application was upheld as the trust's activities did not qualify as charitable under the relevant sections of the Income Tax Act.

Issue 2: Charitable Nature of Activities under Section 2(15)

Relevant legal framework and precedents: Section 2(15) of the Income Tax Act defines charitable purposes. The precedent of CIT vs. Ahmedabad Rana Caste Association was considered.
Court's interpretation and reasoning: The court reasoned that the trust's objectives were not aligned with the definition of charitable purposes, as they primarily benefitted its members.
Key evidence and findings: The court examined the trust's memorandum of association, which indicated activities focused on its members rather than the public.
Application of law to facts: The court applied the definition of charitable purposes, finding the trust's activities did not advance general public utility.
Treatment of competing arguments: The appellant's reliance on the precedent of Ahmedabad Rana Caste Association was dismissed as not directly applicable.
Conclusions: The court concluded that the trust's activities did not qualify as charitable under Section 2(15).

Issue 3: Benefit to General Public vs. Members

Relevant legal framework and precedents: The framework includes the interpretation of charitable purposes under the Income Tax Act.
Court's interpretation and reasoning: The court interpreted the trust's objectives as serving its members, not the general public.
Key evidence and findings: The trust's activities were found to be primarily for the benefit of its members and employees.
Application of law to facts: The court applied the legal definition of charitable purposes, determining the trust's focus on members disqualified it from registration.
Treatment of competing arguments: The appellant's argument of public utility was not accepted due to the specific focus on members.
Conclusions: The trust's activities were not for the benefit of the general public, justifying the rejection of registration.

Issue 4: Delay in Filing the Appeal

Relevant legal framework and precedents: The framework involves procedural rules for condoning delays in filing appeals.
Court's interpretation and reasoning: The court found the reason for delay, a medical exigency, to be genuine.
Key evidence and findings: The appellant provided an affidavit explaining the delay due to medical reasons.
Application of law to facts: The court applied procedural rules, condoning the delay based on the evidence presented.
Treatment of competing arguments: There were no significant competing arguments against condoning the delay.
Conclusions: The delay in filing the appeal was condoned.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The objects as per memorandum of association... are not working for the benefit of general public at large but to the specific section of the society."
Core principles established: The principle that a trust's activities must benefit the general public to qualify as charitable under Section 2(15) was reinforced.
Final determinations on each issue: The court upheld the rejection of the registration application under Section 12AB, concluding the trust's activities did not qualify as charitable. The delay in filing the appeal was condoned.

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