2010 (8) TMI 92 - HC - Income Tax

Registration u/s 12AA - Charitable - ITAT directed the Commissioner of Income tax to grant registration to the assessee - department contended that the assessee that there is no application of funds towards charitable purpose by the assessee - Held that - Requirements for registration are laid down under Section 12AA(1)(b) i.e. satisfaction as to objects of the trust or the institution and genuineness of its activities. The Commissioner has not given any valid reason for not being satisfied about the objects of the trust and genuineness of its activities - finding of the Tribunal that the assessee was a genuine Charitable Institution direction of the Tribunal for grant of registration is fully justified

Summary

Issues:
1. Whether the Income Tax Appellate Tribunal was justified in directing the Commissioner of Income tax to grant registration to the assessee despite the lack of application of funds towards charitable purpose by the assessee?

Analysis:
The appeal before the High Court involved a dispute regarding the registration of the assessee as a Charitable Institution under Section 12AA of the Income Tax Act, 1961. The Commissioner of Income Tax had rejected the application for registration on the grounds that the assessee did not receive voluntary contributions and did not carry out charitable activities during the relevant year. However, the Tribunal overturned the Commissioner's decision based on the activities and objects of the assessee, which were deemed to fall under the definition of 'charitable purposes' as per Section 2(15) of the Act. The Tribunal highlighted that the assessee, a statutory body under the Building & Other Construction Works Act, was responsible for various welfare measures for construction workers, indicating activities of general public utility.

The main contention raised by the revenue was that since the assessee did not incur any expenditure in the relevant year and did not receive voluntary contributions, registration under Section 12AA was not justified. However, the High Court disagreed with this argument. It emphasized that the satisfaction required for registration under Section 12AA(1)(b) pertains to the genuineness of the activities and the objects of the trust or institution. The Court noted that the Tribunal had provided valid reasons for considering the objects and activities of the assessee as genuine, especially given its statutory nature and the ongoing welfare activities for construction workers.

The High Court distinguished a previous judgment of the Kerala High Court cited by the revenue, stating that the case at hand involved a statutory body and not a private society. The Court also referred to a Supreme Court judgment which interpreted the scope of 'charitable purpose' under Section 2(15), emphasizing that objects promoting public welfare, even if benefiting a specific group, are considered charitable. In light of the Tribunal's finding that the assessee was a genuine Charitable Institution, the High Court upheld the Tribunal's direction for registration, concluding that no substantial question of law arose in the matter.

Therefore, the High Court dismissed the appeal, affirming the Tribunal's decision to grant registration to the assessee as a Charitable Institution under Section 12AA of the Income Tax Act, 1961.