2006 (11) TMI 93 - HC - Income Tax

Charitable purpose - Assessee was a trust the object of which was promotion of local business in silver, gold and ornaments and protection of the legitimate rights of businessman - Matter remanded for reconsideration of the details

Summary

Issues Involved:
1. Rejection of the application for registration under section 12A of the Income-tax Act, 1961.
2. Definition and interpretation of "charitable purpose" under section 2(15) of the Income-tax Act.
3. Compliance with procedural requirements under section 12A(a) of the Income-tax Act.

Detailed Analysis:

1. Rejection of the application for registration under section 12A of the Income-tax Act, 1961:
The petition was filed against the order by the Commissioner of Income-tax, Bhopal, which rejected the application for registration of the association under section 12A of the Income-tax Act, 1961. The trust was created on May 17, 1976, and the application for registration was made on July 2, 1998. The Commissioner held that the claim for registration under section 12A read with section 2(15) was not acceptable, leading to the rejection of the application.

2. Definition and interpretation of "charitable purpose" under section 2(15) of the Income-tax Act:
The court examined whether the petitioner-association's objectives fell under the term "charitable purpose" as defined in section 2(15) of the Act. The definition includes "relief of the poor, education, medical relief, and the advancement of any other object of general public utility." The court noted the inclusive nature of this definition and referenced the Supreme Court's interpretation in CIT v. Bar Council of Maharashtra, which emphasized that the advancement of any other object of general public utility should not involve the carrying on of any activity for profit. The court also referenced the amendment effective from April 1, 1984, which omitted the phrase "not involving the carrying on of any activity for profit."

3. Compliance with procedural requirements under section 12A(a) of the Income-tax Act:
The court highlighted that the Commissioner of Income-tax is obliged under section 12A(a) to call for necessary documents or information to satisfy himself about the genuineness of the activities of the trust or institution. The Commissioner should have examined the deed as a whole and considered the various balance-sheets on record. The court found that the Commissioner did not exercise this power adequately, as he did not provide the petitioner an opportunity to establish the genuineness of its activities.

Conclusion:
The court found that the Commissioner's order was unsustainable in law due to the failure to exercise the power under section 12A(a) by calling for requisite information and making necessary inquiries. The impugned order was quashed, and the Commissioner was directed to reconsider the application for registration under section 12A, providing both the petitioner and the Income-tax Department an opportunity to present relevant material. This exercise was to be completed within three months from the receipt of the certified copy of the order. The petition was disposed of accordingly.