2012 (11) TMI 947 - AT - Income Tax

Registration u/s 12AA - charitable activity - genuineness of the activities of the assessee-society -Society receives application from the common citizen for various services on behalf of the departments of State Govt, forwards the same to the concerned department and deliver back the same to the citizen within a specified time frame. The Society is charging prescribed fee from the citizen for providing services. - Held that - After going through the aforesaid balance sheets as well as Income & Expenditure accounts of the assessee for the last three yeas, we have not found any expenditure incurred by the Society on charitable as well as public utility work. Almost all the expenditure has been incurred by the Society on printing and stationery, salary to their employees, Bank expenditure, Computer repair, Audit fee, Electricity Bill, Telephone, Electric repair, traveling, misc. expenditure, postage etc. Merely, mentioning about various objects in the nature of charitable activities in the Memorandum of Association, does not mean that the Society is doing any charitable activities for the general public utility and is entitled for registration under section 12AA of the Act. According to section 12AA of the Act, the Commissioner on receipt of application for registration of a trust or institution has to satisfy himself about the genuineness of activities of the trust or institution. The activities of the assessee-society are not charitable in nature within the meaning of provisions of section 2(15) of the Act and it does not qualify to treat as charitable institution. Since the assessee has not established that its society is formed with objects of any charitable purpose, then the question of discussion of citations relied upon by the Society does not arise. The present society is doing its business and charging huge fees from the public which is in addition to the prescribed fee of the Punjab Govt. Even otherwise, the fees charged by the present society is in addition to the burden forced upon the common-man. Because of this service has to be rendered by the Punjab Govt. free of cost to the public against the fee prescribed in the chart - Decided against the assessee.

Issues Involved:
1. Application for registration under section 12AA of the Income-tax Act, 1961.
2. Verification of genuineness of the Society's activities.
3. Nature of the Society's activities - commercial vs. charitable.
4. Recommendations by the Assessing Officer and Joint Commissioner.
5. Charges levied by the Society for services provided.
6. Examination of financial statements and expenditures.
7. Compliance with the provisions of section 2(15) of the Income-tax Act.
8. Legal precedents and their applicability.

Issue-wise Detailed Analysis:

1. Application for registration under section 12AA of the Income-tax Act, 1961:
The Sukhmani Society for Citizen Services applied for registration under section 12AA on 30.03.2011. The Commissioner of Income Tax (CIT), Bathinda, called for the Society's books of account and other relevant documents to verify the genuineness of its activities. The application was referred to the ITO Ward 1(4), Mansa, who reported that the Society failed to produce the books of account, making it impossible to verify the genuineness of its activities. Consequently, the Assessing Officer (AO) did not recommend the Society for registration.

2. Verification of genuineness of the Society's activities:
The CIT, Bathinda, examined the Society's activities and financial records. The Society's authorized representative attended the proceedings and provided the requisite information. However, the AO's report indicated that the Society did not produce the books of account, leading to a negative recommendation.

3. Nature of the Society's activities - commercial vs. charitable:
The CIT, Bathinda, reviewed the Society's income and expenditure, concluding that the activities were commercial rather than charitable. The Society was found to be earning significant profits, charging fees for various services, which indicated a commercial nature aimed at deriving profit rather than serving a charitable purpose.

4. Recommendations by the Assessing Officer and Joint Commissioner:
The AO's report, endorsed by the Joint Commissioner, stated that the Society failed to produce the books of account, making it impossible to verify the genuineness of its activities. Based on this, the CIT, Bathinda, rejected the Society's application for registration under section 12AA.

5. Charges levied by the Society for services provided:
The Society charged fees for various services, such as Rs.1000 for issuing NOC for petrol pumps, Rs.500 for marriage registration, and Rs.500 for NOC on building plans. These charges were in addition to the statutory fees charged by the State Government. The CIT, Bathinda, viewed these charges as indicative of commercial activities rather than charitable services.

6. Examination of financial statements and expenditures:
The Society's balance sheets and income & expenditure accounts for the years ending 31.03.2009, 31.03.2010, and 31.03.2011 were examined. The expenditures were primarily on administrative costs like salary, printing, stationery, and utilities, with no significant expenditure on charitable or public utility work. This supported the conclusion that the Society's activities were commercial.

7. Compliance with the provisions of section 2(15) of the Income-tax Act:
The CIT, Bathinda, concluded that the Society's activities did not qualify as charitable under section 2(15) of the Act, which defines charitable purpose as including relief of the poor, education, medical relief, and advancement of any other object of general public utility. The Society's activities were found to be commercial, aimed at profit-making, and not for public utility.

8. Legal precedents and their applicability:
The Society cited several legal precedents to support its case for registration under section 12AA. However, the CIT, Bathinda, found these precedents inapplicable as the Society failed to demonstrate that its activities were charitable in nature. The judgments cited were different from the facts of the present case and did not support the Society's claim for registration.

Conclusion:
The Tribunal upheld the CIT, Bathinda's order, concluding that the Society's activities were commercial and not charitable. The appeal filed by the Society was dismissed, and the request for registration under section 12AA was denied. The Tribunal emphasized that the Society's activities did not qualify as charitable within the meaning of section 2(15) of the Act, and the fees charged by the Society were an additional burden on the public, which should have been provided free of cost by the State Government.

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