2015 (6) TMI 752 - AT - Income Tax

Registration u/s 12A(1)(a) denied - services to the employers who were engaged in business and therefore it was hit by the proviso to section 2(15), therefore, held by the Commissioner that the assessee was not entitled to registration u/s 12A(1)(a) - Held that - As per the provisions of the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1981 that the said legislation is intended to regulate the employment of private security guards employed in factories and establishments in the State of Maharashtra for making better provisions in the terms and conditions of their employment and welfare through the establishment of the Boards. We are enumerating the clauses of the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1981 only to point out that the legislature has enacted the aforesaid statute not with the purpose of carrying out of any trade, commerce or business or any activity of rendering any services in relation to any trade, commerce or business. Ostensibly, the said objectives are for regulating the employment of private security guards employed in factories and establishments in the State of Maharashtra and for making better provision for terms and conditions of their employment and welfare. Clearly, it is a welfare measure of the Government of Maharashtra and in our view, the activities of the Board cannot be said to be falling foul of the proviso to section 2(15) of the Act, as contended by the Commissioner. The objections raised by the Commissioner are not germane to reject the assessee s plea for registration u/s 12A(1)(a) of the Act.- Decided in favour of assessee.

Summary

Issues Involved:
1. Denial of registration under Section 12A(1)(a) of the Income Tax Act, 1961.
2. Interpretation of 'charitable purpose' under Section 2(15) of the Income Tax Act, 1961.
3. Applicability of the first proviso to Section 2(15) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Denial of Registration under Section 12A(1)(a) of the Income Tax Act, 1961:
The assessee challenged the order of the Commissioner of Income Tax-I, Nashik, dated 30.09.2010, which denied the assessee registration under Section 12A(1)(a) of the Income Tax Act, 1961. The assessee, constituted under the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1981, aimed to regulate the employment and welfare of private security guards in Maharashtra. The Commissioner denied registration on the grounds that the benefits of the scheme were limited to those who paid the registration fee, suggesting that the object was not of general public utility.

2. Interpretation of 'Charitable Purpose' under Section 2(15) of the Income Tax Act, 1961:
The assessee claimed that its activities fell within the purview of Section 2(15) of the Act, defining 'charitable purpose' as advancement of an object of general public utility. The Commissioner argued that since the benefits were restricted to registered members, the activities did not serve a general public utility. However, the Tribunal referenced a similar case, Security Guards Board for Brihan Mumbai and Thane, where it was held that the objectives of the Board, as per the preamble of the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1981, were of general public utility. The Tribunal noted that the registration could not be declined based on the manner in which the objectives were pursued, as long as the activities and objectives were genuine and aligned with public utility.

3. Applicability of the First Proviso to Section 2(15) of the Income Tax Act, 1961:
The Commissioner cited the first proviso to Section 2(15) of the Act, introduced by the Finance (No.2) Act, 2009, which states that an activity involving trade, commerce, or business, or any service related to such activities, cannot be considered a charitable purpose if it involves a fee or consideration. The Commissioner argued that since the assessee collected a levy from registered companies, its activities could not be deemed charitable. The Tribunal, however, found that the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1981, was intended to regulate employment and welfare of security guards, not to carry out trade or commerce. The Tribunal emphasized that the Board's activities were welfare measures by the Government of Maharashtra and did not fall foul of the proviso to Section 2(15).

Conclusion:
The Tribunal concluded that the objections raised by the Commissioner were not valid grounds to deny the assessee's registration under Section 12A(1)(a). The Tribunal set aside the Commissioner's order and directed the registration to be granted, recognizing the assessee's activities as genuinely charitable and of general public utility. The appeal was allowed, and the order pronounced on 20th February, 2015.