2016 (7) TMI 831 - AT - Income Tax

Registration u/s 12AA denied - non charitable activity - Held that - From the material placed before us we find that the assessee is not carrying out any charitable activity as per the Trust Deed except running play school by collecting a fee. Even otherwise there is nothing on record to show that the assessee is carrying out charitable activities as per its Trust Deed. The assessee trust deed has contained one of the object that to help the orphan and destitute children. We find that the assessee has not admitted single orphan or destitute in its play school. The assessee trust has not admitted any student without collecting fee as prescribed by it. In view of the above in our opinion it is not a charitable activity. That apart the assessee play school neither recognized by the State Government nor recognized by the Central Government or any authority. Therefore the assessee s activity of running play school cannot be said that it is a formal education. In view of the above we are of the opinion that the assessee is not entitled for registration u/s 12AA of the Act - Decided against assessee

Summary

Issues:
1. Eligibility for registration u/s 12AA of the Income Tax Act based on the activities of a society formed for imparting education.

Analysis:
The appeal before the Appellate Tribunal ITAT VISAKHAPATNAM revolved around the eligibility of a society for registration under section 12AA of the Income Tax Act, 1961. The society in question was registered under the Societies Registration Act and had applied for registration u/s 12AA with the objective of imparting education through various activities, including running a play school. The Commissioner had rejected the registration, stating that the play school activities did not amount to formal education and were not charitable in nature. The Tribunal examined the Trust Deed and found that while the society claimed to help destitute children and engage in charitable activities, the only activity being carried out was running a play school where students were admitted by paying fees set by the society. The Tribunal noted that no destitute or orphan children were admitted, and no charitable activities as per the Trust Deed were evident. Additionally, the play school was not recognized by any government authority, leading the Tribunal to conclude that the society's activities did not qualify as charitable and educational in the formal sense. Consequently, the Tribunal upheld the Commissioner's decision to deny registration u/s 12AA, resulting in the dismissal of the appeal.

This judgment underscores the importance of aligning the actual activities of an organization with its stated charitable objectives when seeking registration under the Income Tax Act. Merely running an educational institution, such as a play school, may not suffice if the activities do not meet the criteria of formal education and charitable endeavors as defined by the law. The decision highlights the need for organizations to demonstrate tangible charitable actions beyond fee-based services to qualify for tax benefits and exemptions under relevant provisions.