2018 (6) TMI 607 - AT - Income Tax

Denial of registration u/s 12AA - object of Trust is for educational purposes - charitable nature of trust u/s 2(15) - whether assessee s activity will fall within the last limb of charitable purpose which is advancement of general public utility? - Held that - Imparting financial education to the general public through programmes sponsored by Goldman Sachs, ICICI, Tata, Reliance Life etc, will clearly show that pursuing such object would not come within the meaning of education . In fact none of the objects as contained in the main object clauses of the MOA, will fall within the meaning of education - assessee was not collecting any fees from any of the participants but admittedly, it was collecting substantial amount as sponsorship fees from various sponsors. Further, almost all of these sponsors were from private sector and not from any Department of Government. Since assessee s activity was imparting financial skills, through programme sponsored by various companies and this in our opinion was nothing but rendering services in relation to trade, commerce or business carried on by such companies - also just because assessee was registered u/s 25 of the Companies Act, 1956 would not ipso facto make it eligible for registration u/s 12AA - thus unless the dominant activity show altruistic thought and action which reflects selflessness, we cannot say it involves any charity - hence assessee is not carrying any charitable activity within the meaning of Section 2(15) - Decided against the assessee.

Issues Involved:
1. Whether the activities of the assessee qualify as "education" under Section 2(15) of the Income Tax Act.
2. Whether the activities of the assessee fall under the category of "advancement of any other object of general public utility" under Section 2(15) of the Income Tax Act.
3. Applicability of the first proviso to Section 2(15) regarding the nature of trade, commerce, or business activities.
4. Eligibility for registration under Section 12AA of the Income Tax Act.

Issue-Wise Detailed Analysis:

1. Whether the activities of the assessee qualify as "education" under Section 2(15) of the Income Tax Act:
The assessee claimed that its main object was to impart financial education and awareness among the investor community. The Tribunal referred to the judgment of the Hon’ble Apex Court in the case of Sole Trustee, Loka Shikshana Trust, which defined "education" as systematic instruction, schooling, or training given to the young in preparation for the work of life. The Court emphasized that education connotes the process of training and developing knowledge, skill, mind, and character of students by normal schooling. The Tribunal concluded that the assessee's activities, which included conducting investor awareness programs and publishing financial education materials, did not fall within the meaning of "education" as defined in the judgment. Therefore, the assessee's activities could not be considered as "education" under Section 2(15) of the Act.

2. Whether the activities of the assessee fall under the category of "advancement of any other object of general public utility" under Section 2(15) of the Income Tax Act:
The Tribunal examined whether the assessee's activities could be categorized under "advancement of any other object of general public utility." The assessee conducted various investor awareness programs sponsored by private companies like Goldman Sachs, ICICI, Tata, and Reliance Life. The Tribunal noted that the assessee collected substantial sponsorship fees from these companies and had significant profits. Referring to the judgment in the case of Sole Trustee, Loka Shikshana Trust, the Tribunal emphasized that the essence of charity is selflessness and altruistic thought, benefiting others rather than oneself. The Tribunal concluded that the assessee's activities, being sponsored by private companies and generating substantial revenue, did not reflect the altruistic nature required for a charitable purpose. Therefore, the assessee's activities did not fall within the category of "advancement of any other object of general public utility."

3. Applicability of the first proviso to Section 2(15) regarding the nature of trade, commerce, or business activities:
The Tribunal addressed the argument that the applicability of the first proviso to Section 2(15) should be considered during the assessment and not while adjudicating an application for registration under Section 12AA. The first proviso states that the advancement of any other object of general public utility shall not be a charitable purpose if it involves carrying on any activity in the nature of trade, commerce, or business for a fee or any other consideration. The Tribunal found that the assessee's activities, involving substantial sponsorship fees from private companies, constituted rendering services in relation to trade, commerce, or business. Therefore, the first proviso to Section 2(15) was applicable, and the assessee's activities could not be considered charitable.

4. Eligibility for registration under Section 12AA of the Income Tax Act:
The Tribunal concluded that the assessee's activities did not qualify as "education" or "advancement of any other object of general public utility" under Section 2(15) of the Act. The predominant activity of the assessee was conducting programs sponsored by private companies for substantial fees, which did not reflect the selflessness required for a charitable purpose. Consequently, the assessee was not eligible for registration under Section 12AA of the Act. The Tribunal upheld the order of the Commissioner of Income Tax (Exemptions) denying the registration sought by the assessee under Section 12AA.

Conclusion:
The appeal of the assessee was dismissed, and the order of the Commissioner of Income Tax (Exemptions) denying the registration under Section 12AA was upheld. The Tribunal pronounced the order on June 11, 2018, at Chennai.

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