2021 (9) TMI 195 - AT - Income Tax

Exemption u/s 11 - denying the registration u/s.12AA - Charitable activity u/s 2(15) - objects of the trust - HELD THAT - Hon ble Supreme Court in CIT Vs. Andhra Chamber of Commerce 1964 (10) TMI 19 - SUPREME COURT considered a case in which the assessee therein, a chamber of commerce, had principal objects to promote and protect trade, commerce and industries and to stimulate and promote the development of trade, commerce and industries in India or any part thereof. In the light of such objectives, the Hon ble Supreme Court held that public is vitally interested in the promotion of trade, commerce and industries and hence, the same falls within the scope of advancement of any other object of general public utility . Thus, it is apparent that the assessee satisfies the first condition of being in advancement of any other object of general public utility. Whether the assessee was carrying on activity in the nature of trade, commerce or business ? - The assessee-association carried out protests against certain clauses of the Shop Act for which it collected certain sums from its members and then spent it. The same is true for Advertisement receipts and expenses. The assessee organized certain campaign for the promotion of trade and commerce. The amount collected from the members was described as Advertisement receipts and the amount spent on organizing such an event was described as Advertisement cost. The same stands for Cricket Tournament revenue and expenses. Apart from that, there is minor Interest income and some amount of Membership fee. On going through the bifurcation of the Revenue and the Expenses sides for all the four years that have been take note of by the ld. CIT(E) in the impugned order, it becomes apparent that none of the activity is in the nature of trade, commerce or business. Thus, the assessee satisfies this condition as well. The assessee fulfils the requisite conditions for falling under the head charitable purpose as defined u/s. 2(15) of the Act. Apart from that, the ld. CIT(E) has not referred to any other disqualification disentitling the assessee to registration. Overturning the impugned order, we grant the registration - Decided in favour of assessee.

Summary

Issues:
Registration u/s.12AA of the Income-tax Act, 1961 denied based on the definition of 'Charitable purpose' under section 2(15) - Appeal challenging the denial of registration.

Analysis:

Issue 1: Denial of Registration u/s.12AA
The appeal contested the order denying registration u/s.12AA of the Income-tax Act, 1961 based on the assessment of the trust's activities falling under the definition of 'Charitable purpose' as per section 2(15) of the Act. The ld. CIT(E) refused registration, stating that the trust was a Members' association with activities limited to its members, not the general public, thus not advancing an object of general public utility. The trust's objects included promoting unity and cooperation among persons in trade and commerce, protecting their interests, and fostering cultural links. The Tribunal analyzed the trust deed, emphasizing that the trust aimed to promote and protect trade and commerce interests, which align with the 'advancement of any other object of general public utility' as per section 2(15).

Issue 2: Interpretation of 'Charitable purpose'
The Tribunal scrutinized the trust's activities to determine if they involved trade, commerce, or business activities, which would disqualify them from charitable status. The trust's income and expenditure statements revealed revenue sources such as membership fees, advertisement receipts, and funds from protests against Local Body Tax and Shop Act. The Tribunal clarified that the protests and campaigns organized by the trust did not constitute trade, commerce, or business activities, as they aimed to protect the interests of trade and commerce sectors. The Tribunal cited the Supreme Court's decision in CIT Vs. Andhra Chamber of Commerce, which recognized the promotion of trade, commerce, and industries as serving general public utility, supporting the trust's charitable purpose eligibility.

Issue 3: Compliance with Charitable Purpose Criteria
After detailed analysis, the Tribunal concluded that the trust fulfilled the conditions for charitable purpose under section 2(15) of the Act. The trust's objectives aligned with promoting unity, cooperation, and protecting trade and commerce interests, meeting the criteria of advancing an object of general public utility. Additionally, the trust's activities, including protests and campaigns, were not deemed trade, commerce, or business activities, ensuring compliance with the Act's provisions. As the ld. CIT(E) did not identify any other disqualification for registration, the Tribunal overturned the denial of registration and granted the trust the sought-after registration u/s.12AA.

In conclusion, the Tribunal allowed the appeal, emphasizing the trust's alignment with the definition of 'Charitable purpose' and its compliance with the criteria specified under the Income-tax Act, 1961.