2023 (9) TMI 93 - AT - Income Tax

Exemption u/s 11 - Charitable activity u/s 2(15) - appellant registration u/s 12A as rejected on the ground that the revenue earned by the Council is from commercial activities - HELD THAT - The Council is established under an Act by the State Government for Para-medical education and to promote, develop and regulate the same for the welfare of the society and the public health, with no intent of any business. It has been noted that the surplus is not distributed and only utilized for the activities and the fees/charges are decided in consultation with the State Government at normal level looking to the welfare of the public. CIT (Exemption) in his order has mentioned that the receipts are from examination fees, registration fees, revaluation fees, inspection fees and counseling fees, which are commercial in nature whereas apparently such receipts are from the key services for education only. In this way the contents are contradictory neither it has been brought on record that they are abnormally high with an intent to earn profit on commercial lines nor the same has been established that how they are not related to education in the instant case. In view of the arguments made by the ld A/R, supra, the surplus cannot lead by itself that the activities are from trade, commerce or business. There can be a revenue surplus in particular year/s which is allowed to be applied in the next year(s) as permitted under the Act. The un-applied amount becomes the income of the assessee after the end of the time-limit. Since, the proviso to section 2(15) is, otherwise, also not applicable as the activities are not in the nature of trade, commerce or business. Thus the object of the appellant Council qualified as charitable purpose and covered u/s 2(15) as applied by the appellant and given that there is no dispute on the genuineness of the activities carried on by the assessee Council in furtherance of its object, the order passed by ld. CIT (E) is hereby set aside and directed to grant the registration to the appellant Council under section 12AA as applied by them. Appeal filed by the assessee is allowed.

Summary

Issues Involved:
1. Rejection of registration application under section 12AA of the Income Tax Act, 1961.
2. Classification of the Council's activities as "Charitable purpose" under Sec. 2(15) of the Income Tax Act, 1961.
3. Opportunity of being heard before the order was passed.

Summary:

Issue 1: Rejection of Registration Application under Section 12AA
The appellant, Rajasthan Para-Medical Council, established by a State Legislature Act, applied for registration under section 12AA of the Income Tax Act, 1961. The application was rejected by the Commissioner of Income Tax (Exemptions), Jaipur, on the grounds that the Council's activities were not charitable within the meaning of Sec. 2(15) of the Income Tax Act, 1961. The Commissioner held that the Council's income from registration fees, counseling fees, examination fees, revaluation fees, and inspection fees were business receipts and thus did not qualify for charitable status.

Issue 2: Classification of Activities as "Charitable Purpose"
The appellant argued that the Council's primary objective was to develop, promote, and regulate para-medical education and that its activities were educational and not business-oriented. The Tribunal noted that the Council was established by the State Government for para-medical education and to promote, develop, and regulate the same for societal welfare and public health. The Tribunal found that the receipts from examination fees, registration fees, revaluation fees, inspection fees, and counseling fees were related to education and not commercial in nature. The Tribunal concluded that the Council's activities qualified as charitable purposes under Section 2(15) of the Income Tax Act, 1961.

Issue 3: Opportunity of Being Heard
The appellant contended that the Commissioner did not provide a proper opportunity of being heard before passing the order. The Tribunal did not specifically address this issue in detail but focused on the merits of the case and the nature of the Council's activities.

Conclusion:
The Tribunal set aside the order of the Commissioner of Income Tax (Exemptions) and directed the Commissioner to grant registration to the appellant Council under section 12AA of the Income Tax Act, 1961. The appeal filed by the assessee was allowed, recognizing the Council's activities as charitable and educational rather than commercial.