2010 (8) TMI 513 - AT - Income Tax

Appeal granted for charitable registration under Income-tax Act

The Tribunal allowed the appeal, directing the CIT to grant registration under section 12AA of the Income-tax Act to the assessee. The Tribunal found the ... Registration u/s 12A - The provision of section 12AA(3) of the Income-tax Act, 1961 confines the jurisdiction of the CIT in this respect only to findings as to the charitable objects of the institution and the genuinity of its activities - It is beyond any doubt that the assessee is an entity created under a statute passed by the Sikkim Legislative Assembly and therefore, the genuinity of the institution was not disputed by the CIT - the Ld. D.R., appearing on behalf of the Revenue, only relied on the order of the CIT but could not contradict the arguments made by the Ld. Counsel of the assessee - The activities of the assessee, in our opinion, are charitable in nature within the meaning of section 2(15) of the Act and as such, it is entitled to registration under section 12A of the Income-tax Act, 1961 – Appeal is allowed Issues Involved:1. Rejection of registration under section 12AA of the Income-tax Act.2. Charitable nature of providing free medical treatment to BPL families.3. High fee structure for educational facilities and its impact on charitable status.Detailed Analysis:1. Rejection of Registration under Section 12AA:The primary issue in this case is the rejection of the assessee's application for registration under section 12AA of the Income-tax Act by the CIT, Siliguri. The CIT's rejection was based on two main observations: the provision of free medical treatment to BPL families in Sikkim and the high fees charged for educational facilities.2. Charitable Nature of Providing Free Medical Treatment to BPL Families:The CIT observed that the assessee's activities in providing free medical facilities were limited to BPL families in Sikkim, which he argued did not benefit the public at large. The assessee countered this by citing the Supreme Court decision in Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704 (SC), which held that benefiting a section of the public is sufficient for an activity to be considered charitable. The Tribunal agreed with the assessee, stating, 'It is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present.' Thus, the Tribunal found that the assessee's activities were indeed charitable within the meaning of section 2(15) of the Act.3. High Fee Structure for Educational Facilities:The CIT also rejected the application on the grounds that the fees charged by the assessee were very high and thus accessible only to those who could afford them, implying that the educational facilities were limited to a privileged few. The Tribunal, however, noted that education per se is a charitable purpose. It stated, 'In running an institution, a reasonable revenue generation by it for the purpose of imparting and development of education and expansion of the institution does not militate against its charitable character.' The Tribunal further observed that there was no finding from the CIT that the institution was earning profit by charging exorbitant fees. Citing cases such as St. Don Bosco Educational Society v. CIT [2004] 90 ITD 477 (Lucknow) and Aryan Educational Society v. CIT [2005] 93 ITD 546 (Delhi), the Tribunal concluded that the fee structure was in consonance with the nature of education being imparted and the high expenses incurred for conducting medical education and research.Conclusion:The Tribunal concluded that the CIT was not justified in refusing to grant registration to the assessee. The objects of the institution, which included providing health, medical care, and educational facilities, were found to be charitable. The Tribunal directed the CIT to grant registration to the assessee under section 12AA of the Income-tax Act, stating, 'The activities of the assessee, in our opinion, are charitable in nature within the meaning of section 2(15) of the Act and as such, it is entitled to registration under section 12A of the Income-tax Act, 1961.'Judgment:The appeal by the assessee was allowed, and the CIT was directed to grant registration under section 12AA of the Income-tax Act.