2014 (4) TMI 511 - AT - Income Tax

Appeal granted for society seeking tax-exempt status under Section 12AA

Society for Advance Health Education Versus Commissioner of Income-tax-II, Agra

The Tribunal allowed the appeal of the assessee-society, directing the Commissioner to grant registration under Section 12AA of the Income-tax Act. The ... Rejection of application of registration u/s 12AA of the Act – Scope of the term Charitable purpose u/s 2(15) of the Act – Educational facilities – Held that:- At the time of consideration of application for registration u/s. 12AA, the Commissioner is only required to satisfy himself about the objects of the assessee and genuineness of its activities - The definition of charitable purposes includes relief for poor, education and medical relief - the Commissioner on irrelevant and extraneous consideration wrongly rejected the application of assessee for grant of registration – the assessee is imparting education - providing educational facilities is part of the charitable purposes as per section 2(15) of the IT Act. The objects of the assessee were charitable in nature and were conducting genuine activities - Other considerations, noted by the Commissioner are irrelevant for the purpose of enquiry for grant of registration - the assessee is running Nursing Training Institute to impart education in the Bundelkhand Region and also held free health check-up camps – the Commissioner should have satisfied himself about the genuineness of the objectives and activities of the assessee-society, which were meant for the benefit of general public - as such, rejection of the application u/s. 12AA of the IT Act is clearly unjustified - the assessee satisfied all the necessary conditions for grant of registration u/s. 12AA of the IT Act and is entitled for registration – thus, the order is set aside and the CIT-II is directed to grant registration of the assessee u/s. 12AA of the Act – Decided in favour of Assessee. Issues Involved:1. Rejection of registration under Section 12AA of the Income-tax Act.2. Definition and interpretation of 'charitable purpose' under Section 2(15) of the IT Act.3. Examination of the genuineness of activities and objectives of the assessee-society.4. Consideration of profit motive in the context of educational institutions.Detailed Analysis:1. Rejection of Registration under Section 12AA:The appeal was directed against the order of the Commissioner of Income-tax-II, Agra, dated 21.09.2011, which rejected the application for registration under Section 12AA of the IT Act. The Commissioner concluded that the assessee-society, running a nursing training institution, was not engaged in charitable activities as it charged high fees and provided hostel facilities at a significant cost. The Commissioner was not satisfied with the genuineness of the society's objectives and activities, leading to the rejection of the registration application.2. Definition and Interpretation of 'Charitable Purpose' under Section 2(15):The assessee argued that its activities fell under the definition of 'charitable purpose' as per Section 2(15) of the IT Act, which includes education. The primary objective of the society was to impart education through its nursing training institution, which was registered with the Indian Nursing Council and affiliated with the U.P. State Medical Faculty. The society also organized free health check-up camps in rural areas, further supporting its charitable nature.3. Examination of the Genuineness of Activities and Objectives:The Tribunal examined the activities and objectives of the assessee-society. It was noted that the society was registered with the Registrar of Societies and its objectives included organizing seminars, providing medical services to the poor, and running nursing training programs. The society charged fees that were not excessively high and provided hostel facilities to a limited number of students. The Tribunal found that the surplus generated was minimal, indicating no profit motive. The provision of hostel facilities was deemed incidental to the educational activities.4. Consideration of Profit Motive in the Context of Educational Institutions:The Tribunal referred to several judicial precedents to emphasize that the existence of profit does not disqualify an institution from being considered charitable if its primary objective is education. It was highlighted that the Commissioner should focus on the genuineness of the activities and objectives rather than the quantum of fees charged or the surplus generated. The Tribunal concluded that the Commissioner had erred by considering extraneous factors and not appreciating the charitable nature of the society's activities.Conclusion:The Tribunal held that the assessee-society satisfied the conditions for registration under Section 12AA of the IT Act. The society's activities were genuine and aligned with its charitable objectives of imparting education and providing medical services. The Tribunal directed the Commissioner to grant registration to the assessee-society within one month from the receipt of the order. The appeal of the assessee was allowed, and the rejection of the registration application was set aside.Order Pronounced:The Tribunal pronounced the order in the open court, allowing the appeal of the assessee and directing the Commissioner to grant registration under Section 12AA of the IT Act.