2023 (6) TMI 178 - AT - Income Tax

Tribunal grants registration to trust for public utility activities.

ICRW Group Gratuity Trust, ICLEI South Asia Group Gratuity Trust Versus CIT (Exemptions), Delhi

The Tribunal allowed the appeals filed by the assessee, directing the Commissioner of Income Tax (Exemption) to grant registration under section 12AA of ... Exemption u/s 11 - application seeking registration u/s 12AA denied - CIT(E) concluded that the assessee trust was not created for any general welfare of the employees - Assessee is a non-profit organization established with the objective of promoting social and economic development with women’s full participation and is incorporated as a company registered u/s 25 of the Companies Act, 1956 - HELD THAT:- On going through the objects of the said trust and the reply given by the assessee before the ld.CIT(E), we are of the considered opinion that the assessee’s activity falls squarely within the object of ‘advancement of general public utility’ as defined in section 2(15) of the Act. Hence, apparently, the activity carried out by the assessee is a charitable activity as per section 2(15) of the Act. It is not in dispute that the assessee’s case does not fall within the ambit of proviso to section 2(15) of the Act, which provides a restriction, if the charitable purpose is not for advancement of general public utility. Hence, the assessee’s case does not fall within the ambit of proviso to section 2(15) of the Act. Trust created for the purpose of discharging statutory obligations of another parent trust - Any trust that has been created for the purpose of managing the statutory obligations of employees of the parent trust would certainly fall within the ambit of advancement of general public utility and, hence, to be considered as a charitable activity as defined u/s 2(15) of the Act. We direct the ld.CIT(E) to grant registration u/s 12AA of the Act to the assessee trust. Accordingly, the grounds raised by the assessee are allowed. Issues Involved:1. Whether the Commissioner of Income Tax (Exemption) [CIT(E)] was justified in rejecting the application seeking registration under section 12AA of the Income-tax Act, 1961.2. Whether the activities of the trust fall within the definition of 'charitable purpose' under section 2(15) of the Income-tax Act, 1961.Issue 1: Justification of CIT(E) in Rejecting Registration under Section 12AAThe Tribunal examined the appeals filed by the assessee against the order of the CIT(E) rejecting the application for registration under section 12AA of the Income-tax Act, 1961. The CIT(E) had rejected the application on the grounds that the trust's aims and objectives were only for the workers/employees of the International Centre for Research on Women (ICRW) and did not appear to be for general charitable purposes. The Tribunal noted that in the first round of proceedings, it had restored the matter to the file of the CIT(E) for re-examination with specific directions.Issue 2: Charitable Purpose under Section 2(15)The Tribunal evaluated whether the trust's activities fall within the definition of 'charitable purpose' under section 2(15) of the Act. The CIT(E) had concluded that the trust was not created for any general welfare of the employees but only to discharge the statutory liability of ICRW in the form of gratuity payable to its employees. The Tribunal disagreed with this conclusion, referencing the Hon'ble Supreme Court's judgment in the case of Ahmedabad Urban Development Authority, which clarified that regulatory bodies performing statutory functions in the larger public interest are considered charitable. The Tribunal also cited a similar case decided by the Pune Tribunal, which supported the view that managing statutory obligations of employees falls within the ambit of 'advancement of general public utility' and thus qualifies as a charitable activity.Conclusion:The Tribunal found that the CIT(E)'s observation that no documentary evidence was furnished by the assessee trust was factually incorrect. The Tribunal concluded that the assessee's activities fall squarely within the object of 'advancement of general public utility' as defined in section 2(15) of the Act. Consequently, the Tribunal directed the CIT(E) to grant registration under section 12AA of the Act to the assessee trust for the relevant assessment years.Result:All the appeals of the assessee were allowed, and the order was pronounced in the open court on 01.06.2023.