2005 (5) TMI 286 - AT - Income Tax

Tribunal Upholds Registration Decision for Association Aligning Objectives with Charitable Purposes

The Tribunal upheld the Director of IT (Exemptions)'s decision to grant registration to the association from 13th March, 2000, based on the modified ... Charitable Trust Issues:- Registration of the association from the date of its inception or from the date of modification of objects.Analysis:The main issue in this appeal is whether the Director of IT (Exemptions) was correct in allowing registration to the assessee w.e.f. 13th March, 2000, and not since its inception. The assessee, an association formed for the protection of interests of traders and business associates, initially applied for registration on 21st March, 1994, which was denied as the association's activities were not construed as charitable. Subsequently, the association modified its objects through a resolution passed on 13th March, 2000, to focus on promoting the interests of the trade as a whole rather than just its members. The assessee argued that the modification was clarificatory and aimed to remove doubts regarding its charitable objectives. The contention was that the association represented the trade even before the modification, and the amendment was made to align the objects with the actual activities.The Departmental Representative opposed the assessee's argument, emphasizing the distinction between the interests of individual traders and the trade as a whole. It was argued that the initial objects of the association were not charitable, prompting the modification for availing benefits under section 11 of the IT Act. The rejection of the initial registration application in 1994 was final, and the subsequent approval was granted based on the modified objects from 13th March, 2000. The Departmental Representative highlighted the necessity of differentiating between traders' interests and the broader interests of the trade.The Tribunal considered the legal framework, including the provisions of section 12AA of the IT Act, which lay down the procedure for granting or refusing registration to trusts or institutions. The Tribunal referred to a Supreme Court case, CIT vs. Kamla Town Trust, emphasizing that rectifications in the objects of a trust operate prospectively from the date of such rectification. It was noted that the assessee's voluntary modification of objects to meet charitable purposes indicated that the original objects were not charitable. The Tribunal found no evidence of charitable activities prior to the modification and upheld the Director's decision to grant registration from 13th March, 2000, rejecting the assessee's plea for retrospective effect.In conclusion, the Tribunal dismissed the appeal, affirming the Director's order to grant registration to the assessee association from 13th March, 2000, based on the modified objects. The judgment underscores the importance of aligning organizational objectives with charitable purposes for availing tax benefits under the IT Act.