2024 (7) TMI 643 - AT - Income Tax

Registration under section 12AA rejected for company whose objects failed charitable qualification requirements

ITAT Delhi upheld CIT(E)'s rejection of registration under section 12AA. The appellant company's objects did not qualify as charitable under section 2(15) ... Rejection of registration u/s 12AA - objects of the appellant company do not fall under the term 'charitable' as envisaged in section 2(15) - Filing of return of income in Form No. ITR-6 - as per assessee, the aims and objects of the company are to establish, promote, set-up, run, maintain, assist/finance, support and/or aid to or help in the setting up and/or maintaining and/or running ashrams, educational facilities, ayurvedic medical facilities schools, orphanages, widow homes, lunatic asylums, poor houses or other establishments for relief and/or help to the poor, old and infirm people and/or destitute. HELD THAT:- As decided by CIT(E) it is clear from the above stated objects that the objects of the applicant company do not fall under section 2(15) of the act which is essential for granting registration u/s 12AA of the Act and to that extent the objects of the applicant can't be established as charitable. The presence of such objects in MoA clearly leads one to conclude that the applicant entity intends to cover its motive of organizing seminars, exhibitions and opening lecture hall that too do not enure to the benefit of the public at large, under the provisions of exemptions. Moreover, perusal of financial statements reveal that no activity has been carried out by the applicant so far. In the absence of same, it is also impossible to ascertain the genuineness of activities. To that extent, it is safely concluded that the applicant company would not ensure to benefit for the general public. Also as per rule 12(1) of the IT Rules, 1962, the returns of income of the society/trust/company which works on the principal of 'no profit no loss, are required to be filed in Form No. ITR-7. Filing of return of income in Form No. ITR-6 clearly indicates that the applicant company is involved in business operations. A perusal of the order of learned CIT(E) reveals that in arriving at his conclusion the learned CIT(E) has conducted detailed inquiry and passed an elaborate order. We see no flaw or infirmity in the order of learned CIT(E) to take a different view in the matter. Accordingly, order of learned CIT(E) is upheld. Decided against assessee. Issues:1. Denial of registration under section 12AA of the Income Tax Act, 1961 based on the objects of the appellant company.2. Interpretation of the term 'charitable' under section 2(15) of the Act in relation to the objects of the appellant company.3. Rejection of registration application due to lack of carried-out activities by the appellant company.4. Filing of return of income in Form No. ITR-6 by the appellant company indicating involvement in business operations.Issue 1: Denial of Registration under Section 12AA:The appeal was filed by the assessee against the order denying registration under section 12AA of the Income Tax Act, 1961. The Commissioner of Income-tax (Exemptions) rejected the registration application based on the objects of the appellant company, which were deemed not falling under the term 'charitable' as per section 2(15) of the Act. The appellant company aimed to advance spiritual education, disseminate Vedic knowledge, and conduct seminars for the benefit of the public. The Commissioner concluded that conducting seminars and exhibitions did not qualify as charitable activities, and the absence of carried-out activities made it impossible to ascertain the genuineness of the appellant's motives.Issue 2: Interpretation of 'Charitable' Objects:The Commissioner interpreted the objects of the appellant company in relation to the term 'charitable' under section 2(15) of the Act. The Commissioner emphasized that the objects, including organizing seminars and exhibitions, did not align with the definition of charity. Despite the appellant's arguments citing decisions where objects were deemed genuine without commenced activities, the Commissioner held that the appellant's motives were not for the benefit of the public at large. The Commissioner also highlighted that the filing of return of income in Form No. ITR-6 indicated the appellant's involvement in business operations, further supporting the denial of registration under section 12AA.Issue 3: Lack of Carried-Out Activities:One of the reasons for rejecting the registration application was the absence of any carried-out activities by the appellant company. The Commissioner noted that no activities had been conducted by the appellant, making it challenging to ascertain the genuineness of their motives. This lack of activities led to the conclusion that the appellant company would not provide benefits to the general public, a crucial aspect for registration under section 12AA.Issue 4: Filing of Return in Form No. ITR-6:The Commissioner highlighted the filing of the return of income in Form No. ITR-6 by the appellant company, which is required for companies not claiming exemption under section 11 of the Act and involved in business operations. This choice of form indicated the nature of the appellant's activities, contradicting the claim of being purely non-profit. The Commissioner emphasized that the appellant's involvement in business operations further supported the denial of registration under section 12AA.In conclusion, the Tribunal upheld the order of the Commissioner, dismissing the appellant's appeal and denying registration under section 12AA of the Income Tax Act, 1961 based on the interpretation of the appellant company's objects, lack of carried-out activities, and filing of return in Form No. ITR-6 indicating involvement in business operations.