2015 (9) TMI 1434 - AT - Income Tax

Registration u/s 12AA rejected - Held that - Application of the assessee for registration under section 12A of the Act has been rightly rejected by learned CIT. If the objects and real situation is analysed the objects are not of charitable nature. Almost in every activity there is a scent of commercialization/profit motive but in the charitable institution no profit motive is involved and the service is done mainly with the intent of social/religious upliftment of the masses in general. We agree with the conclusion of the CIT as contended by learned CIT-Departmental Representative that a charitable institution provides services for charitable purposes free of cost and for no gain and are for the benefit of public at large. As we have discussed in the preceding para the assessee acquires land at nominal rates and after developing the same the same land (is sold) on high profit which cannot be said to be a charitable activity. Even just for argument sake under the present facts if registration is granted then every private colonizer will claim charity. See PUDA Versus CIT 2006 (6) TMI 141 - ITAT CHANDIGARH-B - Decided against assessee.

Summary

Issues:
1. Rejection of application for registration under section 12A(a) of the Income Tax Act.
2. Similarity of aims and objects with Punjab Urban Planning & Development Authority (PUDA).
3. Commercial nature of activities carried out by the assessee.
4. Interpretation of charitable purpose under section 2(15) of the Income Tax Act.

Analysis:
1. The appeal was filed against the order of the Commissioner of Income Tax rejecting the application for registration under section 12A(a) of the Income Tax Act for the assessment year 2003-04. The grounds of appeal raised by the assessee challenged the legality of the Commissioner's order and sought the cancellation of the same.

2. The assessee contended that the aims and objects of the organization were similar to those of PUDA, and therefore, registration under section 12A of the Act should have been granted. However, during the hearing, it was acknowledged that the issue was already decided against the assessee by the Chandigarh Bench of the ITAT in a previous case involving PUDA. The Tribunal found that the activities of the assessee were more of a commercial nature with a profit-oriented intent, similar to the case of Bihar State Forest Development Corporation, where commercial activities precluded charitable trust status.

3. The Tribunal examined various judicial pronouncements and concluded that the predominant object of the assessee was profit-oriented, despite some activities benefiting the public. The Tribunal emphasized that charitable institutions provide services for charitable purposes free of cost and without profit motive, which was not the case with the assessee. The Tribunal noted that the facilities provided by the assessee were incidental to commercial activities, and the income generated from land development did not qualify as charitable activity.

4. The Tribunal upheld the decision of the Commissioner of Income Tax, stating that the application of the assessee had been rightly rejected. The Tribunal agreed that the commercial angle with profit motive was the predominant object of the assessee, and granting registration would set a precedent for private colonizers to claim charitable status. The Tribunal dismissed the appeal, citing the commercial nature of the activities and the absence of charitable intent in the organization's operations.

In conclusion, the Tribunal dismissed the appeal and upheld the decision of the Commissioner of Income Tax, highlighting the commercial nature of the organization's activities and the lack of charitable purpose as defined under the Income Tax Act.