GST Helpdesk   Subscription   Demo   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (9) TMI 920 - PUNJAB AND HARYANA HIGH COURT

2016 (9) TMI 920 - PUNJAB AND HARYANA HIGH COURT - [2016] 389 ITR 148 - Eligibility for registration u/s 12AA - “Charitable purpose - objects of trust - Held that:- The Tribunal rightly held that the registration granted under section 25 of the Companies Act is a recognition of the fact that the respondent is essentially established for the purpose of education. It was further held that the status granted by the Government by virtue of licence under section 25 itself recognises the fact that the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

or ancillary to the attainment of the main objects, the respondent is not entitled to registration under section 12AA of the Act. There are 28 incidental or ancillary objects. - To allay Mr. Goel’s objections and apprehensions, Mr. Rohit Jain, learned counsel appearing on behalf of the respondent stated that all the ancillary and incidental clauses are those that are merely ancillary and incidental to the main objects and for no other purpose. He further stated that powers conferred by every .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s - firstly by accepting the statement made by Mr. Rohit Jain as aforesaid and secondly by permitting the appellant to obtain such clarifications and to impose such conditions as they desire upon the respondent to ensure that there is no misuse of any of the incidental and ancillary objects. - A perusal of the order of the Commissioner shows that he declined to register the Company by reading its ancillary objects as its main objects as also on the basis that in the future the Company may, u .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt of exemption under Section 11 and consequently under Section 80-G of the Act. Thus, we find that the order of the Commissioner was rightly set aside by the Tribunal in the order impugned before us. - In view of the above, we order dismissal of the appeal. However, while granting registration, it would be open to the Registering Authority to grant the same by imposing any condition, which would bind the Company to indulge in only charitable activities. It will also be subject to an affidav .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

0-A of the Income Tax Act, 1961 (for short - the Act), the present appeal has been filed at the instance of the Revenue to challenge therein the order passed by the Income Tax Appellate Tribunal, Delhi Bench C , New Delhi (for short - the Tribunal), through which, the Tribunal, while setting aside the order of the Commissioner of Income Tax, Faridabad (for short - the Commissioner), has held the assessee eligible for registration under Section 12-AA as also for exemption under Section 80-G of th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ant facts which have emerged, are that the assessee, which is a Company incorporated under Section 25 of the Companies Act, 1956 (for short - the Companies Act), to become eligible for the grant of exemption under Section 11 of the Act, made an application under Section 12-A(1)(a) of the Act for registration, which was rejected by the Commissioner as he was of the view that the ancillary objects of the respondent (hereinafter referred to as - the Company) empowered its members to invest and util .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sioner to be repugnant to the Company's main object of imparting education. The Commissioner was also of the view that the ancillary objects would be pursued by its members independent of its main objects, as also against the provisions of the license granted under Section 25 of the Companies Act. In view of the aforesaid reasons, holding that the Company was not perfectly constituted to advance charitable activities, the Commissioner refused to register the Company under Section 12AA of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r Section 25 of the Companies Act to hold that the sole object of the Company was to impart education on a non-commercial basis. Drawing a distinction between primary and enabling objects, the Tribunal held the Company eligible for grant of registration under Section 12AA of the Act and as a consequence thereof, for exemption under Section 80-G of the Act. It is in the above background that the Revenue has preferred the present appeal raising therein the afore-quoted substantial question of law. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the company will be carried out without obtaining prior approval/No Objection Certificate from the concerned authority wherever required. 3. None of the objects of the company will be carried out on commercial basis. B. THE OBJECTS INCIDENTAL OR ANCILLARY TO THE ATTAINMENT OF THE ABOVE MAIN OBJECTS ARE : 1. To enter into any arrangement or agreement or contract with any person association firm or corporation whether in India or outside, for professional, technicians, or for such other purpose t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mes, shows displays, invite lecturers, writers, speakers, poets, composers, philosophers, preachers and to purchase copyrights, books, pamphlets, articles, magazines and to give prizes and awards for the implementation of the main objects. 5. To spread and promote education and learning in all its branches, to establish and support schools, colleges and other educational institutions or other education centers, study centers and research centers to carry on systematic research and encourage and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

members or any other persons on such security and on such terms as the company may from time to time arrange and accept and to accept donations, contributions, grants, either in cash or in kind from any persons, companies, corporations, institutions on such terms and for such objects which are in conformity with the objects of the company. 7. To establish and run hostels, dormitory, guest house and to provide any other kind of lodging/accommodation facility for the students, faculty and other s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

received as donations either in the shape or shares or securities or other form of movable or immovable properties and to permit the same to remain in the actual state of investments thereof so long as the Company may think fit and at any time or times to sell, call in or convert into money the aforesaid investments or any of them or any part thereof and with a power to change or vary any investments for the time being forming part of the assets. 10. To appoint committees, advisory boards, gover .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

n any moveable/immovable properties/assets of the company. 14. To indemnify the employees and officers of the Company against proceedings losses, costs, damages, claims and demands under Law or Equity or otherwise in respect of accidents, injury, death, whether as workman, clerk, officer, technician and to appoint advisers, experts, agents or insurers to investigate the circumstances of accident, injury or damage and take steps to prevent the same and to oppose, resist, compromise or satisfy ful .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er as may be decided by the company. 17. To provide living accommodation or housing/developing units for workman and other and in connection therewith to provide such facilities and conveniences for washing, bathing, cooking, and writing purposes and sale of provision and stores and for the safe custody of personal belongings. 18. To sell, let, develop, dispose off or otherwise deal with the undertaking or any party of the property of the company. 19. To enter any arrangements with any Governmen .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, widows. Families, and dependents of such persons and to subscribe to any institution, association or club the funds collected for the benefit of or to advance the interest and well being of the members of the Company. 21. To pay the costs, charges and expenses preliminary or incidental to the formation establishment and registration of the company, and all expenses which the company may lawfully pay, having regards to the provisions of the Companies Act, 1956, for or Incidental to the raising .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

utside India. 24. To open accounts with any banks/financial institutions and to draw, make, accept, discount, execute or issue Bills of Exchange, promissory notes, bills of lading, warrants, debentures and other negotiable instruments or securities. 25. To frame schemes, rules and regulations for attaining any of the objects of the company and bye-laws for conducting the affairs of the Company from time to time. 26. To engage the services of lawyers, bankers, architects, brokers or any other exp .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ich, as an object of the company would make it a Trade Union. C. THE OTHER OBJECTS ARE : NIL. Section 11 of the Act exempts from the payment of tax any income derived by a Trust set up wholly for charitable or religious purposes but for the grant of such exemptions, a Trust is required to be registered under Section 12-A. The procedure for registration is prescribed under Section 12-AA of the Act. Charitable Purpose is defined under Section 2 (15) of the Act, the relevant portion of which reads .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f the Act, what is required to be examined by the Principal Commissioner or the Commissioner (as the case may be) is whether at the time of making the application and consideration thereof, the applicant fulfills the conditions prescribed under Section 12-A and that its main objects are charitable or religious in nature. At that stage, to consider the objects, which are merely incidental or ancillary to the attainment of the main objects, some of which in itself may not be charitable, as distinc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sioner of Income Tax, Gujarat vs. Surat Art Silk Cloth Manufacturers Association - 1980 (121) Income Tax Reports 1, the Apex Court opined as under :- The law is well-settled that if there are several objects of a trust or institution, some of which are charitable and some non-charitable and the trustees or the managers in their discretion are to apply the income or property to any of those objects, the trust or institution would not be liable to be regarded as charitable and no part of its incom .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lary or incidental to the primary or dominant purpose would not prevent the trust or institution from being a valid charity: vide CIT Vs. Andhra Chamber of Commerce (1965) 55 ITR 722 (SC). The test which has, therefore, to be applied is whether the object which is said to be noncharitable is a main or primary object of the trust or institution or it is ancillary or incidental to the dominant or primary object which is charitable. Thus, the Apex Court was clearly of the opinion that if the domina .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

aim exemption under Section 10 (23C) (vi) of the Act, which had been denied by the Revenue, while following the judgment of the Apex Court in American Hotel & Lodging Association Educational Institute vs. CBDT - (2008) 301 ITR 86, held that when an application for exemption is moved by any Trust etc., the conditions prevalent at the time of making of such application and passing of order on the same, are to be considered. If at that time, all mandatory conditions so prescribed are fulfilled .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ocedure prescribed by law, by holding as under :- 11. It follows from the aforesaid judgment that when an application for exemption is to be moved by any trust, fund, university or other educational institution, the threshold conditions which are to be examined at that stage are actually existence of an educational institution and approval of the prescribed authority, for which every applicant has to move an application in the standardized form in terms of first proviso. Insofar as newly added t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

thdraw the approval earlier granted after complying wit the procedure mentioned therein. 12. In order to bind the institutions etc., to properly implemented the rigours contained in the third proviso, the Supreme Court provided the solution also in the aforesaid judgment, which is this: on fulfilling the threshold conditions, approval could be granted with the stipulation that conditions mentioned in the third proviso would be carried by the applicant. The Supreme Court also was of the view that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t that where there were several objects of the Trust, some of which charitable and some not, then in such cases, the Trust was not entitled for exemption. In that case, however, clauses 11 and 16 of the deed gave an uncontrolled discretion to the trusts to spend the whole of the trust fund on any of the non-charitable objects of the trust. The non-charitable objects authorized the management to open and maintain commercial institutions where work at living wages could be provided to the poor and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

It was found that some of the objects of the trust were non-charitable. The question was whether the exemption could be granted where some objects are charitable and some non-charitable. It was held that where some objects are charitable and some non-charitable, the whole trust fails and no part of income is exempt from tax. The test laid down by the Supreme Court was that if one of the objects of the trust deed is not of a religious or charitable nature and the trust deed confers full discretio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the trust. In the case before us the clauses objected to are expressly contained in Part-B which as the heading itself enumerates are ancillary and incidental objects. Further Mr. Rohit Jain s statements as recorded above are accepted. Further, still leaving scope for grievance we have left it to the department to impose any terms and conditions in accordance with law as a condition precedent to the grant of certificate. A closer scrutiny of the judgment shows that the same does not further the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s is that all primary objects of the trust must be of a religious and charitable nature and the existence of any ancillary or secondary object which is not of a religious or charitable nature but which is intended to subserve the religious and charitable objects may not prevent the grant of an exemption. This is because such an ancillary or secondary object, even though not of a religious or charitable nature, is intended to effectuate the main and primary objects of the trust. If the primary or .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of Income-Tax and others - (2011) 339 Income Tax Reports 333 was also cited on behalf of the appellant. That too does not support the case of the Revenue as it was held therein that if the dominant purpose of an institution is educational, then the other objects, which are ancillary or incidental to the dominant purpose, would not disentitle the institution from exemption. Paragraphs 17 and 18 of the judgment read as under :- 17. If the dominant purpose of an institution is educational another o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on created to spend the money exclusively on education . If that obligation is there, the income becomes entitled to exemption (Sole Trustee, Loka Shikshana Trust Vs. CIT (1975) 101 ITR 234 (SC). A Division Bench judgment of the Jammu and Kashmir High Court in Ghulam Mohidin Trust vs. Commissioner of Income-Tax - (2001) 248 Income Tax Reports 587 was also cited. In that case, the issue of non-grant of exemption under Section 11 of the Act vis-a-vis application of Section 13(1)(a) and (b) of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hat as per Clause III-A the Memorandum of the Company, its main objects are for imparting education on a noncommercial basis. All other objects so mentioned under Clause III-B of the Memorandum, as its heading implies, are merely incidental and ancillary to the attainment of the afore-referred main objects. The respondent was incorporated on 18.03.2009 under section 25 of the Companies Act, 1956. The respondent was granted a licence under section 25 issued by the Regional Director dated 21.01.20 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tends to apply its profits, if any, or other income in promoting its objects, and to prohibit the payment of any dividend to its members, the Central Government may, by licence, direct that the association may be registered as a company with limited liability, without the addition to its name of the word" Limited" or the words" Private Limited…………………….." The conditions of the licence issued to the respondent under sectio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r more of them; (3) that no remuneration or other benefit in money or money s worth shall be given by the company to any of its members whether officers or servants of the company or not except payment of out of pocket expenses, reasonable and proper interest on money lent, or reasonable and proper rent on premises let to the company. (4) that no member shall be appointed to any office under the company which is remunerated by salary, fees or in any other manner not excepted by clause (3) The Tr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is certainly an important factor in favour of the applicant for registration. There can be no doubt that the main objects read by themselves entitle the respondent to registration under section 12AA of the Act. It was rightly not even contended otherwise. It was, however, contended that in view of the objects incidental or ancillary to the attainment of the main objects, the respondent is not entitled to registration under section 12AA of the Act. There are 28 incidental or ancillary objects. T .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ered. The clauses also must be read as a part of the entire memorandum of objects and not in isolation. We are satisfied that they confer powers only for the purpose of attaining the main objects and for no other reasons whatsoever. We, however, do not wish to leave anything to chance and provide two safeguards - firstly by accepting the statement made by Mr. Rohit Jain as aforesaid and secondly by permitting the appellant to obtain such clarifications and to impose such conditions as they desir .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version