Case Law Details
It is well-settled principle of law that the test to determine as to what would be a charitable purpose within the meaning of section 2 (15) of the Act, is to ascertain what is the dominant object of the activity; whether it is to carry out a charitable purpose or to earn profit. If the pre-dominant object is to carryout a charitable purpose and not to earn profit the purpose would not lose its charitable character merely because the some profit arises from the activity. (See CIT Andhra Pradesh v. APSRTC Hyderabad (1986) 2 SCC 391).
Deemed registration has already been granted to the assessee in view of the fact that the original application made by the assessee was not disposed of by the Commissioner of Income Tax. The Commissioner of Income Tax while considering second application of the assessee for grant of registration should have examined the objects of the trust and the activities being carried out by the assessee to achieve those objects. The Commissioner of Income Tax misdirected the course of enquiry and concentrated on the surplus generated, leaving aside the objects and activities carried out by the assessee. Generation of surplus while carrying out charitable activities would not disentitle the assessee for registration under section 12A of the Act.
Full Text of the ITAT Order is as follows:-
This appeal by the assessee is directed against the order of Commissioner of Income Tax -I, Pune dated 29-11-2013 rejecting the application of the assessee for grant of registration under section 12AA(1)(b)(ii) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
2. The brief facts of the case as emanating from records are: The assessee is a trust registered under the Bombay Public Trusts Act, 1950 and Societies Registration Act, 1860. The assessee trust was constituted vide Memorandum of Association dated 15-1-2007. The assessee made first application for registration under section 12A of the Act on 1-6-2007. The said application of the assessee was not disposed of by the Commissioner of Income Tax. Despite the fact that the assessee sent reminder to Commissioner of Income Tax on 5-3-2009 to decide the application, the said application remained unattended. In the meantime assessment orders under section 143(3) for the assessment years 2010-11 and 2011-12 were passed on 14-3-2013 and 14-11-2013, respectively treating as if registration has been granted to the assessee under section 12AA of the Act. The assessee filed second application for grant of registration under section 12A and for approval under section 80G on 29-5-2013. The Commissioner of Income Tax vide impugned order rejected the application of the assessee on the ground that the assessee has not paid taxes on the surplus earned during the financial years 2009-10 and 2010-11.
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