Sowgood Foundation Vs CIT (Exemption) (ITAT Delhi)
Charging Fees for Environmental Education Doesn’t Destroy Charity: Delhi ITAT Grants 12A Registration
The Delhi ITAT held that an organisation engaged in environment protection, farming awareness and sustainability education cannot be denied registration under section 12A merely because it earns fee-based receipts from schools or receives payments subjected to TDS.
In the case of Sowgood Foundation, the CIT(Exemption) had rejected 12A registration on the ground that the assessee was carrying on commercial activities by providing environmental education programmes and services to schools for consideration. The Department also relied on business receipts, TDS under section 194J/194JB, filing of ITR-6 and alleged violation of the 20% threshold under the proviso to section 2(15).
However, the Tribunal carefully examined the objects of the foundation, which included promotion of environmental protection, farming education, waste management awareness and sustainability initiatives in schools and institutions.
The ITAT held that the assessee’s activities squarely fell under the specific limb of “preservation of environment” under section 2(15), and not under the residuary category of “advancement of any other object of general public utility.” Therefore, the restrictive proviso relating to commercial receipts and 20% threshold was held to be inapplicable.
The Tribunal further ruled that mere deduction of TDS by payers or filing of ITR-6 before grant of registration cannot automatically convert a charitable institution into a commercial entity. Relying on CIT(E) v. Aroh Foundation, the ITAT observed that TDS deduction by the payer cannot prejudice the exemption claim of the recipient trust.
The ITAT also rejected the Department’s objection regarding filing the application under a wrong proviso, holding that such bona fide technical mistakes cannot defeat substantive charitable registration claims. Accordingly, the Tribunal directed grant of registration under section 12A subject to verification of relevant facts.
FULL TEXT OF THE ORDER OF ITAT DELHI
