CIT (Exemption) Vs AIC@36INCE (Chhattisgarh High Court)
Chhattisgarh High Court recently adjudicated a tax appeal under Section 260A of the Income Tax Act, 1961, involving the rejection of a Section 12AA registration application filed by a society promoting technology business incubators and start-ups in Chhattisgarh. The central issue revolved around whether the activities of the society qualified as charitable under Section 2(15) of the Income Tax Act, particularly considering the argument that the society’s operations were more aligned with trade, commerce, or business, which would disqualify it from receiving registration under the provisions of the Act.
The society, registered under the Chhattisgarh Society Registration Act, 1973, had filed its application for Section 12AA registration on 4th July 2018. The society’s stated objectives included the implementation of the Chhattisgarh Innovation & Entrepreneurship Policy, 2015, setting up accelerators and technology business incubators, and assisting start-ups in raising funds from venture capitalists and angel investors. Despite the submission of the application and responses to inquiries, the Commissioner of Income Tax (Exemption) rejected the application on 30th January 2019, arguing that the society’s activities did not align with charitable purposes as defined by law.
In response to the rejection, the society appealed to the Income Tax Appellate Tribunal (ITAT), which, in its order, reversed the decision of the CIT(E) and directed that the registration be granted. The ITAT held that the activities of the society were charitable in nature and aligned with public welfare objectives, rather than being commercial in nature. The tribunal emphasized that the society was funded by state government grants and aimed at developing and improving the economic landscape by promoting entrepreneurship, a purpose that serves the public interest.
