Charitable Trust: Registration Depends on Genuineness of Objects and Activities ?

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The assessee has been created under the Building & Other Construction Works (Regulation of Employment & Condition of Service) Act, 1996. It applied under section 12AA for registration as Charitable Institution to the Commissioner of Income-tax. The Commissioner rejected the application on the ground that the assessee did not receive any voluntary contribution but only received statutory cess and it did not carry on charitable activities during the year. On appeal, the Tribunal reversed the view taken by the Commissioner relying upon order passed by the Director of Income-tax (Exemption), Bangalore in the case of Karnataka Board, carrying on identical activities and further holding that activities of the assessee were covered under section 2(15) of the Act.

The issue before , PUNJAB AND HARYANA High Court in Haryana Building & Other Construction Works Welfare Board 196Taxman255 was

“Whether on the facts and circumstances of the case, the ITAT was justified in directing the Commissioner of Income-tax to grant registration to the assessee despite the fact that there is no application of funds towards charitable purpose by the assessee?”

The PUNJAB AND HARYANA High Court held vide its order 8/30/2010 as under :

5. We are unable to accept the submission. Requirements for registration are laid down under section 12AA(1)(b), i.e., satisfaction as to objects of the trust or the institution and genuineness of its activities. The Commissioner has not given any valid reason for not being satisfied about the objects of the trust and genuineness of its activities. It only stated that the assessee was not receiving voluntary contributions and had not done any charitable activity during the year. The Tribunal has given valid reasons for holding that the objects and activities of the assessee to be genuine. The assessee was a statutory body constituted for advancing welfare of workers employed in construction activity which is an object of general public utility under section 2(15) of the Act. Having regard to nature of statutory constitution of the assessee and its objects, activities of the assessee are continuing in nature. This finding is not shown in any manner to be erroneous. As regards the judgment of Kerala High Court in Self Employers Service Society’s case (supra), the same is distinguishable. Therein it was held that since no charitable work was done by the society in question, its genuineness was not established. In the present case, the assessee is not a private society as in the case considered by the Kerala High Court. The assessee is a statutory body and functioning under the statutory provisions. Judgment of the Hon’ble Supreme Court in CIT v. Gujarat Maritime Board [2007] 295 ITR 5612 supports the case of the assessee for being covered by section 2(15). Relevant observations are:—

“We have perused a number of decisions of this court which have interpreted the words, in section 2(15), namely, “any other object of general public utility”. From the said decisions it emerges that the said expression is of the widest connotation. The word “general” in the said expression means pertaining to a whole class. Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose CIT v. Ahmedabad Rana Caste Association [1983] 140 ITR 1 (SC). The said expression would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served. If the primary purpose and the predominant object are to promote the welfare of the general public the purpose would be charitable purpose. When an object is to promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry—CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC). If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity—Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 1 (SC).”

6. In view of finding of the Tribunal that the assessee was a genuine Charitable Institution, direction of the Tribunal for grant of registration is fully justified. No substantial question of law arises.