The New Delhi bench of the Income Tax Appellate Tribunal ( ITAT) directed the assessing officer to re-adjudicate the rejection of registration under section 12AA of the Income Tax Act,1961 due to the non-falling of the trust within the ambit of ‘charitable purpose’.
ICRW Group Gratuity Trust, the appellant assessee was a non-profit organization established to promote social and economic development with women’s full participation and was incorporated as a company registered under section 25 of the Companies Act, 1956.
The provisions of the Payment of Gratuity Act, 1972 are applicable in the case of ICRW and, therefore, to protect the financial interest of its employees, the ICRW set up a trust, namely, ‘ICRW Group Group Gratuity Trust’. The assessee appealed against the order passed by the Commissioner of Income Tax (Appeals) for confirming the rejection of registration by the assessing officer.
Anand Chaudhuri, the counsel for the assessee contended that the assessee’s activity falls squarely within the object of ‘advancement of general public utility’ as defined in section 2(15) of the Income Tax Act and thus the activity carried out by the assessee was a charitable activity as per section 2(15) of the Income TaxAct.
It was further contended that the present case was not in dispute and that the assessee’s case does not fall within the ambit of the proviso to section 2(15) of the Income Tax Act, which provides a restriction if the charitable purpose was not for the advancement of general public utility.
Mohd. Gayasuddin Ansari, the counsel for the revenue contended that after the examination of the assessing officer, it was found that the trust’s aims and objectives were only for the workers or employees of the ICRW and did not appear to be for general charitable purposes and, accordingly, rejected the application seeking registration under section 12AA of the Income Tax Act.
The bench observed that the trust that had been created to manage the statutory obligations of employees of the parent trust would certainly fall within the ambit of advancement of general public utility and, hence, be considered as a charitable activity as defined under section 2(15) of the Income Tax Act.
The two-member bench comprising C.M. Garg (Judicial) and M. Balaganesh (Accountant) directed the assessing officer to re-adjudicate the matter to grant registration under section 12AA of the Income Tax Act to the assessee trust while allowing the appeal filed by the assessee.
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