MSME registered for Skill Development not eligible for Income Tax Exemption under Section 12AA of Income Tax Act: ITAT [Read Order]
![MSME registered for Skill Development not eligible for Income Tax Exemption under Section 12AA of Income Tax Act: ITAT [Read Order] MSME registered for Skill Development not eligible for Income Tax Exemption under Section 12AA of Income Tax Act: ITAT [Read Order]](https://www.taxscan.in/wp-content/uploads/2022/12/MSME-Income-Tax-Exemption-under-Income-Tax-Act-ITAT-TAXSCAN.jpg)
The Amritsar Bench of Income Tax Appellate Tribunal (ITAT) presided over by M.L.Meena (Accountant Member) and Anikesh Bnerjee (Judicial Member) upheld the decision of the Commissioner of Income Tax (Appeals).
The tribunal found that Micro Small Medium Enterprises (MSME) formed for skill development of people do not qualify as "Charitable Purposes" under section 2(15) of the Income Tax Act of 1961 and are not exempt from paying taxes under section 12AA of the Income Tax Act.
A laconic fact is that the assessee-society had submitted an application for registration under section 12AA of the Income Tax Act.
Additionally, the primary objective of the assessee is to operate and sustain institutions in rural areas, improve the lives of poor, marginalised youth, and encourage the privileged class to support evening school and employable skills. However, the CIT(A) rejected the application .
As stated by the Apex Court in the case of Sole trustee, Lok Sikshan Sansthan, the CIT(A) stated that the context in which the word "education" has been used in section 2(15) of Income Tax Act is systematic instruction, schooling, or training given to the young in preparation for the work of life.
Moreover, it also connotes the whole course of scholastic instruction which a person has received. The word “education” has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education.
It was observed by the bench in the order of the CIT (A) that the objects in the case of the applicant are based merely on skill enhancement and no systematic education is involved. The aims of the applicant trust are to promote skill development among youth, school children in order to be eligible for suitable employment opportunities.
Further, the applicant trust does not undertake the whole course of scholastic instructions which is a prerequisite to be eligible as a charitable institution for education within the ambit of Section 2(15) of the Income Tax Act.
The bench highlighted that the development of the skill is not the purpose of fulfilling section 2(15) of Income Tax Act to ascertain the objects of the assessee.
After hearing arguments from both sides, the tribunal determined since the applicant does not fall under the interpretation of "Charitable Purposes," it is not eligible for registration under section 12AA of the Income Tax Act, which is confined only for charitable institutions, or for a tax exemption under that section.
To Read the full text of the Order CLICK HERE
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