Payment of Pension to Retired Employees is not Charity: Kerala HC denies Section 12AA Registration to GCDA [Read Judgment]

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The Kerala High Court has ruled that, Payment of pension to the retired employees of the GCDA, in the discharge of the statutory obligation under Part III of the Kerala Service Rules, is not a charity or bounty. The Court also rejected the Registration under Section 12AA of the Income Tax Act.

The GCDA has filed a review petition seeking review of the judgment of this Court dated 08.10.2014 in ITA No.131 of 2014.

The assessee trust was formed by the Greater Cochin Development Authority, which is an authority constituted under the provisions of the Madras Town Planning Act, 1920 and the Travancore Town Planning Act, 1108.

The assessee trust was formed by the GCDA, vide Annexure A registered trust deed dated 09.02.2006, to establish a separate fund in order to operate as a recognised Provident Fund for the benefit of the managerial, supervisory and other staff of the GCDA. The words ‘Provident Fund’ appearing in Annexure A trust deed was substituted by the words ‘Pension Fund’, vide Annexure B rectification deed dated 30.01.2008.

The assessee trust submitted an application dated 27.06.2012 before the respondent-Commissioner of Income Tax- I, Kochi for registration under Section 12AA of the Income Tax Act, which ended in dismissal.

The division bench comprising of Justice V. Chitambaresh and Justice Anil K. Narendran observed that, “Payment of pension to the retired employees of the GCDA, in discharge of the statutory obligation under Part III of the Kerala Service Rules, is not a charity or bounty nor is it a conditional payment solely dependent on the sweet will of the GCDA”.

While dismissing the review petition, the Court also said that, “the GCDA, has no relevance while considering an application for registration under Section 12AA of the Income-tax Act, subject to the conditions in Section 12A, read with clause (15) of Section 2 of the said Act. Even if the entire contribution towards Pension Fund is paid by the GCDA, the object of the assessee trust to establish a separate fund in order to operate as a recognised Pension Fund for the benefit of the managerial, supervisory and other staff of the GCDA would not fall within the definition of ‘charitable purpose’ as defined in clause (15) of Section 2 of the Act”.

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