Objects of the assessee trust meant for benefit of pharma dealers would undoubtedly fall within the advancement of any other object of general public utility
Confederation of Pharma Dealers Association vs. The Commissioner of Income Tax (Exemption); I.T.A. No. 219/RPR/2019); ITAT Raipur; 27.10.21
Present Appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax(Exemption), Bhopal (‘CIT(E)’ in short), dated 27.09.2019 passed under s. 12AA(1)(b)(ii) of the Income Tax Act, 1961 (the Act).
As per the grounds of appeal, the assessee has essentially challenged the denial of registration under s.12AA of the Act on the ground that activities undertaken by the assessee do not fall within the definition of Section 2(15) of the Act.
- The assessee is a trade association meant for promoting the business of pharma dealers and protecting the rights and interest of its members who are engaged in pharma business.
- The assessee society claims to be engaged in the charitable activities falling within the ambit of expression ‘the advancement of any other object of general public utility’ as contained under s. 2(15) of the Act.
- Based on this premise, the assessee filed application on 30.03.2019 electronically before the CIT(E) seeking registration of the society under s. 12AA of the Act to enable it to avail the benefits of Section 11 & Section 12 of the Act.
- After raising queries on the application, the CIT(E) passed the impugned order under s.12AA(1)(b)(ii) of the Act dated 27.09.2019 and rejected the application of the assessee for registration under s.12AA of the Act.
- Aggrieved, the assessee preferred appeal before the Tribunal.
- The Appellants contention was that the trade association has been formed for the advancement of public utility with reference to the pharma dealers. In the wake of long line of judicial precedents wherein the registration was granted to other associations in similarly placed situations, it was urged that the assessee should also be treated similarly and registration claimed w.e.f. 01.04.2018 by an application dated 30.03.2019 in terms of provisions of Section 12A(2) of the Act should be allowed.
Observations and Findings:
- The Hon’ble Chhattisgarh High Court in CIT vs. Chhattisgarh Urology Society (2018) 303 CTR 299 (CG) held that the provisions contained under s.12A of the Act nowhere empowers the CIT(E) to assess the objects vis-à-vis the books of accounts. Even otherwise, it is not to be seen at the stage of application as to whether the fulfillment of the charitable trust would eventually benefit the members of the society.
- The order passed by the CIT(E) does not say in definite terms that the objects of the society are not charitable in nature.
- Merely because the trust consists of Urologist Doctors and the charitable society may mutually benefit those members, the object itself would not seize to be charitable in nature. Thus, as per judgment of Jurisdictional High Court, the larger aim of objects is required to be kept in mind.
- Relying on the judgments in the case of DIT vs. Bharat Diamond Bourse (2003) 259 ITR 0280; ACIT vs. Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1 (SC), it was essentially observed by the bench that where the purpose does not involve the carrying on of any activity for profit and where the profit making is not the real object, the trust would be entitled to avail the benefits emanating from registration under the Act.
- he Hon’ble Supreme Court in CIT Vs. Gujarat Maritime Board (2007) 295 ITR 561 has held that “When an object is to promote or protect the interest of a particular trade or industry that object becomes an object of public utility. Similar view expressed in CIT vs. Andhra Chamber of Commerce (1965) 55 ITR 722 (SC).
- In the light of ratio of various decisions, some of which have been quoted above, it is evident that the objects of the assessee trust meant for benefit of pharma dealers would undoubtedly fall within the fourth limb of Section 2(15) of the Act i.e. ‘the advancement of any other object of general public utility’ which has been held to be very wide in its connotation in several judicial pronouncements noted above.
- The assessee society in the instant case is stated to be engaged in promotion of trade and commerce related to pharma business, protecting the rights and interests of its members, making its members aware about their duties, conducting seminars and workshops and organizing awareness camps and educating them about health and safety, cleanliness and also creating awareness about the legal provisions and duties and obligations under Income Tax Act and other laws to help them becoming a law abiding citizens. engaged in promotion of trade and commerce related to pharma business, protecting the rights and interests of its members, making its members aware about their duties, conducting seminars and workshops and organizing awareness camps and educating them about health and safety, cleanliness and also creating awareness about the legal provisions and duties and obligations under Income Tax Act and other laws to help them becoming a law abiding citizens.
- In this background, we are of the opinion that endeavors of the assessee society tantamounts to advancement of public utility and hence making such objects charitable in nature and susceptible to s.2(15) of the Act.
- Significantly, it was simultaneously noted that it is not necessary that object of general public utility should be beneficial to the whole mankind. The object beneficial to a section of the public is also an object of general public utility.
- Hence, the case of the assessee gets covered in the fourth limb of Section 2(15) of the Act i.e. ‘the advancement of any other object of general public utility’. This being so, the assessee would be entitled to the benefit meant for charitable trust as contemplated in the scheme of the Act.
- Further, merely leasing of developed plots to its members on the basis of their respective contributions does not make the assessee ineligible for registration as a charitable entity per se.
- The Bench also did not find merit in the contention of the CIT(E) that land purchased by the society is not appearing in the balance sheet.
The objects of the assessee society when read in the light of judicial precedents expounding the law in this regard, the conclusion is inescapable that the objects of the assessee is for charitable purpose within the meaning of Section 2(15) of the Act and the assessee is entitled in law for registration under s.12AA of the Act.
Consequently, the impugned order of the CIT(E) dated 27.09.2019 was set aside and directed the CIT(E) / competent authority to grant registration under s.12AA of the Act as sought by the assessee society.
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