2016 (11) TMI 1547 - AT - Income Tax

Registration u/s 12AA rejected - assessee society was formed for the welfare of the gold and bullion merchants of Eluru by the members for the benefit of the members of the society and cannot be said to be for the purpose of charity - exclusively for charitable purposes - Held that - We find that the assessee is only existed for the benefit of few members particularly who are carrying business activity in Eluru town and it cannot be said that the assessee is doing charity. Charity means to help the poor who are in need. In this case, assessee has not done anything to the poor people who are in need, who are suffering with ill health, etc., etc. The Commissioner in his order has observed that the society was formed for the welfare of the gold and bullion merchants of Eluru by the members for the benefit of the members. Such society cannot be considered for the purpose of charity. We find that the Ld. Commissioner correctly held that assessee cannot be considered as a charitable organization. A society is formed for the benefit of themselves, it can only be said that it is a mutual benefit to each other. It cannot be said that people started an association for the benefit of themselves is a charity. The concept of charity means doing something to others who are in poor and helpless condition. The assessee association existed for the people who are in a trade, they are neither poor nor helpless. All the members of the association existed for the purpose of carrying their business with a profit motive. Charity is an anti-thesis of profit. The assessee society is not eligible for registration u/s 12AA - Decided against assessee.

Summary

Issues involved:
Registration under section 12AA of the Income Tax Act, 1961 for a society formed for the welfare of jewelers and bullion merchants; Determination of charitable activities carried out by the society.

Issue 1: Registration under section 12AA of the Income Tax Act, 1961

The appeal was filed by the assessee against the order of the CIT rejecting the registration under section 12AA of the Act. The assessee association, formed in 1947, aimed to protect the business interests of jewelers and bullion merchants in Eluru. The CIT observed that the society was primarily for the welfare of the members and not for charitable purposes. The ITAT remitted the matter back to the Commissioner for re-examination. The Commissioner, after re-examination, concluded that no charitable activities were being carried out by the society, leading to the rejection of registration under section 12AA of the Act.

Issue 2: Determination of charitable activities

The assessee contended that the society also engaged in charitable activities, including providing financial help to poor students and conducting charitable events. However, the Commissioner found that since 1947, the society had not undertaken significant charitable activities, except for some negligible efforts. The ITAT noted that the society existed primarily to safeguard the interests of jewelers and bullion merchants in Eluru, rather than for charitable purposes. The ITAT emphasized that charity involves helping the poor and needy, which the society had not effectively carried out. The ITAT held that the society's focus on benefiting its members for business purposes did not align with the concept of charity, as charity is distinct from profit-seeking activities. The ITAT dismissed the appeal, stating that the society was not eligible for registration under section 12AA of the Act, as it did not meet the criteria for a charitable organization.

In conclusion, the ITAT upheld the decision to dismiss the appeal, emphasizing that the society's primary purpose was to benefit its members in business activities, rather than engaging in significant charitable endeavors. The judgment highlighted the distinction between mutual benefit among members and genuine charitable activities aimed at helping the poor and needy.