2015 (9) TMI 10 - AT - Income Tax

Registration under section 12AA denied - non charitable activities - Held that - The facts in the present case are almost similar to that of the facts in The Chartered Accountants Study Circle which was formed for the benefit of professionals as well as students of Chartered Accountants. In this case, as submitted by the Authorized Representative, the memorandum of the society has been amended with retrospective effect and this was not placed before the Director of Income Tax (Exemptions). According to the amended memorandum benefits are not restricted only to the members of the society or orthopaedic surgeons and since the Director of Income Tax (Exemptions) has not examined the amended memorandum and the case laws relied on by the counsel, we deem it appropriate to remit the matter to the file of the Director of Income Tax (Exemptions) for fresh consideration in the light of the submissions and the above said decisions of the High Court and the Tribunal . Accordingly, we set aside the impugned order and remit the matter back to the file of the Director of Income Tax (Exemptions) for de novo consideration. - Decided in favour of assessee for statistical purposes.

Issues Involved:
1. Denial of registration under section 12AA of the Income Tax Act.
2. Determination of whether the society's activities benefit only its members or the general public.
3. Examination of the applicability of provisions of section 13(2)(b) and 13(2)(d) read with section 11 of the Act.
4. Consideration of the amended memorandum of the society.
5. Reliance on precedent cases for determining eligibility for registration under section 12AA.

Detailed Analysis:

1. Denial of Registration under Section 12AA:
The appeal was filed by the assessee against the order of the Director of Income Tax (Exemptions), Chennai, dated 31.05.2013, which denied registration under section 12AA of the Income Tax Act. The Director of Income Tax (Exemptions) held that the society was formed for the benefit of its members only and not for the public.

2. Benefit to Members vs. General Public:
The Authorized Representative for the assessee argued that the society, registered under section 10 of the Tamil Nadu Societies Registration Act, 1975, was formed with the objective of propagating knowledge of orthopaedic science, providing academic training, conducting clinical meetings, and organizing CME programs. It was submitted that the benefits of the society were not restricted to its members but extended to the general public as well. The Director of Income Tax (Exemptions) observed that the society's benefits were restricted to its members, which violated provisions of section 13(2)(b) and 13(2)(d) read with section 11 of the Act.

3. Applicability of Sections 13(2)(b) and 13(2)(d) Read with Section 11:
The Director of Income Tax (Exemptions) also noted that the society charged subscription fees from its members and provided services and benefits exclusively to them. The Authorized Representative countered that the society was not a trade organization and that the subscription fees were used to organize conferences and other activities for the general public's benefit.

4. Consideration of the Amended Memorandum:
The Authorized Representative mentioned that the society's memorandum of association had been amended with retrospective effect to extend benefits to the general public. However, this amended memorandum was not filed before the Director of Income Tax (Exemptions). The Tribunal noted that the Director of Income Tax (Exemptions) did not examine the amended memorandum and the case laws relied upon by the counsel.

5. Reliance on Precedent Cases:
The Authorized Representative relied on the decision of the co-ordinate Bench of the Tribunal in "The Chartered Accountants Study Circle Vs. ITO (Exemptions)" and the jurisdictional High Court's affirmation in "DIT (Exemptions) Vs. The Chartered Accountant Study Circle (250 CTR 70)". In these cases, it was held that societies formed for the benefit of professionals were entitled to registration under section 12AA. The Tribunal found the facts in the present case similar to those in the Chartered Accountants Study Circle case, where the study circle was imparting knowledge to professionals and students, and its activities were deemed charitable.

Conclusion:
The Tribunal, after perusing the order of the Director of Income Tax (Exemptions) and the decisions relied upon, found no reason to hold that the assessee society was formed for the benefit of its members only. The Tribunal noted that the amended memorandum, which extended benefits to the general public, was not examined by the Director of Income Tax (Exemptions). Therefore, the Tribunal deemed it appropriate to remit the matter back to the Director of Income Tax (Exemptions) for fresh consideration in light of the submissions and the cited decisions. The impugned order was set aside, and the matter was remitted for de novo consideration.

Result:
The appeal of the assessee was allowed for statistical purposes. The order was pronounced in the open court on 17.07.2015.

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