2021 (6) TMI 988 - AT - Income Tax

Exemption u/s 11 - eligible for registration under section 12A - nature of activity of promotion of welfare and recreational activities of the police personnel - Charitable activity u/s 2(15) - Only objection is that the aims objects of standing order No. 270 of Commissioner of police, Delhi clearly establish that the primary objective of the appellant club is to provide benefit to its members of Delhi police personnel only and not to public at large or general public and, therefore, it violates the provisions of section 2 (15) - HELD THAT - In AP Police Welfare Case 1983 (3) TMI 19 - ANDHRA PRADESH HIGH COURT held that insofar as public employment is concerned and in particular the government formed by, for and of the people is the employer, even it is to be taken in a restrictive sense, and the employer is the representative of the public or the people - in the ultimate analysis, it is the public that is the employer; qui facit per alium facit per se, and so, to the service rendered by the employees in the public employment, the beneficiaries are the public. On this test the court reached a conclusion that AP Police Welfare Association which is a charitable in its objects, as is quite apparent from the very objectives laid down under the rules framed thereunder, is a body that would constitute a section of the public and so, the fund founded for the benefit of such section should be treated as charitable in its object, attracting thereby the exemption from the exigibility to tax. It is clear that the issue involved in this matter is no longer res Integra and is squarely covered by the judicial decisions for a long time. In the absence of any change in the facts or law holding the field, we find it difficult to take a different view or not to follow the binding precedent of the higher judicial fora. We accordingly, following the same, hold that the appellant, the Delhi Police Welfare And Recreational Club Fund is charitable in its objects and is a body that constitutes a section of the public, and so, the fund founded for the benefit of such section should be treated as charitable in its objects, attracting thereby the exemption from the exigibility to tax. With this view of the matter, we set aside the impugned order passed by the ld. CIT(E) and hold that the appellant is eligible for registration under section 12 A of the Act and direct its registration thereunder accordingly. - Appeal of the assessee is allowed.

Summary

Issues:
1. Rejection of registration under section 12A of the Income Tax Act, 1961 based on the primary objective of providing benefits to specific individuals rather than the general public.

Analysis:
The case involved an appeal against the rejection of registration under section 12A of the Income Tax Act, 1961 by the Commissioner of Income Tax (Exemptions). The appellant, a club engaged in promoting welfare and recreational activities for Delhi police personnel, sought registration under section 12A, claiming its activities fell under the definition of "charitable purpose" as per section 2(15) of the Act. The Commissioner rejected the application, stating that the club's primary objective was to benefit only its members, violating the provisions of section 2(15) which require benefits to be provided to the general public or a section of the public.

The appellant argued that its activities fulfilled the requirements of section 2(15) and cited legal precedents to support its case. The appellant contended that the welfare of police personnel constituted a section of the public, making the club eligible for registration under section 12A. On the other hand, the Departmental Representative supported the Commissioner's decision, emphasizing that the club's activities exclusively benefited Delhi police personnel and did not cater to the general public or a section thereof.

The Tribunal analyzed the case, considering the nature of the club's activities and the legal precedents cited. Referring to the Andhra Pradesh High Court's decision in a similar matter and the Mumbai Tribunal's ruling in a related case, the Tribunal concluded that the club's objectives aligned with charitable purposes and constituted a section of the public. Therefore, the Tribunal held that the club was eligible for registration under section 12A, overturning the Commissioner's decision.

In light of the legal principles established by previous judgments and the club's activities benefiting a specific section of the public, the Tribunal allowed the appeal, setting aside the Commissioner's order and directing the club's registration under section 12A of the Act. The judgment highlighted the importance of providing benefits to a section of the public to qualify for charitable status, emphasizing the consistent application of legal precedents in such matters.