2012 (8) TMI 611 - HC - Income Tax

Charitable purpose within the meaning of section 2(15) of the Income-tax Act Held that - Assessee is providing sports facilities as a part of its activities consisting of badminton, table tennis, billiards, cricket and skating among others - assessee provides service to its members does not detract from the position that it advances a general public utility. The advancement of any object of benefit to the public or a section of the public as distinguished from a benefit to an individual or a group of individuals would be a charitable purpose - Assessing Officer did not determine whether the requirements of section 11 were fulfilled - matter remanded back to the Assessing Officer

Summary

Issues:
1. Whether the assessee performs a charitable purpose within the meaning of section 2(15) of the Income-tax Act, 1961?
2. Whether a remand of the proceedings would be necessitated to enable the Assessing Officer to determine whether the application of funds has been made in accordance with the provisions of section 11?

Analysis:
1. The Revenue appealed against the Income-tax Appellate Tribunal's order for the assessment year 1996-97. The assessee, a trust registered under the Bombay Public Trust Act, 1950, and under section 12 of the Income-tax Act, 1961, was initially held by the Assessing Officer to be a mutual organization, not a charitable trust. The Commissioner (Appeals) noted that while the promotion of sports is charitable, to avail of exemption under section 11, it should be directed towards the general public, not just members. The Commissioner found that most activities were for members and expenses were primarily on member-related activities. The Tribunal, however, reversed this, holding that the club's activities were of general public utility, meeting the requirements of section 2(15). The Tribunal emphasized that the club was open to all, not limited to a specific group, and engaged in various sports activities for public benefit. The appeal by the assessee was allowed based on these findings.

2. The Supreme Court's principles state that the primary purpose of an institution must be charitable, and any other object should be ancillary to the dominant purpose. In this case, the Tribunal found that the assessee's aims and objects were for general public utility, providing sports facilities for various activities. The Tribunal noted that the club served a diverse cross-section of society, not limited to specific individuals or groups. Therefore, the Tribunal concluded that the assessee fulfilled the definition of a charitable organization under section 2(15) for the assessment year 1996-97. However, regarding the application of funds under section 11, the Assessing Officer needed to determine if the requirements were met. Hence, the proceedings were remanded back to the Assessing Officer for this purpose. The questions of law were answered accordingly, and the appeal was disposed of with no costs awarded.