2018 (4) TMI 1523 - AT - Income Tax

Registration u/s 12AA rejected - Whether the assessee Vijayawada Machinery Merchants Association is a charitable association? - proof of charitable activities - assessee-society as existed to protect the interest of the members - Held that - The assessee is existed for the purpose to protect the interest of its members, i.e. specified individuals, who are the members of the association and contribute subscription and the same is utilized for their benefit. The assessee is not carrying on any useful activity towards public at large or at least a class of the people. The case of the assessee is not covered advancement of any other general public utility. We find that the assessee is not carrying out any activity for promotion of trading. It is existed only for specified individuals, who are the members of the association. Therefore, assessee is not entitled for registration under section 12AA as has rightly been observed by the ld.Commissioner that the assessee is a mutual association. The assessee-society is only existed to protect the interest of the members of The Vijayawada Machinery Merchants Association and is only related to the members of the association and not doing anything towards promotion of trading. We are of the opinion that the ld. CIT(A) rightly rejected the registration under section 12AA - Decided against assessee.

Summary

Issues:
1. Registration under section 12AA of the Income Tax Act, 1961 for a society promoting trade.
2. Eligibility of the society for registration under section 12AA based on its objects and activities.
3. Comparison with previous case laws to determine eligibility for registration.

Detailed Analysis:
1. The appeal was regarding the rejection of registration under section 12AA of the Income Tax Act, 1961 for a society named The Vijayawada Machinery Merchants Association. The primary issue was whether the society, mainly focused on promoting unanimity among machinery merchants, was eligible for registration given its activities and objectives.

2. The Commissioner rejected the registration based on the observation that the society's receipts were from annual membership subscriptions without any charitable activities. The society's main purpose was to promote friendly relations among machinery merchants, indicating a mutual concern rather than a charitable association. The Tribunal noted that the society's activities were limited to benefiting its members without any broader public utility or trading promotion. Citing relevant case laws, the Authorized Representative argued for the society's charitable status, but the Departmental Representative supported the Commissioner's decision.

3. The Tribunal analyzed the society's objectives, emphasizing its focus on protecting the interests of its members rather than engaging in charitable activities for the public. Referring to a similar case involving The Eluru Jewellers & Bullion Merchants Association, the Tribunal highlighted that mere protection of members' interests did not qualify as charity. The decision was influenced by the nature of the society's activities and its limited scope of benefitting specific members without broader charitable endeavors. The Tribunal dismissed the appeal, aligning with the Commissioner's decision and emphasizing the lack of applicability of the case laws cited by the society.

In conclusion, the judgment upheld the rejection of registration under section 12AA for The Vijayawada Machinery Merchants Association, emphasizing the society's focus on member interests over charitable activities for the public. The decision was based on a detailed analysis of the society's objectives, activities, and comparison with relevant case laws, highlighting the importance of engaging in charitable endeavors beyond member benefits for eligibility under the Income Tax Act.