2024 (12) TMI 1159 - AT - Income Tax

Rejection of grant of registration u/s 12AB - charitable activity u/s 2(15) - HELD THAT - While making the reference of the aforesaid objects of the assessee association, we find that the association is established for the purpose to organize and unite the manufactures of steel Re-Rollers and people of similar business and certain other connected / incidental / ancillary objects referred. In view of such objects, it can be safely gathered that the association is set up for safeguard of the interest of its members and to deal with matters having common interest of the trade. Whether such objects shall be treated as trade, commerce and business and not the activities in the nature of charity? - We find force in the contentions raised by the Ld. AR that there was no benefit derived by specified individual. As per law, the benefit is being given to a section of people. We may herein refer to the order of Bar Council of Maharashtra 1981 (4) TMI 8 - SUPREME COURT wherein it was held that trading bodies have been held to be constituted with a view to advance an object of general public utility because their primary or predominant purpose was to promote and protect industry, trade and commerce and are eligible for exemption u/s 11. Thus, we find that the assessee association fulfils the conditions requisite to fall within the charitable purpose as defined in section 2(15) of the Act, dehors any other infirmity in the eligibility qualifications of the assessee, which would have alleged by the Ld. CIT(E), we therefore, are of the considered view that the order of Ld. CIT(E) cannot be sustained, we, therefore, reverse the same and direct to grant the registration u/s 12AB. Assessee appeal allowed.

Issues Involved:

1. Whether the rejection of the application for registration under Section 12AB by the CIT (Exemption) was justified.
2. Whether the activities of the association qualify as "charitable purpose" under the Income Tax Act, 1961.
3. Whether the association's activities are in the nature of trade, commerce, or business.

Detailed Analysis:

Issue 1: Justification for Rejection of Registration under Section 12AB

The primary issue is the rejection of the application for registration under Section 12AB by the Commissioner of Income Tax (Exemption). The assessee contended that the rejection was arbitrary and not justified, arguing that the registration could not be denied as the association's activities fall within the ambit of "charitable purpose" under the Income Tax Act. The CIT (Exemption) rejected the application on the grounds that the association was not established for charitable activities for the general public but rather to facilitate steel manufacturers and stakeholders, which does not qualify as a charitable purpose.

Issue 2: Qualification as "Charitable Purpose"

The association argued that its activities fall under the "advancement of any other object of general public utility," which is a recognized charitable purpose under the Act. The association relied on various judicial precedents, including CIT vs Andhra Chamber of Commerce and Confederation of Real Estate Developers Association of India vs ACIT, which held that activities promoting trade and commerce can be considered as serving a charitable purpose if they benefit a section of the public. The Tribunal noted that the association's objects, such as organizing steel manufacturers and addressing their business issues, align with the promotion of trade and commerce, which is a recognized object of general public utility.

Issue 3: Nature of Activities - Trade, Commerce, or Business

The CIT (Exemption) held that the association's activities were primarily aimed at promoting the business interests of its members, which could be considered as trade or commerce. The Tribunal, however, found that the activities were not for the benefit of specified individuals but for a section of the public, namely steel manufacturers. The Tribunal referenced the Supreme Court's decision in CIT vs Bar Council of Maharashtra, which recognized that associations formed to promote industry and commerce serve a public utility purpose. The Tribunal concluded that the association's activities did not constitute trade or commerce as they were incidental to its objects and aimed at enhancing the knowledge and standards within the steel industry.

Conclusion:

The Tribunal concluded that the CIT (Exemption)'s rejection of the application was not in line with the settled legal position. The association's activities were deemed to fall within the scope of "charitable purpose" as defined under Section 2(15) of the Income Tax Act. Consequently, the Tribunal reversed the CIT (Exemption)'s order and directed the grant of registration under Section 12AB to the association. The appeal was allowed, affirming that the association's activities are for the general public utility and not merely for trade or commerce.

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