Statutory regulatory functions remain charitable where fee income supports public duties and surplus does not create a commercial character.

A statutory council performing regulatory functions under the Pharmacy Act, 1948 was treated as a public-purpose body, and receipts from fees collected for mandated duties did not become commercial merely because a surplus was generated. The distinction between statutory public functions and business activity supported the conclusion that the council's objects remained charitable in nature. The refusal to register under section 12AB was set aside, and registration was held allowable.

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Issues: Whether the assessee, a statutory council regulating the pharmacy profession and collecting fees under the Pharmacy Act, 1948, was entitled to registration under section 12AB of the Income-tax Act, 1961 despite generation of surplus and the revenue's view that its activities were commercial in nature.

Analysis: The council was found to be a statutory body constituted to discharge regulatory functions in furtherance of a public purpose. Its receipts were derived from fees charged for performance of duties mandated by law, and the mere generation of surplus in the course of such statutory activity did not convert its functions into business or commercial activity. The reasoning also took note of the distinction between statutory public functions and commercial receipts, and the fact that similarly placed councils had been granted registration.

Conclusion: The refusal of registration was set aside and the assessee was held entitled to grant of registration under section 12AB.

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