Registration under section 12A for society receiving pharma grants denied where funds used for noncharitable doctor events and hospitality.

Grants from pharmaceutical companies were treated as spent for noncharitable purposes because only 6.2% of receipts funded free medicines for type1 diabetic children while the balance financed seminars, luxury hospitality, entertainment, travel, and payments to officials and relatives. The tribunal accepted the view that such expenditure amounted to networking between doctors and pharma companies and violated professional funding guidelines; thus the society's activities fell outside the statutory definition of charitable purpose and registration under section 12A was rightly refused. No genuine continuing medical education events qualifying for permitted corporate assistance were demonstrated, producing denial of registration.

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Issues: (i) Whether the assessee society is eligible for registration under section 12AB of the Income-tax Act, 1961, having regard to the nature, genuineness and volume of activities undertaken and compliance with professional conduct regulations; (ii) Whether the assessee is entitled to approval under section 80G of the Income-tax Act, 1961, in absence of registration under section 12AB.

Issue (i): Whether the society's activities qualify as charitable purpose under section 2(15) and merit registration under section 12AB.

Analysis: The tribunal examined the society's receipts and expenditures for FY 2021-22 to 2023-24 and noted receipts of approximately Rs. 40 lakhs from pharmaceutical companies, with only Rs. 2.51 lakhs expended on free medicines for Type1 diabetic children. The bulk of expenditures related to conferences, seminars, hospitality at luxury hotels, entertainment, travel and professional fees. The tribunal also considered applicable regulatory standards including the Medical Council of India (Professional Conduct, Etiquette and Ethics) Regulations, 2002 and the Uniform Code for Pharmaceutical Marketing Practices 2024, and assessed whether activities constituted genuine charitable work (including CME events that meet recognised criteria) or amounted to impermissible benefits/quid pro quo to medical practitioners.

Conclusion: Registration under section 12AB is refused. The tribunal held that the activities are not predominantly charitable within the meaning of section 2(15), substantial funds were utilised for noncharitable purposes and in breach of professional conduct norms, and therefore the application for registration under section 12AB is rightly rejected (decision in favour of the Revenue).

Issue (ii): Whether the society is entitled to approval under section 80G where registration under section 12AB has been refused.

Analysis: Section 80G(5) requires registration under section 12AB as a precondition for grant of approval under section 80G. The tribunal applied the finding on issue (i) that registration under section 12AB is not available to the society because its activities are not charitable as per section 2(15).

Conclusion: Approval under section 80G is declined. Given the refusal of registration under section 12AB, the tribunal concurred with the denial of section 80G approval (decision in favour of the Revenue).

Final Conclusion: The tribunal dismissed both appeals of the assessee, upholding the refusal of registration under section 12AB and consequentially refusing approval under section 80G; the society's activities were held not to satisfy the statutory test of charitable purpose and were tainted by expenditures inconsistent with professional conduct regulations.

Ratio Decidendi: Excessive utilisation of donated funds for conferences, hospitality and related noncharitable expenditures, coupled with violation of applicable medical professional conduct standards, establishes that an organisation does not fulfil the statutory requirement of carrying out charitable activities under section 2(15), and therefore registration under section 12AB and approval under section 80G cannot be granted.

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