TaxTMI 
TaxTMI 
2020 (1) TMI 1072
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....005 seeking registration under Section 12A of the Act. The said application was rejected by DIT(E), vide order dated 30.06.2006 holding that certain objects of the trust were not charitable and trustees had discretion in applying the trust's income to any of the objects. Aggrieved with the aforesaid findings, assessee filed an appeal before ITAT which resulted in order dated 30.04.2017, restoring the matter to the file of DIT(E) with direction to pass a speaking order as to which of the objects were of non-charitable nature, after giving opportunity of hearing to the assessee. In compliance with the directions of the ITAT, CIT(E) after examining the records, declined the grant of registration to the assessee, inter alia, on the ground that ATPA is aiming at industry status for Third Party Administrator (TPA) business, and is working for mutual benefit of its members. Aggrieved with the aforesaid order, the assessee preferred an appeal before ITAT. The ITAT after examining the records and having regard to the objects of the assessee, allowed the appeal in favour of the assessee and overturned the order of CIT(E). Consequently CIT(E) was directed to provide registration to the assess....
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.... for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution; and the compliance of such requirements of any other law for the time being in force by the trust or institution, as are materials for the purpose of achieving its objects, and he may also make such inquiries as he may deem necessary in this behalf. Once he is satisfied about the objects of the trust or institution, and genuineness of its activities, he shall pass an order under the said provision. On this aspect, the Tax Authorities have looked into the aims and objects of the trust. Since the same is the backbone of the decision impugned before us, we consider it apposite to extract the same hereinunder: "6. The aims and objects of the Trust shall be: (i) To organize and arrange all licensed Third Party Administrators (TPAs) to be members of the Trust for mutual betterment of the TPA business; (ii) To thrive for an industry status for TPA business; (iii) To draft guidelines, procedures, documents for implementation of the above; (iv) To organize seminars, training and educational sessions for....
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....fer awards, prizes, scholarships and stipends in promotion of the aims and objects of the Trust; (xx) To provide need-based grants and donations; (xxi) To cooperate and collaborate with other national institutions and agencies in furtherance of the objectives of the Trust; (xxii) To cooperate with institutions and associations having similar aims and objects; (xxiii) To borrow moneys for carrying out the objects of the Trust and for that purpose to create security by mortgage or charge or pledge or hypothecation of any immovable property of the Trust; (xxiv) To establish any fund to further the interest of the Trust; (xxv) To establish an institute for training and dissemination of knowledge among Third Party Administrators; (xxvi) To undertake programmes which ensures raising of income levels and expanding employment opportunities of the weaker sections of Trust, particularly of those living below the poverty line and women by involving participants in the planning, implementation and maintenance of activities taken up; (xxvii) To organize disadvantaged section of Trust and take steps for increasing their level of awareness with regard to the programme and contents....
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....nd Hon'ble High Courts in the judgment discussed in the preceding paras, we are of the considered view that the applicant trust cannot be said to be engaged only for TPA members and their employees and working for mutual benefits of its members, but its objects are certainly aimed at providing to the general public in the field of insurance and health facilities. No doubt, activities of the TPA which is a trade association for TPA business for the benefits of its members and non-members, but it is established to protect the interest of TPA members and work towards developing new products related to health insurance or insurance company and to structure the TPA fees, which is like Chambers of Commerce and Industry. So it is certainly providing services to the insurance sector, which in return benefits the public at large. Moreover, at this stage, the Commissioner (E) was not empowered to examine whether the assessee was entitled for exemption u/s 11 or 12 as this issue was required to be examined at the time of assessment. 13. In view of what has been discussed above, we are of the considered view that ld. CIT has erred in rejecting the application for registration u/s 12AA of....
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.... steps to urge or oppose legislation affecting trade, commerce or manufacture, which, standing by itself, may be liable to be condemned as non-charitable, it was merely incidental to the dominant or primary object and did not prevent the Andhra Chamber of Commerce from being a valid charity. The Court pointed out that if "the primary purpose be advancement of objects of general public utility, it would remain charitable even if an incidental entry into the political domain for achieving that purpose, e.g., promotion of or opposition to legislation concerning that purpose, was contemplated". The Court also held that the Andhra Chamber of Commerce did not cease to be charitable merely because the members of the Chamber were incidentally benefited in carrying out its main charitable purpose. The Court relied very strongly on the decisions in Commissioner of Inland Revenue v. Yorkeshire Agricultural Society [1920] 13 Tax Case 58 and Institution of Civil Engineers v. Commissioner of Inland Revenue [1931] 16 Tax Case 158 for reaching the conclusion that merely because some benefits incidentally arose to the members of the society or institution in the course of carrying out its main char....
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....e trust, as pointed out by one of us (Pathak, J.) in Dharmadeepti v. CIT (supra), must be "essentially charitable in nature" and it must not be a cover for carrying on an activity which has profit making as its predominant object. This interpretation of the exclusionary clause in section 2, clause (15), derives considerable support from the speech made by the Finance Minister while introducing that provision. The Finance Minister explained the reason for introducing this exclusionary clause in the following words: "The definition of 'charitable purpose' in that clause is at present so widely worded that it can be taken advantage of even by commercial concerns which, while ostensibly serving a public purpose, get fully paid for the benefits provided by them namely, the newspaper industry which while running its concern on commercial lines can claim that by circulating newspapers it was improving the general knowledge of the public. In order to prevent the misuse of this definition in such cases, the Select Committee felt that the words 'not involving the carrying on of any activity for profit' should be added to the definition." It is obvious that the exclusionar....
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.... of the purpose tested by the obligation created to spend the money exclusively or essentially on charity". The learned Judge also added that the restrictive condition "that the purpose should not involve the carrying on of any activity for profit would be satisfied if profit-making is not the real object" (emphasis supplied). We wholly endorse these observations. xxxx xxxx xxxx 19. There is, however, one comment which is necessary to be made whilst we are on this point and that arises out of certain observations made by this Court in Sole Trustee, Loka Sikshana Trust case (supra) as well as Indian Chamber of Commerce case (supra). It was said by Khanna, J. in Sole Trustee, Loka Shikshana Trust case: "... if the activity of a trust consists of carrying on a business and there are no restrictions on its making profit, the court would be well justified in assuming in the absence of some indication to the contrary that the object of the trust involves the carrying on of an activity of profit." And to the same effect, observed Krishna Iyer, J. in Indian Chamber of Commerce case (supra) when he said: ....
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.... "The decision of the Constitutional Bench of this Court in Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 2 SCC 31 really clinches the issue. The assessee in Surat Art Silk Cloth Mfrs. Association's case (supra) was an association established to promote commerce and trade in Art Silk Yarn, Raw Silk, Cotton Yarn, Art Silk Cloth, Silk Cloth and Cotton Cloth. Its objects, as evidenced from the memorandum of association, included, inter alia, carrying on business in Art Silk Yarn, Raw Silk, Cotton Yarn, Art Silk Cloth, Silk Cloth, and Cotton Cloth belonging to and on behalf of its members as well as buying and selling and dealing in all kinds of cloth and yarn belonging to and on behalf of its members. The Constitutional Bench of this Court held that, if there are several objects of the institution, some of which are charitable and some non-charitable, and the trustees or the managers in their discretion may apply the income of the institution of those objects, the trust or institution would not be liable to be regarded as charitable and no part of its income would be exempted from tax. Where the main or primary objects are distributive, each and every one of the objec....
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.... trade and commerce in diamonds with speed and in secure conditions. (ii) To establish and promote effective liaison between diamond trade and industry in India and abroad with a view to promoting their sales from India in International market. (iii) To promote, advance, protect and develop trade, commerce and industry in India relating to exports and imports of diamonds and (iv) To develop India as Modern and sophisticated diamond market by establishing and maintaining an international trading centre in India for all those engaged as manufacturers, traders, exporters and importers, brokers/commission agents of diamonds." These being the predominant objectives, we agree with the view taken by the Tribunal as well as the High Court that the assessee was rightly registered under section 11 by treating it as an institution established for charitable purpose within the meaning of section 2(15) of the Act." (emphasis supplied) 8. Taking note of the aforesaid decisions, we find that the observations of the ITAT to be in consonance with the view of the Supreme Court. The primary or dominant object of the trust satisfies the conditions laid down under Section 2 (15) of the Act. E....