Rajasthan Khadya Padarth v. The Commissioner of Income Tax (Exemptions), Jaipur
[Citation -2016-LL-0927-42]

Citation 2016-LL-0927-42
Appellant Name Rajasthan Khadya Padarth
Respondent Name The Commissioner of Income Tax (Exemptions), Jaipur
Court ITAT-Jaipur
Relevant Act Income-tax
Date of Order 27/09/2016
Judgment View Judgment
Keyword Tags general public utility • chamber of commerce • predominant object • trade association • medical relief • audit report • relief fund
Bot Summary: AR has submitted that the objects of the institution are for the advancement of general public utility and therefore charitable :- The Learned CIT(E) has refused registration u/s 12AA to the assessee on the ground that the object of the institution are not charitable. The objects are reproduced here under: - 4 ITA No. 335/JP/15 Rajasthan Khadya Padarth Vyapar Sangh, Jaipur vs. CIT(E), Jaipur The perusal of the aforesaid objects reveals that object at no. 5 ITA No. 335/JP/15 Rajasthan Khadya Padarth Vyapar Sangh, Jaipur vs. CIT(E), Jaipur Thus the objects of the institution confirm and are in accordance with the definition of charitable purpose provided u/s 2(15) which includes advancement of any other objects of general public utility. In order to understand the meaning of the term general public utility , we refer to the decision of Hon ble Supreme Court in the case of CIT vs. Dawoodji Bohra Jamat wherein the Hon ble Supreme Court has held that the expression any other object of general public utility is of the widest connotation and the word general in the said expression means pertaining to a whole class. The proposition of law laid down in the Hon ble Supreme Court is contained at para 30 of its order which is reproduced as under: 9 ITA No. 335/JP/15 Rajasthan Khadya Padarth Vyapar Sangh, Jaipur vs. CIT(E), Jaipur According to section 2(15), the expression charitable purpose has been defined by way of an inclusive definition so as to include relief to the poor, education, medical relief and advancement of any other object of general public utility. 14 SCC 704). Therefore, advancement of any object of benefit to the public or a section of the public as distinguished from benefit to an individual or a group of individuals would be a charitable purpose. 2.6 Further, we refer to the decision of the Hon ble Rajasthan High Court in the case of Jodhpur Chartered Accountants Society wherein the Hon ble High Court has held that it is a settled position that in order that a purpose may qualify for being regarded as an object of general public utility, it must be intended to benefit a section of public as distinguished from specified individuals.


IN INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM ITA No. 335/JP/15 Assessment Year : Rajasthan Khadya Padarth cuke Commissioner of Income Vyapar Sangh , B-20 1st Floor, Tax (Exemptions), Jaipur Vs. Chandpole Anaj Mandi, Jaipur PAN No. AAAAR 0336 D Appellant Respondent Assessee by : Shri S.L. Poddar (Adv.) Revenue by :Shri D.S. Kothari (CIT) Date of Hearing : 03.08.2016 Date of Pronouncement : 27/09/2016. ORDER PER SHRI VIKRAM SINGH YADAV, A.M. This is appeal filed by assessee against order of ld. CIT(E), Jaipur dated 18.03.2015 wherein assessee has taken following grounds of appeal: (i) Under facts and circumstances of case assessment order passed by ld. CIT(Exemptions), Jaipur u/s 12AA(1)(b) is unlawful, illegal and unjustified. ITA No. 335/JP/15 Rajasthan Khadya Padarth Vyapar Sangh, Jaipur vs. CIT(E), Jaipur (ii) Under facts and circumstances of case assessment order passed by ld. CIT(Exemptions), Jaipur has erred in refusing registration u/s 12AA of IT Act, 1961. (iii) Under facts and circumstances of case, assessment order passed by ld. CIT(Exemptions), Jaipur has erred in holding that activities of assessee are not charitable within meaning of section 2(15) of Income Tax Act, 1961. 2. brief facts of case are that assessee is trade association constituted under provisions of Rajasthan non-trading Companies Act and is registered under certificate No.41 of 1996 dated 09.09.1966 with Registrar of non-trading Companies, Jaipur, Rajasthan. assessee moved application u/s 12A(1)(a) on 05.09.2014 seeking registration u/s 12AA before ld CIT(Exemption). ld. CIT(Exemption) has passed order u/s 12AA(1)(b) on 18.03.2015 refusing registration to assessee. Hence, present appeal before us. 2.1 relevant findings of ld. CIT(E) are reproduced as under: In case of present applicant, membership is limited to persons related to food products only and all objects are for benefit of traders of KHADYA PADARTH. This consist of very limited and small group and not public at large. In section 2(15), legislature has used language of great amplitude charitable purpose which not only include specific purpose of education medical etc. but also advancement of other objects of general public utility. clause is intended to serve public at charitable falling under 2 ITA No. 335/JP/15 Rajasthan Khadya Padarth Vyapar Sangh, Jaipur vs. CIT(E), Jaipur head advancement of any other general public utility. This is totally missing in case of applicant. Besides objects, genuineness of activities were also examined on basis of Audit Report submitted by appellant. In income and application account submitted for assessment year 2013-14. assessee has shown total receipt of Rs. 14,87,975/- including receipt of special assistance of Rs. 1,30,000/-. main component of expenditure/application is advertisement and publicity and all expenses are of administrative nature not related to object in any manner. Similarly in accounts submitted for A.Y. 2012-13 against total receipt of Rs.77,72,123/-, it can be seen that assessee has claimed application of Rs.29,72,642/- towards Maha Sammellan expenses and all other expenses are of administrative nature. From above details it is apparent that even activities of association/society are not charitable in nature and also not for benefit of public at large. Based on above discussion it is clear that object of society/association as well as activities are not charitable in nature as they are for benefit of particular group of persons. society/trust cannot be held as charitable within meaning of 2(15) of IT Act. Based on above I am satisfied that society/association is not fit for registration and therefore registration u/s 12AA is refused. 2.2 ld. AR has submitted that objects of institution are for advancement of general public utility and therefore charitable :- (a) Learned CIT(E) has refused registration u/s 12AA to assessee on ground that object of institution are not charitable. copy of 3 ITA No. 335/JP/15 Rajasthan Khadya Padarth Vyapar Sangh, Jaipur vs. CIT(E), Jaipur Sangh, constitution of institution is available on paper book page no. 4 to 9. objects are reproduced here under: - 4 ITA No. 335/JP/15 Rajasthan Khadya Padarth Vyapar Sangh, Jaipur vs. CIT(E), Jaipur perusal of aforesaid objects reveals that object at no. (d) very emphatically states that first and foremost object of institution is to encourage goodwill, cooperation and unity in society of Khadya Padarth Vparik Audhogik Samaj. This shows that object is for society or at most for section of society engaged in food trade and industry. This section of society pertaining to food trade and industry is quite big, huge and enormous and cannot be termed as limited to small group of persons. Any activity fostering and encouraging goodwill, cooperation etc. automatically is activity of advancement of general public utility. Therefore it was wrong on part of Learned CIT(E) to hold that it was for benefit of small group of persons. (c) object at serial number (M) is for activity encouraging Trade and Industry and for that purpose extending cooperation in making of rules etc. This object again very clearly establishes that activity of institution was not for small group of persons but for public at large. Food Trade and Industry ultimately serves public at large and not small group of persons and institution is established for benefit and development of food and trade industry. In these circumstances Learned CIT(E) erred in refusing registration to assessee. (d) other objects are ancillary and complementary to main objects stated above. other objects include publication of literature in above regard, interaction with Government in above regard and conducting other activities for achievement of these objects. There is no such object which is not charitable in nature. 5 ITA No. 335/JP/15 Rajasthan Khadya Padarth Vyapar Sangh, Jaipur vs. CIT(E), Jaipur Thus objects of institution confirm and are in accordance with definition of charitable purpose provided u/s 2(15) which includes advancement of any other objects of general public utility. 2.3 As regards findings of Learned CIT(E) that activities of institution are also not charitable in nature and these are for benefit of particular group of persons, ld AR submitted that finding of Learned CIT(E) is erroneous. Learned CIT(E) has failed to appreciate objects of institution and therefore has wrongly concluded that activities of institution were not for public at large. It has already been submitted in forgoing paras that institution works exclusively for development of Food, Trade and Industry. each and every activity of institution was wholly, exclusively for attainment of development, cooperation in field of food, trade and industry which affects public at large. Not single activity has been pointed out by Learned CIT(E) which in not in conformity with objects of institution. expenditure on advertisement and publicity and Mahasammelan being of administrative nature cannot be termed to have been made for benefit of small group of persons. sweeping generalization have been made by Learned CIT(A) without appreciating facts of case and nature of objects. 2.4 ld AR further drawn reference to amendment made by Finance Act 2008 and speech of Finance Minister. ld AR submitted that Finance Act 2008 had amended definition of advancement of any other object of general public utility w.e.f. Assessment Year 2009-10. It laid down that it would not include following as charitable purpose if :- 6 ITA No. 335/JP/15 Rajasthan Khadya Padarth Vyapar Sangh, Jaipur vs. CIT(E), Jaipur (a) it involves carrying on of activities in nature of trade, commerce or business; or (b) activities of rendering services in relation to trade, commerce or business for cess, fee or any other consideration. These have been further subjected amendment vide Finance Act 2010 and 2011 laying limit of receipts from such activity to Rs. 25 Lacs. However while moving amendment in Lok Sabha finance minister made following speech on 29.04.2008:- "I once again assure House that genuine charitable organizations will not in any way be affected. CBDT will, following usual practice, issue explanatory circular containing guidelines for determining whether entity is carrying of rendering any service in relation to any trade, commerce or business. Whether purpose is charitable will depend on totality of facts of case. Ordinarily, Chambers of Commerce and similar organizations rendering services to their members would not be affected by amendment and their activities would continue to be regarded as "advancement of any other object of general public utility." In view of above it is clear that organization rendering services to their members engaged in food trade and industry would be covered in definition of advancement of object of general public utility. case of assessee is covered and assessee deserves registration u/s 12AA. It was further submitted that CBDT has also issued Circular No. 11/2008 dated 19.12.2008 clarifying above position. It has been laid down in circular that trade and organizations are covered under any other object of general public utility. In para 3.1 circular clearly lays down that where 7 ITA No. 335/JP/15 Rajasthan Khadya Padarth Vyapar Sangh, Jaipur vs. CIT(E), Jaipur industry or trade associations claim to be charitable as well as mutual organizations and their activities are restricted to contributions from and participation of their members these would not fall under purview of proviso to section 2(15) owing to principle of mutuality. case of assessee is fully covered by circular. object of institution is charitable as it exists for advancement of food, trade and industry which serves public at large and not to group of people. Therefore registration to institution u/s 12AA may kindly be allowed. 2.5 In respect of decisions quoted by ld CIT(E), ld AR submitted that decisions in respect of Indian Nutritional Medical Association (2013) 35 Taxman 505 (Coachin); BEL Employees Death Relief Fund and Service Benefit Fund Association (Kar) 225 ITR 270; Truck Operators Association (P&H) 328 ITR 636 are not comparable with case of assessee as these cases pertain to smaller groups/associations whereas in case of assessee object is food, trade and industry which touches public at large. decision in case of Western India Chamber of Commerce Ltd. (1982) 136 ITR 67 (Bom.) is very old and has since been superseded by decisions quoted below. It was further submitted that there are divergent decision on same issue one that is favourable to assessee has to be followed 88 ITR 192 and 177 ITR 431 (SC). ld AR thereafter drawn reference to decision of Dawoodi Boharia Jamat (2014) 364 ITR 31 (SC) and CIT vs. Jodhpur Chartered Accountant Society 258 ITR 548 (Raj). 8 ITA No. 335/JP/15 Rajasthan Khadya Padarth Vyapar Sangh, Jaipur vs. CIT(E), Jaipur 2.3 ld CIT DR is heard who has vehemently argued matter and drawn reference to various observations of ld CIT in his order while rejecting assessee s application. 2.4 We have heard rival contentions and perused material available on record. In order to consider issue under consideration, it would be appropriate to refer to section 2(15) of Act where term charitable purpose has been defined to include relief of poor, education, medical relief and advancement of any other object of general public utility. As per ld CIT(E), where object of society is not for benefit of public at large and limited to group of individuals, then it will not be considered as charitable in nature. Ld. CIT(E) held that in instant case membership is limited to persons related to food products only and all objects are for benefit of traders of Khadya Padarth. Accordingly he held that membership is limited to small group and not public at large and in view of that he had denied registration u/s 12AA of Act. 2.5 issue therefore relates to term general public utility . In order to understand meaning of term general public utility , we refer to decision of Hon ble Supreme Court in case of CIT vs. Dawoodji Bohra Jamat (364 ITR 31) wherein Hon ble Supreme Court has held that expression any other object of general public utility is of widest connotation and word general in said expression means pertaining to whole class. It further held that advancement of any object of benefit to public or section of public as distinguished from benefit to individual or group of individuals would be charitable purposes. proposition of law laid down in Hon ble Supreme Court is contained at para 30 of its order which is reproduced as under: 9 ITA No. 335/JP/15 Rajasthan Khadya Padarth Vyapar Sangh, Jaipur vs. CIT(E), Jaipur (30) According to section 2(15), expression charitable purpose has been defined by way of inclusive definition so as to include relief to poor, education, medical relief and advancement of any other object of general public utility. catena of decisions of this court which have interpreted said provision and especially expression any other object of general public utility have observed that said expression is of widest connotation. word general in said expression means pertaining to whole class. (CIT vs. Gujarat Maritime Board (2007) 14 SCC 704). Therefore, advancement of any object of benefit to public or section of public as distinguished from benefit to individual or group of individuals would be charitable purpose. (CIT vs . Ahmedabad Rana Caste Assn.) said expression would prima facie include all objects which promote wellbeing of general public. It cannot be said that purpose would cease to be charitable even when public welfare is intended to be served. 2.6 Further, we refer to decision of Hon ble Rajasthan High Court in case of Jodhpur Chartered Accountants Society (258 ITR 548) wherein Hon ble High Court has held that it is settled position that in order that purpose may qualify for being regarded as object of general public utility, it must be intended to benefit section of public as distinguished from specified individuals. In that decision, Hon ble High Court referred to decision of Hon ble Supreme Court in case of Ahmedabad Rana Caste Association vs. CIT which is reproduced as under: ......... object beneficial to section of public is object of general public utility. To serve charitable purpose it is not necessary that object should be to benefit whole of mankind or all persons in country or State. It is sufficient if intention to benefit section of public as distinguished from specified individual is present. section of community sought to be benefited must be sufficiently definite and identifiable by some common quality of public or impersonal nature . 2.7 above jurisprudence provides sufficient binding guideline to resolve controversy involved in instant case. Applying same, predominant object of assessee is to promote goodwill, co-operation and unity in Khadya Padarth Vyapar Sangh. This shows that predominant 10 ITA No. 335/JP/15 Rajasthan Khadya Padarth Vyapar Sangh, Jaipur vs. CIT(E), Jaipur object is for benefit of section of society which is engaged in food trade and related industry and it cannot be said that trade association is for benefit of small group of individuals. Sangh or trade association is sufficiently definite and identifiable by common quality of persons engaged in food trade and related industry. Further, objectives also relates to carrying out activities in relation to formulation of food trade policies, rules and regulations and dealing with government bodies. These activities will not just help members of association but will help set up environment of mutual trust and cooperation among members, government agencies etc. ultimate beneficiary of such activities will public at large. In light of above, we are of view that assessee association satisfies test of general public utility and thus charitable in nature and qualifies for exemption under section 12AA of Act. We direct ld. CIT(E) to grant registration to assessee s association u/s 12AA of I.T. Act, 1961. In result appeal filed by assessee is allowed. Order pronounced in open court on 27/09/2016. Sd/- Sd/- (KUL BHARAT) (VIKRAM SINGH YADAV) Judicial Member Accountant Member Jaipur Dated:- 27/ 09/2016 Pillai Copy of order forwarded to: s 1. Appellant- Rajasthan Khadya Padarth Vyapar Sangh, Jaipur 2. Respondent- CIT(Exemptions), Jaipur 11 ITA No. 335/JP/15 Rajasthan Khadya Padarth Vyapar Sangh, Jaipur vs. CIT(E), Jaipur 3. CIT , Jaipur 4. CIT(A)-, Jaipur 5. DR, ITAT, Jaipur 6. Guard File (ITA No.335/JP/2015) By order, Assistant. Registrar 12 Rajasthan Khadya Padarth v. Commissioner of Income Tax (Exemptions), Jaipur
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