[2002] 258 ITR 548 (RAJ.)

HIGH COURT OF RAJASTHAN

Commissioner of Income-tax

v.

Jodhpur Chartered Accountants Society

N.N. MATHUR AND D.N. JOSHI, JJ.

D.B. INCOME-TAX APPEAL NO. 14 OF 2001

APRIL 9, 2002

JUDGMENT

N.N. Mathur, J.—This appeal under section 260A of the Income-tax Act, 1961, is directed against the order dated July 27, 2000, passed by the ITAT, Jodhpur, directing the Commissioner of Income-tax, Jodhpur, to grant registration to the applicant-society under section 12A of the Income-tax Act, 1961.

This appeal has been admitted by the order of this court dated July 24, 2001, on the following substantial question of law:

"Whether, on the facts and in the circumstances of the case, the ITAT was right in holding that on the proper construction of aims and objects of the assessee-association as disclosed in its constitution fall within the purview of section 2(15) of the Income-tax Act so as to entitle the assessee-society to registration under section 12A of the Income-tax Act?"

The respondent-assessee is a society registered under the Rajasthan Societies Registration Act, 1958, in the name of "Jodhpur Chartered Accountants Society, Jodhpur". The assessee’s application filed under section 12A of the Income-tax Act on July 1, 1999, was rejected by the order of the Commissioner of Income-tax, Jodhpur, dated January 17, 2000, having held that the object of the society does not fall within the category denoted by the words "advancement of any other object of general public utility" appearing in section 2(15) of the Income-tax Act and as such is not a charitable society. The ITAT after examining the aims and objects of the society arrived at the conclusion that the objects of the applicant-society do embrace, within its fold, a group of individuals of a particular class of society, i.e., chartered accountants, still they form a section of the public distinguished from specified individuals. As they are engaged in the activities of general public utility, it falls in the category of charitable society. In view of the finding, the ITAT by the impugned order directed to grant registration to the assessee-society under section 12A of the Income-tax Act, 1961.

It is contended by Mr. Sandeep Bhandawat, learned counsel appearing for the Revenue, that the membership of the applicant-society is not to the public at large and the benefits of the activities of the applicants are restricted to chartered accountant members of the Institute. It is further submitted that in the city of Jodhpur there is only one branch of the Institute of Chartered Accountants as such it is not understandable as to what activities the said Jodhpur Branch will undertake that may make the society a charitable one. It is apprehended that if the test for charitable institution is applied liberally, many societies or trusts simply by high sounding words in the objects clause will succeed in getting exemption from tax under section 11 of the Income-tax Act. Learned counsel placed reliance on the decision of the Karnataka High Court in CIT v. Bel Employees Death Relief Fund and Service Benefit Fund Association [1997] 225 ITR 270, wherein it is held that if individuals, whose only common quality is their profession or vocation but can legitimately be invested with the attributes of a public nature, then every partnership, company or association of persons can be with an object of charity and the trusts created for the benefit of such partnerships, companies and associations would be charitable trusts earning exemption under section 11. The court further observed that the absurdity of such a situation cannot be over emphasised. On the other hand, it is submitted by Mr. N.M. Ranka, senior advocate appearing for the assessee-society, that the profession of chartered accountants is similar to the legal profession and anything done for education or knowledge of profession falls within general public utility. It is further submitted that the membership of the applicant-society is given to a class of persons and not to specified persons. It is submitted that the requirement of section 2(15) is fulfilled, inasmuch as the society will educate the people on the subject of auditing, accounting, direct or indirect taxes by holding seminars, conferences and workshops, etc. Thus, according to Mr. Ranka, the object of the society as included in the constitution pertains to general public utility. Learned counsel has placed reliance on the following decisions:

(1) CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC);

(2) Addl. CIT v. Madras Jewellers and Diamond Merchants Association [1981] 129 ITR 214 (Mad);

(3) CIT v. A.P. Bankers and Pawnbrokers Association [1988] 170 ITR 476 (AP);

(4) Bar Council of U.P. v. CIT [1983] 143 ITR 584 (All);

(5) Bar Council of Maharashtra v. CIT [1980] 126 ITR 27 (Bom);

(6) CIT v. Bar Council of Maharashtra [1981] 130 ITR 28 (SC);

(7) Bar Council of Rajasthan v. CIT [1984] 147 ITR 720 (Raj);

(8) CIT v. Ahmedabad Rana Caste Association [1983] 140 ITR 1 (SC); and

(9) Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704 (SC).

In order to consider the point germane to the controversy, it would be appropriate to make mention of the relevant provisions of law, i.e., sections 11 and 12A. Chapter III of the Income-tax Act deals with incomes which do not form part of total income. Section 11 excludes income from property held for charitable or religious purposes of trust or institution from the total income of the previous year. Thus, in order to take advantage of section 11 a trust or institution has to get its registration under section 12A. After amendment with effect from April 1, 1997, the registration of the trust or institution is mandatory as per the procedure laid down in section 12AA. Section 12A reads as follows:

"12A. The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:—

(a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later:

Provided that the Commissioner may, in his discretion, admit an application for the registration of any trust or institution after the expiry of the period aforesaid; . . ".

Thus, unless the authority is satisfied that the applicant-trust or institution is charitable or religious, it cannot be registered under section 12A. Clause (15) of section 2 of the Act defines charitable purpose, which is extracted as follows:

"2. In this Act, unless the context otherwise requires,—. . .

(15) ‘charitable purpose’ includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility;"

From a reading of sections 11 and 12A, it is evident that at the stage of filing an application for registration, the Commissioner is required to examine whether the application is made in accordance with the requirements of section 12A read with relevant rules. He is further required to examine whether the objects of the trust or society are charitable or not. According to section 2(15) the expression "charitable purpose" has been defined by way of inclusive definition so as to include:

(a) relief of the poor, or

(b) education, or

(c) medical relief, and

(d) advancement of any other object of general public utility.

It is well settled 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.

We do not consider it necessary to deal with all the cases cited at the Bar except the decision of the apex court in Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704, which provides sufficient binding guideline to resolve the controversy involved in the instant case. We may usefully extract the observations of the Supreme Court making the position clear with respect to benefit to a section of the public and specified individuals (headnote):

". . . . an object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose it is not necessary that the object should be to benefit the whole of mankind or all persons in a country or State. It is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present. The section of the community sought to be benefited must be sufficiently definite and identifiable by some common quality of a public or impersonal nature".

Applying the test laid down by the apex court in Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704, we find that the predominant object of the society is dissemination of knowledge and education of commercial laws, tax laws for the benefit of general public to inculcate a sense of responsibility towards the nation and foster law abiding citizens. The objects clause of the constitution emphasises to propagate and disseminate knowledge about the auditing, accounting, direct and indirect taxes by holding seminars, conferences and workshops, etc. The fruits of such seminars, conferences, etc., would be available to the public at large, thus, it appears that the society is not for the benefit of a small group of individuals and it is also not only for the benefit of members but to promote awareness and education of the commercial and tax laws for the general public without any profit motive. As observed by the Supreme Court, to serve a charitable purpose it is not necessary that the object should be to benefit the whole of mankind or all persons in a country or State, even if a section of the public is given benefit, it cannot be said that it is not a trust for charitable purpose in the interest of the public. In the situation of explosion in population, the vast changes brought by the scientific technology and other developments, more particularly, the universal concept of globalisation, new trends in the world order to meet the ever growing challenges to organising seminars, conferences and workshops to educate the people of commercial laws, tax laws, auditing, accounting, direct and indirect taxes are of great general public utility, at least to a section of people falling in the category of charitable institution. Thus, the Tribunal has rightly directed the Commissioner of Income-tax to grant registration to the applicant-society under section 12A of the Income-tax Act, 1961.

We find no merit in this appeal and the same is dismissed.