INCOME TAX ACT, 1961

Section 12AA

Charitable trust - Registration under section 12AA - Primary or dominant purpose of assessee council was to regulate medical profession of registered nurses, etc. - Receipt of few operational and administrative expenses

Assessee was established by Rajasthan Government under Rajasthan Nursing Council Act, 1964 to provide for registration of nurses, midwives, health visitors and auxiliary nurse-midwives in the State of Rajasthan. Assessee showed receipt of direct income comprising of registration fees, counselling fees, and there were corresponding expenditure of councelling charges, etc. Assessee challenged order of CIT(E) rejecting application of assessee for seeking registration under section 12AA holding that assessee could not be held as charitable within the meaning of section 2(15). It was alleged that assessee was not engaged in 'charitable purpose' of education, and its activities fell under 'General Public Utility' thereby attracting proviso to section 2(15). Held: How can same activity qualified and fall in both categories i.e, an activity in nature of general public utility and at the same time, qualify as business activity. Merely because assessee council charged certain fees as part of rendering its statutory function and to meet its administrative/operative expenses, same could not be said to be done for the purpose of profit. Primary or dominant purpose of assessee council was to regulate medical profession of registered nurses, midwives, health visitors and auxiliary nurse midwives in the State of Rajasthan and to ensure that these persons have undergone requisite training and have passed the qualifying examination and hold the necessary degrees/certificates and thus eligible to practise as nurses, midwives, health visitors and auxiliary nurse midwives in their respective domains and services of such persons are thus available to the hospitals, nursing homes and public at large. Where as part of rendering of such activities, it recovered certain nominal fees to meet its operational and administrative expenses, same will not disqualify it from being involved in activities of general public utility. As courts have held that the proviso to section 2(15) does not seek to disqualify charitable organization covered by the last limb, when certain reasonable/nominal fee is collected from the beneficiaries in the course of activity which is not a business but clearly charity for which they are established and they undertake.

REFERRED : Queen's Educational Society v. CIT (2015) 372 ITR 699 (SC) : 2015 TaxPub(DT) 1436 (SC), Assam State Text Book Production and Publication Corporation Ltd. v. CIT (2009) 319 ITR 317 (SC) : 2009 TaxPub(DT) 2091 (SC), CIT v. Gujarat Maritime Board (2007) 295 ITR 561 (SC) : 2007 TaxPub(DT) 1557 (SC), CST v. Sai Publication Fund 2002 TaxPub(DT) 1304 (SC), Aditanar Educational Institution v. Addl. CIT (1997) 224 ITR 310 (SC) : 1997 TaxPub(DT) 1051 (SC), Khoday Distilleries Ltd. v. State of Karnataka (1995) 1 SCC 574 (SC), CIT v. Andhra Pradesh State Road Transport Corporation (1986) 159 ITR 1 (SC) : 1986 TaxPub(DT) 1395 (SC), CIT v. Bar Council of Maharashtra (1981) 130 ITR 28 (SC) : 1981 TaxPub(DT) 948 (SC), Addl. CIT v. Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1 (SC) : 1980 TaxPub(DT) 848 (SC), Indian Chamber of Commerce v. CIT (1975) 101 ITR 796 (SC) : 1975 TaxPub(DT) 347 (SC) Sole Trustee, Loka Shikshana Trust v. CIT (1975) 101 ITR 234 (SC) : 1975 TaxPub(DT) 344 (SC), State of Gujarat v. Raipur Manufacturing Co. Ltd. (1967) 19 STC 1 (SC), State of Andhra Pradesh v. Abdul Bakhi & Bros. (1964) 5 STC 644 (SC), CIT v. Jodhpur Development Authority [ITA No. 63/12, dated 5-7-2016) : 2016 TaxPub(DT) 3870 (Raj-HC)], India Trade Promotion Organization v. Director General of Income Tax & Ors. (2015) 53 Taxmann.com 404 (Del) : 2015 TaxPub(DT) 623 (Del-HC), GS1 India v. Director General of Income Tax & Anr. (2013) 38 taxmann.com 364 (Del) : (2014) 360 ITR 138(Del) : 2013 TaxPub(DT) 2791 (Del-HC), Bureau of Indian Standards v. Director General of Income Tax (2012) 27 Taxmann.com 127 (Del) : 2013 TaxPub(DT) 323 (Del-HC), Institute of Chartered Accountants of India & Anr. v. Director General of Income Tax & Ors. (2012) 347 ITR 99 (Del) : 2012 TaxPub(DT) 253 (Del-HC), Pinegrove International Charitable Trust v. UOI & Ors. (2010) 188 Taxman 402 (Punj. & Har.) : 2010 TaxPub(DT) 1405 (P&H-HC), DIT v. National Safety Council (2008) 305 ITR 257 (Bom) : 2008 TaxPub(DT) 1497 (Bom-HC), Bar Council of Uttar Pradesh v. CIT (1983) 143 ITR 584 (All) : (1983) 12 Taxman 209 (All) : 1983 TaxPub(DT) 1073 (All-HC), Addl. CIT v. Automobile Association of Southern India (1981) 127 ITR 730 (Mad) : 1981 TaxPub(DT) 477 (Mad-HC), Katra Education Society v. ITO (1978) 111 ITR 420 (All.) : 1978 TaxPub(DT) 526 (All-HC), Secondary Board of Education v. ITO (1972) 86 ITR 408 (Ori) : 1972 TaxPub(DT) 379 (Ori-HC), Bodh Shiksha Samiti v. Asstt. CIT [ITA. No. 590, 591 & 592/JP/2018, dated 29-5-2019], Green Acres Educational Trust v. Dy.CIT (2016) 159 ITD 671 (Mum) : 2016 TaxPub(DT) 2963 (Mum-Trib), Bhartiya Shiksha Samiti v. Addl. CIT [ITA No. 816/Del/2015, dated 16-10-2015], ADIT v. Jeevan Vidya Mission (2015) 155 ITD 1150 (Mum-Trib) : 2015 TaxPub(DT) 5237 (Mum-Trib) and Shavak Shiksha Samiti v. CIT (2006) 104 TTJ 127 (Del-Trib) : 2006 TaxPub(DT) 1797 (Del-Trib).

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