HYDERABAD BATTERY ASSOCIATION, HYDERABAD,HYDERABAD vs. CIT (EXEMPTIONS), HYDERABAD, HYDERABAD

Brief facts of the case are that the assessee was registered as a Society under the Andhra Pradesh Societies Registration Act of 2001 dated 13.10.2015. The objectives of the society are as under: * promote and protect members’ interest & improve the regulatory/business environment for its industry * encourage & assist the prosperity of the industry * provide interfaces between the industry & other organizations. * promote and maintain a high standard of products manufactured. * provide guidance on training and certification of personnel involved.

The assessee, therefore, filed an application in Form 10A on 10.02.2016 for registration u/s 12AA of the Act. The CIT (Exemption) called for the details and on verification found that the assessee’s Society exists only for a particular group of persons i.e. membership is restricted to traders in batteries and allied business. He observed that the association is only to serve the interest in the trade of battery business and that is it in the nature of mutuality concept and there is no obligation for spending the income for charitable purposes only. He therefore, held that the objective of the assessee’s society did not fall under the ambit of section 2(15) of the I.T. Act. Accordingly, he held that the society is not fit for grant of registration u/s 12AA of the Act and rejected the assessee’s application in Form 10A. Aggrieved, the assessee is in appeal before us.

The learned Counsel for the assessee while reiterating the submissions made before the authorities below has placed reliance upon the following case law in support of his contentions: i) Hon'ble Supreme Court in the case of CIT vs. Andhra Chamber of Commerce (1965) 55 ITR 722 (S.C.) ii) CIT vs. Andhra Pradesh Police Welfare Society (1984) 148 ITR 287 iii) CIT vs. Riding Club (1987) 168 ITR 393 iv) Bengal Hosiery Manufacturers Association vs. DIT (E) (2012) 18 ITR 0205 v) DDIT vs. PHD Chamber of Commerce & Industry (2011) 46 SOT 235 vi) PHD Chamber of Commerce & Industry (2013) 357 ITR 296.

Thus, he submitted that though the membership is to the traders in battery business, it is not restricted to any specific persons and as held by the Hon'ble Apex Court, the activity of the Society need not be open to the whole of the mankind. Therefore, he prayed for a direction to the CIT (Exemption) to grant registration u/s 12A of the Act.

The learned DR, on the other hand, relied upon the decision of the Hon'ble Kerala High Court in the case of CIT vs. Ernakulam Distt. Cement Dealers Association (2002) 253 ITR 198 (Ker.).

Having regard to the rival contentions and the material on record, we find that the “object of general public utility” is one of the facts of “charitable purposes” as defined in the Income Tax Act and the Hon'ble Supreme Court in the case of CIT vs. Andhra Chamber of Commerce (1965) 55 ITR 722 (S.C) has explained the object of general public utility as contained in section 2(15) of the I.T. Act as under: “In the promotion of trade, commerce and industries of India the public is vitally interested and if by the activities of the assessee that object is achieved, it would be within the meaning of section 4(3)(i) of the 1922 Act an advancement of an object of general public utility. In enacting the last paragraph of section 4(3) of the 1922 Act the legislature has used language of great amplitude. ‘Charitable purpose’ includes not only relief of the poor, education and medical relief alone, but advancement of other objects of general public utility as well. The clause is intended to serve as a special definition of the expression ‘charitable purpose’ for the Act; it is again inclusive and not exhaustive or exclusive. Even if the object or purpose may not be regarded as charitable in its popular signification as not tending to give relief to the poor or for advancement of education or medical relief, it would still be included in the expression ‘charitable purpose’ if it advances an object of general public utility. The expression ‘object of general public utility’, however, is not restricted to objects beneficial to the whole of mankind. An object beneficial to a section of the public is an

This principle has been applied in all the other cases relied upon by the learned Counsel for the assessee. The decision of the Hon'ble Kerala High Court relied upon by the learned DR has not considered the decision of the Hon'ble Supreme Court in the above case. Therefore, the said decision is not strictly applicable to the case on hand. As regards the objectives of the assessee, we find that they fall under the category of “object of general public utility” and are not restricted to specified individual/persons. Therefore, following the decision of the Hon'ble Supreme Court (cited Supra), the objectives of the assessee society are to be considered as charitable in nature and registration u/s 12A is to be granted.

Another reason for denial of registration is that the objects do not restrict the spending of the funds only for charitable purposes. U/s 11, only such expenditure which is for charitable purposes, is allowable and the AO, during the assessment proceedings, can examine if the funds were utilized for the purposes for which the society has been formed. Since the CIT (E) has not pointed out any particular objective which is not for charitable purposes, and since the objectives are not restricted to any single or specified person/or persons, we are of the opinion that the assessee is eligible for registration u/s 12AA of the Act. In view of the same, we remand the issue to the file of the CIT (E) with a direction to grant registration u/s 12A of the Act. 9. In the result, assessee’s appeal is allowed.