The New Delhi Income Tax Appellate Tribunal (ITAT) has clarified that if a non-profit entity was engaged in promoting commerce between the European Union business community and Indian public authorities through policy advocacy on trade policy, investment protection and ease of doing business, such activities qualified as objects of general public utility under Section 2(15) of the Income Tax Act. Accordingly, the Tribunal held that the Federation of European Business in India (appellant) would be eligible for registration under Section 12A of the Income Tax Act.
The Appellate Tribunal pointed out that Section 2(15) deals with the definition of charitable purpose, and the last limb in the definition is ‘advancement of any other object of general public utility’. ‘Charitable purpose’ is defined to include relief of the poor, education, yoga, medical relief, preservation of the environment and advancement of any other object of general public utility.
Emphasising that the expression “any other object of general public utility” is of the widest connotation, the Tribunal clarified that so long as the dominant object is of general public utility and there is no profit motive, it cannot be said that the trust/institution is not established for charitable purposes, even if there is some profit in the activity carried on by the trust/institution.
The Division Bench comprising Challa Nagendra Prasad (Judicial Member) and Avdhesh Kumar Mishra (Accountant Member) observed that the proviso to Section 2(15) inserted by the Finance Act, 2008 (and later on modified by subsequent Finance Acts) applies only to entities whose purpose is “advancement of any other object of general public utility”, i.e., the sixth limb of the definition of “charitable purpose” contained in Section 2(15).
The Bench pointed out that whether the appellant has its object ‘the advancement of any other object of general public utility’, is a question of fact. Hence, the object of ‘general public utility’ has to be decided on facts and not by generalisation.
Reference was made to the decision of Ahmedabad Urban Development Authority [2022] 143 taxmann.com 278 (SC), where the Apex Court has clarified that while achieving the object of general public utility, the concerned trust, society or other such organization, can carry on trade, commerce or business (or provide services in relation thereto) for consideration, provided that: (i) the activity of trade, commerce or business is undertaken in the course of carrying out the advancement of any object of general public utility; and (ii) the receipt from such business or commercial activity (or service in relation thereto) does not exceed the quantified limit (i.e., 20 per cent of total receipts of the previous year).
As per the object of the appellant, the Bench found that it has to promote commerce in India with the European Union business community and to protect & facilitate the interest of European Union business community in India by advocacy of policy between the European Union business community and the Indian public authorities regarding trade policy, ease of doing business, intellectual property right protection and European union investment protection in India.
The Bench found from the object of the appellant, that it has to build up an overall environment securing the interests and wellbeing for/of the European Union business community so that they have ease of doing business in India. It is not the case of the Commissioner (Exemption) that the appellant is found engaged in any trade or commerce. Rather, members of the appellant are various European business entities, European trade associations, etc.
Briefly, the appellant, a non-profit company registered under section 8 of the Companies Act, 2013, filed its Form No. 10AB for regular registration under section 12A(1)(ac)(vi) as it was engaged in “Advancement of any other objects of general public utility”, which were charitable activities. The Commissioner (Exemption) rejected the request for regular registration under section 12A(1)(ac)(vi) and also cancelled the provisional registration granted vide order dated March 07, 2024 for assessment years 2024-25 to 2026-27 on the ground that the appellant was not engaged in any charitable activity as defined under section 2(15) of the Income Tax Act.
Cases Relied On:
CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC)
Assistant CIT (Exemptions) v. Ahmedabad Urban Development Authority 449 ITR 1
CIT v. Federation of Indian Chambers of Commerce & Industries [1981] 6 Taxman 7/130 ITR 186 (SC)
India Trade Promotion Organisation v. DIT (Exemptions) 371 ITR 333 (Delhi)
Confederation of Pharma Dealers Association v. CIT (Exemption) [2022] 137 taxmann.com 117 (Raipur – Trib.)
Indian Chamber of Commerce v. Dy. CIT [2024] 162 taxmann.com 43 (Kol – Trib.)
Appearances:
Advocates Amol Sinha and Ankit Kumar, for the Appellant/ Taxpayer
CIT-DR Jitender Singh, for the Respondent/ Revenue
