ITAT DELHI BENCH
Greater
Kailash-II Welfare Association
v.
Director
of Income-tax (Exemptions), Delhi
Section 12A of the
Income-tax Act, 1961 - Charitable or religious trust - Registration of -
Whether a trust is to be considered as charitable if its intention is to
benefit a section of public as distinguished from personal benefits to a
specified individual - Held, yes - Assessee-welfare association was formed with
objects to promote various social welfare and recreational activities among
residents of Greater Kailash-II in particular and citizens of Delhi in general
- It claimed to be a charitable institution and applied for registration under
section 12A - Commissioner denied registration on ground that activities of
assessee was confined to a particular colony, and, its benefits were being
derived by an identifiable group of persons and, it was not for general public
- Whether since object clause of assessee-association clearly showed that its
welfare activities were not restricted to a particular colony but extended to
residents of surrounding arrears and to citizens of Delhi in general,
irrespective of caste, creed as gender, it could be said that, assessee was
working for benefits of general public without providing personal benefits to a
particular group of persons - Held, yes - Whether, therefore, assessee was to
be treated as charitable institution eligible for registration under section
12A - Held, yes
The assessee-welfare association was formed with the objects (i) to promote various social, welfare and recreational activities among residents of Greater Kailash-II in particular and citizens of Delhi in general (ii) to foster and promote unity and cooperation among the Welfare Association of Delhi and organize activities beneficial to the public in general and various other welfare activities. It applied for registration under section 12A by claiming itself to be a charitable institution. The Commissioner denied registration on the ground that the assessee was engaged in the welfare of the residents of its colony, i.e., benefits were being derived by an identifiable group of persons and appeared to be an organization working for mutual benefit of its members. According to Commissioner, objects of the assessee could not be said to be charitable within the ambit of section (15) inasmuch as the benefit from these objects were restricted to the residents of Greater Kailash-II and do not satisfy the test of public at large in any impersonal manner. On appeal to the Tribunal, the Accountant Member agreed with the views of the commissioner. But, however, the Judicial Member held that there was nothing personal in such benefits and, therefore, the assessee was entitled to registration under section 12A. As there was difference, of opinion between the two members, the matter was referred to the third member for decision.
The Supreme Court in the decision of Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704 (SC) held that 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 particular country or state. It is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present. In the said case, the objects of the Association were management of the movable and immovable properties of the Rana caste or community of the city of Ahmedabad, doing acts to improve the education of the community, giving medical help to the community, etc. Supreme Court found itself unable to comprehend how such members of the Rana caste can be regarded as having been introduced into that caste by consideration of their personal status as individual. As a matter of fact the predominant content and requirement of the clause defining ‘beneficiaries’ in the constitution of the assessee in the said case was the factum of their belonging to the Rana community of Ahmedabad. The Supreme Court held that the mere fact that a person of the Rana community who was not an original native of Ahmedabad had to prove his credentials according to the custom and usage of that community to get admitted into that community could not introduce a personal element. [Para 15]
In CIT v. Bel Employees Death Relief Fund & Service Benefit Fund Association, [1997] 225 ITR 270 (Kar), it was held that a trust is not charitable, unless it benefits the community or a section of the community. What is excluded is a trust which only confers private benefits. [Para 20]
As held by Allahabad High Court in the case of Fifth Generation Education Society v. CIT [1990] 185 ITR 634 that merely because the objects of a charitable trust are general and they do not cease to be charitable. Before a person can claim the benefit of section 11 or section 12, as the case may be, he must obtain registration under section 12A. [Para 21]
At the time of registration, what could be seen is that the objects of a society or trust are charitable in nature and the activities are genuine and not that as to how its income would be going to be spent for. Even if that be the criterion the assessee had demonstrated that it had been spending the income for maintaining the parks which were visited by residents of various localities around Greater Kailash-ll. The residents of other colonies also participate in sports, quiz, competitions, cultural programmes, etc., under taken by the association. The maintenance and upkeep of the roads was done by the Municipal Corporation of Delhi, but was supervised by the members from time to time. These roads were used by the residents of other colonies when passing through this colony. It was also stated that the beneficiaries of the association include not only the residents of the colony but also people living around the colony. [Para 23]
The term ‘Charitable purpose’ is defined in section 2(15) which includes relief of poor, education, medical relief, and the advancement of any other object of general public utility. The case of the assessee fell in the last of the category ‘any other object of general public utility’. The objects of the association in essence were for promoting welfare of the residents of Greater Kailash-ll. Such residents numbered only 15,000. That number if compared to the number in Ahmedabad Rana Caste Associate’s case (supra) where the number was 2400 was not insufficient enough to exclude it from ‘general public’. It was true that the membership of the association was open only to the owners or the tenants of the buildings in Greater Kailash-ll but its benefits were not restricted to the members alone but to the residents of surrounding areas and whole of Delhi or so to say to whosoever come and enjoy without any discrimination of his being resident of Greate Kailash-ll or caste, creed or gender. The object clause (i) being ‘To promote social and recreational activities among residents of Greater Kailash-ll in particular and citizens of Delhi in general.’ Extended the benefits to citizen of Delhi in general and did not restrict it to residents if Greater Kailash -II alone. Clause (ii) was to foster and promote unity and cooperation among the Welfare Association of Delhi and organize activities beneficial to the public in general. Clause (iii) was to arrange scientific, literary and cultural functions, games and sports, melas, lectures, exhibition, festivals and film shows for the benefit of the general public. Clause (iv) was to organize camps for the relief of the poor and to extend assistance for national and public causes. Clause (v) to open dispensaries to provide medical relief to the needy public. Clause (vi) to promote the development and achievement of civil amenities and welfare of the residents of the locality. It was extended to locality and not restricted to Greater Kailash - II. Clause (vii) was to carry on such other activities as may ensure benefits of the residents of Greater Kailash-ll and' citizens of Delhi. Clause (viii) was to carry out such other activities as the general body of the association might decide to undertake for the welfare of the residents but such activities would be non-political and non-commercial. It was not necessarily of Greater Kailash-ll but residents in general. [Para 24]
The residents of Greater Kailash-ll were not static. They might also change from time to time. Again members join the locality either as tenant or as a landlord and vice versa the residents might leave the locality for any reason. The common quality which unites all the beneficiaries was not that their personal capacity or that they were particular individual but, they were residents of Greater Kailash-ll Colony irrespective of caste, creed or religion and there was nothing which could be called as personal. The benefits were to be enjoyed as resident of Greater Kailash-ll Colony. There was nothing personal in such benefits. The society was formed for the common benefit to the residents in general for their better living conditions. The good work done to augment the objects, was not because there was element of personal benefit to a particular person. It would be essentially impersonal. Therefore, the test of Ahmedabad Rana caste Association was fully satisfied and association was entitled to registration under section 12A. [Para 25]