2023 (9) TMI 836 - ITAT DEHRADUN

Denial of registration u/s 12A - activities are charitable in nature or not? - CIT(E) observed that they are indulging only in leisure and pleasure activities which is the privilege of only few sections of the society and is not available for the welfare of the general public at large - HELD THAT:- We find that the ld. CIT(E) however conceded to the fact that this society is formed by a group of specified individuals who had pooled their funds into the society which were then utilized for the benefit of the members of the society. This act of the members of the society is not charitable in nature according to ld. CIT(E). To buttress this finding, it would be relevant to address the relevant objects as reproduced supra again. We find that clause (m) of the objects of the assessee society provides that all the income, earnings, movable, immovable properties of the association shall solely be utilized and applied towards promotion of its aims and objects only as set forth in memorandum of association and no profit or part of their shall be paid or transferred directly or indirectly by way of dividend, bonus, profits or in any manner whatsoever to the present or past members of the association.

No member shall have any personal claim or any movable or immovable properties of the association or make any profits whatsoever by virtue of his membership. We also find that the memorandum of association and its rules and regulations contained a clause on ‘dissolution’ wherein it is provided that the dissolution of the association and disposal of the property on dissolution will be done in accordance with provisions of section 13 and 14 of the Societies Registration Act, 1860.

As per the bye laws of the assessee society, the membership is open to all state government officers, officers of All India Services serving in Uttarakhand and officers of central government serving and residing in Uttarakhand. Hence we hold that the ld. CIT(E) is wrong in stating that the assessee society is meant only for the purposes to cater to the needs of particular section of the society.

We are not for a moment trying to state that since the assessee society had not made any surplus and hence there is no profit motive at all. What is required to be seen for a charitable trust or a charitable society is that even in the event of earning profits or surplus, such profits or surplus remain with the society itself and again ploughed back into the coffers of the society for furtherance of its charitable objects. As long as the profits or surplus are not distributed to the private individuals of the assessee society either directly or indirectly in any manner whatsoever for malafide purposes, there is no harm in any charitable society earning profits / surplus.

We hold that the assessee society objects are charitable in nature and would be entitled for registration u/s 12AA. Appeal of the assessee is allowed.