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TMI Blog2016 (10) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... at of Nandesari Water and Utilities Ltd. as the matter is covered matter by the decision of the Tribunal in ITA N.2506/Ahd/2008 dated 12.12.2008. Thereafter ld. CIT vide his order dated 16.12.2013 rejected the application u/s 12A of the Act once again not relying on the decision of the Tribunal in the case of Nandesari Water & Utilities Ltd. saying that the same has not been accepted by the department and the matter is in appeal before Hon. Gujarat High Court. 3. Aggrieved, assessee is now in appeal before the Tribunal. 4. Ld. AR submitted that, the Company was formed on 27.04.2007 and registered u/s 25 of the Companies Act, 1956. The main objects of the Company is to Build, Construct, operate and maintain water supply scheme, drainage scheme, Gas Utility Services, Power Utility, Road Network, Rain Water Harvesting, Artificial Recharging and other utilities of Panoli G.I.D.C. Industrial Estate & Surrounding village for the benefit of member industries, and the doing of all such other lawful things as are incidental or conducive to the attainment of the above objects. It may be appreciated that, section 2(15) defines "Charitable Purpose" includes inter alia the advancement of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. On the other hand, ld. DR supported the orders of lower authorities. 6. We have heard the rival contentions and perused the material on record. By way of this appeal assessee is in second round being aggrieved by the order of ld. CIT for rejecting the application u/s 12A of the Act for registration as a charitable company. More precisely the question before us is whether the activities carried out by the assessee company is charitable in nature as per the provisions of section 2(15) of the Act or not. In the first round when the issue came up before the Tribunal, the same was set aside to the file of ld. CIT for fresh decision in the light of decision of the co-ordinate Bench in the case of Nandesari Water & Utilities Ltd. (supra) by observing as under :- "4. Before us the learned counsel for the assessee submitted that section 2(15) defines "Charitable Purpose" include inter alia the advancement of any other object of public utility. He submitted that the CIT has only referred to clause -I of Part (A) of the object clause of the MOU of the company. But there are Umpteen Objects. These are enumerated in Part (B) running from clause 2 to clause 38 many of which do not restric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the individuals and hence satisfies the condition mentioned in section 2(15) in order to be eligible to become a charitable activity and hence registration u/s 12A is entitled for the company. 5. We have heard the rival contentions of both the parties and perused the material on record along with the orders of the authorities below. We have also gone through the decisions as relied on by the assessee before us. We find force in the submissions of the ld. AR that the activities carried on by the assessee company were charitable in nature and the object of the trust is to help the other member industries i.e. public at large. We therefore, quash the order of the CIT and direct the revenue authority to consider the application for registration u/s 12AA of the Act." 7. Thereafter, when the matter came up before ld. CIT for fresh decision whereby the factual position of the case of assessee was to be compared with that of Nandeswari Water and Utilities Ltd. (supra). The CIT again refused to register the assessee u/s 12A of the Act by observing that main objects of the assessee cannot be said to be for charitable purposes within the purview of section 2(15) of the Act. While de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee submitted that section 2(15) defines "Charitable Purpose" include inter alia the advancement of any other object of public utility. He submitted that the CIT has only referred to clause -I of Part (A) of the object clause of the MOU of the company. But there are Umpteen Objects. These are enumerated in Part (B) running from clause 2 to clause 38 many of which do not restrict the activity to the members only. He also referred particularly clause 5,6,7,8,10 to clauses 16,17,18,19 and 20 and submitted that these do not speak of the members of the company but vastly extend to benefit the man kind and therefore satisfies the condition of General Public Utility as envisaged in sec.2(15) of the I.T. Act. The learned counsel for the assessee further submitted that it should not be construed that if a benefit is obtained by a section of public even though it amounts to benefit of General Public in order to serve a charitable purpose. It is not necessary that the object should be to benefit the whole mankind or even all persons leaving in a particular country or province. It is sufficient if the intention is to benefit a section of the public as distinguished from specified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of hearing ld. AR also referred and relied on the decision of Hon. Gujarat High Court in the case of Ahmedabad Mill Owners' Association (supra) and after going through the same we observe that Hon. Gujarat High Court has dealt the issue in detail as to whether the objects which serve personal interest would fall within the scope of section 2(15) of the Act because main object of the assessee company is to work specifically for the member industries of GIDC Industrial Estate. We find that Hon. High Court has held as under :- "15. We now proceed to consider whether an object which serves personal interest would fall within the scope of s. 2(15) of the Act. There is no dispute that the charitable purposes of relief to poor and educational and medical relief have no relevance to the facts of the present case. It is, therefore, the fourth category of the charitable purpose, namely, the object of general public utility, with which we are concerned in this case. The expression "object of general public utility" appearing in s. 2(15) would include only those objects which promote the welfare of general public and not the personal and individual interests of some persons. It is not un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that promotion and protection of trade, commerce and industry cannot be equated with promotion and protection of activities and interests merely of persons engaged in trade, commerce and industry." 17. In this case, the Supreme Court has painted out that even an object beneficial to a section of the Public is an object of public utility and that to serve a charitable purpose, it is not necessary that the object should he to benefit the whole mankind or persons living in a particular country or province. But, while making these observations, the Supreme Court has been careful in pointing out the distinction between "a section of the public" and specified individuals. Even so far as "a section of the public" is conerned, the Supreme Court has been particular in identifying it in the following terms (page 729) : "The section of the community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of a public or impersonal nature: where there was no common quality uniting the potential beneficiaries into a class, it might not be regarded as valid." (Emphasis italicised in print added). 18. These observations are repeated by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at any given moment constitute the class from which the beneficiaries are to be selected. This circumstance does not, however, deprive the gift of its public character. Thus, if there is a gift to relieve the poor inhabitants of a parish the class to benefit is readily ascertainable. But they do not enjoy the benefit, when they receive it, by virtue of their character as individuals but by virtue of their membership of the specified class. In such a case the common quality which unites the potential beneficiaries into a class is essentially an impersonal one. It is definable by reference to what each has in common with the others, and that is something into which their status as individuals does not enter." Our Supreme Court has approved of this principle in Ahmedabad Rana Caste Association's case (supra) and has held that members of Rana caste had a relationship which was an impersonal one dependent upon their status as members of that caste. No such relationship of impersonal nature can he found amongst the millowners and users of motive power, and, hence, none of the objects mentioned in els. (a), (b) and (c) can be treated as objects of public utility. We have already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 4(3)(i) of the Indian IT Act, 1922. In view of this decision, even the object mentioned in cl. (f) cannot be considered as the object serving any public utility. If we closely scrutinise the objects contained in r. 3, we find that a substantial part of these objects benefit the association's own members, those connected with them, and their employees. It is no dubt true that the beneficiaries of these objects arc also those who are non-members but who happen to be millowners or users of motive power. But that aspect of the matter docs not detract from the fact that all the members, and their employees, and "those who are connected" with members, form the substantial part of the recipients of the benefits contemplated by the objects. In IRC vs. City of Glasgow Police Athletic Association (1953) 34 TC 76 (HL) Lord Cohen has summarised the legal Position in such cases as under at p. 105 of the report: "(1) If the main purpose of the body of persons is charitable and the only elements in its constitution and operations which arc non-charitable are merely incidental to that main purpose, that body of persons is a charity notwithstanding the presence of those elements Royal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness undertaking so held. Now, if it is found from the facts of the case that the coal business which the respondent-association held undertaken during the accounting period, was an undertaking held by the respondent-association in trust for others, then the said business can be legitimately considered to be a property held in trust. Therefore, the income which the respondent association has derived from this coal business can be legitimately dealt with as per the provisions contained in s. 11 if that business is found to be a trust property. Therefore, the contention of Shri Kaji, that income from coal business cannot be a subject-matter of treatment under s. 11, cannot be accepted." 11. On application of the above decision to the facts of the case of assessee, we find that the objects of the assessee company speaks about to build, construct, operate and maintain water supply scheme, drainage scheme, storm water drainage scheme, gas Utility Services, Power Utility, Road Network, Rainwater harvesting, artificial recharging and other utilities of Panoli GIDC Industrial Estate for the benefit of member industries. We further observe that during the course of hearing when a question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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