Section 12A – Registration as charitable institution – Assessee formed for improving the quality and profitability of the members’ enterprises by providing suitable platform to its CEOs who only could become assessee’s members – Whether entitled to registration – Held, yes.

Section 12A – registration as charitable institution – assessee formed for improving the quality and profitability of the members’ enterprises by providing suitable platform to its CEOs who only could become assessee’s members – Whether entitled to registration – Held, yes.

The assessee incorporated as a private limited company was granted license u/s. 25 of the Companies Act, 1956. Its main object as per its Memorandum of Association was as under: “To promote and provide networking facilities to the Chief Executive Officers (CEOs) of both private and public companies for improving the quality and profitability of their enterprises by providing a platform for CEOs for exchange of ideas and promotion of entrepreneurship through shared experience in India and to apply its income or profits if any, solely for the promotion of its objects and for the promotion of commerce in India and abroad.” The assessee applied for registration u/s. 12A.

According to the DIT, the object for which the assessee was incorporated were clearly not for the benefit of general public as a whole, but was confined to specific members only, viz., CEOs of companies and was commercial in nature. Hence, the assessee cannot be termed as a charitable association falling within the definition of section 2(15). Further, from the details filed, he noted that most of the activities of the assessee were held outside India. Therefore, relying on the decision of the Bombay high court in the case of State Bank of India (169 ITR 298), he held that the trust would not be entitled to exemption.

Held:

From the decision of the Supreme Court in the case of Surat Art Silks Cloth Manufacturers Association (121 ITR 1), the tribunal noted that the object which seeks to promote or protect the interest of a particular trade or industry is object of public utility. It further noted that the main object of the assessee, was to promote networking facilities to the CEOs for improving the quality and profitability of their enterprises, by providing a platform for CEOs for exchange of ideas and promotion of entrepreneurship through shared experience in India. According to it, advancement or promotion of trade, commerce and industry leading to economic prosperity ensures a benefit of the entire community. It further observed that, that prosperity would also be shared by those who engage in the trade, commerce and industry, but on that account, the purpose is not rendered any less an object of general public utility. As regards holding of conference abroad, it held that the said act would not make the activities of the assessee being carried out outside India. The benefit of such conference will ultimately go to assessee and its members. Thus, it held that the reasons assigned by the DIT for rejecting the assessee’s application for registration cannot be sustained.