ITA No. 542 of 2006 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 542 of 2006 Date of Decision: 12.8.2010 Commissioner of Income Tax ....Appellant. Versus M/s Truck Operators Association ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Sanjeev Kaushik, Advocate for the appellant. Mr. Avneesh Jhingan, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1. Whether the respondent-Truck Operators Association is entitled to registration under Section 12AA of the Income Tax Act, 1961 (in short “the Act”), is the short question which requires adjudication in this appeal filed by the revenue. 2. The appeal was admitted by this Court on 1.10.2007 for determination of the following substantial question of law:- “Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was right in directing for grant of registration under Section 12AA of the Act; ITA No. 542 of 2006 -2- ignoring the fact that the assessee society was not formed for advancement of general public utility within the meaning of Section 2 (15) of the Act?” 3. Briefly stated, the facts of the case are that on 27.12.2001, the assessee-M/s Truck Operators Association filed an application in Form 10A for registration of society under Section 12AA of the Act along with certificate of registration granted by the Registrar of Societies and copy of memorandum and by-laws of the society. The matter was examined by the Income Tax Officer, Hisar who after providing an opportunity of hearing to the assessee submitted his report dated 4.6.2002. The Commissioner of Income Tax (in short “the CIT”) rejected the application holding that the association was not formed for advancement of object of general public utility within the meaning of Section 2 (15) of the Act. It was noticed that the aims and salient features of the activities carried on by the Association are as under:- “(I) This Association has come into existence on the dissolution of an old Association and all the old members have become the members of the New Association on compulsory payment of the lump sum amount of Rs.1100/- though this amount has been fixed at Rs.15,000/- for the other new members. (II) Under the Bye-laws of the Association, the payment of above amount is mandatory and the same does not represent any form of donation. (III) The Association has been formed for the welfare of the Truck operators, their drivers, cleaners ITA No. 542 of 2006 -3- mechanics restricted within the Area of Hansi Town/ village and not for public in general though they may render some occasional help on emergencies if requested, by other Association outside the above area. (IV) The Association facilitates the loading of Trucks within the area of its operation and in turn a fixed commission of Rs.30/- or Rs.50/- per Truck depending upon the distance being covered is charged from the Truck owner. This payment is also compulsory and not a donation. (V) The Association is stated to be having Tata Sumo which is in the name of the Vice President of the Association, Shri Kailash Chand Goyal and not in the name of the Association on the ground that he has some clout in M.G. Motors which enabled him to get the vehicle on instalments. This vehicle is stated to have been kept to protect the interest of Truck owners so that no outsider/non-member is allowed to operate the transportation of Trucks within the area of its operation. (VI) The Association also facilitates transportation of Trucks on behalf of its members from HAFED, FCI, Sugar manufacturing Mills and other Semi-Govt. Agencies etc. on payment of freight to them and such freights are disbursed to the Truck owners ITA No. 542 of 2006 -4- afterwards. During the financial year ending on 31.3.2002, the Association has received more than Rs.64.66 lacs out of which Rs.55.27 lacs have been disbursed to the Truck Operators.” 4. Feeling aggrieved, the assessee filed appeal before the Tribunal who allowed the appeal and directed the CIT to grant registration under Section 12AA to the assessee-society. The relevant observations read thus:- “We have heard both the parties and perused the orders of the lower authorities and the material available on record. We find that the principal object of the assessee are to promote and protect transporting business and to aid, stimulate and promote the development of the transporting business in India or any part thereof. By the achievement of these objects, it is not intended to serve merely the interest of the members of the assessee association. Advancement of trade leading to economic prosperity accrues to the benefit of entire community. The prosperity would be shared also by those who engaged in transporting trade but on that account the purpose is not rendered less as object of general public utility. Promotion of trade cannot be equated with promotion and protection of activities and interest merely of persons engaged in trade. In promotion of trade in India the public is ITA No. 542 of 2006 -5- vitally interested and if by such activities of the assessee that object is achieved, it would be an advancement of an object of general public utility.” 5. We have heard learned counsel for the parties. 6. The revenue has placed reliance on the judgment in Truck Operators' Union v. Commissioner of Income Tax, New Delhi, [1981] 130 ITR 186 and submitted that the assessee is not a Charitable Institution and the Tribunal was in error in granting benefit of registration to the assessee. 7. Controverting the submissions of learned counsel for the revenue, learned counsel for the assessee cited the judgments in Commissioner of Income-Tax, Bombay v. Bar Council of Maharasthra, [1981] 130 ITR 28 (SC), Commissioner of Income-Tax v. Gujarat Maritime Board, [2007] 295 ITR 561 (SC), Commissioner of Income-Tax v. Imporvement Trust, [2009] 308 ITR 361 (P&H) and Commissioner of Income-tax v. Red Rose School, [2007] 163 TAXMAN 19 (ALL) and supported the order of the Tribunal. 8. Before analyzing the judgments relied upon by the counsel for the parties, we delve into the factual matrix. 9. On examination of the objects and the purpose of the Association in the present case, it emerges that the respondent- Association is union of Truck Operators constituted for facilitating its members to carry on the trade of transportation and not to allow the outsider or non-member to undertake any business activity within the precincts of Hansi Town/village. The Association charges fees from its members before the transportation on the basis of the distance ITA No. 542 of 2006 -6- involved. The membership and payment of fees are mandatory and the element of voluntary contribution is missing. The association is vigorously pursuing transportation business by receiving freight charges on behalf of its members. The welfare activities adopted for the truck drivers, cleaners and mechanics of the truck owners are in the nature of staff welfare activities, as are common in other business organizations which cannot be termed for general public utility. 10. We now advert to the judgments relied upon by learned counsel for the assessee. 11. In Bar Council of Maharashtra's case (supra), Bar Council of Maharashtra had claimed itself to be covered under “Object of General Public Utility” as the same was established for charitable purpose. The Apex Court opined that the primary or dominant purpose of a State Bar Council being safeguarding the rights, privileges and interests of Advocates on its roll enjoined upon State Bar Council under the Advocates Act, 1961 would fall as advancement of an object of general public utility as encompassed under Section 2(15) of the Act. 12. Interpreting the expression “any other object of general public utility” in Section 2(15) of the Act, the Apex Court in Gujarat Maritime Board's case (supra) stressed that it would be of widest connotation which would prima facie include all objects promoting the welfare of the general public. The welfare of the general public was required to be predominant object to be covered for charitable purpose. Applying the aforesaid characteristic, the Apex Court upholding the judgment of the High Court had recorded that the respondent-Board which was constituted under Gujarat Maritime Board Act, 1981 for the ITA No. 542 of 2006 -7- purpose of development and maintenance of minor ports in the State of Gujarat was a Charitable Institution. 13. Relying upon the Apex Court decision in Gujarat Maritime Board's case, this Court had come to the conclusion that Improvement Trust was entitled to registration under Section 12AA of the Act being covered under Section 2(15) of the Act in Improvement Trust's case (supra). 14. Allahabad High Court in Red Rose School's case (supra) where the assessee-society was running an Institution exclusively for educational purposes to provide education to children from Primary Section to Degree level and to improve mental, social and other developments of the students and not with profit motive but had defaulted in utilizing its income derived from Charitable Institution for its charitable activities, it was held that it may be a ground to refuse exemption with respect to that part of income which had not been so utilized but it could not be denied registration. 15. In view of the above, the assessee cannot derive any advantage from the judgments relied upon by it. 16. Now, reference is made to the judgment of Delhi High Court in Truck Operators' Union's case (supra) whereupon the revenue has placed heavy reliance. 17. The assessee was a union of transport operators registered as a Trade Union under the Indian Trade Unions Act, 1926. On analysis of the objects of the union for which it was constituted, it was discerned that the surplus funds of the trade union could be distributed among the members at the time of its dissolution. In other words, it was ITA No. 542 of 2006 -8- held that the rules and regulations do not impose a legal obligation on the assessee or its members to hold the income of the assessee only for charitable purposes and the element of private gain could not be excluded. The union was, thus, held not to be a Charitable Institution. 18. Accordingly, we are of the opinion that the Tribunal was in error in holding that the assessee was carrying on activities for charitable purposes and was, thus, entitled to the benefit of registration under Section 12AA of the Act. 19. Consequently, the question claimed above is answered in favour of the revenue and against the assessee. 20. The appeal is allowed and the order of the Tribunal dated 28.2.2006 is set aside. (AJAY KUMAR MITTAL) JUDGE August 12, 2010 (ADARSH KUMAR GOEL) gbs JUDGE