Income Tax Appellate Tribunal - Delhi
Association Of Third Party ... vs Cit(E) (Hqrs), New Delhi on 19 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'E' : NEW DELHI)
BEFORE HON'BLE PRESIDENT, SHRI G.D. AGRAWAL
and
SHRI KULDIP SINGH, JUDICIAL MEMBER
ITA No.6077/Del./2015
Association of Third Party Administrators, vs. CIT (E)(Hqrs.),
C/o Sarkar & Associates, Delhi.
K - 45, Kailash Colony,
New Delhi - 110 048.
(PAN : AABTA6334J)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri S.K. Sarkar, CA
REVENUE BY : Shri S.R. Senapati, Senior DR
Date of Hearing : 10.04.2018
Date of Order : 19.04.2018
ORDER
PER KULDIP SINGH, JUDICIAL MEMBER :
The appellant, Association of Third Party Administrators (hereinafter referred to as 'the assessee') by filing the present appeal, sought to set aside the impugned order dated 17.09.2015 passed by Ld. CIT (Exemptions), Delhi on the ground that :-
"The learned Commissioner of Income Tax (Exemptions) has erred in refusing to grant registration u/s 12AA (1)(b) r.w.s. 12A of the Income-tax Act, 1961."2 ITA No.6077/Del./2015
2. Briefly stated the facts necessary for adjudication of the controversy at hand are : Applicant/Assessee, Association of Third Party Administrators (ATPA) initially moved an application on 12.12.2005 in Form No.10A seeking registration under section 12A of the Income-tax Act, 1961 (for short 'the Act') which was rejected by DIT (E). Applicant had filed an appeal before the Tribunal which has restored the matter to the file of DIT (E) with direction to pass a speaking order. In the second round of litigation, CIT (E) declined the grant of registration u/s 12A of the Act on the ground that ATPA is aiming at industry status for TPA business and is working for mutual benefit of its members.
3. Feeling aggrieved, the applicant/assessee has come up before the Tribunal by way of filing the present appeal.
4. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
5. Applicant registered as a public charitable trust known as ATPA has the following aims and objects :-
"6. The aims and objects of the Trust shall be :
(i) To organize and arrange all licensed Third Party Administrators (TPAs) to be members of the Trust for mutual betterment of the TPA business;3 ITA No.6077/Del./2015
(ii) To thrive for an industry status for TPA business;
(iii) To draft guidelines, procedures, documents for implementation of the above;
(iv) To organize seminars, training and educational sessions for all employees/associates of member TPAs;
(v) To devise and develop new products related to health insurance or insurance companies, TPAs and other related parties;
(vi) To regulate and structure the TPA fees and to represent to insurance companies and other related parties, taking out insurance policies, on issues relating to TPAs as also others concerned with the insurance industry;
(vii) To organize and regulate the hospital network of TPAs and implement common procedures, standardized billing and standardized tariff and other related documentations;
(viii) To represent to regulatory bodies, Govt authorities, on behalf of member TPAs on matters related to TPA/insurance business with the object of improvement and development of TPA industry;
(ix) To create common data bank, exchange information pertaining to claim statistics, enrollment statistics and other related matters pertaining to member TPAs;
(x) To initiate legal proceedings against defaulting hospitals, fraudulently insured and such other persons involved in malpractices or frauds pertaining to claims, cashless mechanism, insurance underwriting, etc.;
(xi) To promote and create awareness for healthy living and to bring together all persons who subscribe to this common cause;
(xii) To educate members about health insurance and comprehensive medical services;
(xiii) To interact with various regulatory and other public and private sectors bodies for framing health-related and other beneficial schemes for people in general and those below the poverty line, and also participate in implementation of such schemes whether as consultants, advisors or otherwise. The Trust may also devise such packages as are of benefit to its members;4 ITA No.6077/Del./2015
(xiv) To publish books, periodicals and other literature in any subject of medical science, healthy living and insurance which may be of interest to its members;
(xv) To document all relevant information pertaining to health and hygiene;
(xvi) To advise and if needed assist the Government in the formation and implementation of policies relating to health and other areas of insurance;
(xvii) To promote education, research, training and professional development on health related issues;
(xviii) To organize and promote conferences, seminars, lectures, workshops, public debates and exhibitions in furtherance of the objectives of the Trust;
(xix) To offer awards, prizes, scholarships and stipends in promotion of the aims and objects of the Trust;
(xx) To provide need-based grants and donations;
(xxi) To cooperate and collaborate with other national institutions and agencies in furtherance of the objectives of the Trust;
(xxii) To cooperate with institutions and associations having similar aims and objects;
(xxiii) To borrow moneys for carrying out the objects of the Trust and for that purpose to create security by mortgage or charge or pledge or hypothecation of any immovable property of the Trust;
(xxiv) To establish any fund to further the interest of the Trust;
(xxv) To establish an institute for training and dissemination of knowledge among Third Party Administrators;
(xxvi) To undertake programmes which ensures raising of income levels and expanding employment opportunities of the weaker sections of Trust, particularly of those living below the poverty line and women by involving participants in the planning, implementation and maintenance of activities taken up;
(xxvii) To organise disadvantaged section of Trust and take steps for increasing their level of awareness with regard to the programme and contents and facilities therein under government / non government programme, legal provisions etc. and also for 5 ITA No.6077/Del./2015 increasing their bargaining power by promoting co-operative and group action;
(xxviii) To raise or acquire funds or property from Central Government, State Government, Foreign Agencies, Non- Government Agencies, Charitable Trusts by way of donations or grants or contribution or by taking loan from public and private Financial Institutions and Banks. The funds, properties, assets and all other resources, present and future of the Trust shall be utilized for any or all the purposes or objects of the Trust as stated above and also for all other similar activities in furtherance of ideals of truth and non-violence; (xxix) To acquire by purchase or otherwise hold on lease, hire or rent or by exchange any movable or immovable property or properties;
(xxx) To organize and maintain residential hostels, restaurants and other amenities for its members;
(xxxi) To maintain and keep in good repair all buildings and common services;
(xxxii) To constitute or cause to be constituted Regional Centres at convenient places to promote the objectives of the Trust; (xxxiii) To sell, give on lease or hire any property of the Trust; (xxxiv) To promote National Unity and International Peace and Amity;
(xxxv) To aim towards Communal and Social Harmony and Brotherhood;
(xxxvi) To undertake evaluation of Economic and Social projects;
(xxxvii) To engage in any other lawful activity which may be conducive to the promotion or attainment of any or all objects of the Trust.
6. The ld. CIT (E) proceeded to decline the registration u/s 12A of the Act by relying upon the selective aims and objects that the organisation is aiming at industry status for TPA business and to organize, train and work for betterment of TPA members and their 6 ITA No.6077/Del./2015 employees and benefits are being derived by its members only. However, when we examine aims and objects in entirety ATPA is also working towards developing new products related to health insurance or insurance companies and to structure the TPA fees to represent regulatory bodies and Government authorities; to promote and create healthy living and to bring together all persons who subscribed to this common cause; to educate members about health insurance and comprehensive medical services; to interact with various regulatory and other public and private sector bodies for promoting health related and other beneficial schemes for people in general and those below the poverty line and also participate in implementation of such schemes; to promote education, research, training and professional development on health relates issues, to provide need based grants and donations; to promote national unity and international peace and amity; to aim towards social harmony and brotherhood, to undertake evaluation of economic and social projects.
7. When we examine the aforesaid aims and objects of the assessee trust in entirety in the light of the fact that the applicant is one TPA out of 28 TPAs appointed by Insurance Regulatory Development Authority (IRDA) and its activities are to be percolated down to the public at large.
7 ITA No.6077/Del./2015
8. In the identical facts and circumstances of the case, Hon'ble Rajasthan High Court in case cited as CIT vs. Jaipur Stock Exchange Ltd. - (2015) 377 ITR 469 (Raj.) held stock exchange entitled to exemption u/s 2(5)(11) by holding as under :-
"Held, that the Jaipur Stock Exchange Ltd. was a company registered as charitable trust under section 12A of the Income-tax Act, 1961. The object of the stock exchange was not only to further the interests both of the brokers and dealers but also the public interested in securities, to assist, regulate and control the trade or business in securities, to maintain high standards of commercial honour and integrity, to promote and inculcate honourable practices and just and equitable principles of trade and business, to discourage ad to suppress malpractices, to settle disputes, and to decide all question of usage, custom or courtesy in the conduct of trade and business. The memorandum of association did not permit the profits to be distributed between the members. The profits were to be utilized for services of the public utility. It would thus clearly qualify for exemption under section
11."
9. Moreover, Hon'ble Allahabad High Court in case cited as CIT (E) vs. Yamuna Expressway Industrial Development Authority - (2017) 395 ITR 18 (All.) has held that it is not within the purview of Commissioner to examine whether the assessee was entitled to exemption u/s 11 or 12 since that was within the jurisdiction of AO and not the Commissioner (E). Hon'ble High Court further held that, "A body or institution which is functioning for advancement of objects of general public utility and whose 8 ITA No.6077/Del./2015 activities are not in the nature of trade, business or commerce or sheer profit making, is entitled to claim itself to be constituted for "charitable purposes" and seek registration under section 12A(1) of the Income-tax Act, 1961. Charitable purpose primarily means that the predominant object must be to promote welfare of general public. An ancillary activity, if any, to that general one performed by the institution would not render such institution "non- charitable".
10. Hon'ble Delhi High Court in case cited as PHD Chamber of Commerce & Industry vs. DIT (E) - (2014) 265 CTR (Del.) 318 while dealing with the identical issue held as under :-
"Held: By rendering specific services to members and non-members for a fee, a trade, professional or similar association cannot be said to be carrying on a business activity. There can be no doubt that the activities in the case of an assessee such as the present one, which is a trade association - Chamber of Commerce and Industry, established to protect the interests of trade and industry were activities which are incidental to the attainment of the objects of the Chamber. The Tribunal is not justified in taking the view that the assessee, which is a chamber of commerce and industry, is carrying on business activities, which require compliance with the conditions of s. 11(4A). In most of the cases, the services are performed in the true spirit of service to the members of the association (such as a chamber of commerce) and the fees charged are so calculated or fixed that it merely covers the costs incurred by the association in rendering the service. Since accuracy in matching the costs and the fees charged cannot be maintained consistently, there can arise a surplus. The mere arising of a surplus does not 9 ITA No.6077/Del./2015 clothe the activity of performing the services for the members with a profit motive, which is essential in business. -Addl. CIT vs. Surat Art Silk Cloth Manufacturers Association (1979) 13 CTR (SC) 378:
(1980) 1211TR 1 (SC) relied on."
11. Hon'ble Apex Court in case cited as CIT vs. Andhra Chamber of Commerce - (1965) 55 ITR 722 (SC) defined the charitable purpose for a trust under the Income-tax Act as under :-
"That the expression "object of general public utility"
was not restricted to objects beneficial to the whole of mankind. An object beneficial to a section of the public was an object of general public utility. To serve a charitable purpose, it was not necessary that the object should be to benefit the whole of mankind or even all persons living in a particular country or province. It was sufficient if the intention was to benefit a section of the public as distinguished from specified individuals. 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 is no common quality uniting the potential beneficiaries into a class, it might not be regarded as valid."
12. In view of the decision rendered by Hon'ble Supreme Court and Hon'ble High Courts in the judgment discussed in the preceding paras, we are of the considered view that the applicant trust cannot be said to be engaged only for TPA members and their employees and working for mutual benefits of its members, but its objects are certainly aimed at providing benefit to the general public in the field of insurance and health facilities. No doubt, 10 ITA No.6077/Del./2015 activities of the TPA which is a trade association for TPA business for the benefits of its members and non-members, but it is established to protect the interest of TPA members and work towards developing new products related to health insurance or insurance company and to structure the TPA fees, which is like Chambers of Commerce and Industry. So it is certainly providing services to the insurance sector, which in return benefits the public at large. Moreover, at this stage, the Commissioner (E) was not empowered to examine whether the assessee was entitled for exemption u/s 11 or 12 as this issue was required to be examined at the time of assessment.
13. In view of what has been discussed above, we are of the considered view that ld. CIT has erred in rejecting the application for registration u/s 12AA of the Act filed by the assessee. Consequently, the appeal filed by the assessee is allowed directing the ld. CIT to provide registration u/s 12AA to the assessee.
Order pronounced in open court on this 19th day of April, 2018.
Sd/- sd/-
(G.D. AGRAWAL) (KULDIP SINGH)
PRESIDENT JUDICIAL MEMBER
Dated the 19th day of April, 2018
TS
11 ITA No.6077/Del./2015
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(E), New Delhi.
5.CIT(ITAT), New Delhi. AR, ITAT
NEW DELHI.