Consortium Of Accredited Healthcare Organization vs CIT (Exemption)

ITA No.4967/DEL/2026

1.

That the learned Commissioner of Income Tax (Exemption), Delhi has erred in law and on facts in rejecting the application for registration under section 12A(1)(ac)(ii) of the Income Tax Act, 1961 vide order dated 27.03.2026 passed under section 12AB(ii)(B) of the Act, which order is wholly illegal, arbitrary, perverse and contrary to the provisions of law. 2. That the learned CIT(E) has grossly erred both on facts and in law in holding that the assessee has failed to satisfy the conditions for the grant of registration u.sec 12A of the Income Tax Act. He has failed to appreciate that the assessee society had only been established with the object of carrying activities of charitable nature and has only been engaged to carry charitable activities with no change since inception.

3.

That the learned CIT(E) has erred in law and on facts in holding that the activities of the appellant are commercial in nature and do not qualify as charitable purpose within the meaning of section 2(15) of the Income Tax Act, 1961, without properly appreciating the true nature, scope and object of the appellants activities which are purely charitable and for the purpose of education in medical system leading to advancement of general public utility. 4. That the learned CIT(E) has failed to appreciate that the society had been established in the year 2013 to carry out only charitable activities as defined in section 2(15) of the Act and in fact carried no other activity other than charitable activity as defined in section 2(15) of the Income Tax Act, 1961 and had also been granted registration u.sec 12A of the Act by an order dated 01.10.2021 and related to the AYs. 2022-23 to 2026-27. That the learned CIT(E) has failed to comprehend that it had been granted registration u.sec 12A

5.

That the learned CIT(E) has failed to appreciate that the society has no profit motive in earning any income but is only engaged in providing its services in healthcare sector to improve the human life. That in fact the activities carried on presently continues to be carried in the identical manner with no change since inception. 6. The findings of the learned CIT(E) in his order that the major activities of the assessee are centred around collection of sponsorship fee is misconceived. He has failed to comprehend that sponsors, who sponsor the healthcare programs are only been providing space to advertise their products at the time of seminar organised by the institution

7.

That the learned CIT(E) has erred in failing to appreciate that sums received from sponsors was not in the nature of fee received for consideration but the sponsors had contributed the sums to the assessee society to achieve its objective, and there are no quid-pro-quo between the sponsors and the society and thus the sum received was not in the nature of fee received for consideration. 8. That the learned CIT(E) has also failed to appreciate that the institution is a non-profit organization and had been established ONLY with the object to bring awareness in healthcare people by improving quality, developing skills, patient safety in a systematic manner.

9.

That the learned CIT(E) has also failed to appreciate that the society has been backed by medical professionals who were rendering their services pro-bono to help in implementation and enhancement of healthcare facilities, patient safety etc., imparting of training to health care people was only the objective of the institution for which there was no profit motive. 10. That the learned CIT(E) has failed to appreciate that, it has organised training programs in government hospitals like AIIMS, Dr. Ram Manohar Lohia Institute of Medical Science, Lucknow, Indian Institute of Public Health Gandhinagar etc. etc. to educate healthcare personnel for improving quality, skills and patient safety.

11.

That the learned CIT(E) has also overlooked that source of its receipt reflected under the heads from sponsorship sums, membership fee, registration fee, Training programme, Partners event, Projects and survey income and initiatives income, income from books publication income, was only to maintain and to cover the expenses incurred by the institution, which could not be regarded to be in the nature of trade, commerce OR business. 12. That the learned CIT(E) has also failed to comprehend the true nature and concept of the sums received and reflected as sponsorship fee. Infact the sums contributed by the sponsorors were the sums financed by them in order to meet out the expenditure to be incurred on the events OR conferences which were proposed to be conducted by the society periodically in different cities with no profit motive.

13.

That the learned CIT(E) has erred in law and on facts in rejecting the appellants explanation that sponsorship fees are charged only to meet specified event expenses and are not solicited unless some event is organized, without providing any cogent reasons for such rejection, and without appreciating that sponsorship fees is utilized exclusively for organizing events, conferences, workshops and training programmes for spreading awareness about healthcare quality and patient safety amongst all sections of society. 14. That the learned CIT(E) has also failed to comprehend that the sums received from sponsorors was not a fee and the expression fee is misnomer on the facts and in law. No sponsorship fee is received but the sums were paid by the sponsorors to assist the society to enable it to achieve the object of education in medical system leading to advancement of general public utility in the healthcare sector

15.

That the learned CIT(E) having admitted that WHARE commercial receipts exceeds 20 percent in a particular year, the institution may lose exemption, itself establishes that as long an institution is established for charitable purpose, registration u.sec 12A of the Act could not be denied to it. Infact he has failed to appreciate that the activities carried on were not in the nature of trade, commerce OR business OR any activity of rendering any service in relation to any trade, commerce OR business. The learned CIT(E) has failed to properly appreciate the nature of the activities in which the assessee was engaged. 16. That the learned CIT(E) has erred in law and on facts in holding that the appellants activities do not constitute education within the meaning of section 2(15) of the Act by adopting an unduly narrow and restrictive interpretation of the term education and by failing to appreciate that professional skill development, capacity building and competency enhancement in th

17.

That the learned CIT(E) has erred in law and on facts in not appreciating that the appellants activities of conducting structured training programmes, workshops, camps and educational initiatives for healthcare professionals, trainees and institutions to enhance competencies in patient safety, quality improvement, infection control and accreditation standards constitute both education and advancement of general public utility within the meaning of section 2(15) of the Act. 18. That the learned CIT(E) has failed to comprehend that the judgment of Honble Supreme Court in the case of Ahmedabad Urban Development Authority (AUDA) and others in Civil Appeal No. 21762 of 2017, has no application either for the grant of registration u.sec 12A of the Income Tax Act, 1961 OR a certificate u.sec 80G of the Act.

19.

That the learned CIT(E) has also failed to appreciate that merely because the society has made an income which is in the nature of trade, commerce OR business, could not tantamount sufficient to deny the continuation of registration u.sec 12A of the Income Tax Act. 20. That the learned CIT(E) has failed to appreciate that even u.sec 12AA of the Act, the registration granted cannot be cancelled unless the institution is found to be engaged in the activities, which are no genuine and WHARE the activities are not been carried out in accordance with the object. In the instant case there is no allegation that the activities in which it is engaged are not in accordance with its objects.

“..6.7 From the discussions above it is evident that the applicant has substantial net surplus in absolute terms and hence its markup for commercial transactions is not nominal. In other words, the applicant fails the test of nominal markup as enumerated in the case of AUDA supra as well. Thus, in light of the law laid down by the Hon’ble Supreme Court in Ahmedabad Urban Development Authority v. CIT, the applicant does not qualify as a charitable institution within the meaning of section 2(15) of the Income-tax Act, 1961.

7.

In view of the above facts and circumstances, it is evident that:

1.

The applicant is not eligible for registration u/s 12AB as its purpose is not charitable in terms of the proviso to Section 2(15) of the Act.

2.

It works exclusively as a commercial entity.

3.

Its markup on consideration charged for services provided by it is not nominal.

4.

It has committed regular specified violation as enumerated in clause e(ii) of explanation to 12AB(4) of the Act as its activities are not being carried out in accordance with all or any of the conditions subject to which it was registered.

8.

Therefore, the conditions for grant of registration are not satisfied and hence the application filed in Form 10AB for grant of registration u/s 12A(1)(ac)(ii) is hereby rejected.”

“.9. Section 12AA undoubtedly requires the Commissioner to satisfy himself about the objects of the trust or institution and genuineness of its activities and grant a registration only if he is so satisfied. The said section requires the Commissioner to be so satisfied in order to ensure that the object of the trust and its activities are charitable since the consequence of such registration is that the trust is entitled to claim benefits under sections 11 and 12 of the Act. In other words, if it appears that the objects of the trust and its activities are not genuine that is to say not charitable the Commissioner is entitled to refuse and in fact, bound to refuse such registration.

10.

It was argued before us that the Commissioner is required to be satisfied about two things - firstly that the objects of the trust and secondly, its activities are genuine. If there have been no activities undertaken by the trust then the Commissioner cannot assess whether such activities are genuine and therefore, the Commissioner is bound to refuse the registration of such a trust.

11.

We have given our anxious consideration to the above submissions made by Ms. Aishwarya Bhati, learned Senior Counsel appearing for the appellant - Director of Income-tax and find that it is not possible to agree with the same. The purpose of section 12AA of the Act is to enable registration only of such trust or institution whose objects and activities are genuine. In other words, the Commissioner is bound to satisfy himself that the object of the Trust are genuine and that its activities are in furtherance of the objects of the Trust, that is equally genuine.

12.

Since section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done, we are of the view that the term 'activities' in the provision includes 'proposed activities'. That is to say, a Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of section 12AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust.

13.

We therefore find that the view of the Delhi High Court in the impugned judgment is correct and liable to be upheld.

14.

Ms. Bhati, learned Senior Counsel for the appellant, fairly drew our attention to a judgment of the Allahabad High Court in titled as CIT v. R.S. Bajaj Society [2014] 42 taxmann.com 573/222 Taxman 111 (All.) which has taken the same view as that of the Delhi High Court in the impugned judgment. The Allahabad High Court has also referred to a similar view taken by the High Courts of Karnataka and Punjab & Haryana.

15.

Apparently, a contrary view has been taken by the Kerala High Court in the case of Self Employers Service Society v. CIT [2000] 113 Taxman 703/[2001] 247 ITR 18. That view however does not commend itself. However, the facts in Self Employers Service Society (supra) suggest that the Commissioner of Income-tax had observed that the applicant for registration as a Trust had undertaken activities which were contrary to the objects of the Trust.

16.

In the result, we find that there is no reason to interfere with the impugned judgment of the High Court of Delhi. The appeal is, accordingly, dismissed.”

“.7. We have considered rival contentions of both sides and perused the impugned order as well as the material held on record to which our attention has been drawn. Admittedly, the CIT(E) has analysed object No. 2 & 3 of assessee and observed "The above referred objects clearly show that the intention of the assessee is to carry out various commercial activities and also to engage in trading of various products as mentioned in the objects of the assessee". On this limited basis, the CIT(E) has denied registration to assessee. Here, we find a strong merit in the contention raised by Ld. AR that proviso to section 2(15) of the Act defining 'charitable purpose' itself allows commercially in the activities of assessee but upto a ceiling limit of 20%. Further, section 11(4A) of the Act grants exemption to commercial or business activity on fulfillment of certain requirements. It is also important to note that the section 13(8) also provides that the exemption u/s 11/12 shall be denied in that previous year only in which the proviso to section 2(15) is violated. Therefore, these provisions of law clearly show that even if any object or activity of assessee, out of various multiple objects and activities, has element of commerciality, that would result in denial of exemption u/s 11/12 to that extent and in that particular previous year only but the CIT(E) in exercise of power u/s 12AB, cannot deny registration to assessee. The decisions in East India Industries (Madras) Pvt. Ltd.( supra) and Yogiraj Charity Trust (supra) relied by Ld. CIT(E) are not related to grant of registration but are for computation of total income by Assessing Authority. In present case, we are concerned with grant of registration by CIT(E), therefore those decisions are not relevant. It also remains a fact, as shown by Ld. AR with reference to the documents in Paper-Book, that the assessee has done only charitable activities till now and not undertaken any activity contemplated by object No. 2 & 3. Therefore, as and when the activity of Object No. 2 & 3 is actually undertaken by assessee in future, it would be a prerogative of Assessing Authority in that particular year, to ascertain the quantum of exemption u/s 11/12 available to assessee. Being so, we are inclined to hold that the CIT(E) is not justified in denying registration to assessee on the footing that by means of object No. 2 & 3, the assessee had intention to carry out commercial activity. Consequently, we direct the CIT(E) to grant registration u/s 12AB to assessee as applied. The assessee succeeds in this appeal.”

ITA No.4968/Del/2026