Medical Accident Prevention Society Vs. Cit - Court Judgment

G. Sivarajan, J.

The petitioner-society is one which is registered under the Travancore Cochin Literary and Scientific Charitable Societies Registration Act (XII of 1955) with registration No. 576/1994 granted by the Registrar of Society, Ernakulam. The memorandum of rules and bye-laws of the society contained in Ext. P8, was amended in the year 1998. According to the petitioner, the objects of the society as per the deed are charitable and that it is entitled to registration under section 12A of the Income Tax Act, 1961 (hereinafter referred to as'the Act'). The CIT by its order dated 10-8-1998, rejected the said application. The petitioner challenges the said order in this writ petition.

2. Sri P. Balachandran, learned counsel appearing for the petitioner, took me to the deed (Ext. P8) and brought to my notice the preamble which contains the objects and submitted that the objects are purely charitable. Counsel further submitted that the CIT was carried away by the powers of the society and had mixed the objects with the powers and with reference to the provisions of clauses 7.4 and 8, came to the conclusion that the activity of the society will come into play only when there is a complaint or legal action against a member of the society and that reading clause 5.4 along with clauses 7.4 and 8, since the objects and service of the society are confined to its members and the same are meant to prevent accidents of its members, which does not make it a society for general public. Counsel submits that, the CIT did not bear in mind the preventive aspects contained in the objects clause referred to in the order itself. The counsel further submitted that, the society is created to maintain high standard of services in the medical profession and to provide a uniform and higher standard of medical care to the public with respect to which the society set up various measures to prevent the accidents associated with during the course of medical treatment. The counsel also submits that the CIT took the stand that the only object of the trust is to protect the erring members from the proceedings under the Consumer Protection Act as also from prosecution for professional negligence, etc. The counsel also took me to the decision of the Supreme Court in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association : [1980]121ITR1(SC) and CIT v. Andhra Chamber of Commerce : [1965]55ITR722(SC) , besides three other decisions, CIT v. Bar Council of Maharashtra : [1981]130ITR28(SC) and Director of IT v. Bharat Diamond Bourse (2003) 259 ITR 280 to establish that the objects of the trust satisfied the principles laid down by the Supreme Court and other courts in the matter.

3. Sri P.K. Ravindranath Menon, senior counsel for the Central Government appearing for the respondents, on the other hand, submits that the petitioner had produced the deed containing the bye-laws of the society, as per which the only object was to protect the erring professionals, who are members of the society from action under the Consumer Protection Act and under other enactments for professional negligence or misconduct. The senior counsel further submits that the CIT after due consideration of the terms of the deed rightly came to the conclusion that the society is not one which exists for charitable object and that the object as per the deed is not an object of general public utility or meant for general public. The senior counsel also submits that the object of the society was only to protect the small section of the professionals, who are members of the society and that there was no object in the deed to benefit the public at large. The counsel further relied on the decision of the Gujarat High Court in Addl. CIT v. Ahmedabad Mill Owners' Association : [1977]106ITR725(Guj) . Counsel also submits that the trust deed gives unfettered discretion on the trustees to use the trust fund for purposes other than the charitable purpose also. The counsel relied on the decision of the Supreme Court in East India Industries (Madras) (P) Ltd. v. CIT : [1967]65ITR611(SC) in support of his contention.

4. I have considered the rival submissions and also perused the deed, the byelaws of the society (Ext. P8) and the order of the CIT (Ext. P7). It is discernible from the order of the CIT that the petitioner had initially produced the bye-laws in the year 1994 which according to the CIT were not for charitable purposes and that it is after due deliberation that the petitioner had amended the said bye-laws in the year 1998, which is Ext. P8 and that a revised application for registration under section 12A of the Act was filed. I find that the CIT with reference to the contentions of the petitioner, has noted that although subsequently preamble has been modified when it made amendment to the memorandum and bye-laws, in substance, the object of the society practically remains the same, that is, defend its members from the consumer disputes. With this view in mind, the CIT has considered the various clauses in the deed and came to the following conclusions :

'The society is not one existing for charitable object. It is not existing for an object of general public utility or meant for general public. The services of the society are limited to its members and it is meant to defend actions initiated under or in relation to consumer protection laws or criminal laws, such actions arising as a result of medical practice. It is meant to defend actions initiated by Government or judicial forums also. Therefore, the objects of the society cannot be held to be charitable. It is against public policy. In view of foregoing, I hold that Medical Accident Prevention Society is not entitled to registration under section 12AA (12A previously) of the Income Tax Act. Therefore, the application is rejected.'

5. It would appear from the objects of the society that though it is the ultimate goal, the objects also provide for measures to avoid such contingency. It does not appear that the CIT had considered the matter keeping in mind the aforesaid circumstances also. So far as the law which is applicable while considering the application under section 12A of the Act, what is required to be established is that the trust or institution is a charitable one having charitable purposes. Charitable purpose is also defined in section 2(15) of the Act. As per the said definition, the charitable purpose includes relief to the poor, education, medical relief and advancement of any object of general public utility. The last limb of the said definition, viz., advancement of any other object of general public utility to which the petitioner's case also may fall is considered by the Supreme Court in the case of Addl. CIT's case (supra). Coming to the application of the said principles to a particular case there are numerable decisions of the Supreme Court and the various High Courts. The decisions relied on by the counsel for the petitioner and the senior counsel for the respondent are some of them. I find that the CIT in the impugned order has referred to a few of them and has held that the said decisions have no application to the facts of the case. In this context I should say that the CIT has already taken a view against the petitioner in view of the provision of clause 5 read with clauses 4 and 8. In other words, the impact of the other clauses in the preamble and in the rules has not been given due weightage with reference to the principles laid down in the aforesaid decisions.

6. In these circumstances, I am of the view that the matter requires a detailed consideration by the CIT with reference to the principles laid down in the aforementioned decisions and with respect to the entirety of the trust for the said purpose. I set aside Ext. P7 and direct the CIT to pass a fresh order in accordance with law taking note of the factors mentioned in this judgment, after affording an opportunity of being heard to the petitioner, within a period of four months from the date of receipt of a copy of this judgment.

The original petition is disposed of as above.