The dominant purpose test was applied to determine the charitable nature of the trust's objects, emphasizing that even if some ancillary or incidental objects were not charitable in nature, the institution would still be considered as a charitable organization.

JUDGMENT

Sanjeev Narula, J. (Oral) - The Commissioner of Income Tax - Exemption has filed the present appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") assailing the order dated 19.04.2018 passed by the Income Tax Appellate Tribunal (hereinafter referred to as the ''ITAT''). The present appeal proposes substantial questions of law, questioning the correctness of the findings of ITAT in relation to the activities of the assessee in the context of eligibility to get registration as a charitable organization under Section 12AA of the Act.

2. The Respondent-Association of Third Party Administrators (ATPA) filed an application on 12.12.2005 seeking registration under Section 12A of the Act. The said application was rejected by DIT(E), vide order dated 30.06.2006 holding that certain objects of the trust were not charitable and trustees had discretion in applying the trust''s income to any of the objects. Aggrieved with the aforesaid findings, assessee filed an appeal before IT AT which resulted in order dated 30.04.2017, restoring the matter to the file of DIT(E) with direction to pass a speaking order as to which of the objects were of non-charitable nature, after giving opportunity of hearing to the assessee. In compliance with the directions of the ITAT, CIT(E) after examining the records, declined the grant of registration to the assessee, inter alia, on the ground that ATPA is aiming at industry status for Third Party Administrator (TPA) business, and is working for mutual benefit of its members. Aggrieved with the aforesaid order, the assessee preferred an appeal before ITAT. The ITAT after examining the records and having regard to the objects of the assessee, allowed the appeal in favour of the assessee and overturned the order of CIT(E). Consequently CIT(E) was directed to provide registration to the assessee under Section 12AA of the Act.

3. Mr. Abhishek Maratha, learned Senior Standing Counsel assisted by Mr. Pratyaksh Gupta, Junior Standing Counsel has argued that the reasoning given by the ITAT is flawed. The benefit of the activities of the association is limited to identifiable individual groups and it cannot be called a public charitable institution. It was further argued that profit earning motive of the assessee trust is the predominant object, which can be discerned by reading the object clause of the trust deed. During the course of the arguments, the attention of the learned counsel was drawn to the decisions of the Supreme Court in the case of Additional Commissioner of Income Tax, Gujarat vS. Surat Art Silk Cloth Manufactures Association (1979) 13 CTR (SC) 378 and Director of Income Tax vS. Bharat diamond Bourse (2003) 259 ITR 0280 . Mr. Maratha then sought time to go through the aforesaid decisions and address the Court on the same aspect. Today, Mr. Maratha argues that neither the CIT (E), nor the ITAT had passed the orders in line with the aforesaid judgments and while applying the test prescribed by the Constitution Bench of Supreme Court in the case of Surat Art Silk (supra), the Court has to independently consider the facts of each case and come to a conclusion as to whether the assessee would be entitled to the benefit of Section 12AA of the Act. Mr. Maratha then referred to the aims and objects of the trust and submitted that the same are in the nature of advancement of the business of health insurance for TPAs to get the industry status to TPA business and it was thus clear that the intent was to earn profit. He submitted that the income of TPAs is assessable to income tax and is not exempted under the Act. Further the insurance business too is assessable to income tax and is not exempted and, therefore, having regard to the objects of the trust, the ITAT has wrongly granted the benefit to the Respondent assessee.

4. We have carefully examined the record and given due consideration to the contentions urged by Mr. Maratha. At the initial stage of registration,