Society’s Activities Promoting Pharma-Doctor Networking Not a Charitable Purpose.

By | October 31, 2025
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Society’s Activities Promoting Pharma-Doctor Networking Not a Charitable Purpose.

Issue

Can a society, whose primary activities involve organizing conferences for doctors funded by donations from pharmaceutical companies, be considered as having a “charitable purpose” of “medical relief” under Section 2(15), or are its activities promotional and contrary to public policy?

Facts

  • An assessee-society applied for charitable registration under Section 12AB.
  • The Commissioner (Exemption) observed several red flags:
    • The society shared its address with a commercial hospital.
    • Its primary income was from donations from pharmaceutical companies and registration fees from doctors.
    • Its major expenditure was on organizing conferences and paying professional fees.
  • Based on this, the Commissioner concluded that the society was not engaged in genuine medical relief. Instead, it was acting as a platform for networking between doctors and commercial entities (pharma, labs, medical instrument companies), which is considered unethical and against public policy.
  • The registration application was accordingly rejected.

Decision

  • The High Court ruled in favour of the revenue, upholding the rejection of the application.
  • It found a clear and direct nexus between the funds received (from pharma companies) and the activities conducted (conferences for doctors).
  • The court held that the possibility of the society being used as a conduit to promote the products of pharmaceutical companies could not be ruled out.
  • Such activities do not qualify as “charitable purposes” under Section 2(15) of the Income-tax Act.

Key Takeaways

  • Substance Over Form: The actual activities and funding sources of an organization are scrutinized, not just its stated objects. An entity’s purpose is determined by what it does, not what it says it does.
  • Activities Against Public Policy are Not Charitable: Activities that facilitate potentially unethical practices, such as pharmaceutical companies influencing doctors through sponsored events, are considered contrary to public policy and cannot form the basis for a charitable registration.
  • Nexus of Funding is Crucial: The source of funds and their application are key indicators of an organization’s true purpose. When funds from commercial entities are used for activities that benefit those same entities, the charitable claim is weakened.

No 80G Approval Without a Valid 12AB Charitable Registration.

Issue

Can an institution be granted approval under Section 80G(5) of the Income-tax Act if its primary application for registration as a charitable institution under Section 12AB has been rejected?

Facts

  • The assessee-society, whose application for charitable registration under Section 12AB was rejected (as detailed in the first case), had also filed an application for approval under Section 80G(5).
  • The Commissioner (Exemption) rejected the Section 80G application as well.
  • The sole reason for this rejection was that the assessee did not hold a valid registration under Section 12AB, which is a prerequisite for obtaining 80G approval.

Decision

  • The court ruled in favour of the revenue, holding that the Commissioner was justified in rejecting the application.
  • It affirmed that securing registration under Section 12AB is a mandatory primary condition that must be fulfilled before an institution can be considered for approval under Section 80G(5).
  • Since the foundational registration was absent, the application for the subsequent approval was rightly dismissed.

Key Takeaways

  • Hierarchical Nature of Approvals: The Income-tax Act establishes a clear hierarchy. Section 12AB registration is the foundational step that certifies an entity’s charitable character. Section 80G approval is a subsequent benefit that allows its donors to claim a tax deduction.
  • No 12AB, No 80G: The absence of a valid 12AB registration is a non-negotiable bar to obtaining 80G approval. The two are inextricably linked.
  • Conditional Eligibility: The eligibility conditions for Section 80G(5) explicitly require the institution to be established for a charitable purpose, a fact that is formally certified by the 12AB registration.
IN THE ITAT CHANDIGARH BENCH ‘A’
Endocrine and Breast Surgery Foundation
v.
Commissioner of Income-tax, Exemptions
Rajpal Yadav, Vice President
and KRINWANT SAHAY, Accountant Member
IT APPEAL Nos. 244 & 245 (Chd) OF 2025
[Assessment year 2025-26]
OCTOBER  8, 2025
S.K. Bhasin and K.B. Sood, CAs for the Appellant. Manav Bansal, CIT DR for the Respondent.
ORDER
Krinwant Sahay, Accountant Member.- These are two appeals filed by the Assessee against the order of the Ld. CIT(E), Chandigarh each dt. 06/01/2025 whereby the application seeking registration under section 12A(1)(ac)(iii) of the Act as well as the application seeking Registration under section 80G(5) has been dismissed by the Ld. CIT(E).
2. Since both the above appals were heard together therefore they are being disposed off by this consolidated order for the sake of convenience.
3. We shall firstly deal with the appeal of the Assessee in ITA No. 244/Chd/2025 for the Assessment Year 2025-26 wherein Ld. Counsel for the assessee submitted that the assessee’s application seeking registration under section 12A(1)(ac)(iii) of the Act was rejected by the Ld. CIT (Exemptions) without issuing any show cause notice and without affording a reasonable opportunity of being heard before such rejection. It was also contended that such action is violative of the principles of natural justice.
4. Thus, against the order of the Ld CIT(E), the assessee is in appeal before us.
5. During the course of hearing, the Ld. AR argued that the assessee has been engaged in carrying out genuine charitable activities in the field of medical relief, which fall squarely within the definition of ‘charitable purpose’ under section 2(15) of the Act. It was submitted that the activities undertaken by the assessee are directed towards providing medical assistance to the needy and underprivileged, thereby advancing an object of general public utility. The Ld. AR contended that rejection of registration without examining these facts and without granting an opportunity to explain or substantiate the charitable nature of activities is arbitrary and unjustified. The Ld. AR therefore pleaded that the order of the Ld. CIT (Exemptions) deserves to be set aside and the matter may be restored to CIT(E) file for fresh adjudication, after affording due and reasonable opportunity of being heard to the assessee.
6. The Ld. CIT-DR relied on the order of Ld. CIT(E) to state that no charitable activities are shown to have been carried out by the assessee. Having heard rival submissions and upon perusal of case record, the appeal is disposed off as under.
7. From case records, it emerges that the assessee filed registration application seeking registration u/s 12AB(1)(ac)(iii) r.w.s. 12AB of the Act. The applicant society is stated to be engaged in providing relief to the poor, education and medical relief. The Ld. CIT(E), upon perusal of assessee’s submissions and financial statements, observed that the assessee society shared its address with a hospital by the name Trinity Hospital. The perusal of the photographs as submitted by the assessee would show that the assessee’s activities were basically been conducted by Trinity hospital. The assessee reflected expenses which were in the nature of conference expenses, donation expenses, medicine expenses, professional expenses salary / wages and tour and training expenses. For FY 2021-22, the assessee received donations from pharma companies, laboratories and medical instrument companies and registration fees from the doctors. The expenses were primarily to hold conferences from time to time or for sponsoring participation of its members in conferences held across India by paying for their air tickets and stay expenses.
8. The Ld. CIT(E) then referred to Medical Council (Professional conduct, Etiquette and Ethics) Regulations, 2002 prohibiting medical practitioner from taking monetary benefits from pharma companies. The law recognizes no purpose as charitable unless it was of public character. A purpose to be charitable must be directed for the benefit of the community and not for the benefit of private individuals. The same was not the case here. The assessee classified its activities as education and medical relief. However, the genuineness of the activities and expenses thereof was doubtful considering the nature of expenses and considering the fact that the assessee shared its address with Trinity Hospital to which the members of the society belong. The term ‘education’ was to be interpreted in a narrow sense to imply only formal schooling. In the present case, the assessee work solely for the purpose of networking between the doctors and the pharma companies, labs and medical instrument companies which was unethical and contrary to public policy rather than to work for general public and in no way the activities of the assessee could be termed as for ‘Charitable purposes’ as defined u/s 2(15). Accordingly, the application was rejected against which the assessee is in further appeal before us.
Our findings and Adjudication
9. Upon perusal of the records it could be seen that the assessee has received donations and registration fees and other receipts. As against this, the major expenditure is on account of professional expenses. The other major expenses are in the nature of conference expenses, medicine expenses, advertisement and donations to other funds. No major expenditure is shown to have been incurred towards charitable activities. The perusal of donors would show that the major donors are medical centers, healthcare centers, pharma companies and labs etc. These donations have been used to conduct meetings / conferences. The perusal of photographs would show that the assessee is carrying out its activities under the banner of Trinity Hospital which, apparently, run as a commercial enterprises. On these facts, it could very well be concluded that there was direct nexus between the subscription as received by the assessee and meetings / seminars conducted by the assessee. Therefore, the possibility of assessee-entity being used as a medium to promote the products of pharma companies as well as Trinity Hospital could not altogether be ruled out. The assessee is not shown to have carried out any substantial charitable activity. The Medical Council (Professional conduct, Etiquette and Ethics) Regulations, 2002, as referred to by Ld. CIT(E), prohibits such a nexus. We concur with the observation of Ld. CIT(E) that the assessee work solely for the purpose of networking between the doctors and the pharma companies, labs and medical instrument companies which is unethical and contrary to public policy. In no way the activities of the assessee could be termed as for ‘Charitable purposes’ as defined u/s 2(15). No substantial material could be shown to us to rebut these findings of Ld. CIT(E). Therefore, we see no reason to interfere in the impugned order.
10. In the result present appeal is dismissed.
11. We shall now take up the appeal of the assessee in ITA No. 245/Chd/2025 for the Assessment Year 2025-26, wherein The Ld. Counsel for the assessee contended that the Ld. CIT(E), Chandigarh erred in rejecting the assessee’s application under section 80G(5) of the Income Tax Act, 1961 on the ground that exemption under section 80G(5) could not be granted unless and until the assessee’s application under section 12A(1)(ac) of the Act was first approved.
12. We have heard the rival submissions of both the parties and have carefully perused the material available on record. In the present case, it is observed that the Ld. CIT(E) has rejected the assessee’s application under section 12AB of the Act, which had been filed on 31.07.2024. In so far as the application seeking approval under section 80G(5) is concerned, the Ld. CIT(E) has held that, in the absence of registration under section 12AB, the conditions prescribed under section 80G(5) are not satisfied. Consequently, the request for approval under section 80G(5) was declined without being examined on merits.
12.1 On due consideration of the facts and circumstances of the case, we find no infirmity in the order passed by the Ld. CIT(E). It is a mandatory requirement under the law that, for obtaining approval under section 80G(5) of the Act, the assessee must first secure registration under section 12AB of the Act. Since this primary condition was not fulfilled, the Ld. CIT(E) was justified in rejecting the assessee’s application. The findings recorded by the Ld. CIT(E) are accordingly upheld, and the appeal of the assessee is dismissed.
13. In the result, both the above appeals of the Assessee are dismissed.