ORDER
Laliet Kumar, Judicial Member.- The present appeal has been filed by the assessee feeling aggrieved by the order passed by the ld. Commissioner of Income Tax (Exemptions) Chandigarh [in short ‘the CIT (E)’] dated 17.02.2026 for the assessment year 2027-28.
2. The brief facts of the case are that the assessee is a Residents Welfare Association (SSC), constituted for the welfare, maintenance and management of a residential complex. It filed an application in Form No. 10AB seeking registration under section 12AB of the Income-tax Act, 1961. The learned Commissioner of Income Tax (Exemptions), Chandigarh, after examining the objects and activities of the assessee, observed that the society was primarily engaged in providing maintenance, security, housekeeping, facility management and other related services to the residents of a specified residential complex. The assessee was collecting maintenance charges, service fees and other contributions from its members and was also deriving rental income from common facilities. The learned CIT(E), therefore, formed an opinion that the activities of the assessee were confined to a closed group of members and did not constitute charitable activities within the meaning of section 2(15) of the Act. Consequently, the application for registration under section 12AB was rejected. Aggrieved by the said order, the assessee is in appeal before the Tribunal.
3. The learned Authorised Representative vehemently submitted that the learned CIT(E) had erred in rejecting the application merely because the assessee was a Residents Welfare Association. It was argued that the expression “advancement of any other object of general public utility” occurring in section 2(15) is of wide amplitude and is not restricted to activities benefiting the whole of mankind. It was contended that even an object benefiting a definite and identifiable section of the public would qualify as a charitable purpose. The learned AR submitted that residential welfare associations are formed solely for the welfare of the residents and without any profit motive. The maintenance charges collected from the members are merely reimbursements towards common expenses such as security, housekeeping, repairs, electricity and upkeep of common areas and do not constitute commercial receipts. It was further argued that the rental income and other incidental receipts are applied entirely towards the objects of the Association and no part of the income is distributed amongst the members. Reliance was placed upon various judicial precedents to contend that even Residential Welfare Associations have been held to be entitled to registration under section 12A/12AB where their dominant purpose is the advancement of general public utility. It was also submitted that only one opportunity of hearing had been afforded by the learned CIT(E), thereby violating the principles of natural justice.
4. Per contra, the learned Departmental Representative strongly supported the impugned order. It was submitted that the assessee is nothing but a mutual benefit society formed for rendering services exclusively to its members and residents of a particular residential complex. The beneficiaries are neither the public at large nor any sufficiently identifiable section of the public contemplated under section 2(15) of the Act. The learned DR contended that none of the objects of the assessee fall within any of the recognised charitable purposes, namely, relief of the poor, education, yoga, medical relief, preservation of environment, preservation of monuments or advancement of any other object of general public utility. It was argued that the Association merely provides maintenance, housekeeping, security and other common facilities to its members against consideration in the form of maintenance charges and service fees, thereby operating on the well-recognised principle of mutuality. Such reciprocal arrangements between members cannot be equated with charitable activities. It was, therefore, submitted that the learned CIT(E) had rightly rejected the application for registration under section 12AB.
5. We have heard the rival submissions and carefully perused the material available on record. The controversy involved in the present appeal lies within a narrow compass, namely, whether the activities carried on by the assessee-Residents Welfare Association satisfy the definition of “charitable purpose” as contained in section 2(15) of the Income-tax Act. Section 2(15) recognizes charitable purpose under distinct heads, namely, relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife), preservation of monuments or places or objects of artistic or historic interest, and advancement of any other object of general public utility. The activities admittedly carried on by the assessee consist of maintenance of common areas, housekeeping, security services, operation and maintenance of lifts, sanitation, organising cultural and social programmes, community welfare activities and other facilities exclusively for the benefit of the residents of a particular residential complex. Such activities undoubtedly improve the quality of life of the members of the Association. However, the crucial question is whether these activities amount to “charitable purpose” within the meaning of section 2(15) of the Act. In our considered opinion, the answer has to be in the negative.
6. The concept of charity necessarily presupposes an element of public benefit. Charity is founded upon altruism and philanthropy, where benefits are extended without any expectation of reciprocal advantage. On the other hand, a Residents Welfare Association functions upon the principle of mutuality. Every member contributes maintenance charges and, in consideration thereof, receives maintenance and common facilities. The relationship between the Association and its members is thus reciprocal in nature, wherein contributors and beneficiaries substantially constitute the same class of persons.
7. The services rendered by such Associations—maintenance of common facilities, security, cleanliness, housekeeping, organising social or cultural programmes, welfare activities and similar functions—are essentially contractual or reciprocal services rendered for consideration collected from the members themselves. These cannot, by any stretch of imagination, be equated with relief of the poor, education, medical relief, preservation of environment or any other recognised charitable object contemplated by section 2(15) of the Act. Merely because a group of persons joins together to facilitate better living conditions for themselves and collectively manages the affairs of their residential complex would not convert such mutual arrangements into charitable activities. If such an interpretation were to be accepted, every association formed by individuals for their mutual convenience and benefit would become entitled to registration under section 12AB, thereby obliterating the distinction between mutuality and charity, which the Legislature has consciously maintained. Charity, as understood both in law and in its traditional philosophical sense, is directed towards benefiting others without regard to personal gain, identity, caste, creed or reciprocal obligation. Assistance rendered amongst members who themselves contribute towards the common fund cannot be elevated to the status of charity merely because the activities are undertaken without a profit motive. Absence of profit by itself is not synonymous with charity.
8. The beneficiaries of the present assessee are confined exclusively to its members and residents of a particular housing complex. There is no element of benefit available to the public at large or to an indeterminate section of the public. The activities are restricted to a closed and identifiable body of contributors who receive services commensurate with their contributions. Such activities may fundamentally governed by the doctrine of mutuality and not by the principles governing charitable institutions.
9. The learned AR has also contended that only one opportunity of hearing was granted by the learned CIT(E). Ordinarily, where adequate opportunity has not been afforded, the matter deserves to be restored for fresh adjudication. However, in the facts of the present case, we are of the considered opinion that no useful purpose would be served by remanding the matter. The rejection is founded not upon insufficiency of evidence but upon the very nature and character of the assessee itself. Since the admitted objects and activities of the assessee do not satisfy the statutory requirements of “charitable purpose” under section 2(15) of the Act, a remand would merely be an empty formality without altering the legal position.
10. Accordingly, we find no infirmity in the order passed by the learned CIT(E). The same is upheld.
11. In the result, the appeal of the assessee stands dismissed.
