Pharma-Sponsored Conferences & Hospitality Held Non-Charitable: Analysis of C-Dot Forum Vs CIT (Exemptions)

The decision of the ITAT Amritsar in C-Dot Forum Vs CIT (Exemptions) is a significant ruling on whether organising pharma-funded conferences, conclaves and hospitality events at luxury hotels can be regarded as “charitable activity” for the purposes of Section 12AB and Section 80G of the Income Tax Act 1961. The Tribunal examined the assessee society’s activities in light of Section 2(15), Medical Council of India (MCI) Regulations, 2002, the Uniform Code for Pharmaceutical Marketing Practices (UCPMP), 2024, and the Supreme Court judgment in Apex Laboratories Pvt. Ltd. v. DCIT.

The order ultimately upheld the rejection of registration under Section 12AB and consequent denial of approval under Section 80G. Both appeals filed by the assessee were dismissed.

This write-up summarises and explains the key legal findings and reasoning of the Tribunal.

Background of the Case

The assessee, a society involved in diabetes-related activities, applied for:

  • Registration under Section 12AB via Form 10AB dated 30 September 2023, and
  • Approval under Section 80G of the Income Tax Act 1961.

The CIT (Exemptions), Chandigarh rejected the Section 12AB application on 12 December 2024, holding that the society’s activities were not “charitable” as defined in Section 2(15). Since registration under Section 12AB is a precondition for Section 80G(5) approval, the 80G application was also rejected.

This was the second round of proceedings:

  • Earlier, the registration application was rejected on 20 March 2024.
  • On appeal, the ITAT had, by order dated 9 July 2024, set aside that rejection due to violation of principles of natural justice and remanded the matter for fresh consideration.
  • After remand, fresh material was filed and examined, leading again to rejection by the CIT(E), which is the subject of the present appeals.

Evidence and Financial Pattern Examined by CIT(E)

Documents Submitted by the Assessee

During the de novo proceedings, the assessee society placed on record multiple documents for FYs 2021-22 to 2023-24, including:

  • Audited financial statements and income & expenditure accounts
  • Bank statements
  • Photographs and brochures of events
  • Audit reports
  • Newspaper cuttings and other supporting material

Receipts from Pharma Companies

The CIT(E) observed that the society’s activities were substantially funded by pharmaceutical companies. Over three financial years, the receipts were as follows:

  • FY 2021-22: ₹10,00,000
  • FY 2022-23: ₹18,95,000
  • FY 2023-24: ₹10,60,000

Totaling approximately ₹40,00,000, all primarily from pharma companies.

Actual Application of Funds

On scrutiny of the expenditure, the CIT(E) noted an overwhelming tilt towards event and hospitality-related spending, with minimal outlay on genuine charitable work.

FY 2021-22

  • ₹2.31 lakh paid to an event management entity
  • ₹3.42 lakh incurred for a conference at Hotel Novotel, which included entertainment performances by professional singers (Razia Sultana and Soni Singh)
  • No amount spent on any direct charitable activity

FY 2022-23

  • ₹8.73 lakh towards digital marketing, event management and related services (including amounts to Gagan Colour Images and other vendors)
  • ₹5.20 lakh paid to Sepal Hotels for a governing body meeting
  • ₹1.03 lakh paid as lecture fees at a Novotel event
  • Only ₹2.51 lakh disbursed to “Friends Medicine Shop” for insulin for Type-1 diabetic children – the only item accepted as charitable expenditure

FY 2023-24

  • ₹2.21 lakh towards digital marketing (again including payments to Gagan Colour)
  • ₹8.01 lakh transferred to Garg Pharmaceuticals for reasons not convincingly explained as charitable

Overall Charitable Spend vs Receipts

The Tribunal found that out of total pharma receipts of around ₹40 lakh, only ₹2.51 lakh, i.e. about 6.2%, was actually spent on sponsoring free insulin for Type-1 diabetic children.