Raman Kant Munjal Foundation, New Delhi V. DDIT(E), New Delhi

CO 263/DEL/2010

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7180 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 06-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 24-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY VOHRA ITA NO DEL; CO NO D
• Section: 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F NEW DELHI DELHI BENCH : F NEW DELHI DELHI BENCH : F NEW DELHI DELHI BENCH : F NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMEBR AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO. 3091/DEL/10 ASSTT. YEAR 2006-07 DY. DIRECTOR OF INCOME TAX (E) INV. CIR-II, , ROOM NO. 308, 3 RD FLOOR, AAYAKAR BHAWAN, LAXMI NAGAR, DISTT. CENTRE, NEW DELHI. VS. RAMAN KANT MUNJAL FOUNDATION, 37, COMMUNITY CENTRE, BASANT LOK, VASANT VIHAR, NEW DELHI 110 057. AAATR0598N (APPELLANT) (RESPONDENT) AND C.O. NO. 263/DEL/10 ASSTT. YEAR 2006-07 RAMAN KANT MUNJAL FOUNDATION, 37, COMMUNITY CENTRE, BASANT LOK, VASANT VIHAR, NEW DELHI 110 057. AAATR0598N VS. DDIT(E) INV. CIRCLE-II, ROOM NO. 306, 3 RD FLOOR, AAYAKAR BHAWAN, LAXMI NAGAR, DISTTT. CENTRE, NEW DELHI 110 092 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI PRADEEP KUMAR, CIT DR. RESPONDENT BY: SHRI AJAY VOHRA, ADVOCATE ITA NO. 3091/DEL/10 & CO. NO. 263/DEL/10 ASSTT. YEAR 2006-07 2 ORDER PER RAJPAL YADAV, JM: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LD. CIT(A) DATED 23.3.2010 PASSED FOR ASSTT. YEAR 2006-07. THE GROUNDS OF APPEAL TAKEN BY THE REVENUE ARE NOT IN CONSONANCE WITH RUL E 8 OF ITAT RULES. THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. 2. IN BRIEF, THE GRIEVANCE OF REVENUE IS THAT LD. C IT(A) HAS ERRED IN ALLOWING DEDUCTION OF ` 14,44,322/- TO THE ASSESSEE BY HOLDING THAT ONCE REGISTRATION GRANTED TO THE ASSESSEE BY DIT(E) U/S 12A OF THE INCOME TAX ACT, 1961, THE AO CANNOT OVER RIDE SUCH EXEMPTION W HILE PASSING THE ASSTT. ORDER. ACCORDING TO THE REVENUE, LD. CIT(A) HAS IGNORED THE FACT THAT REGISTRATION U/S 12A OF THE ACT WAS GRANTED BY TH E DIT(E) ON CERTAIN TERMS AND CONDITIONS WHICH HAVE TO BE MET BY THE AS SESSEE AND SUCH REGISTRATION DOES NOT AUTOMATICALLY GUARANTEE EXEMP TION FROM INCOME TAX U/S 11 OF THE INCOME TAX. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A TRUST SET UP ON 29.5.1992. IT IS REGISTERED U/S 12A VIDE ORDER NO. DIT(E)/92-93/60/92/566 DATED 26.11.1992. THE ASSESSEE HAS ALSO BEEN GRANTE D EXEMPTION U/S 80G(5) (VI) OF THE INCOME TAX VIDE ORDER DATED 31.1 0.2003 WHICH WAS EXTENDED TIME TO TIME AND VALID UPTO 31.12.2012. IT HAS FILED ITS RETURN OF INCOME ON 30 TH OCTOBER, 2006 DECLARING NIL INCOME. THE CASE OF TH E ITA NO. 3091/DEL/10 & CO. NO. 263/DEL/10 ASSTT. YEAR 2006-07 3 ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND N OTICE U/S 143(2) WAS DULY ISSUED AND SERVED UPON THE ASSESSEE. 4. DURING THE COURSE OF ASSTT. PROCEEDING LD. AO HA S HARBOURED A BELIEF THAT ASSESSEE HAS PAID COMMISSION TO THE DOCTORS WH ICH IS IN VIOLATION OF CLAUSE 6.4 .1 OF CODE OF MEDICAL ETHICS. HENCE IT D OES NOT DESERVE THE BENEFIT AVAILABLE U/S 11 OF THE INCOME TAX ACT. IN ORDER TO BRING HOME THIS BELIEF, LD. AO HAS REFERRED CLAUSE 6.4.1 OF CODE OF MEDICAL ETHICS AND THEREAFTER, HE OBSERVED THAT FROM THE DETAILS EXHIB ITING PAYMENTS TO THE DOCTORS, IT REVEALED THAT ASSESSEE HAS PAID 70% OF OPD CHARGES FROM THE PATIENTS TO THE DOCTORS WHO ATTENDED SUCH OPD PATIE NTS OR ADMITTED PATIENTS. HE MADE REFERENCE TO FOUR DOCTORS NAMELY DR. G. PRAVEEN, DR. PAWAN BANSAL, DR. AJAY GOYAL & DR. R.M. SETH. HE FU RTHER OBSERVED THAT 20% OF THE INVESTIGATION CHARGES WERE ALSO PAID TO THESE DOCTORS. ACCORDING TO THE CONSTRUCTION MADE BY THE AO OF THE SE DETAILS IS THAT THESE DOCTORS HAS NOTHING TO DO WITH THE INVESTIGAT ION REQUIRED TO BE MADE BY THE LABORATORY OF SUCH PATIENTS. THEREFORE, THEY OUGHT NOT TOBE PAID 20% CHARGES COLLECTED FROM THE PATIENTS TOWARD S INVESTIGATION. 5. DISSATISFIED WITH THIS CONCLUSION ASSESSEE CARRI ED THE MATTER IN APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY. IT POINTED OUT THAT LD. AO HAS MISERABLY FAILED TO CONSTRUE THE TRUE NATURE OF THE PAYMENTS MADE BY THE ASSESSEE. THE ASSESSEE HAS NOT MADE THE PAYMENT S TO THE DOCTORS FOR SOLICITING THE PATIENTS, RATHER ASSESSEE WAS NOT IN A POSITION TO HIRE ITA NO. 3091/DEL/10 & CO. NO. 263/DEL/10 ASSTT. YEAR 2006-07 4 CERTAIN DOCTORS WHO ARE EXPERTS IN THEIR FIELDS FOR PERMANENT BASIS. THEIR SERVICES WERE AVAILED ACCORDING TO THE REQUIREMENTS AND PAYMENTS WERE MADE OUT OF THE OPD COLLECTION AS WELL AS OUT OF T HE COLLECTION MADE TOWARDS INVESTIGATION. LD. FIRST APPELLATE AUTHORIT Y HAS SUMMARIZED THE CONTENTION MADE BY THE ASSESSEE IN PARAGRAPH NO. 5. 12 WHICH READ AS UNDER :- 5.12 THE VARIOUS CONTENTIONS SO MADE WERE ULTIMATEL Y SUMMARIZED AS UNDER: IN VIEW OF THE AFORESAID, IT IS RESPECTFULLY SUBMI TTED THAT : (A) THERE IS NO ILLEGAL PAYMENT BY WAY OF COMMISSIO N BY THE ASSESSEE OF ANY OF ITS DOCTORS; (B) CODE OF MCI ARE NOT APPLICABLE TO THE ASSESSEE; (C) PAYMENT BY THE ASSESSEE TO ITS DOCTORS DO NOT F ALL WITHIN THE PROHIBITED PAYMENTS ENVISAGED/COVERED IN CLAUSE 6.4.1 OF THE CODE OF MEDICAL ETHICS ISSUED BY MCI; (D) PAYMENT BY THE HOSPITAL TO THE DOCTORS ARE PAYM ENTS IN THE COURSE OF PURSUING ITS PRINCIPAL CHARITABLE OBJ ECT; (E) THE ASSESSEE CONTINUES TO BE A CHARITABLE INSTI TUTION ELIGIBLE FOR EXEMPTION UNDER SECTION 11/12 OF THE A CT; (F) WITHOUT PREJUDICE TO THE AFORESAID, ALLEGED VIO LATION, IF ANY, CANNOT RESULT IN COMPLETE DENIAL OF EXEMPTION UNDER SECTION 11/12 OF THE ACT BUT THE ONLY CONSEQU ENCE THAT FOLLOWS IS THAT SUCH ILLEGAL PAYMENT WOULD NOT BE REGARDED AS APPLICATION OF INCOME. (G) THAT EVEN AFTER EXCLUDING THE PAYMENT IN QUESTI ON, APPLICATION OF INCOME BY THE APPELLANT BEING TO THE EXTENT OF 97.68% FULFILLING THE LIMIT OF 85% UPTO W HICH UTILIZATION IS MANDATORY, EXEMPTION UNDER SECTION 1 1 OF THE ACT WAS ADMISSIBLE IN RESPECT OF THE ENTIRE INC OME OF THE APPELLANT. ITA NO. 3091/DEL/10 & CO. NO. 263/DEL/10 ASSTT. YEAR 2006-07 5 6. ON AN ANALYSIS OF AL THESE DETAILS SHE DELETED T HE ADDITION MADE BY THE AO. 7. WITH THE ASSISTANCE OF LD. REPRESENTATIVE, WE HA VE GONE THROUGH THE RECORD CAREFULLY. BASICALLY THE AO IS OF THE OP INION THAT CERTAIN DOCTORS WHO ARE PHYSICIAN AND OTHER CONSULTANTS HAVING NOTH ING TO DO WITH THE INVESTIGATION REQUIRED TO BE MADE AT LABORATORIES. THUS, THE CHARGES COLLECTED TOWARDS INVESTIGATION OUGHT NOT TO BE PAR TED WITH THOSE DOCTORS, WHEREAS THE CASE OF THE ASSESSEE IS, IT DID NOT MAK E ANY DISTINCTION BETWEEN THE CHARGES COLLECTED FROM OPD PATIENTS OR ADMITTED PATIENTS OR TOWARDS TEST FOR INVESTIGATION. IN A WAY, ALL THESE COLLECTION FORM COMMON FUND FOR THE ASSESSEE. IT HAS MADE PAYMENTS FROM TH AT FUNDS. FOR THE FACILITY OF IDENTIFICATION, IT HAS ALLOCATED THAT 7 0% OF THE COLLECTION MADE FROM OPD OR ADMITTED PATIENTS, THE CHARGES TO THE D OCTORS WOULD BE PAID . SIMILARLY THE RECEIPTS REPRESENTING 30% TOWARDS INV ESTIGATION CHARGES ASSESSEE WOULD PAY 20% TO THE DOCTORS. IT IS A REMU NERATION TO THE DOCTORS FOR THEIR SERVICES. ASSESSEE HAS NOT PAID T HE COMMISSION TO THOSE DOCTORS IN A WAY, THAT THE DOCTORS WOULD REFER THE PATIENTS TO THE ASSESSEE. THERE IS NO VIOLATION OF THE CODE OF ETH ICS BY THE ASSESSEE . LD. AO MISERABLY FAILED TO UNDERSTAND THE TRANSACTION . THE AO HAS OBSERVED THAT THESE DOCTORS ARE NOT LOOKING AFTER OR CONTROL LING THE INVESTIGATIONS OF THE PATIENTS, BECAUSE DR. MONICA VERMA IS APPOINTED AS CONSULTANT LOOKING AFTER THE DEPARTMENT OF PATHOLOGY. THUS, IN HIS UNDERSTANDING THE PAYMENT OF 20% OUT OF INVESTIGATION CHARGES TANTAMO UNT TO THE ITA NO. 3091/DEL/10 & CO. NO. 263/DEL/10 ASSTT. YEAR 2006-07 6 COMMISSION PAID TO DOCTORS. AS OBSERVED EARLIER IN OUR UNDERSTANDING, THE AO FAILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES IN RIGHT PERSPECTIVE. THE DOCTORS HAVE NOT REFERRED THE PATIENTS TO THE A SSESEES HOSPITAL. RATHER IT IS A CHARITABLE HOSPITAL AND IT IS PAYING THE FEES TO THE DOCTORS OUT OF ITS COLLECTION. LD. FIRST APPELLATE AUTHORIT Y HAS RIGHTLY ANALYZED THE CONTROVERSY AND HAS RIGHTLY DELETED THE ADDITIONS M ADE BY THE AO. THE AO CANNOT DENY THE BENEFIT U/S 11 OF THE INCOME TAX AC T ON THE BASIS OF HIS ERRONEOUS BELIEF. 8. IN VIEW OF THE ABOVE DISCUSSION WE DO NOT FIND A NY MERIT IN THIS APPEAL, IT IS DISMISSED. CROSS OBJECTION NO. 263/DEL/10 CROSS OBJECTION NO. 263/DEL/10 CROSS OBJECTION NO. 263/DEL/10 CROSS OBJECTION NO. 263/DEL/10 9. AS FAR AS CROSS OBJECTION OF THE ASSESSEE IS CON CERNED, WE FIND THAT ASSESSEE HAS CHALLENGED DISALLOWANCE OF ` 1,66,508/ - WHICH REPRESENT EMPLOYERS AND EMPLOYEES CONTRIBUTION TOWARDS THE PF.THERE IS NO DISCUSSION AVAILABLE IN THE ASSTT. ORDER BUT IT EME RGES OUT FROM THE COMPUTATION MADE AT THE END THAT THE AO HAS NOT GRA NTED THE DEDUCTION OF THESE AMOUNTS. LD. CIT(A) HAS UPHELD THE DISALLO WANCE ON THE GROUND THAT HE HAS GRANTED EXEMPTION U/S 11 OF THE INCOME TAX ACT, THEREFORE, THIS GROUND WOULD BECOME INFRUCTUOUS. LD. COUNSEL F OR THE ASSESSEE SUBMITTED THAT PAYMENTS WERE MADE BEFORE DUE DATE O F FILING OF RETURN AND HENCE THE ISSUE IS COVERED IN FAVOUR OF THE ASS ESSEE BY THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AIMIL LTD REPORTED IN 321 ITR 508. ON DUE CONSIDERATION OF THE FACTS AND CIRC UMSTANCES, WE FIND THAT ITA NO. 3091/DEL/10 & CO. NO. 263/DEL/10 ASSTT. YEAR 2006-07 7 BOTH THE AUTHORITIES HAVE NOT MADE ANY DISCUSSION O N THIS ISSUE. THEREFORE, WE REMIT THIS ISSUE TO THE FILE OF AO FO R VERIFICATION AND IF IT IS FOUND THE PAYMENTS HAVE BEEN MADE TO THE PF ACCOUNT BEFORE DUE DATE OF FILING OF THE RETURN THEN DEDUCTION OF THESE AMOUNT S BE GRANTED TO THE ASSESSEE IN VIEW OF THE JUDGMENT OF HONBLE DELHI H IGH COURT IN THE CASE OF AIMIL LTD. THE CROSS OBJECTION IS ACCORDINGLY AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20.4.2012. SD/- SD/- [T.S. KAPOOR] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT