M/S PUNJAB INSTITUTE OF MEDICAL SCIENCES, JALANDHAR V. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION),CIRCLE-1, CHANDIGARH

ITA 1426/CHANDI/2018

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 8712 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 14-11-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANDEEP DAHIYA
• Keywords: Gift; Charitable institution
• Section: 143(3); 12AA; 13; 22; 20

Judgement Text

आयकर य कर , य य “ब ”, IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH ‘B’, CHANDIGARH य , य य क य !" # $ % &" , ेख य BEFORE: SHRI SANJAY GARG, JUDICAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No.1426/Chd/2018 / Assessment Year : 2015-16 M/s Punjab Institute of Medical Sciences, (PIMS), Garha Road, Jalandhar. ब म The CIT (Exemptions), Circle-1, Chandigarh. ./PAN NO: AAABP0193P /Appellant /Respondent /Assessee by : Shri Vipul Arora, CA ! / Revenue by : Shri Sandeep Dahiya, CIT " # $ /Date of Hearing : 18.08.2021 %&'( $ /Date of Pronouncement: 12.11. 2021 (Hearing through Webex) आदेश/ORDER Per Annapurna Gupta, Accountant Member : Th e a b o v e a p pe a l h a s b e e n p re fe r re d b y t he a s s e s s e e a g a i n s t t h e o r de r o f t he C o mmi s s i o n e r o f I nc o me Ta x ( A p p e a l ) - 2 , Ja l a n dh a r ( i n s h o r t C I T( A ) d a t e d 0 7 .0 9 .2 0 18 re lat in g t o a s s e s s me n t y e a r 2 0 15 - 1 6 p a s s e d u /s 2 5 0( 6 )) o f t h e Inc o me Ta x A c t , 1 9 6 1 ( he re ina f t e r re fe r re d t o a s ‘ A c t ’ ) . ITA No.1426/Chd/2018 A.Y. 2015-16 Page 2 of 29 2 . I t w a s p o i nte d ou t t h a t t he p r i ma r y is s u e in v o l ve d i n t he p r e se nt a p pe a l r e l a te d t o d e n ia l o f e xe mp t i o n o f inc o me f ro m t a x a t io n , t o t he as s e s s e e , a s a c h ar it a bl e e n t i t y , c lai me d u /s 1 1 o f t h e A c t . R e fe rr in g t o t h e fa c t s o f t he c a se a s no t e d in t he a s s e s s me n t o r d e r i t w a s p o in t e d t ha t t he a s s e s s e e s o c ie t y w a s e s t a b li s he d b y t he P u n j a b G o ve r nme n t o n 0 7 .0 7 .1 9 9 4 a n d r e g i s te re d u n d e r t he R e g i s t r a t i o n o f So c ie t i e s A c t X X I o f 1 8 6 0 b y t h e R e g is t r a r o f F i r ms a nd S o c i e t ie s , P u nj a b , C ha nd i g a r h v i d e N o . 91 6 d a te d 1 0. 1 0 .1 9 94 . Th a t t h e a s s e s s e e ’ s app l i c a t i o n f o r g ra n t o f re g is t r a t i o n u /s 1 2 A o f t he A c t a s a ch a r it a ble e n t i t y f o r t h e p u r po s e o f a v a il i ng e xe mpt io n , a s p er t he p r o v i s i o n s o f s e ct io n 1 1 o f t he A ct , w a s i ni t i a ll y re j e c t e d b y t he Ld .C I T- I I , Ja l a nd h a r w . e . f. 20 0 4 - 0 5 v id e o rd e r d a ted 2 3 .1 2 .2 0 1 3 , w hi c h o rd e r w a s c an c e lle d b y t he I TA T vi de i t s o r d e r d a te d 2 9 .09 . 20 1 5 ho l d i ng t ha t t he Ld . C I T h a d n o p o w e rs f o r c a n c e ll i ng t h e re g is t r a t i o n . I n t h is b a c k d r o p th e a s se s s me nt p r o c e e d in g s f o r th e i mp u g ne d ye ar w e re u nde r t a ke n , d u r in g t he c o u r s e o f w h ic h t h e A O n o te d fr om t h e f i na n c i a l s t at e me nt o f t h e a s s e s s e e s o ci e t y t ha t i t h a d e a r ne d in c o me onl y b y w a y o f i nt e re s t o n F D R s a n d t he e x pe n dit u r e in c u r re d we r e re l a te d t o a d mi ni s t r a t i o n e x p e ns e s o nl y . H e , t he re f o re , no t e d t h a t t he a s s e s se e ha d c a rr i e d o u t no c h a ri t a b l e a c t iv i t y , a s l is t e d i n i t s o b j e c t s , a nd a c co rd i ng ly p r o p o s e d wi t h d r a wi n g e x e mpt i o n u /s 1 1 o f t he A c t . A s h o w c a u s e no t ic e w a s i s s ue d t o the a s se s se e , ITA No.1426/Chd/2018 A.Y. 2015-16 Page 3 of 29 i n r e s po ns e t o w hi c h d e t a il e d re p ly w a s f i le d b y th e a s s e s s e e s t a t i ng t h a t i t ha d i nd u l g e d i n i t s s t a t e d o b je c t s a nd w a s ma i nt a in in g Me d ic a l C o ll e g e i n Ja la n d ha r a n d ha d a ls o e x pe nde d i n m e d i c a l p ro je c t s in t h e s t a t e . Th e A O aft e r c o ns id e r i ng t he r e pl y f i le d b y th e a s se s se e re je c t ed a ll t he c o nt e nt i o n s o f th e a s s e s se e h o l din g t h a t t he a s se s se e w a s no t r u n ni n g a ny h o s p it a l b u t i n fa c t h a d l e a s e d o u t t h e la n d a n d h o s p i t a l bu i ld i ng t o a n o t h e r s o c i e t y wh i c h in t u r n w a s r u n ni ng a n d ma in t a i ni n g t h e h o s p i t a l . Th a t i t h a d in c u r r e d no e x pe nd i t u re w o r th it s w hi le o n t he r u nn i ng o f t he ho s p it a l, n o r h a d e a r ne d a n y th i ng f r o m t he s a me . H e fu r t he r no t e d t ha t t he a s s e s se e ha d b e e n e a r ni ng hu g e s u r p lu s f r o m y e a r t o y e a r a n d w a s a c c u mu la t i n g t he s a me f o r u t i li z a t io n in t h e c ha r it a ble o b j e c t s o f t he s oc ie t y i n f u t u re as a l l o w e d b y t he p r o v i s i o ns of s e c t i o n 1 1( 2 ) o f the A c t . N o t i ng th e s a me t he A O he ld t h a t t he p r ima r y o b je c t o f t he a s se s se e s o c i e t y , t he re fo re , a p pe a re d to b e pr o f i t ma k i ng o n ly . He a c c o r din g l y , h e l d t h a t t he a s s e ss e e w a s no t e l ig ib le fo r e x e mp t i o n u / s 11 o f t he A c t an d t a x e d t he s u r p lu s g e ne r a te d d u r i ng t h e y e ar b y t h e a s se s s e e amo u n t i ng t o R s .5 , 02 , 3 5, 7 99 /- i n t h e s t a t u s o f A s s o c i a t i o n o f P e rs o ns ( A O P ) . F u r t h e r t he A O a d d e d ba c k t he a mo u nt a c c u mu lat e d b y t h e a s se s se e i n a s s e s s me nt ye a r 2 0 1 0- 11 f o r u t il i za t io n i n t he n e x t f i ve ye a r s as p e r t he pr o v is io ns o f s e c t i o n 1 1( 2 ) o f t h e A c t a mo u nt i n g t o R s . 6 0 , 65 , 9 7, 1 52 /- f o r t h e re a s o n t hat n e i t he r h a d ITA No.1426/Chd/2018 A.Y. 2015-16 Page 4 of 29 t h e a s s e s s e e a c cu mu l a t e d t he s ame f o r a s pe c i fie d pu r p o s e a s r e q u ire d b y l a w , n o r u t i l iz e d i t fo r a n y s p e c i fi c pu r p o s e . He f u r t h e r n o te d t ha t t h e a s se s se e h a d ma d e a d v a nc e s to t wo p a r t i e s M/s H S C C , N o i d a a n d M /s P H S C a mo u nt i n g t o R s .1 , 69 , 77 , 2 90 a nd R s . 82 , 20 , 8 8, 4 6 9/- , w h i c h w e r e not in t he mo d e s p r e s c r ibe d f o r c ha r i t a b le e nt i t ie s a s pe r l aw u /s 1 1( 5 ) o f t h e A c t a n d t h u s v i o l a t e d t he p r ov i s i o n s o f s e c t i on 1 3 (1 ) ( d) o f t h e A c t . He , t he r e fo re , he l d t ha t s in c e t he a s s e ss ee h a d not f u l fi l le d t he c o nd i t io n fo r e x e mp t io n i t w a s n o t e nt i t l e d t o t he s a me a ls o . A c c o r d i ng ly , t h e in c o me o f t h e a s s e s s e e w as a s s e s se d a t R s .6 5 , 68 , 3 2, 9 51 /- a f t e r ma k i ng a d d i t i o n t o t he ni l i nc o me r e t u r ne d b y t he a s s e s se e , t h e s u r p l u s e a r n ed d u r i ng t h e ye a r a mo u nt in g t o R s .5 , 0 2 , 35 , 7 99 /- a n d t h e a mo unt a c c u mu la t e d i n a s s e s s me n t y e a r 2 0 1 0- 1 1 f o u nd t o h a ve r e ma i ne d u nu t il ize d , a mo u n t i ng t o R s .6 0 ,6 5 , 69 , 15 2 /-. 3 . A g g ri e v e d b y t he s a me , t he a s s e ss e e c a r r ie d t he ma t t e r i n a p p e a l be fo re t he Ld. C I T( A ) w ho u p he l d t he o r de r o f t he A O d e n y i ng t he e x e mp t i o n u /s 1 1 o f t h e A c t . A c c o rd i n g ly , t he t a x a t io n o f t h e s u r p l u s g e ne r a te d du r in g t h e y e a r in t he s t a t u s o f A O P a m o u nt i n g t o R s .5 , 0 2, 3 5 , 7 9 9/- w a s u p h e l d . A s f o r t he a d d it io n ma d e b y t he A O o n a c c o u n t o f no n - u t il i za t io n o f t he a c c u mu la t e d s u r p lu s p e r t a i ni ng to t h e a s s e s s me nt y ea r 2 0 1 0- 1 1 , t h e Ld. C I T( A ) de le te d t he s ame n o t i ng t he fa c t t h a t t he a s s e s se e h a d b e e n de n ie d e xe mp t i o n o n t h e s a m e in th e s a i d ITA No.1426/Chd/2018 A.Y. 2015-16 Page 5 of 29 y e a r a ls o w hi c h h a d b e e n c o n fi rme d i n a p p e a l by t h e Ld .C I T(A ) a n d, t he re fo re , t a x i n g t he a c c u mu la t e d s u r p lu s in the i mpu g n e d y e a r w o u ld t a nt a mo u n t t o d o u b le a d d it io n . 4 . A g g ri e v e d b y t he s a me t he a s s e s s e e h a s c o me u p in a p pe a l b e f o re u s r a i s i ng t h e fo l l o w in g g r ou nd s : l. That the Worthy CIT (A) has erred in confirming the stand of Learned A.O. that the appellant society was not doing any Charitable activity during the relevant previous year and erred in making addition of Rs.5,02,35,799/- on this account ; 2. That the Worthy CIT (A) has erred in confirming the Order of A.O. in assessing the income of the appellant society in the status of AOP. 3. That the Worthy CIT (A) has failed to appreciate that the Assessment order of learned A.O. is vague with regard to para 5.1 of the order in which A.O. at one place mentioned the withdrawal of exemption u/s 10(23C)(vi) and at other place registration under Section 12AA was denied. 4. That the Worthy CIT (A) erred in confirming that the appellant society was doing business during the relevant previous year. 5. That the worth CIT (A) failed to appreciate that the appellant society was carrying on its Charitable activities through another Charitable trust registered under Section 12AA in Public Private Partnership; 6. That the Worthy CIT (A) failed to appreciate that the Learned A.O. has allowed the deduction u/s 11 to the assessee society in assessment order u/s 143(3) for AY 2013- 14 and the facts of the case of AY 2015-16 are absolutely similar to that of AY 2013-14. 7. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.” ITA No.1426/Chd/2018 A.Y. 2015-16 Page 6 of 29 5 . Th e a s s e s s e e h a s a l s o r a is e d a d d it io n a l g r o u nd s b e fo re us v i d e le t te r d a te d 1 5. 0 2 .2 0 19 a s u n d e r : “1. That the Ld. A.O erred in holding that the provisions of Section 11(2) of the Income Tax Act,1961 were not followed by the appellant society during the relevant previous year for setting apart Rs,3,45,850477- . That the Learned A.O failed to appreciate that the purpose of accumulation was clearly mentioned in Form 10 filed. That the worthy CIT (A) has not given any findings on the issue when the purpose of accumulation was written as "for the objects of the society" in Form 10. 2. That the Worthy CIT (A) has omitted to adjudicate the ground 9 raised by the appellant in Form no. 35 "That Ld. AO erred in holding that the appellant society has made violations of section 13(1)(d) r.w.s 11(5) of the income tax act 1961." A n d V id e le t t e r da t e d 0 1 .0 7 .2 0 1 9 a s u nd e r : 2. That the Income tax demand of Rs.24,50,96712/= was recovered from the bank accounts of the society during the relevant Financial Year 2014-15 may be allowed as application of income.” 6 . Th e o ri g i n a l g ro u n ds r a is e d b y t h e a s se s se e a re a g a in s t t h e de n i a l o f e x e mp t i o n u /s 1 1 o f t he A c t re s u l t ing i n t a x a t i o n o f i t s s u r pl u s a mo u n t i ng t o R s . 5 ,0 2 ,3 5 ,7 9 9 /- i n t h e s t a t u s o f A O P . Th e a d d i t io na l g r o u n d s , w e fi n d a r e a g a i ns t t he de n ia l o f b e ne f it o f a c c u mu la t io n o f i n c o m e a s pe r se c t i o n 1 1(2 ) o f t he A c t , t h e de n ia l of t r e a t me n t o f inc o me t a x pa i d d u ri ng t h e ye a r a s a mo u n t u t i li z e d f o r t he pu rpo s e o f c h a r it y a n d th e n o n a d j u d ic a t i o n b y t he Ld . C I T( A ) o f t he g r o u n d ra i s e d b y t he a s s e s se e re g a r d in g A O’ s fi nd i n g o f v i o l a t i o n b y t he a s se s se e o f t h e c o nd i t i o n s pr e s c r i be d f o r ch a r i t a b le e n t i t ie s u /s 13 ( 1 )( d ) r .w . s . 11 ( 5 ) o f t h e A c t re s u lt i n g in d e n ia l o f e xe mp t i o n u /s 1 1 ITA No.1426/Chd/2018 A.Y. 2015-16 Page 7 of 29 o f t h e A c t . The a d d it i o n a l g r o u n d s a s is e v ide nt a re re le v a nt o n ly i f t he a s s e ss e e is he ld t o be e nt it le d t o g r a nt o f e xe mp t i o n u /s 1 1 o f t he A c t . Th e r e f o r e , i t i s p e rt ine n t t o a dj u d i c a t e t he ma i n g r o u nd s r a is e d b y t h e a s se s s e e fi r s t be fo re d ea li ng w i t h t h e a d di t i o n a l g ro u nd s . 7 . We ha v e he a r d b o t h t he p a rt ie s a n d ha v e a l s o c a re fu l ly p e r u s e d t he o rde r s o f t he Ld . C I T( A ) a nd t he A O . We ha v e n o te d f ro m t he s a me t ha t p ri ma r y r e a s on fo r de ni a l o f e x emp t i o n u /s 1 1 o f t h e A c t i s t h e c a te g o r ic a l f i nd i ng o f f a c t , aff ir me d b y t he Ld .C I T(A ), t h a t t h e a s s e s se e w a s n o t c a r r y i n g o u t any c h a r i t a b le a c t i v i ty w ha t s o e v e r a n d t h e b a s is fo r a rri v i n g a t t h is f in d in g a r e a s u nd e r: 1) Th e in c o me a nd e x pe n d i t u re a c c ou nt o f t h e a s s e sse e d o e s n o t r e ve al a n y i n c o me e a r ne d f r o m t he c h a r i t a b le a c t i vi t y , n o r do e s i t r e v e a l a ny e x pe nd i t u re i nc u r r e d f o r t he s a me . Tha t t he a n nu a l i nc o me r e f le c t e d in t h e s a id f in a nc i a l s t a t e me nt p e r t a i ns t o in te re s t e a r ne d on F DR s a nd le a se i nc o me , w h ic h c a n no t b e a t t r ib u t e d t o e a r ni ng f r o m c h a r i t a b le a c t iv it y a nd t he e x pe n d it u r e pe r t a i ns t o b e i ng i n t he na t u r e o f a d min i s t r a t i v e e x pe n se s . 2. Th a t i n a ny c a s e t he a s se s se e c a nn o t be s a id t o be c a r r y i n g o u t i t s s t a t e d o b je c t s o f r u nn i ng o f me d ica l c o ll e g e /ho s p it a l in Ja la n d ha r s i n c e i t i s i t s e l f no t r u n ni n g t h e me d ic a l c o l l e ge /ho s p it a l c o n s t r u c t e d o r ITA No.1426/Chd/2018 A.Y. 2015-16 Page 8 of 29 b u i l t b y i t b u t o n t h e c o nt ra r y ha s le a se d i t o u t to a t h ir d pr i v a t e p a r ty . B e s i de s t he a f o re s a i d re a s o n s , it h a s a l s o b e e n h e ld t ha t t h e a s se s s e e is o n l y i n du lg in g in ma k i ng p r o fi t o u t o f d e v e l o p me nt a c t i v i t i e s a nd , t h e re fo r e , fo r t he a fo re s a i d r e a s o ns s i n c e t he a s se s se e is no t i n d u l g ing i n a n y c ha r i ta ble a c t i v i t ie s i t i s n o t e nt it le d t o e xe mpt io n u /s 1 1 o f t he A c t . 8 . B e f o re u s t he Ld . C o u n s e l fo r t he a s s e s s e e ha s c ou n t e re d a l l t h e a bo v e c o nt e n t i o ns o f t he au t ho ri t i e s be l o w , w h il e t he Ld . D R h a s v e he me nt l y s u p po rt e d t he o r de r o f t he Ld . C I T( A ) . W e s h a l l b e t a k i ng a n d de a li n g w it h e a c h o f s u c h fa c t ua l f in d in g s o f t h e Re ve n ue wh il e de n y i ng t he e xe mpt io n . 9 . Ta k i ng u p t h e f ir s t c o n t e nt i on t h a t t h e i nc o me an d e x pe nd i t u re a c c ou n t r e f le c t e d n o c h a r it a bl e a c t i v i ty c a r r ie d o u t b y t he a s se s se e , t h e Ld .C o u ns e l f o r t he a s s e s se e c ont e nde d t h a t t h e fa c t s r e f l e c te d i n t he f i na n c i a l s t a t e me nts t h o u g h no t d e n ie d , do n o t re fle c t t he c o mp l e te p i c t u re a n d t h e fa c t u m of h a v i ng c a rr i e d ou t c ha r i t a b le a c ti v i t y no r c a n it be c u lle d o u t f ro m t h e s a id s t a t e me nt a l o ne . Th e Ld . C o u n s e l fo r the a s s e s s e e c o nt e nde d t ha t re a d i ng de e pl y int o t he f in a n c i a l s ta t e me n t o r e v e n de h o r s it , it c a n b e de mo n s t r a t e d t h a t t he a s se s se e w a s i nd u lg i n g i n i t s s t a t e d c h a r i t a b le a c t i v i t ie s . To th is e ff e c t, Ld .C o u n s e l fo r t h e a s se s se e fi rs t d r e w o u r a t t e n t io n t o t he ITA No.1426/Chd/2018 A.Y. 2015-16 Page 9 of 29 o b j e c t s fo r w h i c h t he a s s e s s e e s oc i e t y ha d b e e n re gi s te re d a n d g r a n t e d re g i s t r a t io n u /s 1 2A o f t h e A c t a s a c ha r i ta b le e nt i t y a s u n d e r : “To established and to carry on the Administration and management of Punjab Institute of Medical Sciences’, Jalandhar. (i) To set up, establish, promote manage or associate with, any other Institution or Centre in The state of Punjab devoted to education, training, research and related infrastructure in various branches of health sciences and working for the advancement of scientific knowledge aimed at enhancing eh quality of patient care. (iii) To provide for training, instructions and research in such branches of medical education and research & to induct advanced medical knowledge and techniques into our medical education system and to set tip Punjab Institute of Medical Sciences and Jalandhar as the institute may think fit and for the advancement of learning and dissemination of knowledge and patient care in such branches; (iv) To gel affiliation to the Medical Council of India or any other affiliating agency for the award of degrees, diplomas and certificates; (v) To institute and award fellowships, scholarships, prizes and medals in accordance with the Rules and Bye - laws; (vi) To confer honorary awards or other distinctions; (vii) To fix demand and receive such fees and other charges an may he laid down in the Bye-laws made under the rules of the Society. (viii) To established, maintain and manage halls and hostels for the residence of students: (ix) To provide for the maintenance of mils of the National Cadet corps when established for the students of the Institute; (x) To create administrative, teaching/non-- teaching and ministerial and other posts under the society and make appointments there to us needed in- accordance with rules and Bye-laws; ITA No.1426/Chd/2018 A.Y. 2015-16 Page 10 of 29 (xi) To co-operate with educational or other institutions in any part of the work having objectives wholly or partly similar to those of the society by exchange of teachers, scholars & generally in such manner as may be conductive to their common objects: (xii) To make Rules and Bye-laws for the conduct of the affairs of the society and to amend, vary or rescind them from time to lime with the approval of the state Govt./Medical Council of India. (xiii) To acquire and hold proper, provided prior approval of the Stale Govt. is obtained for the acquisition o] immovable property: (xiv) To deal with or dispose off or write off any properly or loss there in belonging to or vested in the society in such manner as the society may deem fit for advancing its objectives subject to the provision that in case of transfer and disposal of any immovable property the prior approval of the State Govt. shall be obtained; (xv) To maintain a fund to which shall be credited:- (i) all money provided by the Central and State Government: (ii) all fees and other charges received by the society; (iii) All moneys received by the society by way of grants, gifts, donations, benefactions bequests or transfers; and (iv) all money received by the society in any other manner or from any other sources (xvi) To deposit all moneys credited to the fund in such banks or to invest them in such manner as the society may, with the approval of the state Government, decide: (xvii) To meet expenses of society including expenses incurred in the exercise of its powers and discharged of its functions out of the Fund: (xviii) To prepare and maintain accounts and other relevant records and to prepare an annual statement of accounts including the balance sheet of the society in such from as may be prescribed by the Stale Government hi consultation with the Accountant General of Punjab. (xix) To forward annually to the state Government the accounts of the society as certified by the Accountant General, Punjab or any other authority as may be decided by the stale Government. ITA No.1426/Chd/2018 A.Y. 2015-16 Page 11 of 29 (xx) To do all such things as may be necessary incidental or conducive to the attainment of all or any of the objects of the society. (xxi) To constitute such committee or committees as it any deem fit for the disposal of any business of the institute or for tendering advice inc any matter pertaining to the Institute; (xxii) To delegate any or all of its powers to the Governing Body of the Institute or to any of the committee or committees constituted by it; 1 0 . R e fe r r in g t o t he s a me h e s t a t e d th a t b e s i de s t he ac t i v i t y o f a d mi ni s t r a t i o n a nd ma na g e me n t o f Pu nj a b I n s t i t u t e of Me d ic a l S c i e n ce s , Ja la n d ha r , t he o t he r ob je c t s o f t he a s s e ss e e s o c ie t y i nc lu d e e s t a b lis h i ng , p r o mo t i n g , ma n a g i ng a n d a s s oc i a t i ng w i t h o t he r in s t it u t i o ns i n P u nj a b d e v o t e d to e d u c a tio n , t r a i ni n g , r e s e a rc h a n d re la t e d i n fr a s t ru c t u r e in v ar i o u s b r a nc he s o f he a lt h s c i e n ce s a nd s u c h re la t e d o bj e c ts . He t h e re a f te r p o i nt e d o u t t ha t t he a s s e s se e h a d be e n in du l g i ng i n a l l t h e a b o v e c har i t a b l e a c t i v i t ie s . To s u p p o r t hi s c o n t e n t io n he s t a t e d t h a t t h o ug h u nd e n i a bl y t he a s se s se e h a s le a se d o u t t he P u n j a b I n s t i t u te o f Me d i c a l S c i e n ce s pre mis e s a t Jala n d ha r t o a t h ir d pa r t y b u t i t s t i ll e xe r c is e d a ll c o nt r o l o v e r i t s r u n ni ng a n d ma n a g e me nt , ha v i ng c le a r ly st i p u l a t e d i n t he a g re e me nt p a r a me t e rs w it h in w h ic h t h e i ns t it u t e w a s t o b e r u n by t he t h ir d p a r t y , t hu s e n s u r in g t h a t th e in s t it u te w o u ld r u n o n t he l in e s o f c ha r i t y . Th a t n o f r e e re i n ha d b e e n g i ve n t o t he le s s o r f o r t he r u n ni n g o f t h e i ns t it u te bu t w a s s u bje c te d t o li mi t a t i o n w hi c h e n s u re d th a t t he i ns t i t u t e wa s r u n o n c ha r ita b l e li ne s a l o ne a nd fu r t he r t ha t t h e a s se s se e ha d r e t a in e d r ig h t o f ITA No.1426/Chd/2018 A.Y. 2015-16 Page 12 of 29 c o nt r o l o v e r t he fu nc t io ni ng o f ma na g e me n t o f t h e sa i d i ns t i t u t e . The Ld .C o u n s e l f o r t he a s s e s se e d re w o ur a t t e n t i o n to t h e s u b mi s s io n ma de i n t h i s r e g ar d a s u nd e r : “i. That the Society (PIMS) has been monitoring the functioning of the Medical College and hospital Jalandhar being run by the PIMS Medical & Education Charitable Society in terms of Concession Agreement dated 28.8.2009. The Society staff has been reporting lo the Managing Committee of the Society about the running of the hospital & medical college at Jalandhar. It is coordinating in the manner that all the policies framed for the running of the Charitable Institution as per Concession Agreement are adhered lo. Il is further stated that administrative expenses are necessary to carry out the activities of the society. The copy of Concessionaire agreement executed between Society. PIMS Medical & Education and Charitable Society (PMEC) and State Government was produced before AO to apprise her the massive work being carried out by the assessee society in terms of management of the hospital and medical college at Jalandhar. PIMS has been operating through PMEC a medical college of 150 seats along with 500 bed hospital in terms of Concession Agreement as discussed above. The hospital and medical college has a constructed area of around 10 lacs sq yards and the same is spread in nearly 56 acres. The Main terms of the agreement like the Hospital charges are as per PGI Chandigarh rates, Medical College fees is as per Pvt. Medical College Fee Charges as applicable to Pvt. Medical Colleges of Punjab State, BPL, Patients are being treated free of cost and its expenses will be reimbursed by PIMS Society being Concessioning Authority, PMEC Society will also complete the remaining construction of Hostels, residence and Auditorium etc. The Obligations of Concessioning authority i.e. PIMS Society are mainly related to all assistance to get the approval from state govt. or other authorities, frequent inspection of the activities of concessionaire and regulate the functioning of the concessionaire as prescribed in the concession agreement. A steering committee (Chief Secretary Punjab chairman) as prescribed in the concession agreement to regulate the activities of the concessionaire and Concessioning authority and assist for approval of many activities in the hospitals or required to the concessionaire has also been in existence. The Concessioning Authority also approves the constituents (members) of concessionaire being prescribed in the concession ITA No.1426/Chd/2018 A.Y. 2015-16 Page 13 of 29 agreement Therefore there are many such obligations and as such responsibilities etc. in the concession agreement for Concessioning authority i.e. PIMS Society Jalandhar which are being regularly undertaken by the PIMS. The part covering the above said terms and conditions in the Concessionaire agreement is being attached for your ready reference.” 2. The copy of Concession Agreement dated 28.OK.2009 has already been filed before your goodself. The main points/articles of Concession agreement where your indulgence is sought are as under ; As per the Concession Agreement the consortium. Consortium (I'SP) has formed a society named as PIMS Medical & Education Charitable Society (PMEC Society) On the direction the 21 st Governing Body meeting held on 27.8.2009 the Concession Agreement was signed on 28.8.2009 amongst the Concessioning Authority (PIMS Society), the Concessionaire (PIMS Medical & Education Charitable Society) and the Confirming Party State Govt). Till dale PMEC Society has full & final payment of Rs. 131.00 crore during 2008, 2000-10 and 2010-11 including interest on delayed payment of Rs. 54044419.00 during 2009-10 and 2010- 11. The PMEC Society will also pay Annual Concession Fee from the financial year 2016-17 onward rate as stated in Article 5 of Concession Agreement. The Lease Deed was signed on 7.1.2010 and registered on 11.1.2010. The building of Medical College & Hospital has been handed over to the PMEC Society during Feb. 2010 and after issuance of Certificate of Compliance on 4.6.2010 the hospital of the institution was started. Medical College was started by the PMEC Society on 2011-12 sessions onward. The Private Player, M/s PIMS Medical & Education Charitable (PMEC) being concessionaire of the project as per the Concession Agreement Executed for the project PIMS Hospital & Medical College running PPP Mode as under 1) Will charge the same rate as applicable from time to time in PGI Chandigarh for teaching as well as General Hospital,(Article 8 clause xviii ,page 39) ITA No.1426/Chd/2018 A.Y. 2015-16 Page 14 of 29 2) Provisions for free treatment facilities to the Below Poverty Line (BPL) patients has been kepi, the expenses of which will borne by PIMS.(Article 18) 3) The fees will be charged from the students of the Medical College as per notifications issued by the Govt. of Punjab from time to time for "Private Medical Colleges" of the Punjab state.(article 32 ) 4) The PSP shall not use more than 5 acres of land for other related infrastructure facilities like health club, food court, attendant's inn, faculty club, wellness programs etc. 5) Minimum Requirements, Standards and Rules and Regulations for running a Medical College will be as per Medical Council of India (MCI), Quality of health care servicesl be as per Standards of Joint Commission of International (JCI). 6) Obligations of the Concessioning Authority (Article 7) 7) Obligations of Concessionaire ( Article 8) 8) Termination for Default Article 22) 9) Steering Committee to review the overall functioning of project facility with other powers and duties having two representatives of Concessioning Authority, two representatives of Confirming party and one representative of the Concessionaire (article 29) The above main ingredients of Concession agreement prove that the agreement executed in transparent manner and keeping in view the fact that the Charitable purpose and objects of the society remain intact. 3. The AO wrongly observed in para 5.1 (last para of page 10 of assessment order ) of her order (hat Assessee is a basically a lessor. It was further wrongly observed that the assessee has claimed exemption u/s 10(23C)(vi), has earned systematic profits. The AO has held that the assessee society is not entitled for registration granted under Section I2AA(3) as the assessee society is not existing and working for the objects for which it was created as per MOA. 1 1 . Th e L d .C o u n s e l fo r t he a s s e s se e fu r t he r c o n t e n de d t ha t b e s ide s t he a b o ve it w a s a l s o b ro u g ht o u t t o t h e a ut ho r i t ie s b e l o w t he v a r i o us o t h e r c h a ri t a b le a c t i v i t ie s w hi ch t he a s s e s s e e ITA No.1426/Chd/2018 A.Y. 2015-16 Page 15 of 29 h a d be e n i nd u lg in g i n o ve r a n u mb e r o f y e a r s . O u r at t e n t i on w a s d r a wn t o t he s u b mis s i o n s ma d e b y t he a s se s se e as u n de r : “ii. Further (lie AO has wrongly understood that the assessee society has been carrying only one object that of "To establish and carry on the administration and management of Punjab Institute of Medical Sciences." Whereas she has herself reproduced the Objects as per MOA on page 2 of assessment order which also includes the following apart from 20 other ancillary objects" ' “To set up establish, promote, manage or associate with ,any other Institution or centre in the slate of Punjab devoted lo education training .research and related infrastructure in various branches of health sciences and working for the advancement of scientific knowledge aimed at enhancing the quality of patient care” It is submitted before your goodself that the society has incurred on expenditure on the objects of the society amounting to Rs.I11.79 crores till 35 th meeting of the managing Committee on 05.05.2015.The documents evidencing the same were produced before Learned AO (Pages I-S). It was submitted before the Learned AO that apart from para i) the society had already invested Rs.150.85 cr on various projects upto 31-03-2017 as per 36 ll th Meeeting of managing Committee , prominent among these are upgradation & strengthening of Govt. Medical College, Patiala amount spent is nearly Rs 40 Cr, Project of setting up of Comprehensive Cancer Treatment Centre at Bhatinda amount spent is more that of Rs 20 Cr, setting up of Comprehensive Cancer Diagnostic Treatment Centre at Baba Farid University of Health Sciences, Faridkot amount spent is Rs. 21.82 Cr, Govt Dental Colleges of the state, amount spent on it is nearly 12 crore, Skill development centre in 3 state medical colleges amounting to Rs. 18.81 cr and Upgradation of Radiotherapy department of Govt, Medical College Amritsar amounting to Rs. 5.53 crore etc. Apart from above the assessee society has given Rs. 82.20 crores in the financial year 2013-14 to PHSC to be spent on health projects as per the objects of the society. The evidence in this regard is enclosed for your ready reference. (Pages 9-14 ) iii. It was further submitted before the Learned AO that the projects carried out by the Society are duly approved by the Managing/Governing Body (i.e. body of high authorities of govt and experts of health and medical educations) and its status is always discussed in the each meeting of the Governing Body. In this regard extract of agenda and ITA No.1426/Chd/2018 A.Y. 2015-16 Page 16 of 29 proceedings of 35 l Governing Body meeting dated 5.5.2015 and agenda 36 th Governing Body dated 1.12.2017 (which shows the latest status and funds provided to the projects) filed before Learned AO is attached. (Pages 1-14) iv. It is also submitted that income during the year has not only been spent on the administrative expenses but also on the projects i.e. Rs 27,61,055/- {Upgradation of Govl. Dental College (GDC) Arnritsar/Patiala and Nursing College and National Level Physiotherapy ^Workshop at Govt. Medical College (GMC) Paliala). Further more than 3 crore advance to M/s HSCC (supervising agency) with the project of Nursing College & National Level Physiotherapy workshop at GMC Patiala was also adjusted. Hence the belief of AO that the society spent whole of the amount on Administrative Expenses during FY 2014-15 is wrong. Copy of ledger accounts filed before Learned AO are attached at Pages 15-18. v. In FY 2014-15 the amount on the project could not be spent due to the reason the Income Tax department had issued the bank attachment notice n/s 281. All the bank accounts and FDR accounts having balances of Rs. 29.54 crore were attached by the Income 'fax department (Pages 19- 2 1). Moreover an amount of Rs.24,50,9672/= was recovered from the bank accounts of the society/Institute by AO during FY 2014-15.This has jeopardized the spending of the Society on the objects of the society. (Copies attached at Pages 22-24). Documents evidencing the above were duly filed before Learned AO during assessment proceedings. (Pages I 9-24).” 1 2 . Th e Ld . C o u ns e l f o r t he a s s e s s e e t he re a ft e r c o nte nd e d t ha t t h e fi nd i ng s o f t h e Ld . C I T( A ) t h a t t he a s se s se e ha d be e n i nd u lg i n g i n i nf r a s t r u c t u r e de ve lo pme nt pr o j e c t s a nd in d u l g i ng i n p r o f it ma k in g w a s ba s e d o n t he f a c t t ha t it ha d e nte re d i nt o t r i p a rt it e a g re e me n t a s pe r w h ic h l a nd h a d be e n so ld by P UD A a n d p r o c e e d s o f t h e s a me ha d b e e n fo rw a r de d t o t he a s se s se e . Th e Ld . C o u n s e l fo r t h e a s se s se e co n t e n de d t h a t t he De pa r t me nt h a d he ld t he a s s e s se e a s t he ow n e r o f t he l a nd a nd l i a b le t h e re f o re t o c a p i t a l g a i n t a x o n t h e s a le o f s a me . H e po in te d o u t ITA No.1426/Chd/2018 A.Y. 2015-16 Page 17 of 29 t h a t t he s a id a c t io n o f t h e de p a r tme n t ha d b e e n s t ru c k do wn b y t h e I TA T ho l d i n g t h a t t he a mo u nt r e ce iv e d was g r a nts . The Ld .C o u n s e l fo r t h e a s se s se e d re w o u r a t t e nt i o n t o th e o r de r o f t h e I TA T i n t h is r e g a r d d a te d 3 1 .1 2 .2 0 1 3. He c o n te nde d, t h e re f o re , t h a t t h i s a l l e g a t i o n o f t h e Ld C I T( A ) t h at t he a s s e ss e e i s in d u l g i ng i n pr o f i t ma k i ng b y d e v e lo p me nt a c t i v ity , t he re f o re , s t o o d n e g a t e d b y t h e a fo re s a i d o rd e r o f t he I TA T 1 3 . Th e Ld . DR , o n t h e o t he r h a nd , ve he me nt ly s u p p or t e d t he o r d e r o f t he A O /C I T( A ) . W ri t t e n s u bmi s s io ns d a t e d 2 8 .0 1 .2 0 2 1 w e re re fe rre d t o b y t h e Ld . D R an d c o n t e n t i o n o f t he Ld .C I T(A ) r e i te r a t e d t he re in t h a t t he a s s e s s e e w a s in d ul g i ng i n t he a c t iv it y f o r pr o f i t mo t iv e a nd w a s e a rn i ng a n nu a l re n t a l o r le a se i nc o me f r o m p r iv a t e i n di v i d u a l s and i t s e lf w a s no t c a r r y i ng o u t a n y c h a r it a b le ac t i v i t i e s b u t w a s o nl y a pp l y i ng the mo n e y i n v a r i o u s pr o j e c ts a t v a r i o u s s t a t i o n s t h ro u g h v a r i o us i ns t i t u t i o n s w hi c h c o u l d a t b e s t be t e r me d t w o s t a ge a p p li c a t io n w h i c h i s de fi ni t e ly no t in t h e na t u r e of c h a r i t a b le a c t iv it y . A n u mb e r o f de c i s i o n s we re re l ie d u p o n by t h e Ld . DR i n t h is r e g a r d. “1) Winsome Foundation, Chandiarh in ITA No.522 to 525/CHD/2018, dated 12.07.2018. 2) Maharaja Ranjit Singh War Museum Society, Ludhiana Vs. CIT, Jalandhar in ITA No.259 of 2019 (O&M), decision dated 20.03.2020. ITA No.1426/Chd/2018 A.Y. 2015-16 Page 18 of 29 3) CIT Kottayam Vs. M/s Annadan Trust, Vechoorettu Building, Ettumanoor, Kottayam-686 632 in ITA No.213 of 2013 delivered on 23.07.2018.” Ld. D R f u r t h e r p o i nt e d o u t t h a t t h e I TA T i n t h e c a s e o f t he a s s e s se e it se l f pe r t a in i ng t o A . Y 20 0 6 - 0 7 h a d a ft e r t a k in g n o te o f t he fa c t t ha t s i nc e i nc e p t i o n in 1 9 9 4 t he a s se s se e h a d be e n i nd u lg i n g o nl y i n c o ns t r u c t io n a c t i v i t y a nd h a d d e cid e d t o ha n d o v e r f u n c t i o n in g o f i t s me d i c a l c o l l e ge a n d ho s pi t al t o a p r i v a te s o c i e t y t o be r u n o n P PP mo d e , h e l d t ha t t he a s se s se e w a s no t i nd u lg i n g in a ny c ha r i t a b l e a c ti v i t y a n d w a s t he re fo re not e n t i t le d t o e xe mp t i o n u /s 11 o f t h e A c t . C o p y o f t he o rde r p a s s e d b y t he I TA T i n I TA N o .5 0 4 & 5 1 5 /C hd /2 0 0 9 d a te d 3 1- 1 2 - 2 01 3 w a s p l a c e d be f o re u s . 1 4 . We h a v e he a rd t h e c o nte nt i o n s o f bo t h t h e p a r tie s a n d p e r u s e d t he d oc u me n t s p la c e d b e fo re u s . Th e de n i a l of e x e mp t i o n t o t h e a s s e s se e s o c ie t y i n t he p re s e nt cas e i s fo r t he r e a s o n t h a t i t wa s f o u n d t o b e no t c a r r y i ng o u t a n y c h a r it a b le a c t iv it ie s . U nd o u b t e d l y , t he o bje c t i v e w it h w hi c h th e a s s e ss e e s o c i e t y w a s s e t u p in 1 9 9 4 w a s t o e s t a b li s h a n d c a r ry o n t he a d mi ni s t r a t i o n a nd ma na g e me n t o f Pu nj a b I n s t i t u t e of Me d ic a l S c i e n ce s , Ja l a nd h a r, w hi c h t he as s e s se e c l a i ms t o be c a r r y i ng o u t t h ro u g h a c o n c e s s i o n a ire . A dmi t t e d ly , a s p e r t he C o n c e s s i o n a ire Ag r e e me nt e n te re d in t o o n 28 . 08 . 200 9 , t h e l a n d a n d b u il d in g c o ns t r u c t e d b y t he a s s e s s e e f o r th e p ur p o s e of ITA No.1426/Chd/2018 A.Y. 2015-16 Page 19 of 29 r u n ni n g t h e h o sp i t a l ha s b e e n le a s e d o u t t o a p r i v at e p a rt y , P I MS Me d ic a l & E d u c a t i o na l a n d C h a r it a b l e So c ie t y , fo r a p e r i o d o f 9 9 ye a r s fo r a c o n s i de r a t i o n c o mpr i s i n g of R s .1 31 c r o r e s a s u pf r o nt c o n s i d e r a t i o n a n d a n a n nu a l c o nce s s i o n fe e b e i ng 5 % o f t h e u p f ro nt c o ns ide ra t io n t o be i nc re a se d e ve ry y e a r @ 5% b e g in n in g fr o m t h e 8 t h ye a r f r o m t he a c c e p t a nc e o f t h e p r o p o s a l o r t he e nte r in g i nt o u p fr o n t c o n s i d e r at i o n. The Ld .C o u n s e l f o r t h e a s s e s s e e ha s i n hi s r e j o in de r d ate d 0 3 .0 8 .2 0 2 1 t o t he w r it t e n s u bmi s s i o ns f il e d b y t he Ld . DR d a t e d 2 8 .0 1 . 20 21 s t a t e d t h a t t he a s s e s se e s o c ie t y ha d re c e i ve d o n ly R s . 1 /- a s l e a s e r e n t a l in c o me d u r i ng t he imp u gne d a s s e s s me n t ye a r. Thi s f a c t i s c o rr o b o r a t e d b y t he fi na n c i a l s o f t h e a s se s se e f o r t h e imp u g ne d y e a r r e fle c t in g re ce ip t o f R s . 1 /- a s l e a se re nt a l as u n de r : Particular Schedule As on 31.03.2015 A I N C O M E Interest Income Lease Money Misc. Income T O T A L ( A ) VII 53,214,466.18 1.00 2,912,400.00 56,126,867.18 B E X P E N D I I T U R E administrative and other expenses T O T A L ( B ) To excess of Income and Expenditure transferred to Reserve & surplus N o t e s t o A c c o u n t s VIII IX 5,891,068.00 5,891,068.00 50,235,799.18 ITA No.1426/Chd/2018 A.Y. 2015-16 Page 20 of 29 He a l s o o r a ll y s u b mit t e d be fo r e u s t h a t u p f r o nt c o ns id e r a t i o n t o be p a i d t o t he c o nc e s s i o na ir e w a s s t il l o u t s t a n d in g fo r p a y me n t a s o n d a t e . 1 5 . Th e f a c t r e ma in s t ha t i t i s n o t t he a s s e ss e e w hic h is a c t u a l ly r u n ni n g t h e me di c a l c o lle ge a n d h o s p i t a l bu t i t i s t he p r iv a t e p l a ye r i n t he c o n ce s s io n ai r e a g re e me n t w ho is do in g i t . W ha t is t o b e a ddr e s se d t he re f o re i s wh e t he r t he as s e s s e e c a n i n s u c h c i r c u ms t a n c e s be s a i d t o be c a r r y i ng o u t c ha r i t a b le a c t iv it y , t h o u g h t hr o u g h a n o t h e r pa r t y . 1 6 . We a re no t in c l ine d t o a g re e wi th t h i s c o nt e nt io n o f t he a s s e s se e . The fa c t o f t he a s s e s s e e h a v i ng le as e d o ut t he me d i c a l in fr a s t r u c t u r e , c o n s t r u ct e d b y i t o ve r a l ong p e ri o d of t i me , f o r 9 9 y e a rs , t a n t a mo u nt s v ir t u a l ly t o s e l l ing t he p r o pe r t y t o t he p r iv a te p l a y e r . We a g re e wi t h t h e Ld . C I T( A ) o n t h e s a me , w ho ha s ri g h t l y p o i nt e d o u t t h a t i n l e g a l p a r l a nc e a n y le a se of l a nd fo r 9 9 y e a rs a mo u nt s t o s a le o f p r o pe r t y . Ha v in g he ld so t h e re re ma i ns n o q u e s t i o n o f t h e a s se s se e c a rr y i n g o u t i t s s t a t e d c h a r it a ble a c t i v i t y o f r u n ni ng t he me d ic a l co l le ge a n d h o s p i t a l t he re a ft e r . Th e c o nte nt io n o f t he Ld .C o u nse l fo r t he a s s e s se e t ha t t he te rms o f t he c o nc e s s io n a g re e me n t e ns ure t h a t t he me d i c a l c o l le ge a nd h o s pit a l i s r u n o n c har i t a b l e l i ne s , i s o f n o a s s i s t a nc e t o t he a s s e s s e e f o r s t re ng t he nin g i t s c a s e o f c a r r y i n g o u t c h a ri t a b l e a c t i v i t y o n a c c o u n t o f t he fa c t t h a t t he ITA No.1426/Chd/2018 A.Y. 2015-16 Page 21 of 29 me d i c a l in fr a s t r u c t u r e h a s be e n v i rt u a l l y s o l d by th e a s s e ss e e t o a p r iv a t e p a r t y .H o w it i s r u n w il l n o t c h a n g e th e fa c t t ha t t h e a s se s se e h as v ir t u a ll y no t h i ng t o d o w i t h it . N o t hi ng c o nc re te ha s als o b e e n b r o u g ht t o o u r n o t i c e f r o m the c o nc e s s io n a g re e me nt d e mo n s t r a t i n g t he r ig ht o f t h e a s s e ss e e t o e x e r c i se s u b s t a nt i a l c o nt r o l o v e r t he me di c a l inf ra s t r u c t u r e l e a se d . V a r io u s ca s e l a w s re l ie d up o n b y t he Ld .C o un s e l f o r t he a s s e s se e t o b u t tr e s s i t s c o n te n t io n t ha t i t c a n be s a i d t o be c a r r y i n g o u t i t s c h a ri t a b l e a c t i v i ty t hr o u g h le a s i ng a ls o , a ll a r e d is t i ng u i s h a bl e o n a c c o u nt o f t he ma t e r ia l fa c t o f t h e le ase b e i ng f o r a p e ri od o f 9 9 y e a r s w h ic h d r a ma t ic a l l y cha n g e s t he c h a r a c t e r o f t he t r a n s a c t io n f ro m a s imp l ic it o r l e as e t o v ir t u a l s a l e . 1 7 . B e s i de s We ha ve n o te d t h a t t he I TA T, in it s o rd e r i n t he c a s e o f t h e a s se s s e e re l a t i ng t o A. Y . 2 0 0 6- 07 i n I TA N o s .5 0 4 & 5 1 5( A s r )/2 0 0 9 d a t e d 31 . 12 . 2 01 3 , h a d c o ns id e re d t h is f a c t o f t h e a s s e s se e in te n d i ng t o t he n h a nd o v e r t he ru n ni ng o f i t s me d i c a l f a c i li t y i n PP P mo d e l t o a p r i v a t e p a rt y an d no t in g t he f a c t t h a t i t a c tu a l ly d i d s o i n 2 0 09 w he n it e nt e red i nt o a c o nc e s s io n a i re ag r e e me nt a n d f ur t h e r no t in g t h at r ig ht f ro m i nc e p t i o n t he a ss e s se e s o c ie t y ha d d o n e n o t h i ng t ow a r d s i t s s t a t e d c ha ri t a b le a c t i v i t y b u t ind u lg e o nl y in c o n st r u c t i o n a c t iv it y fo r a se e mi ng l y v e r y l o ng p e r i o d o f t i me , fr o m 1 9 9 4 t o 2 0 09 , w he n i t h a nd e d o v e r i t s i nf r a s t r u c t u r e t o t he ITA No.1426/Chd/2018 A.Y. 2015-16 Page 22 of 29 c o nc e s s io n a i re , he ld t ha t i t w a s no t c a r ry in g o u t any c h a r it a ble a c t iv it y . Th e I TA T n o t e d t h a t d e s p it e t he i ni t i a l b u i ld i ng b e i ng c o mpl e t e d b y 20 0 0 n o t h in g w a s d o ne b y t he a s s e s se e to c o mme nc e i t s a ct iv it ie s o f i mp a r t i ng me d i c a l e d u c at i o n a n d r u n ni n g a h o s pi t a l . I t n o te d th e f a c t t ha t t he re a f te r t he a s s e s se e o nl y p ro c e e de d w it h a n e x p a ns io n d r iv e a n d i n 2 0 0 5- 0 6 t he g o ve rn ing b o d y o f t he a s s e s s e e de c i de d t o ta ke P PP ( Pu b li c Pr i v a t e P a r t n e r s h ip ) mo d e f o r o pe r a t i on a l isin g a n d ma n a g i ng t he i n s t i t u t e w hi c h w a s f i na l ly a c h ie ve d in 2 0 09 . Ta ki n g n o t e o f t he s a me t he I TA T h e l d t h a t t he i n te n t i on o f t h e a s s e s se e t o o pe r a t i o na l i ze t he i ns t i t u t e t h ro u g h P P P Mo d e c le a r ly s ho w e d t he mo t i v e be h i nd s pe nd i ng a l on g pe r i o d f o r c o ns t r u c t i o n o f b u il d in g f o r me di c a l c o l le g e whi c h , i t he l d, w a s c l e a r ly no t fo r c h a ri t a b l e p u rp o s e . The r e le v ant f i nd i ng s o f t h e I TA T i n t h e c a s e o f t he a s s e s s e e f o r A . Y 2 00 6 - 07 a r e as u n d e r : “22. As per the facts narrated by the learned CITfA) in para no. 4.4 at page 20 of the impugned order, the assessee was proposed to be set up in the year 1993 by the State Government and decided to have society registered in 1994. The assessee-society got registered under Section 12AA of the Act on 01.11.2000. The assessee-trust has governing council headed by the Chief Minister and to appoint a Director of the Institute on contract basis. In 1997, the Prime Minister announced Additional Central Assistance (ACA) of Rs. 25 crores under the scheme 100% centrally sponsored schemes of the 9 1 five year plan Rs. 7.50 crores was received on 23.01.98; Rs. 7.50 crores was received on 5.5.2000 and the balance Rs. 10 crores was received on 10.03.2006. In 1998, an agreement was made with a contractor to construct an initial building to be used to accommodate some departments of the institute and hospital. The building was completed in 2000. In October, 1999, ITA No.1426/Chd/2018 A.Y. 2015-16 Page 23 of 29 a master plan of Rs. 80 crores was approved and process of selecting a contractor was started. The plan proposed 150 MBBS students intake each year and an attached hospital of 1000 beds, though in a phased manner. The Society was granted registration u/s 12AA on 1.11.2000. In October, 2001 it was decided that the main source of funding would be development of around 104 acres of land purchased by PIMS from PAU for Rs. 15 crores. PUDA would develop and sell the land. In 2001, L&T was selected as the main contractor for the main building and the construction was started. In 2005-06, it was decided by the Governing Body to take the Public Private Partnership (PPP) mode for operationalising and managing the Institute. This has been finally achieved in August, 2009. 23. Keeping in view the facts narrated by learned CIT(A), it is admitted that the assessee-society has not yet started imparting medical education and the expenditure incurred during the year by the society was not for any other purpose other than setting up of the medical institute. He finally held that the expenditure incurred by the assessee-trust is for charitable purpose and the assessee-trust is entitled for exemption under Section 11(l)(a) of the Act in respect of the income applied to such construction, which has to be allowed to the assessee. i) In our view, as per the facts narrated by learned CIT(A) in the aforesaid paragraph that in the year 1998, an agreement was made with a contractor to construct an initial building to be used to accommodate some departments of the institute and hospital. The building was completed in 2000. We fail to understand that if the building, as stated by learned CIT(A), completed in 2000, then why the assessee has not taken any step to impart the medical education and to provide free medical facilities to the general public of the concerned area. Further, learned CIT(A) has allowed the exemption benefit to the assessee only on the ground that the assessee has been registered under Section 12AA of the Act, which is contrary to the law and facts on the file and are not logical. ii) As regards to the development of 104 acres of land purchased by assessee-trust from PAU for Rs. 15 crores, in the year 2001 L&T was selected as the main contractor for the main building and the construction was started in 2001. In 2005- 06, it was decided by the Governing Body to take Public Private Partnership (PPP) mode for operationalising and managing the Institute. This has been finally achieved in August, 2009. We are of the view that the motive of the assessee behind the long period for about more than 8 years spent on construction of building by the assessee-trust, is to take Public Private Partnership (PPP) mode for operationalising and managing the Institute and capitalizing more ITA No.1426/Chd/2018 A.Y. 2015-16 Page 24 of 29 and more on the project, which they have achieved finally in August, 2009. ....................................................... 24. Keeping in view the notice dated 08.12.2008 issued by the Assessing Officer asking various questions from the assessee as well as the reply of the assessee dated 19.12.2008, which we have reproduced above, we are of the view that the assessee-trust itself admitted in its reply dated 19.12.2008 that running of medical college and other facilities on private public participation is under consideration as one of the proposal. The assessee is also of the view that there is no harm in running the medical college and other facilities on private public participation and it has become need of the hour. Keeping in view the admitted position by the assessee in reply dated 19.12,2008 reproduced above, we are of the view that the motive of the assessee in prolonging the construction work of building of medical institution, is to give the assessee trust to run the medical college and other facilities on private public participation which the assessee-trust has achieved later on. Therefore, the assessee-trust has not applied any part of its income of the year for charitable purpose. Thus, the assessee trust is not entitled for any exemption, as claimed. .................................................... 26. Keeping in view the facts and circumstances of the present case, we are of the view that the assessee has not given any explanation as to why it has not taken any step for about 8 years from 10.10.1994 to 2002 to achieve the objects of the assessee-trust and also has not given any explanation regarding any charitable activities done by the assessee during these period except to spending time in construction of building for medical institute. As per para no. 4.4 at page 20 of the impugned order as well as the reply dated 19.12.2008 filed in response to the notice dated 08.12.2008, the assessee itself admitted that in 2005-06, it was decided by the Governing Body to take Public Private Partnership (PPP) mode for operationalising and managing the Institute and this was finally achieved in August, 2009, as informed by the assessee. The intention of the assessee clearly shows the motive behind spending a long period for construction of building of medical college which is certainly not for charitable purpose to achieve the objects of the assessee-society. Secondly, if the assessee-trust was granted registration under Section 12AA of the Act, it does not mean that the assessee is automatically entitled for the exemption under Section 11 of the Act. We hold that ITA No.1426/Chd/2018 A.Y. 2015-16 Page 25 of 29 the Assessing Officer will not be precluded from examining in detail the very object of the assessee and to give the findings in assessment order as to whether the assessee has complied with requirement of Section 11 of the Act or not, as and when assessee seeking exemption under Section 11 of the Act. The registration granted under Section 12AA of the Act to the assessee should not be the obstacle in the way of Assessing Officer at the time of completion of assessment proceedings. Therefore, the arguments advanced by learned counsel for the assessee are rejected. The citations cited by the learned counsel for the assessee in his written submission are not applicable on the facts and circumstances of the present case because the case- laws relied by him are not identical to the facts of the present case. Learned counsel for the assessee has not supplied us any decision of Hon'ble Courts on the issue in dispute, in which the assessee is incurring expenditure on construction only for a very long period, as in the present case and any court of law has given the exemption under Section 11 of the Act.” 1 8 . I n t he b a c k g r o u nd o f t h e h is t or y o f t h e a s s ess e e , as n o t e d by t h e I TA T in i t s o r d e r in e a r lie r ye a r , a s a b o v e , t h a t t he a s s e s se e ha d o nly b e e n in d u l g i ng in c o ns t r u c t io n a ct iv i t y s in ce i t s c r e a t io n f o r a v e r y lo n g pe r io d o f a ro u n d 8 - 1 0 y e a r s , h a d n e ve r i t se lf r u n t he me di c a l fa c ili t y d e s p it e a p a rt o f it be i ng c o mpl e t e d i n t h e y e a r 2 0 0 0 a nd ha d i n fa c t e a r li er o n d e c i de d t o l e a se o u t t he ru nn in g o f i t s me d i c a l f a c i l it y t o a pr i v a t e p a r t y i n P PP mo d e , a n d c o ns id e r i ng t he o r de r o f t h e I TA T in t he b a c k d r o p o f t h e a fo r e s a i d fa c t s , ho ld i ng t h a t t h e a s s e ss e e n e ve r i nt e nde d t o c a r r y o u t i t s s t a t e d c ha r i t a bl e ac t i v i t y o f r u n ni n g t h e me di c a l c o l le ge a n d ho s pi t a l , a n d fu r t he r i n v ie w o f o u r fi n di n g s a b o v e t ha t t he as s e s s e e ha d v ir t u a lly s o ld i t s f a c i li t y b y l e a s ing i t o u t fo r 99 y e a r s a nd h a v i n g n o s u b s t a n t i a l c o nt r o l o v e r i t , w e h a ve n o he s i t a t i o n in a g re e i ng w it h t he Ld .C I T(A ) t h a t v i s a v is t he me dic a l fa c il i t y be i ng r u n i n P P P ITA No.1426/Chd/2018 A.Y. 2015-16 Page 26 of 29 mo d e t h e a s se s s e e c a n no t be s a i d t o b e c a r ry in g o u t a ny c h a r i t a b le a c t iv it y . 1 9 . Th e o t he r c o n t e n t i o n o f t he Ld . C o u ns e l fo r t he a s s e ss e e t h a t it ha d a me n d e d i t s o b je c t s i n 2 0 0 9 a nd in c l u d ed t he re i n f u n di n g o f v a r io u s me d ic a l p r o j e c t s i n G o v e r nme nt Me d ic al C o l l e ge a n d H o s p i t a l s in Pu nj a b a n d t o w h ic h e f fe c t it h a d c o nt r i b u t e d o ve r t h e ye a r s s u b s ta n t i a l s u m o f m o n e y, t he Ld . D R h a s p o i nt e d o u t t he f a l la c y i n t hi s a rg ume nt o f t he Ld .C o u n s e l fo r t he a s se s se e b y d r a wi n g o u r a t t e n t ion t o t he Me mo ra n d u m o f U n de r s t a n d in g t he a s se s s e e s o c i e t y h ad e n te re d i nt o w it h B a b a F a r i d U ni v e r s i t y , f ile d a lo ng w i t h s u b mis s i o ns o f t he a s se s se e d a t e d 9 /7 /20 1 9 , w he re the a s s e s se e h a s c o nt e nde d t o h a ve ut i l iz e d it s fu nd s fo r me d ic a l u p g ra d a t i o n in the ho s p it a l r u n by i t . The Ld . D R ha s p o i nte d o u t t ha t it w a s n o t s imp l ic it o r f u n d in g o f pr o j e c t s i n t he h o s p i t a l a s c l a i m e d b y t he a s se s se e , b u t i n fa c t i n t h e na t u re o f i nv e s t me nt i n t he h o s pi t a l . The M e mo r a nd u m o f U n de rs t a n di n g , h e p o i nte d o u t , r e q u ire d re ve n ue s h a r in g b e t we e n t he a s s e ss e e a n d B a b a F a r i d U ni v e r s i t y in t he r a t i o 60 : 40 o r 80 :2 0 o f t he ne t r e c e i pt s e a r ne d f r o m t h e p r o je c t. Su b mis s i o n s t o th i s e f fe c t w e re f ile d in w r i ti ng b e f o re u s a s u nd e r : “8. Further, there is another unique issue in case of Assessee trust. The sums advanced to various intuitions are not even donations. A perusal of the balance sheet for the year under consideration reveals that the assessee has funded ITA No.1426/Chd/2018 A.Y. 2015-16 Page 27 of 29 various projects, which were still pending for execution as on 31.03.2015 (Refer Page-9 of the paper book submitted by the appellant on 15.02.2019). Out of these projects, two are being executed at Faridkot, as per MOU dated 24.05.2011 entered into with Baba Farid University of Health Sciences, Faridkot. There is a clause -4 "COMMERCIAL CONSIDERTION" (Page 11 of the above paper book) which reads as under: “ In consideration of the rights, privileges and interests granted by Party 1 to Party 2 in terms of this MOU, both the parties agree to share the increase in revenue, resulted due to the development/ up-gradation & improvement at Faridkot carried out by Party 1 (hereinafter referred as "the Consideration Amount"), The consideration amount shall be shared between both the parties in 60:40 ratio. However, it is being clarified that for the purposes of revenue sharing, the base year shall be 2010-11. In addition to this, a separate account shall be maintained by Party 2 in relation to the funds released by Party 1 and the details of revenue collected from the development up gradation carried out by Party 1. All payments to Party 1 by Party 2 under this MOU shall be made in Indian currency." 8.1 The above arrangement by the assessee is absolutely businessman like with a motive to earn profit not doing any charitably activity by it.” 2 0 . We h a ve pe r u se d t he d o c u me n t s an d fi n d t h e c o n te n t i o n o f t h e Ld .D R w it h r e g a r d s t o R e v e n ue s ha r i ng a r r a n g e ment e n te re d in t o wi t h r e s pe c t t o t h e a mo u n t i nv e s t e d in B a ba Fa r i d U ni v e r s i t y o f H e a l t h a n d Sc ie nc e s , t o be c o rr e c t . Ev e n o t h e r w i se t he Ld .C o u n s e l f o r th e a s se s se e w as u n a b le t o c o nt r a d i c t t he s ame . I t i s c le a r, th e re fo re , t he re is n o t me r i t i n t h e c la i m o f t h e a s s e s se e t h a t i t w a s in d u l g i ng in c h a r i t a b le a c t iv it ie s by w ay o f fu nd i ng me di c a l p r o je c t s i n G ov e r nme nt h o s p i t a ls a s i t wa s n o t h i ng b u t a c o m me r c i a l t ra n s ac t i o n b y t he a s s e s se e s o c ie t y . ITA No.1426/Chd/2018 A.Y. 2015-16 Page 28 of 29 2 1 . C o ns id e ri n g t he e nt ire fa c t s o f t he c a s e , we h ol d, a g r e e i ng w i t h t h e R e v e n ue , t h a t t he a s se ss e e s o c ie t y w a s n o t in d u l g i ng i n c a rr y in g o u t an y c h a r it a b l e a c ti v i t ie s w o r t h it s n a me d u r i ng t h e ye a r b u t o n t h e c o n t r a r y w a s o nl y e a r n in g i nc o me by n o n c h a r i t a b le a c t iv it ie s , e a r ni n g f r om i n v e s t me n t s mad e by i t i n F DR ’ s o r o t he r me d i c a l i n s t i t u t e s . Th e a s s e s s e e , we h o l d, has t h e re f o re be e n r ig ht l y he ld t o b e no t e n t it le d t o e x e mp t i o n u /s 1 1 o f t h e A c t . Th e o r de r o f t h e Ld .C I T( A ) i s , t he r efo re , u p he l d . Th e g r o u n ds o f a pp e a l r a is e d b y th e a s s e s s e e a re dis mis s e d. 2 2 . Si nc e we ha v e h e l d t h a t t he as s e s s e e s o c ie t y w as no t e n t i t le d t o e xe mp t i o n u /s 1 1 o f t h e A c t , t he a d d i t io na l g r o u nd s r a i s e d b y t he as s e s se e w h ic h a s w e ha v e n o te d a b o v e, a re r e le v a nt o nl y i f the a s s e s s e e s o c ie t y we re e n t i t le d t o e xe mp t i o n a r e , t he re f o re , re n de re d i nf r u c t uo u s a n d a r e n o t b ei ng de a lt w i t h b y u s . 2 3 . I n t he re s u lt t he a p p e a l o f t he a s se s se e i s d ismis s e d. Sd/- Sd/- (SANJAY GARG) (ANNAPURNA GUPTA) * / Judicial Member '( / Accountant Member Dated: 12 th November, 2021 *रती* आदेश * + ,े+ / Copy of the order forwarded to : 1. / The Appellant 2. / The Respondent 3. आ र आ " - / CIT 4. आ र आ " - ( )/ The CIT(A) ITA No.1426/Chd/2018 A.Y. 2015-16 Page 29 of 29 5. + . / 0 , आ कर $ आ0 कर , 123 /4/ DR, ITAT, CHANDIGARH 6. / 3 फ ई / Guard File आदेश ु स र/ By order, सह क ंज क र/ Assistant Registrar