ETERNAL FOUNDATION, JAIPUR V. COMMISSIONER OF INCOME TAX (E), JAIPUR

ITA 1504/JPR/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7671 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 26-12-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B K GUPTA CIT DHK
• Keywords: Charitable institution; Cancellation of registration; Set aside
• Section: 80G; 12AA; 12; 11

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH B, JAIPUR JH JES'K LH- 'KEKZ] YS[KK LNL; ,O A H JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH C. SHARMA, AM & SHRI VIJAY PAL RAO, JM VK;DJ VIHY LA-@ ITA NO. 1504 & 1505/JP/2018 ETERNAL FOUNDATION 3A, JAGATPURA ROAD, NEAR JAWAHAR CIRCLE, JAIPUR. CUKE VS. THE COMMISSIONER OF INCOME - TAX (EXEMPTIONS) JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO.AAATE 6375 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI PC PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI BK GUPTA (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 15.07.2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 22/07/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST TWO SEPARATE ORDERS OF THE LD. CIT (EXEMPTIONS), JAIPUR BOTH DATED 29.1 0.2018 PASSED UNDER SECTION 12AA(3) AND (4) READ WITH SECTION 293C OF THE IT AC T AS WELL AS SECTION 80G(5)(VI) OF THE IT ACT WHEREBY THE REGISTRATION GRANTED UNDER S ECTION 12AA WAS WITHDRAWN BY THE LD. CIT (EXEMPTIONS) AND CONSEQUENTLY THE APPLI CATION FILED FOR APPROVAL OF EXEMPTIONS UNDER SECTION 80G WAS ALSO REJECTED. FI RST, WE TAKE UP THE APPEAL CHALLENGING THE ORDER OF LD. CIT (EXEMPTIONS) WITHD RAWING/CANCELLATION OF THE REGISTRATION GRANTED UNDER SECTION 12AA OF THE IT A CT. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. THE LD. CIT (E) HAS ERRED ON FACTS AND IN LAW IN CANCELLING THE REGISTRATION GRANTED TO THE ASSESSEE TRUST U/S 12AA (3) OF THE IT 2 ITA NOS. 1504 & 1505/JP/2018 ETERNAL FOUNDATION, JAIPUR. ACT, 1961 BY INCORRECTLY HOLDING THAT ACTIVITIES OF THE TRUST ARE NOT AS PER ITS OBJECTS AND THEREFORE NOT GENUINE. 2. THE APPELLANT CRAVES TO ALTER, AMEND AND MODIFY ANY GROUND OF APPEAL. 3. NECESSARY COST BE AWARDED TO THE ASSESSEE. 2. THE ASSESSEE TRUST WAS CONSTITUTED ON 16.05.2015 AND WAS GRANTED REGISTRATION UNDER SECTION 12AA BY THE LD. CIT (EXE MPTIONS) VIDE ORDER DATED 17.12.2015. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE FILED AN APPLICATION DATED 25 TH APRIL, 2018 FOR APPROVAL OF EXEMPTION UNDER SECTIO N 80G OF THE IT ACT. IN THE COURSE OF PROCEEDINGS, THE LD. CIT (EXEMPTIONS) OBSERVED THAT THE ASSESSEE IS INDULGING IN THE ACTIVITY OF CONDUCTING CLINICAL TR IAL SPONSORED BY VARIOUS MULTI- NATIONAL PHARMACEUTICAL COMPANIES WHICH IS AT THE I NSTANCE OF SUCH MNCS AND NOT FROM VOLITION OF THE TRUST. ACCORDINGLY, THE LD. C IT (EXEMPTIONS) ISSUED A SHOW CAUSE NOTICE DATED 24.10.2018 AS TO WHY THE IMPUGNE D CLINICAL TRIALS SHALL NOT BE TREATED AS NON-CHARITABLE ACTIVITY AND ALSO AN ACTI VITY NOT AS PER THE OBJECTS OF THE ASSESSEE TRUST AND CONSEQUENTLY THE REGISTRATION GR ANTED UNDER SECTION 12AA SHALL NOT BE CANCELLED UNDER SECTION 12AA(3) OF THE ACT. IN RESPONSE, THE ASSESSEE FILED A DETAILED REPLY OBJECTING TO THE CANCELLATION OF THE REGISTRATION. THE LD. CIT (EXEMPTIONS) WAS NOT SATISFIED WITH THE REPLY OF TH E ASSESSEE AND FINALLY HELD THAT THE ACTIVITIES OF THE TRUST ARE NOT AS PER THE OBJE CTS AND, THEREFORE, ARE NOT GENUINE AND CONSEQUENTLY THE REGISTRATION GRANTED UNDER SEC TION 12AA WAS CANCELLED WHILE PASSING THE IMPUGNED ORDER. 3 ITA NOS. 1504 & 1505/JP/2018 ETERNAL FOUNDATION, JAIPUR. 2. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBMI TTED THAT THE REGISTRATION CAN BE CANCELLED UNDER SECTION 12AA(3)/12AA(4) OF THE A CT ONLY WHEN THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF THE TRUST ARE N OT GENUINE OR NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR ARE BEI NG CARRIED OUT IN THE MANNER THAT THE PROVISIONS OF SECTIONS 11 & 12 DO NOT APPLY TO EXCLUDE EITHER WHOLE OR ANY PART OF THE INCOME OF SUCH TRUST DUE TO OPERATION OF SEC TION 13(1) OF THE ACT. THE GROUND OF CANCELLATION OF REGISTRATION AS STATED BY THE LD . CIT (EXEMPTIONS) IS THAT THE ACTIVITIES OF THE ASSESSEE TRUST ARE NOT CARRIED OU T IN ACCORDANCE WITH THE OBJECTS. THE LD. A/R HAS SUBMITTED THAT ONE OF THE OBJECTS O F THE TRUST IS TO CARRY OUT OTHER MEDICAL PROJECTS WHICH MAY HELP AND ALLEVIATE HUMAN SUFFERINGS SOLELY FOR PHILANTHROPIC PURPOSES. THE ACTIVITY OF CARRYING O UT CLINICAL TRIAL IS COVERED BY THE SAID OBJECT OF OTHER MEDICAL PROJECTS AS SUCH CLINI CAL TRIALS WOULD RESULT IN INVENTION OF MEDICINES WHICH WOULD PROVIDE RELIEF FROM THE PA RTICULAR DISEASE FOR THE WHOLE SOCIETY AND PUBLIC AT LARGE. THE LD. A/R HAS SUBMI TTED THAT IT DOES NOT MAKE ANY DIFFERENCE WHETHER SUCH CLINICAL TRIAL IS CONDUCTED FOR MNCS AND ASSESSEE RECEIVED FEES FROM THE MNCS WHEN THE SAID FEE IS UTILIZED FO R INCURRING EXPENDITURES FOR CONDUCTING SUCH TRIALS AND FOR ORGANIZING VARIOUS M EDICAL CAMPS FREE OF COSTS. THE ACTIVITY OF THE ASSESSEE IS PHILANTHROPIC IN NATURE AND MERELY BECAUSE THE SAID ACTIVITY WOULD BE BENEFICIAL FOR THE MNCS IT CANNOT BE HELD THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT CHARITABLE. THE LD. A/R HAS POINT ED OUT THAT THERE IS NO CHANGE IN THE OBJECTS OF THE ASSESSEE WHEN IT IS GRANTED REGI STRATION TILL THE IMPUGNED ORDER IS PASSED BY THE LD. CIT (EXEMPTIONS). THEREFORE, ONC E THE REGISTRATION IS GRANTED AND THERE IS NO CHANGE IN THE OBJECTS OF THE ASSESSEE, THE SAME CANNOT BE WITHDRAWN BY 4 ITA NOS. 1504 & 1505/JP/2018 ETERNAL FOUNDATION, JAIPUR. DRAWING INCORRECT INFERENCE THAT THE ACTIVITY OF CA RRYING OUT CLINICAL TRIALS WHICH ULTIMATELY HELP IN INVENTION OF MEDICINES FOR TREAT MENT OF INCURABLE DISEASES IS NOT A PHILANTHROPIC ACTIVITY. IN SUPPORT OF HIS CONTENTI ON HE HAS RELIED UPON THE DECISION OF AGRA BENCH OF THE TRIBUNAL IN CASE OF SAMARPAN SAMI TI VS. CIT, 54 SOT 30 (URO). THE LD. A/R HAS FURTHER CONTENDED THAT THE DECISION IN CASE OF CIT VS. ANNADAN TRUST, 258 TAXMAN 54 (KERALA) AS RELIED UPON BY THE LD. CIT (EXEMPTIONS) IS NOT APPLICABLE ON THE FACTS OF THE ASSESSEES CASE. TH US HE PRAYED THAT THE IMPUGNED ORDER MAY BE SET ASIDE AS THE ACTIVITIES OF THE ASS ESSEE ARE CHARITABLE AND PHILANTHROPIC IN NATURE. 4. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THAT T HE ASSESSEE HAS NOT CARRIED OUT THESE ACTIVITIES ON ITS OWN BUT THESE W ERE CONDUCTED ON BEHALF OF THE MNCS WHICH ARE PHARMACEUTICAL COMPANIES AND THEREFO RE, THE ENTIRE ACTIVITIES OF CONDUCTING OF CLINICAL TRIALS WERE SPONSORED BY THE MNCS WITH THE PURPOSE THAT THE END PRODUCT OF SUCH TRIALS WOULD BE OWNED BY THE MN CS. WHEN THE ASSESSEE IS NOT GETTING ANYTHING OUT OF THE CLINICAL TRIALS EXCEPT THE PAYMENT MADE BY THE MNCS AND THE END PRODUCT BELONGS TO MNCS THEN THE ASSESSEE I S INVOLVED IN THE ACTIVITIES WHICH ARE IN THE NATURE OF BUSINESS OR COMMERCIAL T HOUGH ON BEHALF OF THE MNCS. HE HAS REFERRED TO THE DETAILS OF THE CLINICAL TRIA LS CARRIED OUT BY THE ASSESSEE AND SUBMITTED THAT THE ASSESSEE HAS ENTERED INTO AGREEM ENTS WITH A SERIES OF PHARMACEUTICAL COMPANIES WHICH ARE ALL MNCS FOR CON DUCTING CLINICAL TRIALS ON THEIR BEHALF. SUCH ACTIVITIES CANNOT BE HELD AS CHARITAB LE IN NATURE WHEN IT IS ONLY FOR THE BENEFIT OF THE PHARMACEUTICAL COMPANIES AND NOT FOR THE BENEFIT OF THE PUBLIC. THE LD. D/R HAS ALSO REFERRED THE CLINICAL TRIAL AGREEM ENT PLACED AT PAGE 23 OF THE PAPER 5 ITA NOS. 1504 & 1505/JP/2018 ETERNAL FOUNDATION, JAIPUR. BOOK AND SUBMITTED THAT THERE WAS A CLEAR CUT UNDER STANDING BETWEEN THE PARTIES THAT THE OUTCOME OF THE CLINICAL TRIAL WOULD BELONG TO THE MNCS AND THE ASSESSEE SHALL NOT HAVE ANY RIGHT OVER THE END PRODUCT OF TH E CLINICAL TRIAL. EVEN THE ASSESSEE WAS NOT A PARTY TO THE SAID CLINICAL TRIAL AGREEMEN T BUT ONE ETERNAL HEART CARE CENTRE & RESEARCH INSTITUTE PVT. LTD. WAS PARTY TO THE AGR EEMENT. HE HAS STRONGLY RELIED UPON THE IMPUGNED ORDER OF THE LD. CIT (EXEMPTIONS) AS WELL AS THE DECISION OF HONBLE KERALA HIGH COURT IN CASE OF CIT VS. ANNADA N TRUST (SUPRA). THE LD. D/R HAS ALSO REFERRED TO THE FINANCIAL BREAK-UP FOR THE VAR IOUS YEARS AND SUBMITTED THAT THE MAJOR RECEIPTS OF THE ASSESSEE IS ONLY FROM THE CLI NICAL TRIALS AND THE EXPENDITURE IS ALSO IN RESPECT OF THE ACTIVITIES OF THE CLINICAL T RIALS, THEREFORE, NO OTHER CHARITABLE ACTIVITY HAS BEEN CARRIED OUT BY THE ASSESSEE. THE LD. D/R HAS POINTED OUT THAT SINCE THE ASSESSEES ACTIVITIES ARE NOT CARRIED OUT IN AC CORDANCE WITH THE OBJECTS ON WHICH THE REGISTRATION WAS GRANTED, THEREFORE, THE LD. CI T (EXEMPTIONS) IS JUSTIFIED IN WITHDRAWING/CANCELLATION OF THE REGISTRATION GRANTE D UNDER SECTION 12AA OF THE IT ACT. 5. IN RE-JOINDER, THE LD. A/R SUBMITTED THAT THE AS SESSEE IS PROVIDING MEDICAL AIDS TO THE PATIENTS THROUGH THESE CLINICAL TRIALS AND THEN EVEN IF THE LIFE OF A PATIENT IS SAVED DUE TO SUCH CLINICAL TRIAL, IT IS A CHARIT ABLE ACTIVITY. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE TRUST WAS GRANTED REGISTRATIO N VIDE ORDER DATED 21.12.2015 ON THE BASIS OF THE OBJECTS OF THE ASSESSEE TRUST AS R EPRODUCED BY THE LD. CIT (EXEMPTIONS) IN PARA 3 AS UNDER :- 6 ITA NOS. 1504 & 1505/JP/2018 ETERNAL FOUNDATION, JAIPUR. 03. IT IS PERTINENT TO STATE THAT THE TRUST DEED OF THE APPLICANT TRUST ENVISAGES FOLLOWING OBJECTS :- (A) RELIEF OF THE POOR INCLUDING IN GENERAL THE ESTABLI SHMENT, MAINTENANCE AND SUPPORT OF INSTITUTIONS OR FUNDS FO R THE RELIEF OF ANY FORM OF POVERTY. (B) MEDICAL RELIEF PARTICULARLY :- TO GRANT AID FOR MEDICAL RELIEF TO POOR PERSONS INC LUDING FREE DISTRIBUTION OF DRUGS AND MEDICINES AND ESTABLISHME NT MAINTENANCE OR SUPPORT TO INSTITUTIONS SUCH AS HOSPITALS, DISPE NSARIES AND CENTRES FOR YOGIC/TREATMENT OR BLIND RELIEF AND OTH ER MEDICAL PROJECTS WHICH MAY HELP AND ELEVATE HUMAN SUFFERING SOLELY FOR PHILANTHROPIC PURPOSE. (C) ADVANCEMENT OF EDUCATIONAL PARTICULARLY :- (I) TO ESTABLISH AND RUN LIBRARY, READING ROOM, RESEARC H CENTERS AND OTHER INSTITUTIONS FOR MEDICAL, EDUCATIONAL, CULTUR AL AND SPIRITUAL PURPOSES AND NOT FOR PURPOSES OF PROFIT WITHIN THE MEANING OF SEC. 10(23) OF THE INCOME TAX ACT, 1961 AS AMENDED FROM TIME TO TIME. (II) TO PROMOTE, TO SET UP, HELD OR SUBSIDISE INSTITUTIO NS AND PERSONS AND SOCIETIES FOR STUDY AND RESEARCH IN LITERATURE, ART, HUMANITIES, SOCIAL SCIENCES, DANCE AND MUSICAL PERF ORMANCES OR FOR ANY OTHER BENEVOLENT PURPOSES. (III) TO PROMOTE, ENCOURAGE AID OR CONDUCT STUDY COURSES, SEMINARS, LECTURES OR CAMPS FOR LITERARY STUDIES, HUMAN WELFA RE, ANCIENT CULTURE, FOLK ARTS AND OTHER SCIENCES IN ITS WIDEST AND MOST COMPREHENSIVE SENSE. 7 ITA NOS. 1504 & 1505/JP/2018 ETERNAL FOUNDATION, JAIPUR. (IV) TO GRANT SCHOLARSHIPS, FELLOW-SHIPS, AID FOR EDUCAT IONAL PURPOSES, AID FOR PUBLICATIONS AND FREE DISTRIBUTIO N OF LITERATURE FOR THE PURPOSES OF IMPROVING STUDY AND RESEARCH WO RK IN HUMANITIES, MEDICAL SCIENCE, SOCIAL SCIENCES, SANSK RIT AND SPIRITUAL AND PHILOSOPHICAL STUDIES. (V) TO MAKE ENDOWMENT AND OR DONATIONS TO UNIVERSITIES, COLLEGES, SCHOOLS AND OTHER EDUCATIONAL INSTITUTIONS AT PRESE NT EXISTING OR WHICH MAY HEREAFTER COME INTO EXISTENCE IN INDIA FO R THE PURPOSE OF ENCOURAGING OR SPREADING MEDICAL, TECHNI CAL, SPIRITUAL OR OTHER GENERAL EDUCATION INCLUDING FREE OR SUBSID IZED STUDENTS BOARDING HOUSES. WE FURTHER NOTE THAT FOR THE FINANCIAL YEAR 2015-16 THE ASSESSEE HAS SHOWN THE RECEIPT OF DONATION OF RS. 20,000/- ONLY AND, THERE FORE, AT THE TIME OF REGISTRATION THERE WAS NO SUCH ACTIVITY OF CLINICAL TRIAL CARRIE D OUT BY THE ASSESSEE. THUS IT IS CLEAR THAT THE REGISTRATION WAS GRANTED BY CONSIDER ING THE OBJECTS OF THE ASSESSEE TRUST WHICH ARE NO DOUBT CHARITABLE IN NATURE. SUB SEQUENTLY, WHEN THE ASSESSEE APPLIED FOR APPROVAL UNDER SECTION 80G OF THE IT AC T VIDE APPLICATION DATED 25.04.2018, THE LD. CIT (EXEMPTIONS) NOTED FROM THE RECORD ANNEXED TO THE APPLICATION THAT THE ASSESSEE HAS INDULGED IN THE A CTIVITIES OF CONDUCTING CLINICAL TRIALS SPONSORED BY VARIOUS MNC PHARMACEUTICAL COMPANIES. THIS FACT IS NOT IN DISPUTE THAT THE ASSESSEE HAS BEEN CARRYING OUT THE ACTIVIT IES OF CLINICAL TRIALS ON BEHALF OF THE VARIOUS PHARMACEUTICAL COMPANIES, THE DETAILS O F WHICH ARE AS UNDER :- 8 ITA NOS. 1504 & 1505/JP/2018 ETERNAL FOUNDATION, JAIPUR. 9 ITA NOS. 1504 & 1505/JP/2018 ETERNAL FOUNDATION, JAIPUR. THE ASSESSEE HAS UNDERTAKEN THE JOB OF CLINICAL TRI AL ON BEHALF OF AS MANY AS 14-15 PHARMACEUTICAL COMPANIES WHICH ARE ALL MNCS. THE A SSESSEE HAS NOT DISPUTED THAT AS PER THE TERMS AND CONDITIONS AGREED BY THE PARTI ES, THE FINAL PRODUCT AS OUTCOME OF THE CLINICAL TRIAL WOULD BE OWNED BY THE PHARMAC EUTICAL COMPANIES WHO SPONSORED THE CLINICAL TRIAL UNDERTAKEN BY THE ASSESSEE. AS PER ONE OF THE CLINICAL TRIAL AGREEMENT DATED 29 TH JUNE, 2016 BETWEEN NOVARTIS HEALTHCARE PRIVATE LIM ITED AND OTHER PERSONS, WE FIND THAT ONE M/S. ETERNAL HEART CARE CENTRE & RESEARCH INSTITUTE PVT. LTD. IS THE PARTY TO THE SAID AGREEMENT AND CO NSULTANT DR. KRISHNA KUMAR SHARMA OF THE SAID M/S. ETERNAL HEART CARE CENTRE & RESEARCH INSTITUTE PVT. LTD. HAS ALSO SIGNED THE SAID AGREEMENT AS CHIEF CONSULTANT, PULMONARY & SLEEP MEDICINE BEING AN INVESTIGATOR OF THE CLINICAL TRIAL. THE P AYMENTS OF THE CLINICAL TRIALS WERE MADE BY THESE MNCS TO VARIOUS PERSONS INCLUDING THE INVESTIGATOR AND ASSESSEE TRUST THOUGH IN THE AGREEMENT THE ASSESSEE WAS NOT REFERRED AS A PARTY. FOR READY REFERENCE, WE REPRODUCE CLAUSES 16 & 17 OF THE AGRE EMENT AS UNDER :- 16. ALL RIGHTS, TITLE AND INTERESTS INCLUDING THE RIGHTS TO ANY INTELLECTUAL PROPERTY IN ALL DOCUMENTATION USED OR SUPPLIED BY THE SPONSOR, ALL THE DATA, INVENTIONS, DISCOVERIES AND RESULTS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT AND THE CLINICAL TRIAL AND IN THE KNOW-HOW INCIDENTAL THERE TO AND ANY PATENT APPLICATIONS AND RESULTANT PATENTS DERIVED T HEREFROM SHALL BE OWNED AND BE THE EXCLUSIVE PROPERTY OF THE SPONS OR. THE SPONSOR MAY USE THIS INFORMATION IN ANY WAY IT DEEM S FIT. THE INVESTIGATOR AND THE INSTITUTION AGREE AND UNDERTAK E TO CAUSE THEIR EMPLOYEES TO EXECUTE PROMPTLY ALL DOCUMENTS A ND TAKE ALL SUCH OTHER ACTION AS MAY REASONABLY BE REQUESTED BY THE 10 ITA NOS. 1504 & 1505/JP/2018 ETERNAL FOUNDATION, JAIPUR. SPONSOR TO PERMIT THE SPONSOR TO OBTAIN THE BENEFIT OF ITS RIGHTS UNDER THIS AGREEMENT. THIS INCLUDES WITHOUT LIMITA TION TAKING ALL NECESSARY STEPS FOR THE TRANSFER/ASSIGNMENT OF OWNE RSHIP OF ALL DATA, INFORMATION, DOCUMENTS, INVENTIONS AND DISCOV ERIES TO THE SPONSOR IN ACCORDANCE WITH THIS AGREEMENT, AND ASSI STING THE SPONSOR IN THE PREPARATION AND PROSECUTION OF PATEN T APPLICATIONS. THE PARTIES AGREE THAT THIS CLAUSE SH ALL SURVIVE THE TERMINATION/EARLIER DETERMINATION OF THE AGREEMENT. 17. THE INSTITUTION/INVESTIGATOR SHALL NOT ACQUIRE ANY RIGHTS OF ANY KIND IN THE CLINICAL TRIAL INVESTIGATIONAL PRODUCT OR ITS USES AS A RESULT OF PARTICIPATION IN THE CLINICAL TRIAL. THUS IT IS CLEAR FROM THE AGREEMENT THAT ALL RIGHTS , TITLE AND INTERESTS INCLUDING INTELLECTUAL PROPERTY RIGHTS AS WELL AS KNOW-HOW IN CIDENTAL TO THE CLINICAL TRIAL, ANY PATENT DERIVED FROM THE SAID TRIAL SHALL BE EXCLUSI VE PROPERTY OF THE SPONSOR (PHARMACEUTICAL COMPANIES). THUS IT IS CLEAR THAT T HE PRE-DOMINANT OBJECT OF THE SAID ARRANGEMENT OF CONDUCTING THE CLINICAL TRIAL IS TO BRING OUT AN END PRODUCT WHICH SHALL BE OWNED AND BE EXCLUSIVE PROPERTY OF MNC. THIS IS NOTHING BUT PART OF THE BUSINESS ACTIVITIES OF PHARMACEUTICAL COMPANIES GIV EN AS A JOB WORK TO THE OTHER INSTITUTIONS INCLUDING THE ASSESSEE. IT IS NOT ASS ESSEES OWN ACTIVITY IN FULFILLMENT OF THE OBJECTS AS ENUMERATED IN THE TRUST DEED. EVEN OTHERWISE, THE FINAL PRODUCT IN THE SHAPE OF DEVELOPMENT OF NEW DRUG AND TEST OF DR UG IS OWNED AND EXCLUSIVELY A PRODUCT OF THE SAID PHARMACEUTICAL COMPANY AS AN OU TCOME OF THEIR REGULAR BUSINESS ACTIVITY. THEREFORE, DOING SUCH WORK ON BEHALF OF T HE SAID COMPANY WOULD NOT BE FALLING IN THE AMBIT OF CHARITABLE ACTIVITY CARRIED OUT BY THE ASSESSEE AS IT IS CLEAR FROM THE OBJECTS OF THE ASSESSEE THAT THE MAIN OBJE CT OF THE ASSESSEE TRUST IS TO 11 ITA NOS. 1504 & 1505/JP/2018 ETERNAL FOUNDATION, JAIPUR. ESTABLISH, MAINTAIN AND SUPPORT INSTITUTIONS OR FUN DS FOR RELIEF OF ANY FORM OF POVERTY. SECONDLY, TO GRANT AID FOR MEDICAL RELIEF TO POOR P ERSONS INCLUDING FREE DISTRIBUTION OF DRUGS, MEDICINES OR SUPPORT TO THE INSTITUTION SUC H AS HOSPITALS, DISPENSARIES AND OTHER TREATMENT CENTERS WHICH MAY HELP AND ALLEVIAT E HUMAN SUFFERING. BY ANY STRETCH OF IMAGINATION OR EXPANDING THE TERM CHARIT ABLE ACTIVITY, THE CLINICAL TRIAL CARRIED OUT BY THE ASSESSEE ON BEHALF OF THE PHARMA CEUTICAL COMPANIES DOES NOT FALL IN THE EXPANDED MEANING AND TERM OF CHARITABLE ACTI VITY. THERE IS NO DISPUTE THAT THIS ACTIVITY DOES NOT FALL IN ANY OF THE PRE-DOMIN ANT OBJECT OF THE ASSESSEE TRUST. FROM THE FINANCIAL DETAILS AND PARTICULARLY INCOME AND EXPENDITURE ACCOUNT OF THE ASSESSEE FOR THE YEARS 2016-17 AND 17-18 IT IS MANI FEST THAT THE ENTIRE RECEIPT IS FROM CLINICAL TRIAL ACTIVITY AND MAJOR EXPENDITURE INCURRED BY THE ASSESSEE DURING THESE YEARS IS ALSO IN RESPECT OF THE CLINICAL TRIA L ACTIVITY. THEREFORE, EXCEPT THE CLINICAL TRIAL AND RELATED ACTIVITIES, THE ASSESSEE HAS NOT CARRIED OUT ANY OTHER CHARITABLE ACTIVITY. ONCE REGISTRATION IS GRANTED U NDER SECTION 12AA BASED ON THE CHARITABLE NATURE OF THE OBJECTS OF THE ASSESSEE TR UST AND SUBSEQUENTLY IF IT IS FOUND THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT CARRIED OUT AS PER THE OBJECTS AND THE SAID ACTIVITIES ARE ALSO NOT IN THE NATURE OF CHARITABLE , THEN THE LD. CIT (EXEMPTIONS) IS EMPOWERED AND AUTHORIZED TO CANCEL/WITHDRAW THE REG ISTRATION AS PER THE PROVISIONS OF SECTION 12AA(3)/(4) OF THE IT ACT. THE LD. CIT (EXEMPTIONS) HAS CONSIDERED ALL THESE RELEVANT FACTS AND AFTER A DETAILED DISCUSSIO N HAS CANCELLED/WITHDRAWN THE REGISTRATION AS UNDER :- APPLICANT TRUST HAS SPECIFICALLY CONTENDED VIDE S UBMISSION LETTER DATED 24.10.2018 THAT THE IMPUGNED CLINICAL TRIALS HAVE B EEN CARRIED OUT FOR ACHIEVEMENTS OF THE OBJECTS OF TRUST AND ADVANCEMEN T OF MEDICAL 12 ITA NOS. 1504 & 1505/JP/2018 ETERNAL FOUNDATION, JAIPUR. HEALTH OF SOCIETY AT LARGE AND THEREFORE ARE CHARIT ABLE ACTIVITIES. HOWEVER, THE CONTENTION IS NOT TENABLE IN THE FACTU AL MATRIX OF THE CASE AND IN THE EYES OF LAW DUE TO FOLLOWING REASONS :- (1) THE APPLICANT TRUST SUBMITTED COPY OF ONE OF THE CO NTRACTS BETWEEN INVESTIGATOR, INSTITUTION (ETERNAL FOUNDATION) & SP ONSOR. THE CLINICAL TRIALS PERFORMED BY THE APPLICANT TRUS T I.E. INSTITUTION IS DUE TO SUCH CONTRACTS BETWEEN THE THREE PARTIE S INVESTIGATOR, INSTITUTION & SPONSOR IN ORDER TO FIN D OUT THE OUTCOME OF VARIOUS MEDICINES/DRUGS ON A TARGET POPU LATION WHICH VOLUNTEERS FOR SUCH TRIALS WITH THE SOLE MOTIVE OF CATERING TO THE COMMERCIAL PROFITS OF THE SPONSOR (MULTINATIONAL PH ARMACEUTICAL COMPANIES). THE FINDING OF SUCH TRIALS BECOME THE E XCLUSIVE PROPERTY OF THE MNC, AND IS EVIDENTLY USED BY THE M NC TO MAXIMIZE ITS PROFITS. FURTHER, THE CONTRACT ALSO CONTAINS C LAUSES FOR FIXING COMPENSATION IN CASE OF PHYSICAL HARM OR DEATH OF A NY VOLUNTEER. THUS, THE TRIALS DO NOT SERVE ANY PHILANTHROPIC PUR POSE AND ARE CARRIED OUT IN DEVELOPING COUNTRIES LIKE INDIA DUE TO LOW COSTS OF SUCH TRIALS AND COMPENSATION, THEREBY SERVING THE P URPOSE OF MAXIMIZING THE PROFIT OF MNC. SINCE, THE CLINICAL TRIALS HAVE BEEN PERFORMED WITHOUT ANY VOLITION ON PART OF THE APPLI CANT TRUST AND PERFORMED ONLY DUE TO THE LEGAL BINDINGS EMERGING O UT OF IMPUGNED CONTRACTS WITH THE SOLE MOTIVE TO MAXIMIZE THE PROF ITS OF THE SPONSORS, SUCH TRIALS CANNOT BE TERMED AS A CHARITA BLE ACTIVITY. IN FACT, THE CLAIM OF THE APPLICANT LEADS TO A SELF -CONTRADICTORY PROPOSITION OF CONTRACTUAL CHARITY. HONBLE KERALA HIGH COURT HAS DISAPPROVED OF SUCH CHARITY IN ITS DECISION IN THE CASE OF CIT VS. ANNADAN TRUST (2018) 258 TAXMAN 54 (KERALA), WHERE IT IS HELD AS FOLLOWS :- THE SUB-CONTRACT OF THE ASSESSEE CANNOT BE CONSID ERED TO BE A CHARITABLE ACTIVITY, ESPECIALLY SINCE THE S UPPLY OF 13 ITA NOS. 1504 & 1505/JP/2018 ETERNAL FOUNDATION, JAIPUR. FOOD IS WITH THE FUNDS OF THE STATE GOVERNMENT, REC EIVED BY THE ASSESSEE AS CONTRACT AMOUNTS. THE ACTIVITY O F THE ASSESSEE CONFINED TO SUCH SUB-CONTRACTS CANNOT BE DEEMED TO BE A CHARITABLE ACTIVITY AND, HENCE THE T RUST IS NOT ENTITLED TO REGISTRATION U/S 12AA THE ASSESSEE , AS RIGHTLY FOUND, IS ENGAGED IN A BUSINESS AND THERE C AN BE NO REGISTRATION AS A CHARITABLE INSTITUTION. (2) ON EXAMINATION OF INCOME & EXPENDITURE ACCOUNTS OF VARIOUS YEARS, IT TRANSPIRES THAT APPLICANT TRUST HAS PERFORMED ME AGER AND INSIGNIFICANT ACTIVITIES (AS ENVISAGED IN OBJECTS O F THE TRUST DEED) IN COMPARISON TO THE RECEIPTS OF THE TRUST. A COMPARI SON TABLE IS MENTIONED HEREUNDER :- PARTICULARS F.Y. 2015-16 2016-17 2017-18 AMOUNT IN RS. SPENT FOR MEDICAL CAMPS FOR HUMAN WELFARE NIL 751.18 19797.95 TOTAL RECEIPTS (INCOME) 20000 1564038 9734530 % IN RESPECT OF TOTAL RECEIPTS NIL .04% .00002% HERE, IN THE INSTANT CASE OF APPLICANT TRUST, IT IS CLERLY EVIDENT THAT THE INCOME DERIVED BY THE TRUST DOES NOT ENURE FOR THE BENEFIT OF THE PUBLIC INSTEAD THE TRUST IS PERFORMING ACTIVITIES I N ORDER TO MAXIMIZE THE PROFITS OF MULTINATIONAL PHARMACEUTICAL COMPANI ES (SPONSORS). THE MAIN ACTIVITY OF THE APPLICANT IS IN DIRECT CON TRAVENTION OF THE OBJECT (B) (SUPRA) WHICH STIPULATES CARRYING ON OF MEDICAL PROJECTS WHICH MAY HELP AND ALLEVIATE HUMAN SUFFERING SOLELY FOR PHILANTHROPIC PURPOSE. 06. BASED ON AFORESAID DISCUSSIONS, IT CAN BE CONCL UDED THAT THE ACTIVITIES OF THE TRUST ARE NOT AS PER THE OBJECTS OF THE TRUST AND, THEREFORE, ARE NOT GENUINE. THEREFORE THE PROVISIO NS OF SECTION 12AA(3) ARE ATTRACTED. IN VIEW OF THESE PROVISIONS, REGISTRATION GRANTED 14 ITA NOS. 1504 & 1505/JP/2018 ETERNAL FOUNDATION, JAIPUR. VIDE UNIQUE REGISTRATION NO. (URN) AAATE6375J/08/15 -16/T- 0193/12AA IS HEREBY CANCELLED. THUS THE LD. CIT (EXEMPTIONS) HAS FOLLOWED THE DECI SION OF HONBLE KERALA HIGH COURT IN CASE OF CIT VS. ANNADAN TRUST (SUPRA) WHIC H IN OUR VIEW IS SQUARELY APPLICABLE IN THE FACTS OF THE PRESENT CASE WHERE T HE ASSESSEE IS ENGAGED IN THE ACTIVITIES WHICH ARE SPONSORED BY THE PHARMACEUTICA L COMPANIES (MNCS) IN THEIR REGULAR BUSINESS ACTIVITY. ACCORDINGLY, IN VIEW OF THE ABOVE FACTS, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDER OF THE LD . CIT (EXEMPTIONS). ITA NO. 1504/JP/2018 : 7. IN THE APPEAL CHALLENGING THE REJECTION OF THE A PPLICATION FOR APPROVAL UNDER SECTION 80G(5), THE ASSESSEE HAS RAISED THE FOLLOWI NG GROUNDS :- 1. THE LD. CIT (E) HAS ERRED ON FACTS AND IN LAW IN REJECTING THE APPLICATION OF ASSESSEE TRUST SEEKING EXEMPTION/S 8 0G(5) OF THE INCOME TAX ACT, 1961. 2. THE APPELLANT CRAVES TO ALTER, AMEND AND MODIFY ANY GROUND OF APPEAL. 3. NECESSARY COST BE AWARDED TO THE ASSESSEE. 8. WE HAVE HEARD THE LD. A/R AND THE LD. D/R AND CO NSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. A/R HAS NOT DISPUTED T HAT THE IMPUGNED ORDER PASSED BY THE LD. CIT (EXEMPTIONS) IS CONSEQUENT TO THE ORDER PASSED UNDER SECTION 12AA(3) OF THE ACT. IN VIEW OF OUR FINDING ON THE APPEAL CHALL ENGING THE CANCELLATION OF REGISTRATION UNDER SECTION 12AA, THE APPEAL CHALLEN GING THE ORDER PASSED UNDER SECTION 80G(5) HAS NO MERIT OR SUBSTANCE. 15 ITA NOS. 1504 & 1505/JP/2018 ETERNAL FOUNDATION, JAIPUR. 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 22/07/2 019. SD/- SD/- ( JES'K LH- 'KEKZ ) ( FOT; IKY JKWO (RAMESH C. SHARMA ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 22/07/2019. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- ETERNAL FOUNDATION, JAIPUR. 2. THE RESPONDENT THE CIT (EXEMPTIONS) JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 1504 &1505/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR