Charusat Healthcare & Research Foundation, Anand V. The CIT-I, Baroda

ITA 2844/AHD/2012

• Counselvise Citation: 284420514 RSA 2012
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-09-2013
• Assessment Year: misc
• Appeal Filed On: 18-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P VAISHNAV
• Assessee Lawyers: M K PATEL
• Keywords: Charitable institution
• Section: 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI T. R. MEENA, ACCOUNTANT MEMBER ITA NO. 2843 & 2844/AHD/2012) CHARUSAT HEALTHCARE & RESEARCH FOUNDATION 2, SURYA VALLEY BUNGLOWS, BAKROL LAMBHVEL ROAD, VALLABH VIDHYANAGAR, DIST. ANAND - 388120 PAN: AABTC 3869J VS COMMISSIONER OF INCOME TAX-I, SURAT (APPELLANT) (RESPONDENT) REVENUE BY : SHRI O.P. VAISHNAV, CIT- D.R. ASSESSEE(S) BY : SHRI M. K. PATEL, A.R. DATE OF HEARING : 26/09/ 2013 DATE OF PRONOUNCEMENT : 27/09/2013 O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THESE TWO APPEALS OF THE ASSESSEE ARE CONNECTED WIT H EACH OTHER, THEREFORE, CONSOLIDATED AND HEREBY DECIDED BY THIS COMMON ORDER. A. ITA NO.2843/AHD/2012 2. THE ASSESSEE HAS FILED THIS APPEAL ARISING FROM AN ORDER OF LEARNED CIT-I, BARODA, DATED 31.10.2012 PASSED U/S.12AA(1)( B)(II). THE MAIN GROUND OF THE ASSESSEE IS REPRODUCED BELOW: THE COMMISSIONER OF INCOME TAX-I, BARODA HAS ERRED IN LAW AS WELL AS ON FACTS OF THE CASE IN NOT GRANTING REGISTRATION TO T HE APPELLANT TRUST U/S 12AA OF THE INCOME TAX ACT, 1961. ITA NO.2843 & 2844/AH D/2012 CHARUSAT HEALTH CARE & RESEARCH VS. CIT-I, BARODA - 2 - 3. THE ASSESSEE IS STATED TO BE A TRUST PROVIDING H EALTH SERVICES BY RUNNING A HOSPITAL. THE TRUST HAS FILED, FOR THE FI RST TIME, AN APPLICATION ON FORM 10A DATED 10.4.2012 FOR REGISTRATION U/S. 1 2A(A) OF IT ACT. THE TRUST WAS CREATED VIDE A TRUST DEED DATED 5 TH APRIL, 2012. LEARNED COMMISSIONER HAS INQUIRED ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST. IT WAS ALSO INQUIRED ABOUT THE MAIN OBJECTS OF THE TRUST. IN COMPLIANCE, IT WAS INFORMED THAT THE TRUST WAS REGI STERED BY CHARITY COMMISSIONER W.E.F. 5 TH APRIL, 2012. AN INCOME AND EXPENDITURE ACCOUNT OF THAT PERIOD WAS FURNISHED BEFORE THE LEARNED COM MISSIONER. IT WAS NOTED THAT NO REVENUE OR INCOME WAS RECORDED DURING THE FINANCIAL YEAR 2011-12. HOWEVER, THE EXPENDITURE OF RS.2,91,109/- WAS ACCOUNTED FOR IN THE BOOKS. LEARNED COMMISSIONER HAS EXAMINED THE ME MORANDUM OF ASSOCIATION AS ALSO THE OBJECTS OF THE TRUST. ONE O F THE OBJECT AS NOTED BY LEARNED COMMISSIONER WAS AS UNDER: TO MAKE AVAILABLE AFFORDABLE PROMOTIVE, PREVENTIVE AND CURATIVE HEALTHCARE SERVICE TO ALL CLASSES OF COMMUNITY WITHOUT DISCRIM INATION OF CASTE, CREED, RELIGION, RACE OR REGION THROUGH ESTABLISHMENT OF H OSPITALS, DISPENSARIES, HEALTH CENTRES, DIAGNOSTIC LABS, BLOOD BANKS AND OT HER SUCH ALLIED SERVICES RELATED TOP HEALTH CARE AS CONFIRMING TO INTERNATIO NAL STANDARDS. 4. A STRONG OBJECTION WAS RAISED IN RESPECT OF THE TERM AFFORDABLE. ACCORDING TO COMMISSIONER, THE AFFORDABLE RATES WER E CHARGED FROM THE PATIENTS; THEREFORE, THE ACTIVITY OF THE ASSESSEE W AS COMMERCIAL IN NATURE. HE HAS ALSO NOTED THAT NOWHERE IN THE OBJECTS IT WA S MENTIONED THAT THE ACTIVITY OF THE ASSESSEE SHALL BE CHARGEABLE. A BAL ANCE SHEET DRAWN AS ON 31 ST OF MARCH, 2012 HAS ALSO BEEN EXAMINED AND IT WAS N OTED THAT THE ASSESSEE HAD COLLECTED RS.35,82,000/- OUT OF WHICH ONLY RS.2,91,109/- WAS EXPANDED. IT WAS ALSO NOTED BY THE COMMISSIONER THAT THE AMOUNT OF RS.32,90,000/- WAS DEPOSITED IN THE BANK. ACCORDING TO HIM, AT LEAST 85% ITA NO.2843 & 2844/AH D/2012 CHARUSAT HEALTH CARE & RESEARCH VS. CIT-I, BARODA - 3 - OF THE INCOME WAS NOT SPENT FOR THE CHARGEABLE PURP OSE. HE HAS HELD THAT THE INCOME SO ACCUMULATED WAS NOT AS PER THE PROVIS IONS OF SECTION 11(2) OF IT ACT. THE REGISTRATION WAS REJECTED AS FOLLOWS : FROM THE ABOVE, IT IS APPARENT THAT THE TRUST HAS NOT CARRIED OUT ANY CHARITABLE ACTIVITIES BUT ONLY SOME PERIPHERAL ACTI VITIES LIKE AWARENESS PROGRAMME WAS BEING CARRIED OUT AND THE MAIN OBJECT IVE OF THE TRUST IS COMMERCIAL. THEREFORE, IT IS NOT A FIT CASE FOR GRA NTING REGISTRATION UNDER SECTION 12A OF THE INCOME TAX ACT. 5. BEING AGGRIEVED THE ASSESSEE IS BEFORE US. FROM THE SIDE OF THE APPELLANT, LEARNED AR., MR. M.K. PATEL AND FROM THE SIDE OF THE REVENUE, LEARNED CIT-DR, MR. O.P. VAISHNAV APPEARED. OUR ATT ENTION HAS BEEN DRAWN ON THE MEMORANDUM OF ASSOCIATION OF THE TRUST AS WELL AS THE ARTICLES OF ASSOCIATION. IT IS EMPHASIZED THAT THE MAIN OBJECT OF THE TRUST WAS TO PROVIDE MEDICAL SERVICES TO THE SOCIETY WITH OUT DISCRIMINATION OF CASTE AND RELIGION. IT HAS ALSO BEEN INFORMED THAT THE DIAGNOSTIC LAB, BLOOD BANK AND OTHER ALLIED HEALTH SERVICES WERE AVAILABL E IN THE HOSPITAL HAVING ABOUT 450 BEDS. 6. LEARNED AR HAS ARGUED THAT THE QUESTION OF THE A CCUMULATION OF THE FUND WAS NOT CORRECTLY APPRECIATED BY LEARNED C OMMISSIONER. HE HAS PLEADED THAT THE RECEIPTS AND EXPENDITURE OF THE TR UST COULD ONLY HAVE BEEN EXAMINED IF THE REGISTRATION WAS GRANTED AND T HE ASSESSMENT WAS MADE BY THE AO. HE HAS ALSO PLEADED THAT AS PER THE PROVISIONS OF SECTION 12AA, THE COMMISSIONER IS REQUIRED TO EXAMI NE THE GENUINENESS OF THE CREATION OF THE TRUST AND NOT REQUIRED TO EX AMINE THE APPLICATION OF THE INCOME OF THE TRUST. IN SUPPORT OF THE ARGUMENT , HE HAS PLACED RELIANCE ON THE FOLLOWING CASE LAWS: 1. CIT VS. KUTCHI DASA OSWAL MOTO PARIWAR AMBAMA TR UST IN TAX APPEAL NO.918 OF 2011. ITA NO.2843 & 2844/AH D/2012 CHARUSAT HEALTH CARE & RESEARCH VS. CIT-I, BARODA - 4 - 2. AVS EDUCATIONAL TRUST VS. ITO (140 ITD 681) CHEN NAI. 3. CIT VS. BKK MEMORIAL TRUST (29 TAXMANN. COM 286) (P & H) 4. DIT VS. FOUNDATION OF OPHTHALMIC & OPTOMETRY RES EARCH EDUCATION CENTRE (79 DR (DEL) 178). 5. CIT VS. SURYA EDUCATIONAL & CHARITABLE TRUST (20 3 TAXMAN 53) (P & H). 7. FROM THE SIDE OF THE REVENUE, LEARNED CIT-DR, MR . O.P. VAISHNAV HAS ARGUED THAT BY PROVIDING AFFORDABLE FEES THE HO SPITAL HAS ATTRACTED THE PATIENTS DURING THE START OF THE HOSPITAL. ACCORDIN G TO LEARNED DR., THE ASSESSEE HAS ADMITTEDLY CHARGED THE FEES FROM THE P ATIENT; HENCE, THE ACTIVITY WAS NOT CHARITABLE IN NATURE BUT COMMERCIA L IN NATURE. HE HAS ALSO INFORMED THAT THE ASSESSEE TRUST HAS RECEIVED HUGE DONATION IN CRORES OF RUPEES WITHOUT ANY SATISFACTORY EXPLANATI ON. HE HAS ALSO NOTICED THAT AS PER THE COMPARISON OF THE CHARGES RECEIVED BY OTHER HOSPITAL, IN SOME OF THE SERVICES PROVIDED SUCH AS SUPER SPECIAL TY; FIRST VISIT AND FOLLOW UP REGISTRATION CHARGES WERE HIGHER THAN THE CHARGES OF OTHER HOSPITALS. ALL THESE EVIDENCES THUS GIVE INDICATION THAT THE ASSESSEE WAS ENGAGED IN THE COMMERCIAL ACTIVITY, THEREFORE, THE REGISTRATION WAS RIGHTLY DENIED BY THE LEARNED COMMISSIONER. 8. FACTS OF THE CASE HAVE REVEALED THAT THE TRUST W AS CREATED ON 5 TH OF APRIL, 2012 TO PROVIDE MEDICAL SERVICES BY RUNNING A HOSPITAL. AS REQUIRED UNDER LAW, THE ASSESSEE HAS APPLIED FOR A REGISTRATION U/S. 12AA. IT IS CORRECT THAT SECTION 12AA PRESCRIBES THAT THE LEARNED COMMISSIONER CAN CALL FOR SUCH DOCUMENTS AND INFORMATION TO SATI SFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE INSTITUTION. L EARNED COMMISSIONER IS ALSO REQUIRED TO SATISFY HIMSELF ABOUT THE OBJECTS OF THE TRUST. AFTER INQUIRING ABOUT THE GENUINENESS AS WELL AS THE OBJE CTS OF AN INSTITUTION, ONLY A REGISTRATION CAN BE GRANTED. AS FAR AS THE O BJECTS OF THE TRUST ARE ITA NO.2843 & 2844/AH D/2012 CHARUSAT HEALTH CARE & RESEARCH VS. CIT-I, BARODA - 5 - CONCERNED THE SAME ARE ADMITTEDLY IN RESPECT OF PRO VIDING MEDICAL FACILITIES AND MEDICAL TREATMENT TO THE SOCIETY WIT HOUT ANY DISCRIMINATION. AS FAR AS THE GENUINENESS OF THE ACTIVITIES ARE CON CERNED THAT TOO ARE RELATED TO THE MEDICAL ACTIVITIES. HOWEVER, THE MAI N OBJECTION OF THE LEARNED COMMISSIONER WAS THAT THE ASSESSEE HAS CHAR GED AFFORDABLE RATES FROM THE PATIENTS. THIS TERM AFFORDABLE WAS STATE D TO USE IN RESPECT OF THE PATIENTS TO PROVIDE CHEAP OR LESS EXPENSIVE MED ICAL FACILITY. CERTAIN EVIDENCES IN THIS CONNECTION HAVE NOW BEEN PLACED B EFORE US TO DEMONSTRATE THAT THE FEES CHARGED FROM THE PATIENTS DURING THE LAST FEW FINANCIAL YEAR WAS NOMINAL IF COMPARED WITH OTHER H OSPITALS. BEFORE US, THE ASSESSEE HAS ALSO FURNISHED AN ANNUAL REPORT OF ACCOUNTS FOR THE YEAR 2012-13. LEARNED AR HAS VEHEMENTLY ARGUED THAT THE MEDICAL FACILITIES ARE PROVIDED AS PER THE INTERNATIONAL NORMS AND THE ASSESSEE IS RUNNING A 450 BEDS MULTI SPECIALTY WORLD CLASS HOSPITAL. THE INCOME AND EXPENDITURE ACCOUNT HAS, THEREFORE, INDICATED THAT THE AMOUNT WAS SPENT FOR THE PURPOSE OF RUNNING OF THE HOSPITAL. HOWEVER , THE GENUINENESS OF THE EXPENDITURE WAS YET TO BE EXAMINED BY THE REVEN UE DEPARTMENT, IT APPEARS THAT WHEN THE PROCESS OF REGISTRATION U/S.1 2AA WAS GOING ON, THE REQUISITE INFORMATION IN CONNECTION OF THE RUNNING OF THE HOSPITAL WAS NOT PROPERLY PROVIDED TO THE LEARNED COMMISSIONER. IT A LSO APPEARS THAT THE HOSPITAL WAS NOT FUNCTIONAL AT THAT TIME, THEREFORE , THE LEARNED COMMISSIONER HAS NOTED THAT IN THE INCOME AND EXPEN DITURE ACCOUNT FOR THE PERIOD 2011-2012 ASSESSEE HAS NOT REFLECTED ANY CHARITABLE ACTIVITY WHICH WAS FOR THE PURPOSE OF PROVIDING MEDICAL TREA TMENT. AS AGAINST THAT NOW THE ASSESSEE IS VEHEMENTLY STATING THAT TH E HOSPITAL IS NOW FUNCTIONAL AND THE MEDICAL ACTIVITIES ARE FULLY OPE RATIONAL WHICH COULD BE EXAMINED BY THE REVENUE DEPARTMENT. THEREFORE, THE CRUX IS THAT AT THE ITA NO.2843 & 2844/AH D/2012 CHARUSAT HEALTH CARE & RESEARCH VS. CIT-I, BARODA - 6 - TIME WHEN THE REGISTRATION U/S.12AA WAS EXAMINED BY THE LEARNED COMMISSIONER, THE HOSPITAL PROJECT WAS AT ITS NASCE NT STAGE, THEREFORE, THE OBJECTS WERE NOT CLEARLY DEMONSTRATED TO THE LEARNE D COMMISSIONER. IN THIS SITUATION, WE DEEM IT PROPER TO REFER THIS ISS UE BACK TO THE STAGE OF PROCESS OF REGISTRATION TO BE EXAMINED DE NOVO BY L EARNED COMMISSIONER. IF THE ASSESSEE IS IN A POSITION TO DEMONSTRATE THA T THE CONDITIONS AS PRESCRIBED U/S. 12AA HAVE BEEN FULFILLED THEN THE A SSESSEE IS DEFINITELY ENTITLED FOR A REGISTRATION U/S 12AA OF IT ACT. FOR GRANTING REGISTRATION U/S.12AA, THE GUIDELINES HAVE BEEN ISSUED BY SEVERA L HONBLE COURTS AS PER THE PRECEDENTS CITED (SUPRA). IT IS EXPECTED FR OM THE LEARNED COMMISSIONER TO EXAMINE THE FACTS OF THE CASE IN TH E LIGHT OF THESE CASE LAWS. WITH THESE REMARKS AND DIRECTIONS, THE MATTER IS RESTORED BACK FOR DE NOVO CONSIDERATION; HENCE, THE GROUND RAISED BY THE ASSESSEE MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. B. 2844/AHD/2012 9. THE GROUNDS RAISED BY THE ASSESSEE ARE READS AS UNDER: THE COMMISSIONER OF INCOME TAX-I, BARODA HAS ERRED IN LAW AS WELL AS ON FACTS OF THE CASE IN NOT GRANTING REGISTRATION TO T HE APPELLANT TRUST U/S.80G(5)(VI) OF THE INCOME TAX ACT, 1961. 10. VIDE AN ORDER PASSED U/S. 80G(5)(VI), DATED 05. 11.2012, THE LEARNED COMMISSIONER HAS DENIED THE APPROVAL U/S.80 G TO THE ASSESSEE TRUST. IN FACT, THIS ORDER WAS PASSED IN CONSEQUENC E OF THE ORDER PASSED U/S.12AA AS DISCUSSED (SUPRA). SINCE, WE RESTORE TH E ENTIRE ISSUE FOR AFRESH CONSIDERATION, THEREFORE, THE ISSUE OF APPRO VAL U/S.80G AND BE DECIDED ACCORDINGLY. IN THE RESULT, THIS GROUND MAY ALSO BE TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ITA NO.2843 & 2844/AH D/2012 CHARUSAT HEALTH CARE & RESEARCH VS. CIT-I, BARODA - 7 - 11. BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FO R STATISTICAL PURPOSE ONLY. SD/- SD/- (T.R. MEENA) (MUKUL KR. SHRAWA T) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 27/09/2013 PRABHAT KR. KESARWANI, SR.P.S. TRUE COPY COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A)-III, AHMEDABAD 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, (DY./ASSTT.REGISTRAR) ITAT, AHMEDABAD