V.G. Sapovadiya Netraraksha Charitable Trust, RAJKOT-GUJARAT V. The Commissioner of Income Tax-II, RAJKOT-GUJARAT

ITA 382/RJT/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6854 (ITAT-RAJKOT)
• Duration Of Justice: 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 28-07-2014
• Assessment Year: misc
• Appeal Filed On: 12-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L MEENA
• Assessee Lawyers: J C RANPURA
• Keywords: Charitable institution; Principle of natural justice
• Section: 80G; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBULAL, SMC BENCH, RAJKOT BEFORE SHRI T. K. SHARMA, JM ITA NO. 382/RJT/2014 V.G. SAPOVADIA NETRARAKSHA CHARITABLE TRUST, NETRADEEP EYE HOSPITAL, KANAK ROAD, B/H. S.T. BUS STATION, RAJKOT PAN : AAAJV 0160 C ( / APPELLANT) THE COMMISSIONER OF INCOME-TAX RAJKOT-II, RAJKOT / RESPONDENT / ASSESSEE BY SHRI J.C. RANPURA, CA / REVENUE BY SHRI M L MEENA, DR / DATE OF HEARING 28.07.2014 !'# / DATE OF PRONOUNCEMENT 31.07.2014 / ORDER THIS APPEAL BY THE ASSESSEE-TRUST IS AGAINST THE OR DER DATED 16.05.2014 OF COMMISSIONER OF INCOME-TAX, RAJKOT-II, RAJKOT REJEC TING THE APPLICATION OF THE ASSESSEE-TRUST FOR RECONSIDERATION OF RECOGNITION U /S 80G(5) OF THE INCOME-TAX ACT, 1961. 2. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE-TRUST CAME INTO EXISTENCE ON 30.04.2000 AND IT WAS SUBSEQUENTLY REGISTERED WITH THE CHARITY COMMISSIONER ON 16.10.2000. THE ASSESSEE-TRUST WAS GRANTED REGISTRA TION UNDER SECTION 12AA OF THE INCOME-TAX ACT, 1961 ON 22.12.2000. THE ASSESSEE-T RUST HAD FILED AN APPLICATION IN FORM NO.10G FOR GRANT OF APPROVAL U/S 80G(5) OF THE INCOME-TAX ACT EARLIER ON 25.09.2012, WHICH WAS REJECTED BY THE LD. CIT VIDE ORDER DATED 25.03.2013 ON THE GROUND THAT THE ASSESSEE-TRUST HAD NOT SPENT MORE T HAN 85% OF ITS INCOME AND THE PROPERTY OF THE TRUST WAS VESTED ON TRUSTEES ONLY, AS PER TRUST DEED. AGGRIEVED BY THE ORDER PASSED BY LD. CIT, THE ASSESSEE-TRUST WENT IN APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL VIDE ORDER DATED 30.04.2013 IN ITA NO. 83/RJT/2013, SET ASIDE THE ORDER OF THE LD. CIT AND DIRECTED HIM TO RECONSIDER THE R EQUEST OF THE ASSESSEE-TRUST FOR RECOGNITION U/S 80G(5) OF THE ACT BECAUSE EARLIER T HE LD. CIT REFUSED THE RECOGNITION U/S 80G(5)(VI) ON A DIFFERENT GROUND THAN MENTIONED IN THE SHOW CAUSE NOTICE ISSUED ON 15.03.2013. AS PER THE DIRECTIONS OF THE TRIBUN AL IN ITS ORDER DATED 30.04.2013 (SUPRA), THE LD. CIT ISSUED ANOTHER NOTICE UPON THE ASSESSEE-TRUST ON 19.02.2014, WHICH READS AS UNDER:- 2 382-RJT-2014 - V.G. SAPOVADIA NETRARAKSHA CHARITABLE TRUST -80G(5)-(SMC) I) ON PERUSAL OF YOUR APPLICATION AND TRUST DEED, IT IS SEEN THAT THERE IS A CLAUSE THAT THE PROPERTY OF THE TRUST SHALL VEST IN TRUSTEES ONLY. THIS PROVISION OF YOUR TRUST DEED VIOLATES THE PROVISIONS OF SECTION 13 OF THE INCOME-TAX ACT, 1961 AND YOUR TRUST SHALL NOT BE ELIGIBLE FOR EXEMP TION U/S 11 &12 OF THE ACT. SINCE THE INCOME OF THE TRUST SHALL NOT BE EXEMPTED AB INITIO, IT VIOLATES THE PROVISION OF SECTION 80G(5) OF THE ACT AND YOUR TR UST THE ABOVE APPLICATION DOES NOT DESERVE RECOGNITION U/S 80G(5) OF THE ACT. II) ON PERUSAL OF YOUR TRUSTS ACCOUNTS FOR THE FY 2011-12, IT IS NOTICED THAT YOUR TRUST HAS NOT SPENT MORE THAN 85% OF ITS INCOM E. THE TRUST HAS UTILIZED ONLY 76.74% OF THE INCOME OF THE TRUST AND THEREFOR E DOES NOT FULFILL THE CONDITIONS LAID DOWN IN SECTION 80G(5) OF THE I.T. ACT, 1961. III) ON PERUSAL OF INCOME AND EXPENDITURE STATEMENT S FOR THE YEAR ENDED 31.03.2010, 31.03.2011 AND 31.03.2012, IT IS NOTICE D THAT THE TRUST HAS RECEIVED NOMINAL AMOUNT IN FORM OF DONATION WHILE M AJORITY PORTION OF INCOME RECEIVED BY WAY OF OPD AND OT INCOME. SIMILARLY, MA JOR PORTION OF EXPENSES CLAIMED ARE PROFESSIONAL FEES PAID. IT SEEMS THAT T RUST IS ENGAGED IN DISPENSARY ACTIVITIES AND MAKING CONSIDERABLE PROFI T. THE ACTIVITIES OF THE TRUST ARE FOUND TO BE DONE MORE IN COMMERCIAL NATURE. IT CANNOT BE SAID THAT TRUST IS PURELY ENGAGED IN CHARITABLE ACTIVITIES IN RESPONSE TO THE AFORESAID SHOW-CAUSE NOTICE, TH E COUNSEL OF THE ASSESSEE- TRUST ALONGWITH ITS TRUSTEE WERE ATTENDED AND PRODU CED BOOKS OF ACCOUNTS BEFORE THE LD. CIT. AFTER CONSIDERING ALL THE SUBMISSIONS/DOCU MENTS, LD. CIT REJECTED THE APPLICATION OF THE ASSESSEE-TRUST FOR RECONSIDERATI ON OF RECOGNITION U/S 80G(5)(VI) OF THE INCOME-TAX ACT VIDE ORDER DATED 16.05.2014 ON T HE GROUND THAT THE ASSESSEE- TRUST IS WHOLLY ENGAGED IN COMMERCIAL ACTIVITIES AN D DIVERTING INCOME OF NETRADEEP HOSPITAL, THEREBY VIOLATING THE PROVISION OF SECTIO N 2(15) OF THE INCOME-TAX ACT, 1961. AGGRIEVED WITH THE ORDER OF LD COMMISSIONER OF INC OME-TAX, RAJKOT-II, RAJKOT, THE ASSESSEE-TRUST IS NOW IN APPEAL BEFORE THIS TRI BUNAL, ON THE FOLLOWING GROUNDS:- 1. THE GROUNDS OF APPEAL MENTIONED HEREUNDER ARE W ITHOUT PREJUDICE TO ONE ANOTHER. 2. THE LEARNED COMMISSIONER OF INCOME TAX-II, RAJKO T [HEREINAFTER REFERRED TO AS THE CIT] HAS ERRED ON FACTS AND AL SO IN LAW IN REJECTING APPELLANTS APPLICATION FOR RECOGNITION U/S 80G(5) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT]. THE LEARNED CIT BE DIRECTED TO GRANT RECOGNITION U/S 80G(5)(VI) OF THE ACT. 3. THE LD. CIT HAS ERRED ON FACTS AND ALSO IN LAW I N NOT RECOGNIZING APPLICATION OF TRUST U/S 80G(5) ON THE ALLEGED GROU ND THAT THE PROPERTY OF TRUST SHALL VEST TO TRUSTEE WHICH IS IN VIOLATION OF PROV ISION OF SECTION 13 OF THE ACT AND THEREBY HOLDING THAT TRUST SHALL NOT ELIGIBLE F OR EXEMPTION U/S 11 AND 12 OF THE ACT. 4. THE LD. CIT HAS ERRED ON FACT AND ALSO IN LAW IN HOLDING THAT THE TRUST HAS NOT SPENT MORE THAN 85% OF ITS INCOME WHICH IS IN VIOLATION OF CONDITION LAID DOWN IN SECTION 80G(5) OF THE ACT. 3 382-RJT-2014 - V.G. SAPOVADIA NETRARAKSHA CHARITABLE TRUST -80G(5)-(SMC) 5. THE LD. CIT HAS ERRED ON FACTS AS ALSO IN LAW IN NOT RECOGNIZING THE APPLICATION OF TRUST U/S 80G(5) OF THE ACT ON THE A LLEGED GROUNDS THAT THE TRUST HAS ENGAGED IN COMMERCIAL ACTIVITIES AND NOT FOR TH E PURPOSE OF OBJECT OF TRUST AS STIPULATED IN SECTION 2(15) OF THE ACT. 3. AT THE TIME OF HEARING, ON BEHALF OF ASSESSEE-TR UST, SHRI J.C. RANPURA, CA, APPEARED AND CONTENDED THAT THOUGH LD. CIT IN THE I MPUGNED ORDER HAS MENTIONED THAT A FURTHER OPPORTUNITY WAS ALLOWED BUT NO SUCH OPPORTUNITY WAS ALLOWED TO CONTROVERT THE FURTHER ALLEGATIONS MADE BY THE LD. CIT IN PARA 6 OF THE IMPUGNED ORDER. HE FURTHER POINTED OUT THAT ONLY ONE SHOW-CA USE NOTICE DATED 19.02.2014 WAS ISSUED AND NO OTHER SHOW-CAUSE NOTICE WAS EVER ISSU ED TO THE ASSESSEE-TRUST. TO SUM-UP, HE POINTED OUT THAT THIS IS A CLEAR VIOLATI ON OF PRINCIPLE OF NATURAL JUSTICE; THEREFORE, IN THE INTEREST OF JUSTICE, THE IMPUGNED ORDER OF LD. CIT BE SET ASIDE. 4. ON THE OTHER HAND, SHRI M L MEENA, DR, APPEARED ON BEHALF OF THE REVENUE, VEHEMENTLY SUPPORTED THE ORDER OF LD. COMMISSIONER OF INCOME-TAX, RAJKOT-II, RAJKOT. THE LD. DR ALSO RELIED UPON THE DECISION OF ITAT BA NGALORE BENCH IN THE CASE OF SUBHARAM TRUST V. DIRECTOR OF INCOME-TAX (EXEMPTION S), REPORTED IN [2010] 126 ITD 33 (BANGALORE), FOR THE PROPOSITION THAT DIT(EXEMPT IONS) HAS AUTHORITY TO LOOK INTO PROVISIONS OF SECTION 13 WHILE CONSIDERING APPLICAT ION OF TRUST FOR RENEWAL OF APPROVAL UNDER SECTION 80G (5) OF THE INCOME-TAX ACT, 1961. 5. IN REJOINDER, THE LD. COUNSEL OF THE ASSESSEE SU BMITTED THAT THE ALLEGATIONS MADE BY LD. CIT IN HIS ORDER ARE NOT CORRECT BECAUS E THIS WAS NOT A PART OF SHOW CAUSE NOTICE. THE ALLEGATIONS THAT APPARENTLY THE S URGERY WAS PERFORMED WITHOUT ANY INTRAOCULAR LENS IS TOTALLY INCORRECT. IT IS FACT O N RECORD THAT AT DHROL THE ASSESSEE-TRUST PERFORMED CATARACT PROCEDURES/OPERATIONS WHICH CANN OT BE DONE WITHOUT LENS. WITH REGARD TO THE ALLEGATIONS AT PARAGRAPHS NO.5-8 OF T HE IMPUGNED ORDER, THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT IN THE IMPUGNED OR DER THE LD. CIT FAILED TO APPRECIATE THAT THE PATIENTS COME TO THE PREMISE OF THE ASSESSEE-TRUST FOR TREATMENT CONSCIOUSLY AND ONLY BECAUSE THAT IT IS CHARGING MU CH LESSER THAN IT BEING CHARGED BY PRIVATE DOCTORS/HOSPITALS. HE FURTHER POINTED OUT T HAT LD. CIT CANNOT HAVE ANY OBJECTION FOR THE PAYMENT OF CONSULTATION CHARGES T O DR. SHAH BY NETRADEEP HOSPITAL FOR THE SERVICES RENDERED BY HIM TO IT. THE ASSESSE E-TRUST AVAILS HIS SERVICES AS PER 4 382-RJT-2014 - V.G. SAPOVADIA NETRARAKSHA CHARITABLE TRUST -80G(5)-(SMC) THE TERMS WITH DR. SHAH AND THE LD. CIT OUGHT TO HA VE APPRECIATED THAT HE IS A PROFESSIONAL AND THE DEPARTMENT CANNOT HAVE ANY OBJ ECTION AGAINST RENDERING OF SERVICES BY DR. SHAH TO THE ASSESSEE TRUST AS ALSO NETRADEEP HOSPITAL OR ANY OTHER HOSPITALS AS HE MAY DEEM FIT. FURTHER HE POINTED OU T THAT THE ASSESSEE-TRUST RENDERS SERVICES IN THE FIELD OF EYE DONATIONS, EYE BANK AC TIVITIES AND CORNEA TRANSPLANT AND FOR THIS, THE ASSESSEE-TRUST CHARGES BETWEEN RS.25, 000/- TO RS.35,000/-; HOWEVER, FEES CHARGED BY PRIVATE DOCTORS FOR THE SAME PROCED URES ARE MUCH HIGHER THAN THE ASSESSEE-TRUST. 6. RIVAL SUBMISSIONS WERE CONSIDERED. I HAVE CAREFU LLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. PRIMA-FACIE IT APPEARS TH AT THE LD. CIT ISSUED ONLY ONE SHOW- CAUSE NOTICE DATED 19.02.2014, ON WHICH THE ALLEGAT IONS MADE IN PARAGRAPH NO.6 OF THE IMPUGNED ORDER WERE NOT MENTIONED. THOUGH IN P ARAGRAPH 8, THE LD. CIT HAS MENTIONED THAT A FURTHER OPPORTUNITY WAS ALLOWED TO THE ASSESSEE-TRUST, BUT KEEPING IN VIEW THE SPECIFIC DENIAL BY THE LD. COUNSEL OF T HE ASSESSEE-TRUST, I, IN THE INTEREST OF JUSTICE, SET ASIDE THE IMPUGNED ORDER OF LD. CIT AN D DIRECT HIM TO GRANT ONE MORE OPPORTUNITY TO THE ASSESSEE-TRUST, POINTING OUT SPE CIFIC ALLEGATIONS, CONSIDERING THE OBJECTIONS OF THE ASSESSEE-TRUST THEREON AND RECONS IDER THE REQUEST OF THE ASSESSEE- TRUST FOR RECOGNITION U/S 80G(5)(VI) OF THE INCOME- TAX ACT, 1961. 7. BEFORE PARTING WITH, I MAY OBSERVE THAT THE LD. CIT IS AT LIBERTY TO CONSIDER THE DECISION CITED BY THE LD. DR OR ANY OTHER DECISIONS ON THIS ISSUE WHICH ARE AVAILABLE AFTER CONFRONTING THE SAME TO THE ASSESSEE-TRUST. 8. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APP EAL OF THE ASSESSEE-TRUST IS TREATED AS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON THE DATE MEN TIONED HEREINABOVE. SD/- ( $.. &' / T. K. SHARMA) ( ) /JUDICIAL MEMBER *)& +) ,/ ORDER DATE: 31.07.2014 !$ /RAJKOT *BT 5 382-RJT-2014 - V.G. SAPOVADIA NETRARAKSHA CHARITABLE TRUST -80G(5)-(SMC) / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT- V.G. SAPOVADIA NETRARAKSHA CHARITABLE TRUST, NETRADEEP EYE HOSPITAL, KANAK ROAD, B/H. S.T. BUS STATIO N, RAJKOT 2. / RESPONDENT- THE COMMISSIONER OF INCOME-TAX, RAJK OT-II, RAJKOT 3. ,0,1 * * 2 / CONCERNED ADDL.CIT, RANGE-2, RAJKOT 4 . 345 1, * 1#, !$ / DR, ITAT, RAJKOT 5 . 57 89 / GUARD FILE *)& / BY ORDER TRUE COPY PRIVATE SECRETARY, ITAT, RAJKOT