ITO (E), Delhi V. Society for Essential Health Action & Traning, New Delhi

ITA 4329/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5428 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 05-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 09-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 80G; 12A; 12AA; 12; 2; 11

Judgement Text

ITA NO.4329/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : G : NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO.4329/DEL/2012 ASSESSMENT YEAR : 2009-10 ITO (E), TRUST WARD II, DELHI. VS. SOCIETY FOR ESSENTIAL HEALTH ACTION & TRAINING, 45, KALU SARAI, NEW DELHI. PAN : AABTS4273J ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI RAHUL KHARE, ADVOCATE DEPARTMENT BY : S HRI S HAMEER SHARMA, S R. DR ORDER PER A.D. JAIN, JUDICIAL MEMBER: THIS IS DEPARTMENTS APPEAL FOR ASSESSMENT YEAR 2009-10 A GAINST THE ORDER DATED 29.05.2012, PASSED BY THE LD. CIT(A)-XXI, NEW DELHI. THE FOLLOWING GROUNDS HAVE BEEN TAKEN:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT (A) HAS ERRED IN ALLOWING EXEMPTION U/S 11 & 12 OF THE IT ACT, 1961, WHEREAS THE ACTIVITIES CARRIED OUT BY THE ASSESSEE FELL OUTSIDE THE PURVIEW OF CHARITABLE PURPOSE AS PER SECTION 2 ( 15) OF THE IT ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT (A) HAS ERRED IN HOLDING THAT THE ACTIVITIES OUT BY THE ASSESSEE DOS NOT FALLS UNDER 4 TH LIMB OF SECTION 2 (15), AS THE RESEARCH ACTIVITY CONDUCTED BY THE SOCIETY HAS BEEN FOUND TO BE IN THE NAT URE OF EDUCATION WHICH FALLS UNDER 2 ND LIMB OF SECTION 2 (15) OF THE IT ACT. ITA NO.4329/DEL/2012 2 2. AS PER THE MATERIAL ON RECORD, THE MEMORANDUM OF ASSOCIATION OF THE SOCIETY STATES THE FOLLOWING TO BE THE MAIN AIMS AND O BJECTS OF THE SOCIETY:- A) TO FACILITATE AND IMPLEMENT ESSENTIAL RESEARCH FOR PREVENTION OF DISEASES, DEFICIENCIES AND DISABILITIES OF PUBLIC HE ALTH SIGNIFICANCE WITH SPECIAL EMPHASIS ON MOTHERS AND CHILDREN. B) TO SUPPORT ACTIVITIES FOR DEVELOPMENT AND STRENGTHENIN G OF MAN POWER THROUGH TRAINING, EDUCATIONAL TOOL DEVELOPMENT AND OTHER RELATED ACTIVITIES IN THE FIELD OF ESSENTIAL HEALTH AND RELATED RESEARCH AND IN PROGRAMME IMPLEMENTATION. C) TO FACILITATE INFORMAL EDUCATION AND COMMUNICATION A CTIVITIES ON HEALTH AND NUTRITIONAL ISSUES FOR URBAN SLUMS AND RURA L COMMUNITIES. D) TO CARRY OUT RESEARCH OR OTHER ACTIVITIES TO IMPROVE THE QUALITY OR IMPACT OF EXISTING HEALTH CARE AND SOCIAL WELFARE PRO GRAMMES. 3. THE ASSESSEE SOCIETY IS REGISTERED U/S 12A OF THE IT AC T, VIDE ORDER DATED 11.07.1994. IT IS ALSO NOTIFIED U/S 80G (5) (VI) OF THE ACT, VIDE ORDER DATED 25.02.2010. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD RECEIVED CONTRACTUAL INCOME OF ` 42 LACS FROM SOCIETY FOR APPLIED STUDIES (SAS FOR SHORT), WHICH WAS HAVING THE SAME ADDRESS AS THAT OF THE ASSESSEE. ON QUERY, TO JUSTIFY ITS RE CEIPTS IN THE LIGHT OF THE AMENDED PROVISIONS OF SECTION 2 (15) OF THE ACT, THE ASSESSEE, VIDE LETTERS DATED 09.11.2011 AND 26.12.2011 JUSTIFIED THE RECEIPT AS PROFESSIONAL RECEIPT STATING THAT THE ASSESSEE SOCIETY HAD ENTERED IN TO AN AGREEMENT WITH SAS, WHICH HAD ITS REGISTERED OFFICE IN KOLKATA AND HAD BEEN ENGAGED IN RESEARCH ACTIVITY ON IMPLICATIONS OF VARIOUS MEDICINES RELATED TO CHILDREN INFECTIONS FOR THE LAST MORE THAN TWENTY YEARS; THAT SI NCE THE SAS HAD BEEN UNABLE TO DO SOME PART OF THE RESEARCH WORK, THEY HAD ENTERED INTO THE AGREEMENT WITH THE ASSESSEE SOCIETY TO GIVE TECHNO-MEDI CAL RESEARCH SUPPORT IN THE PROJECT CALLED ROTA VIRUS; AND THAT THE RECEIPT IN QUESTION COULD NOT BE TERMED AS A CONTRACT RECEIPT. 4. THE ASSESSING OFFICER, HOWEVER, OBSERVED THAT A PERUSA L OF THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH SAS SHOWED THAT SAS HAD PROVIDED EXPERTISE SERVICES TO THE ASSESSEE AND HAD TAKEN CONSIDERATION FOR ITA NO.4329/DEL/2012 3 THE SAME FROM THE ASSESSEE, RENDERING THE TRANSACTION TO TALLY COMMERCIAL IN NATURE; THAT THE PROVISO TO SECTION 2 (15) OF THE AC T IS APPLICABLE TO CHARITABLE ORGANIZATIONS ENGAGED IN THE CARRYING ON OF ANY OTH ER PUBLIC UTILITY; THAT THE SAID PROVISO IS NOT APPLICABLE TO CHARITABLE ORGANIZA TIONS ENGAGED IN EITHER RELIEF TO THE POOR OR MEDICAL RELIEF OR EDUCATION; THAT THE ACTIVITIES OF THE ASSESSEE DID NOT FALL WITHIN THE AMBIT OF EITHER RELIEF TO THE POOR OR MEDICAL RELIEF OR EDUCATION; THAT THEREFORE, IT COULD SAFELY BE PRESUMED THAT THE ACTIVITY OF THE ASSESSEE COULD FALL UNDER THE GENERAL PUBLIC UTILITY; THAT IF THE ASSESSEE WAS CARRYING ON ANY ACTIVITY FALLING UNDER THE CATEGORY ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, RECEIVING OF CON TRACTUAL INCOME, WHETHER IT RESULTED IN PROFIT OR LOSS, WAS IRRELEVANT; THAT AS PER SECTION 2 (15), ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADING, COMMERCE OR BUSINESS, OR ANY ACTIVITY OR R ENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION IN EXCESS OF ` 10 LACS, IRRESPECTIVE OF TH E NATURE OF THE USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH A CTIVITY; AND THAT THUS, SINCE THE ASSESSEE HAD DECLARED CONTRACTUAL INCOME AMOUN TING TO ` 42 LAC, IT DID NOT FALL WITHIN THE SCOPE OF CHARITABLE PURPOSE DEFINED IN SECTION 2 (15) OF THE ACT. THE ASSESSING OFFICER, IN THIS MANNER, HELD THE ASSESSEE NOT TO BE ELIGIBLE FOR THE BENEFIT OF SECTIONS 11/12 OF THE AC T FOR THE YEAR UNDER CONSIDERATION, I.E., ASSESSMENT YEAR 2009-10. 5. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT (A) HELD THAT RESEARCH ACTIVITY HAD BEEN CONDUCTED BY THE ASSESSEE ON ROTA VI RUS PROJECT WHICH WAS AN ACTIVITY IN THE FIELD OF MEDICAL RESEARCH AND THIS WAS FOUND TO BE ONE OF THE MAIN OBJECTS OF THE ASSESSEE SOCIETY; THAT THE RE SEARCH ACTIVITY CONDUCTED BY THE ASSESSEE SOCIETY WAS IN THE NATURE OF E DUCATION; AND THAT THE ASSESSING OFFICER WAS WRONG IN TREATING SUCH ACTIVITY OF THE ASSESSEE SOCIETY TO BE IN THE NATURE OF ADVANCEMENT OF ANY O THER OBJECT OF GENERAL PUBLIC UTILITY. ITA NO.4329/DEL/2012 4 6. CHALLENGING THE IMPUGNED ORDER, THE LD. DR HAS CO NTENDED THAT THE LD. CIT (A) HAS ERRED IN ALLOWING EXEMPTION UNDER SECTIO NS 11 AND 12 OF THE IT ACT TO THE ASSESSEE, IGNORING THE FACT THAT THE ACTIVIT IES CARRIED ON BY THE ASSESSEE FALL SQUARELY OUTSIDE THE PURVIEW OF CHARITABLE PURPOSE WITHIN THE MEANING OF SECTION 2 (15) OF THE IT ACT; THAT WHILE DOING SO, THE LD. CIT (A) HAS ERRED IN HOLDING THAT THE ACTIVITIES OF THE ASSESSEE DID NOT FALL WITHIN THE CATEGORY OF ADVANCEMENT OF ANY OTHER OBJECT OF GEN ERAL PUBLIC UTILITY, BUT WERE COVERED WITHIN THE CATEGORY OF EDUCATION. 7. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN CONTENDE D THAT THE ACTIVITY OF THE ASSESSEE WAS THAT OF A RESEARCH IN THE ROTA VIRUS P ROJECT, WHICH RESEARCH IS THE MAIN ACTIVITY OF THE ASSESSEE SOCIETY EVE N AS PER ITS MEMORANDUM OF ASSOCIATION; THAT THE SAID ACTIVITY, UND ISPUTEDLY, IS A CHARITABLE ACTIVITY; THAT THE ASSESSEE IS DULY REGISTERE D U/S 12A OF THE ACT; THAT IN SUCH CIRCUMSTANCES, THE LD. CIT (A) HAS CORREC TLY APPLIED THE DECISION OF HARNAM SINGH HARBANS KAUR VS. DIRECTOR OF INCOME- TAX (EXEMPTION), DELHI, 2011 (12) TMI 232-ITAT DELHI (COPY FILED); THAT AS CORRECTLY OBSERVED BY THE LD. CIT (A), THE MEANING OF THE TERM EDUCAT ION CANNOT BE RESTRICTED TO FORMAL SCHOOLING OR COLLEGE AND IT MUST BE UNDERSTO OD IN A BROAD SENSE, WHERE KNOWLEDGE IS PASSED ON THROUGH ANY MEANS TO THE U LTIMATE RECIPIENT; THAT THE RESEARCH ACTIVITY CONDUCTED BY THE ASSESSEE SOC IETY IS NOTHING OTHER THAN IN THE NATURE OF EDUCATION AND AS SUCH, IT IS A CHARITABLE ACTIVITY WITHIN THE MEANING OF SECTION 2 (15) OF THE IT ACT AND NOT AN ACTIVITY IN THE NATURE OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLI C UTILITY. 8. THE MAIN AIMS AND OBJECTS OF THE ASSESSEE SOCIETY, AS P ER ITS MEMORANDUM OF ASSOCIATION, AS REPRODUCED AT PAGE 2, PA RA 2 OF THE ASSESSMENT ORDER, ARE AS FOLLOWS:- A) TO FACILITATE AND IMPLEMENT ESSENTIAL RESEARCH FOR PREVENTION OF DISEASES, DEFICIENCIES AND DISABILITIES OF PUBLIC HE ALTH SIGNIFICANCE WITH SPECIAL EMPHASIS ON MOTHERS AND CHILDREN. ITA NO.4329/DEL/2012 5 B) TO SUPPORT ACTIVITIES FOR DEVELOPMENT AND STRENGTHENIN G OF MAN POWER THROUGH TRAINING, EDUCATIONAL TOOL DEVELOPMENT AND OTHER RELATED ACTIVITIES IN THE FIELD OF ESSENTIAL HEALTH AND RELATED RESEARCH AND IN PROGRAMME IMPLEMENTATION. C) TO FACILITATE INFORMAL EDUCATION AND COMMUNICATION A CTIVITIES ON HEALTH AND NUTRITIONAL ISSUES FOR URBAN SLUMS AND RURA L COMMUNITIES. D) TO CARRY OUT RESEARCH OR OTHER ACTIVITIES TO IMPROVE THE QUALITY OR IMPACT OF EXISTING HEALTH CARE AND SOCIAL WELFARE PRO GRAMMES. 9. DURING THE YEAR, THE ASSESSEE RECEIVED AN AMOUNT OF ` 42 LACS FROM SAS, FOR RESEARCH CONDUCTED ON IMPLICATION OF VARIOU S MEDICINES RELATED TO CHILDREN INFECTIONS. THIS RESEARCH WAS PART OF THE RESEA RCH ACTIVITY WHICH WAS TO BE CARRIED OUT BY SAS, BUT WHICH SAS COULD NOT C ARRY OUT. THIS RESEARCH WAS CARRIED OUT BY THE ASSESSEE SOCIETY IN PURSUANCE OF A WRITTEN ARRANGEMENT WITH SAS. AS PER THE ARRANGEMENT/AGREEME NT, THE ASSESSEE PROVIDED TECHNO-MEDICAL RESEARCH SUPPORT AND COMPILAT ION OF DATA IN A PROJECT CALLED ROTA VIRUS. IN CONSIDERATION THEREO F SAS AGREED TO PAY THE ASSESSEE A LUMPSUM AMOUNT OF ` 50 LACS. IT WAS TERMED AS SE RVICE FEE. 10. THE ASSESSING OFFICER CONSTRUED THE ABOVESAID AGREEME NT BETWEEN THE ASSESSEE AND SAS TO BE A COMMERCIAL AGREEMENT. THE SERVI CES PROVIDED BY THE ASSESSEE TO SAS WERE TAKEN AS BEING OF COMMERCIAL NA TURE. THE ASSESSING OFFICER HELD THAT THE PROVISO TO SECTION 2 (15 ) OF THE ACT IS APPLICABLE TO ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY AND NOT TO CHARITABLE ORGANIZATIONS ENGAGED IN PROVIDING EITHER RELIEF TO THE POOR OR MEDICAL RELIEF, OR EDUCATION; AND THAT SINCE THE ACTIVITIES OF THE ASSE SSEE DID NOT FALL UNDER EITHER RELIEF TO THE POOR OR MEDICAL RELIEF, OR EDU CATION, IT COULD BE SAFELY PRESUMED THAT THEY FELL UNDER THE CATEGORY OF GENER AL PUBLIC UTILITY; THAT FOR SUCH ACTIVITY, THE ASSESSEE WAS RECEIVING CONTRACTUAL INC OME, IRRESPECTIVE OF WHETHER IT RESULTED IN PROFIT OR LOSS; AND THAT AS SUCH , THE ASSESSEE HAD VIOLATED THE PROVISIONS OF SECTION 2 (15) OF THE IT A CT; THAT SINCE THE ASSESSEE DID NOT FALL WITHIN THE SCOPE OF CHARITABLE PURPOSE , AS DEFINED IN SECTION 2(15) OF THE ACT, THE BENEFIT OF SECTIONS 11/12 OF T HE ACT WAS BEING DISALLOWED TO THE ASSESSEE FOR THE YEAR UNDER CONSIDERATI ON. THE ASSESSING ITA NO.4329/DEL/2012 6 OFFICER ALSO SENT A PROPOSAL FOR WITHDRAWAL OF REGISTRA TION TO THE ASSESSEE U/S 12AA OF THE ACT, TO THE DIT (E), SEPARATELY. 11. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT (A ) DELETED THE DISALLOWANCE, TREATING THE ACTIVITY CARRIED ON BY TH E ASSESSEE AS FALLING UNDER EDUCATION WITHIN THE MEANING OF SECTION 2 (15) OF THE ACT AND THUS, A CHARITABLE ACTIVITY. WHILE DOING SO, THE LD. CIT (A) APPLIED THE DECISION RENDERED BY THE DELHI BENCH OF THE TRIBUNAL IN HAR NAM SINGH HARBANS KAUR VS. DIRECTOR OF INCOME-TAX (EXEMPTION), DELHI (SUPRA ). 12. THE GRIEVANCE OF THE DEPARTMENT BEFORE US IS THAT THE LD. CIT (A) HAS ERRONEOUSLY HELD THE ACTIVITY OF THE ASSESSEE SOCIETY TO BE FALLING UNDER EDUCATION AS DEFINED IN SECTION 2 (15) AND NOT UND ER ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AS DEFINED T HEREIN. 13. IN THIS REGARD, AS NOTED HEREINABOVE, THE MAIN AI MS AND OBJECTS OF THE ASSESSEE SOCIETY, AS PER ITS MEMORANDUM OF ASSOCIATION, AS REPRODUCED AT PAGE 2, PARA 2 OF THE ASSESSMENT ORDER, INCLUDE MEDICAL RESEARCH AND INFORMAL EDUCATION AND COMMUNICATION ACTIVITIES ON H EALTH AND NUTRITIONAL ISSUES FOR URBAN SLUMS AND RURAL COMMUNITIES. NOW, THE AC TIVITIES IN QUESTION IS UNDISPUTEDLY THE ACTIVITY OF RESEARCH, I.E., TECHNO -MEDICAL RESEARCH SUPPORT FOR RESEARCH AND COMPILATION OF DATA ON ACCOUNT OF ROTA VIRUS PROJECT, TO SAS. THEREFORE, THE ACTIVITY CARRIED ON BY THE ASSESSEE CANNOT BE SAID TO BE BEYOND ITS MAIN AIMS AND OBJECTS. IT ALSO REMAINS IRREFU TED THAT THE ASSESSEE SOCIETY CONTINUES TO ENJOY REGISTRATION U/S 12A OF THE ACT, AS A CHARITABLE TRUST, CONFIRMING THAT THE CHARITABLE PURPOSE FOR WHI CH THE ASSESSEE SOCIETY WAS ESTABLISHED REMAINS UNCHANGED. THE ACTIVITY OF THE ASSESSEE DURING THE YEAR, AS DISCUSSED, IS IN PURSUANCE OF SUCH PURPOSE. 14. IN SUCH FACTS, WE FIND THAT HARNAM SINGH HARBANS KAUR VS. DIRECTOR OF INCOME-TAX (EXEMPTION), DELHI (SUPRA) IS SQUARELY APP LICABLE AND THE LD. CIT (A) HAS CORRECTLY APPLIED IT. AS PER THIS DECISION, AS C ORRECTLY NOTED BY THE LD. CIT (A), CHARITABLE INSTITUTIONS REGISTERED U/S 12A OF THE IT ACT AND DOING THE ITA NO.4329/DEL/2012 7 ACTIVITY IN THE NATURE OF CHARITY, CANNOT BE HELD T O BE ENGAGED IN THE ACTIVITY OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLI C UTILITY. THE LD. CIT (A) HAS SPECIFICALLY NOTED THAT THE RESEARCH REPORT OF THE ASSESSEE, WHICH WAS PUBLISHED IN MEDICAL JOURNALS, WAS IN THE NATURE OF DO ING EDUCATION ACTIVITY. THE DEPARTMENT HAS NOT BEEN ABLE TO REFUTE THIS FINDI NG, AS ALSO THE FINDING THAT THE ASSESSEE IS MAINLY ENGAGED IN THE FIELD OF MEDI CAL RESEARCH AND DURING THE YEAR UNDER CONSIDERATION, IT HAS DONE RESEA RCH WORK IN COLLABORATION WITH VARIOUS INTERNATIONAL ORGANIZATIO NS, LIKE WHO, UNICEF AND RESEARCH COUNCIL OF NORWAY. PERTINENTLY, THIS ASPECT W AS DULY VERIFIED BY THE DIT AT THE TIME OF GRANTING REGISTRATION TO THE ASSESSEE U/S 12AA OF THE ACT. THE LD. CIT (A), IN THE DETAILED SPEAKING ORDER PASSE D, HAS ALSO TAKEN INTO CONSIDERATION CBDT CIRCULAR NO.11/2008, AS PER WHICH, WHERE THE PURPOSE OF A TRUST OR INSTITUTION IS, INTER ALIA , RELIEF TO THE POOR, EDUCATION ON MEDICAL RELIEF, IT WILL CONSTITUTE CHARITABLE PURPOSE EVEN IF IT INCIDENTALLY INVOLVES THE CARRYING ON OF COMMERCIAL ACTIVITY. 15. IN VIEW OF THE ABOVE, FINDING NO ERROR WHATSOEVE R IN THE ORDER OF THE LD. CIT (A), THE SAME IS HEREBY CONFIRMED, REJECTING THE GRIEVANCE RAISED BY THE DEPARTMENT. 16. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 21.02.201 4. SD/- SD/- [S HAMIM YAHYA ] [A.D. JAIN] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 21 ST FEBRUARY, 2014. DK ITA NO.4329/DEL/2012 8 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.