PIMS Medical & Education Charitable Society, Chandigarh V. CIT II, Chandigarh

ITA 456/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63996 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-09-2012
• Assessment Year: misc
• Appeal Filed On: 24-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Competent authority
• Section: 12; 10; 11; 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 456/CHD/2012 PIMS MEDICAL & EDUCATION V CIT-II, CHARITABLE SOCIETY, CHANDIGARH. SCO 29FF, SECTOR 33-D, CHANDIGARH. PAN: AABAP-0228K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HARRY RICKY RESPONDENT : SHRI N.K.SAINI DATE OF HEARING : 11.09.2012 DATE OF PRONOUNCEMENT : 30.10.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER DATED 29.03.2012 PASSED BY THE LD . CIT U/S 12AA OF THE INCOME-TAX ACT,1961 (IN SHORT 'THE ACT'). 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL: 1. THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX II, CHANDIGARH IS DEFECTIVE BOTH IN LAW AND FACTS OF T HE CASE. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX II, CHANDIGARH IS NOT JUSTIFIED IN REJECTING THE APPLICATION OF THE A PPELLANT FOR THE GRANT OF REGISTRATION U/S 12A OF INCOME TAX ACT, 1961 AS THE APPELLANT TRUST DULY FULFILLS ALL THE NECESSARY CONDITIONS FOR REGISTRAT ION U/S 12A OF INCOME TAX ACT, 1961. THE APPLICATION FOR REGISTRATION HAS BEE N REJECTED ONLY ON SURMISES AND ON WHIMSICAL GROUNDS. 2 3. THAT ANY OTHER GROUND MAY KINDLY BE ALLOWED TO BE TAKEN AT THE TIME OF HEARING. 3. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. 'AR' VEHEMENTLY CONTENDED THAT LD. CIT HAS DECLINED REGI STRATION, TO THE APPELLANT, U/S 12AA OF THE ACT, VIDE ORDER, DATED 29.03.2012, ON THE FOUNDATION OF IRRELEVANT CONSIDE RATIONS BY INVOKING THE PROVISIONS OF SECTION 11 & 12 OF TH E ACT. THE ISSUE OF REGISTRATION U/S 12AA OF THE ACT, HAS TO BE CONSIDERED, IN THE LIGHT OF THE STATUTORY PROVISION S, AS CONTAINED U/S 12A READ WITH SECTION 12AA OF THE ACT AND NOT IN THE CONTEXT OF SECTION 11 & 12 OF THE ACT. HE WAS OF THE OPINION THAT REGISTRATION PROCEEDINGS U/S 12AA OF THE ACT AND ASSESSMENT PROCEEDINGS OF THE INSTITUTION O R TRUST ARE EXCLUSIVE, DIFFERENT AND INDEPENDENT PROCEEDING S. LD. 'AR' CONTENDED THAT THE APPELLANT SOCIETY IS RUNNIN G A HOSPITAL AND RENDERING OTHER SERVICES, WITHIN THE M EANING OF SECTION 2(15) OF THE ACT. MEMBERS OF THE SOCIETY A RE QUALIFIED DOCTORS, AS IS EVIDENT FROM PAGE 31 OF TH E PAPER BOOK. LD. 'AR' NARRATED FACTUAL HISTORY OF THE CAS E AND, FURTHER, STATED THAT THE HOSPITAL IS RUN ON THE PAT TERN AND RULES OF PGI, CHANDIGARH, IN TERMS OF CHARGING OF F EES, FROM THE PATIENTS, IRRESPECTIVE OF THE CASTE, CREED, REL IGION ETC. OF THE PATIENTS. THE ASSESSEE FILED A PAPER BOOK AND P LACED RELIANCE ON PAGE 32, 33 AND 34 OF THE SAME. HE ALS O PLACED RELIANCE ON THE PAPER BOOK FROM PAGES 22 TO 29, WHI CH CONTAIN NOTE ON CHARITABLE ACTIVITIES. THE SUMMARY OF CHARITABLE OBJECTS, AS CONTAINED AT PAGE 22 OF THE BOOK ARE 3 REPRODUCED HEREUNDER : MAJOR CHARITABLE ACTIVITIES DONE BY OUR SOCIETY. DEC 15,16: GENERAL CHECK UP CAMP IN CAMBRIDGE INTER NATIONAL SCHOOL FOR GIRLS PIMS JOINS HANDS WITH WHO AGAINST DRUNK DRIVING RS 10 PROJECT FOR TWO DAYS; DEC 12,13 DEC 07: ENT DEPARTMENT HOLDS MEDICAL CAMP; 202 PATI ENTS CHECKED NOV 24'11: PIMS HOLDS ORTHOPEDIC CAMP; 263 PATIENTS DIAGNOSED MEDICAL CAMP AT PIMS ON WORLD DIABETES DAY; NOV 14' 11443 PATIENTS AVAIL FREE SUGAR TEST AND MEDICINES UROLOGY CAMP HELD AT PIMS; NOV 11'11152 PATIENTS AV AILED THE FACILITY AND UROFLOWMETRY TEST WAS DONE. DIABETIC, BP AND BLOOD DONATION CAMP ORGANIZED; 215 PATIENTS PSYCHIATRY CAMP; 86 PATIENTS OCTOBER 20'11 PULMONARY MEDICINE CAMP; OCT 17'11 SEP 08'11 INTERNATIONAL STUDENTS DO A PROJECT ON AI DS IN PIMS CCCON ORGANIZED AT PIMS; CRITICAL CARE AND PATIENT MANAGEMENT INLCU;07AUG'LL MEDICAL CAMP AT RAMNAGAR; PULMONARY MEDICINE & MEDI CINE BUDHIANA MEDICAL CAMP JUNE 13'11: MEDICINE, ENT, PH YSIOTHERAPY MAY 29'11: PIMS ORGANIZES MEDICAL CAMP AT MISSIONAR IES OF CHARITY; PSYCHIATRY, PHYSIOTHERAPY, PEEDS PIMS PERFORMING MAJOR ACID BURN INJURIES AND CANCER TISSUE. MAY 06'11 CAMBRIDGE SCHOOL STUDENTS; 503 VISIT PIMS FOR CHECK UP 3(I) ACTIVITIES OF THE APPELLANT SOCIETY ARE PROVID ING HEALTH CARE AND EDUCATION. PUNJAB INSTITUTE OF MEDICAL SCI ENCES UNDER THE AEGIS OF PIMS MEDICAL AND EDUCATION CHARI TABLE SOCIETY, IS SPREAD OVER 56 ACRE OF LAND IN THE HEAR T OF CITY, HAS BEEN CONTRIBUTING TO THE SOCIETY IN FORM OF HEA LTHCARE AND EDUCATION SINCE TWO YEARS NOW. FIFTH JUNE, 2010 HAS 4 BEEN AN IMPORTANT LAND MARK IN THE HISTORY OF THE H OSPITAL, AS ON THIS DAY THE HOSPITAL STARTED FUNCTIONING. SI NCE THEN IT HAS REACHED OUT TO NEARLY 2.5 LAKH OPD PATIENTS, WITH AN AVERAGE OF 1300 PATIENTS A DAY AND THE IPD MARK TOU CHING 17,000 PATIENTS. AN EXTREMELY DEDICATED TEAM OF PROFESSIONAL DOCTORS, NURSES AND TECHNICIANS HAVE PERFORMED APPROXIMATELY 6,700 SURGERIES WITH WELL E QUIPPED ICU, ICCU AND NICU UNIT. PIMS IS ALSO PROVIDING ONC OLOGY TREATMENT AT 15% DISCOUNT AND HAS A WELL EQUIPPED D IALYSIS UNIT PROVIDING TREATMENT AT SUBSIDIZED COST. 3(II) JALANDHAR, BEING THE HEART OF DOABA, HAS T HE HIGHEST NUMBER OF HOSPITALS IN THE CONTINENT, BUT PIMS STAN D OUT DUE TO ITS MEDICAL CARE AFFORDABILITY. THE MAIN AIM OF THE HOSPITAL IS TO PROVIDE TREATMENT TO ALL SECTIONS OF SOCIETY AT SUBSIDIZED RATES. THIS THOUGHT WAS NURTURED BY A GR OUP OF PROMOTERS WHICH INCLUDES VERY PROMINENT DOCTORS, BUSINESSMEN AND INDUSTRIALISTS. DR. APPA RAO MUKKAMALA, MD, FACR, CLINICAL PROFESSOR IN RADIOLOG Y IS A BOARD-CERTIFIED RADIOLOGIST AND HAS BEEN IN PRIVA TE PRACTICE IN FLINT, MICHIGAN (USA) FOR OVER 30 YEARS . HE IS ONE OF THE PRIME PROMOTERS OF THE HOSPITAL AND MEDI CAL COLLEGE. DR. SURESH ANNE, MD, FACP, FAAAAI, FACAAI, WHO PRACTICES ALLERGY AND CLINICAL IMMUNOLOGY IN FLINT, MI (USA)HAS A STANDING OF OVER 25 YEARS IN HIS FIELD. DR. DEVINDER MAHAJAN IS ALSO ONE OF THE PROMOTERS WHO I S A KNOWN PULMONARY SPECIALIST IN PULMONARY MEDICINE SI NCE 1980. 5 3(III) APART FROM DOCTORS, BRIGADIER (RETD) KULDIP SINGH CHANDPURI IS THE EXECUTIVE MEMBER OF PIMS MEDICAL A ND EDUCATION CHARITABLE SOCIETY. A DISTINGUISHED SOLDI ER, HE IS KNOWN FOR DISPLAYING CONSPICUOUS BRAVERY AND LEADER SHIP IN THE FACE OF ENEMY IN THE BATTLE OF LONGOWALA (RAJAS THAN) FOR WHICH HE WAS AWARDED THE NATION'S SECOND HIGHEST GA LLANTRY AWARD OF MAHA VIR CHAKRA, DURING THE INDO-PAK WAR 1 971. 4. OTHER IMPORTANT CONDITIONS REQUIRED TO BE F ULFILLED UNDER THE SOCIETIES REGISTRATION ACT, 1860: I) THE INCOME AND PROPERTY OF THE SOCIETY SHALL B E APPLIED SOLELY TOWARDS THE PROMOTION OF THE OBJECTS OF THE SOCIETY AS SET FORTH IN THE MEMORANDUM OF ASSOCIATION AND NO PORTION THEREOF, SHALL BE PAID O R TRANSFERRED DIRECTLY OR INDIRECTLY TO THE MEMBERS O F THE SOCIETY. II) THE SOCIETY BY ITS CONSTITUTION IS REQU IRED TO APPLY ITS. PROFITS, IF ANY OR OTHER INCOME IN PROMOTING ITS OBJECTS. III) IF UPON THE WINDING UP OR DISSOLUTION OF TH E SOCIETY, THERE REMAINS AFTER PAYMENT OF ITS DEBTS AND LIABILITIES, ANY PROPERTY WHATSOEVER, THE SAME SHALL NOT BE PAID TO OR DISTRIBUTED AMONG THE MEMBERS OF THE SOCIETY, BUT SHALL BE GIVEN OR/TRANSFERRED TO SOME OTHER INSTITUTION, HAVING OBJECTS SIMILAR TO THE OBJECTS OF THE SOCIETY, DETERMINED BY THE MEMBERS OF THE SOCIETY AT OR BEFORE THE TIME OF DISSOLUTION. 5. TEACHING/GENERAL HOSPITAL : THE CONCESSIONAIRE SHALL BE ABLE TO GENERATE REVEN UE FROM THE TEACHING/GENERAL HOSPITAL. PSP SHALL STRIC TLY 6 FOLLOW THE RATES OF PGIMER, CHANDIGARH AS AMENDED F ROM TIME TO TIME, FOR VARIOUS CATEGORIES OF SERVICES. 6. LD. 'AR' ALSO FILED A COPY OF REGISTRATION CERTIFICATE NO. 4004 OF 2009, VIDE ORDER DATED 29.01.2009 BY TH E REGISTRAR OF FIRMS & SOCIETIES, UT, CHANDIGARH (AT PAGE 54 OF THE PAPER BOOK). PAGE 55 OF THE PAPER BOOK CONT AINS RULES AND REGULATIONS OF THE SOCIETY WITH AIMS AND OBJECTIVES OF APPELLANT SOCIETY STATED THEREIN. THE AIMS AND OBJECTS, INTERALIA, INCLUDES TO START, ESTABLISH, RUN, TAKEO VER OR MANAGE AND MAINTAIN EDUCATIONAL INSTITUTIONS, SCHOO LS, COLLEGES, TECHNICAL EDUCATIONAL INSTITUTES IN ANY O NE OR MULTIPLE FIELDS OF ARTS, DESIGN, SCIENCE, MEDICAL, NURSING, DENTAL, PHARMACEUTICAL, PARA-MEDICAL, ENGINEERING, LAW, EDUCATION, MANAGEMENT, INFORMATION TECHNOLOGY, COMM ERCE OR ANY OTHER DISCIPLINE/SYSTEM OF EDUCATION, TO OPE N, RUN & MANAGE HOSPITALS, HEALTH CLUBS, HOSTELS, RECUPERATI ON CENTERS, ORPHANAGES, OLD PEOPLES HOMES, SHELTERS F OR NEEDY/POOR, SHELTERS FOR WIDOWS OR DESTITUTE WOMEN AND PROVIDE TRANSPORT FOR STUDENTS, FACULTY, PATIENTS O R STAFF ETC. 6(I) LD. 'AR' PLACED RELIANCE, ON THE DECISION, O F THE CHANDIGARH BENCH, IN ITA NO. 253/CHD/2011 DATED 31.05.2012 IN THE CASE OF SANDHYA EDUCATIONAL TRUST , SECTOR 37, CHANDIGARH V CIT-II, CHANDIGARH. HE ALSO PLACED RELIANCE ON THE DECISION, AS REPORTED IN 69 DTR 315 , IN THE CASE OF PINE GROVE INTERNATIONAL CHARITABLE TRUST V UNION OF INDIA & OTHERS (2010) 327 ITR 73 (P&H). 7 7. LD. 'DR', ON THE OTHER HAND, PLACED RELIANCE ON THE ORDER PASSED BY THE CIT. 8. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND THE RELEVANT RECORDS, AS ALSO THE J UDICIAL PRECEDENTS RELIED UPON BY LD. 'AR'. THE ASSESSEE A PPELLANT PIMS MEDICAL & EDUCATION CHARITABLE SOCIETY FILED A N APPLICATION DATED 16.09.2011, FOR REGISTRATION U/S 12A READ WITH SECTION 12AA OF THE ACT. THE COMPETENT AUTHOR ITY, CIT- II CHANDIGARH, MADE ENQUIRIES THROUGH AO AND THE AD DL.CIT TO VERIFY THE GENUINENESS OF SOCIETY AND ITS ACTIVI TIES. THE LD. CIT OBSERVED THAT THE SOCIETY IN QUESTION OBTAI NED REGISTRATION FROM THE REGISTRAR OF FIRMS & SOCIETIE S, UT CHANDIGARH, ON 29.01.2009, VIDE REGISTRATION NO. 40 04 OF 2009, AND IN THAT CERTIFICATE OF REGISTRATION, NO A DDRESS OF SOCIETY HAS BEEN RECORDED BY THE REGISTRAR. IN THE COURSE OF REGISTRATION PROCEEDINGS U/S 12A READ WITH SECTION 12AA OF THE ACT, THE APPELLANT SOCIETY FILED VARIOUS DOCUMENTS/PAPERS INCLUDING BALANCE SHEET, INCOME AN D EXPENDITURE STATEMENT, FOR THE PERIOD FROM 18.01.20 09 TO 31.3.2009 (A.Y. 2009-10), BALANCE-SHEET, INCOME AND EXPENDITURE STATEMENT, FOR THE PERIOD 01.04.2009 TO 31.3.2010 (A.Y. 2010-11). ON A SCRUTINY OF SUCH DOCUMENTS, CIT FOUND THAT AS PER BALANCE-SHEET FILE D FOR ASSESSMENT YEAR 2009-10 (FOR THE PERIOD 18.01.2009 TO 31.3.2009) UNDER THE HEAD GENERAL CORPUS, THE OP ENING BALANCE HAS BEEN SHOWN AS NIL WHILE DURING THE Y EAR THE ADDITION TO CORPUS HAS BEEN SHOWN AT RS.8,03,32,807 /-. THE CIT, FURTHER, OBSERVED THAT IN THE ASSESSMENT Y EAR 8 2010-11 (FOR THE PERIOD FROM 1.4.2009 TO 31.3.2010) THE CORPUS FUND OPENING BALANCE HAS BEEN SHOWN AT RS.8,01,23,338/- AND ADDITIONS DURING THE YEAR HAVE BEEN SHOWN AT RS.9,58,37,500/-, THUS, MAKING A TOTAL OF RS.17,59,60,838/- AS THE CORPUS FUND. THE CIT, FUR THER, OBSERVED THAT DURING THE YEAR, MASSIVE SECURED LOAN S, TO THE EXTENT OF RS.40,42,31,619/- HAS BEEN SHOWN AS TERM LOAN FROM ANDHRA BANK. THE UNSECURED LOANS HAD BEEN SHO WN FROM VARIOUS PARTIES AT RS.33,55,30,093/-. THE CIT OBSERVED THAT IN THE COURSE OF REGISTRATION PROCEED INGS BEFORE HIM, THE ASSESSEE DID NOT GIVE ANY PROPER EV IDENCE, REGARDING THE EXISTENCE/IDENTITY OF THE PERSONS STA TED TO HAVE MADE SUCH MASSIVE CONTRIBUTIONS TOWARDS THE CO RPUS FUND OF THE SOCIETY. THE CIT ALSO NOTICED AND OBSE RVED THAT NO PROOF HAS BEEN GIVEN REGARDING THE INVESTMENTS M ADE IN THE CORPUS FUND. THE CIT ALSO OBSERVED THAT TRUST/INSTITUTION IS REQUIRED TO FILE ITS ACCOUNTS FOR RELEVANT YEARS UNDER RULE 17(A), FOR THE PURPOSE OF ASCERTAI NING, WHETHER A GENUINE TRUST OR INSTITUTION WAS IN EXIST ENCE, FOR WHICH REGISTRATION IS SOUGHT. THE CIT OBSERVED THA T SUCH MASSIVE CONTRIBUTION FROM INDIVIDUALS/ENTITIES, WHO SE IDENTITY/EXISTENCE IS NOT BEYOND DOUBT, RAISED QUER Y, ON THE VERY IDENTITY OF THE SOCIETY AND ITS CHARITABLE PUR POSE. THE LD. CIT, REFERRED TO PARA 9.2 AND 8.3 OF CONCESSION AGREEMENT DATED 28.08.2009, AND HOLD THAT ACTIVITIE S OF THE SOCIETY CANNOT BE PERFORMED, IN ACCORDANCE WITH THE OBJECTS, FOR WHICH HAD BEEN SET UP, AND THE SAME HAS BEEN SE T UP FOR, THE PURPOSE OF CARRYING AND RUNNING THE INSTIT UTION, FOR 9 PROFIT AND ON COMMERCIAL LINES. THE CIT FOUND THAT IT IS NOT A CASE WHERE SOCIETY IS CARRYING ON CHARITABLE ACTI VITIES. LD. CIT, FURTHER, OBSERVED THAT VERACITY AND GENUINENES S OF THE SOCIETY IS IN DOUBT. AFTER REFERRING TO THE PROVIS IONS OF SECTION 12AA OF THE ACT, LD. CIT OBSERVED THAT IT C AN BE DEDUCED THAT THE PROJECT HAS NOT BEEN CONCEIVED OR DEVELOPED FOR CHARITY, INSTEAD, IT IS TO BE RUN ON ENTIRELY COMMERCIAL LINES. THE CIT, FURTHER, NOTICED THAT TH E SOCIETY, THOUGH ESTABLISHED AND INCORPORATED UNDER THE SOCIE TIES ACT, 1860, DOES NOT HAVE THE STATED PURPOSE OF NO PROFIT. IN THE FINAL ANALYSIS, FINDINGS OF THE CIT AS CONTA INED IN PARA 13 OF THE ORDER IS REPRODUCED HEREUNDER : 13. KEEPING IN VIEW THE ENTIRE CORRESPONDENCE AVAILABLE ON FILE, IT CAN BE UNAMBIGUOUSLY CONCLUDED THAT THE APPLICAN T SOCIETY HAS NOT PROVED ITS CASE THAT THE PROJECT IS TO BE R UN UNDER ITS NAME IN A CHARITABLE MANNER. IT HAS MISERABLY FAILED TO PROVE THE GENUINENESS OF ITS FINANCIAL ACTIVITIES. IT IS HEL D THAT THE SOCIETY HAS NOT BEEN CREATED WHOLLY FOR CHARITABL E 1 PURPOSES. THE APPLICANT SOCIETY HAS SQUARELY FAILED TO SATISFY THE UNDERSIGNED ABOUT THE OBJECTS OF THE INSTITUTION AN D THE GENUINENESS OF ITS ACTIVITIES WITH RESPECT TO CHARITABLE PURPOS E. AS SUCH, THE APPLICATION FILED BY THE APPLICANT SOCIETY FOR REGI STRATION U/S 12A VIDE ITS APPLICATION DATED 16.09.2011 STANDS REJECT ED U/S 12AA(L)(B)(II). 9. THE CIT, THUS, DECLINED REGISTRATION TO THE APPE LLANT U/S 12AA OF THE ACT. 10. A BARE PERUSAL OF THE IMPUGNED ORDER PASSED BY THE CIT(A) REVEALS THAT HE DID NOT APPRECIATE THE AMEND MENT EFFECTED TO THE DEFINITION OF CHARITABLE PURPOSE AS PROVIDED 10 U/S 2(15) OF THE ACT AND FIRST PROVISO THEREUNDER. IT APPEARS THAT LD. CIT(A) HAS APPLIED FIRST PROVISO TO SECTIO N 2(15) OF THE ACT WHILE CONSIDERING THE CASE OF REGISTRATION OF THE APPELLANT. IT IS THE SETTLED LEGAL PROPOSITION THA T FIRST PROVISO TO SECTION 2(15) IS NOT APPLICABLE TO THE F IRST FIVE CHARITABLE OBJECTS, SPECIFIED IN THE SAID DEFINITIO N OF CHARITABLE PURPOSE AND IS APPLICABLE TO THE LAST LIMB OF THE DEFINITION, I.E. ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY. 11. INCOME-TAX ACT 1961, PROVIDES THE INCLUSIVE DEF INITION OF THE TERM CHARITABLE PURPOSE UNDER SECTION 2(15 ) OF THE ACT. BY THE AMENDMENT TO SECTION 2(15), BY WAY OF INSERTION OF A PROVISO, TO THE DEFINITION OF CHARI TABLE PURPOSE BY THE FINANCE ACT, 2008, THE SCOPE OF THE EXPRESSION ADVANCEMENT OF ANY OTHER OBJECT OF GENE RAL PUBLIC UTILITY HAS BEEN RESTRICTED, AS IS EVIDENT FROM A BARE PERUSAL OF THE PROVISO REPRODUCED HEREUNDER: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTI VITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR AN Y ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO AN Y TRADE, COMMERCE OR BUSINESS FOR A CESS OR FREE OR A NY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SU CH ACTIVITY: PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT A PPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE 11 ACTIVITIES REFERRED TO THEREIN IS TEN LAKH RUPEES O R LESS IN THE PREVIOUS YEAR. 12. IN SIMPLE LANGUAGE, THE ACTIVITIES INCORPORATED IN THE NEWLY INSERTED PROVISO ARE EXCLUDED FROM THE DEFIN ITION OF CHARITABLE PURPOSE PROVIDED U/S 2(15) OF THE ACT A) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS B) ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO TRADE, COMMERCE OR BUSINESS C) IF FEE OR CESS OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF SUCH INCOME BY THE CONCERNED ENTITY. THE AFORESAID PROVISO WILL BE OPERATIVE FROM 1.4.2009 AND WILL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2009-10 AND SUBSEQUENT ASSESSMENT YEARS. 13. THE FINANCE MINISTER HAS AMENDED THE DEFINITIO N OF CHARITABLE PURPOSE PROVIDED UNDER SECTION 2(15) O F THE ACT BY THE FINANCE ACT,2008, WITH EFFECT FROM 1.4.2009, BY ADDING A PROVISO, TO THE SECTION OF JUST FIVE LINES , WHICH WILL AFFECT THE EXEMPTION OF CHARITABLE TRUSTS FOR ADVA NCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY VERY SUBSTANTIALLY. 14. IN PARA 180 OF THE BUDGET SPEECH, THE FINANCE MINISTER STATED AS FOLLOWS: CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THESE ACTIVITIES ARE TAX EXEMPT, AS THEY SHOULD BE. HOWEVER, SOME ENTITIES CARRYING ON REGULAR TRADE, COMMERCE OR BUSINESS OR PROVIDING SERVICES IN RELATION TO ANY TRADE COMMERC E OR BUSINESS AND EARNING INCOME HAVE SOUGHT TO 12 CLAIM THAT THEIR PURPOSE WOULD ALSO FALL UNDER CHARITABLE PURPOSE. OBVIOUSLY, THIS WAY NOT THE INTENTION OF PARLIAMENT AND, HENCE, I PROPOSE TO AMEND THE LAW TO EXCLUDE THE AFORESAID CASES. GENUINE CHARITABLE ORGANIZATIONS WILL NOT IN ANY WAY BE AFFECTED. 14(1) IT WILL, THUS, BE NOTED THAT THE INTENTI ON OF FINANCE MINISTER WAS ONLY TO EXCLUDE FROM EXEMPTION, ENTITI ES CARRYING ON BUSINESS AND EARNING INCOMES FOR WHICH EXEMPTION WAS CLAIMED ON THE BASIS THAT THE PURPOSE WOULD FALL UNDER CHARITABLE PURPOSE AS DEFINED IN THE LAS T LIMB OF THE DEFINITION U/S 2(15) OF THE ACT. 15. THE CENTRAL BOARD OF DIRECT TAXES HAS ISSUED TH E CIRCULAR NO.11/2008 DATED 19.12.2008, STATING THAT THE FOLLOWING IMPLICATIONS ARISE FROM THE AMENDMENT, THE NEWLY INSERTED PROVISO TO SECTION 2(15) WILL NOT APPLY IN RESPECT OF THE FIRST THREE LIMBS OF SECTION 2(15) I.E. RELIEF OF THE POOR, EDUCATION OR MEDICAL RELIEF. CONSEQUENTLY WHERE THE PURPOSE OF A TRUST OR INSTITUTION IS RELIEF OF THE POOR, EDUCATION OR MEDICAL RELIEF, IT WILL CONSTITUTE CHARITABLE PURPOSE, EVEN IF IT INCIDENTALLY INVOLVES THE CARRYING ON OF COMMERCIAL ACTIVITIES. THE CIRCULAR STATES FURTHER AS FOLLOWS: 3. THE NEWLY INSERTED PROVISO TO SECTION 2(15) WILL APPLY ONLY TO ENTITIES WHOSE PURPOSE IS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY I.E. THE FOURTH LIMB OF THE DEFINIT ION OF THE CHARITABLE PURPOSE CONTAINED IN SECTION 2(15). HENCE SUCH ENTITIES WILL NOT BE ELIGIBLE U/S 11 OR U/S 10(23C) OF THE ACT IF THEY CARRY ON 13 COMMERCIAL ACTIVITY. WHETHER SUCH AN ENTITY IS CARRYING ON AN ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS IS A QUESTION OF FACT WHICH WILL BE DECIDED BASED ON THE NATURE, SCOPE, EXTENT AND FREQUENCY OF THE ACTIVITY. 16. IT IS SETTLED PROPOSITION THAT REGISTRATION BY ITSELF WOULD NOT CONFER THE RIGHT TO EXEMPTION. THE REGIS TRATION IS GRANTED BY THE CIT U/S 12A READ WITH SECTION 12AA O F THE ACT, WHEREAS EXEMPTION IS GRANTED BY THE AO, ON THE SATISFACTION OF STATUTORY CONDITION AS LAID DOWN UN DER SECTION 11, 12 AND 13 OF THE ACT. FURTHER, AS PER SECTION 12AA(3) OF THE ACT, CIT IS COMPETENT TO CANCEL THE REGISTRATION OF AN ASSESSEE IF SATISFIED THAT ITS A CTIVITIES ARE NOT GENUINE. THE REGISTRATION U/S 12A READ WITH 12 AA, IS ONE OF THE CONDITIONS FOR EXEMPTION AND NOT THE ONL Y CONDITION FOR EXEMPTION. IN THIS SPECIFIC CONTEXT, THE CIT, IS REQUIRED TO APPRECIATE THE REAL ACTIVITIES AND OBJE CTS BUT NOT THE ENABLING POWERS TO ACHIEVE THE OBJECTS. 17. THE ASSESSEE RELIED ON THE DECISION, IN THE CAS E OF PINEGROVE INTERNATIONAL CHARITABLE TRUST V UNION OF INDIA (SUPRA), THE HON'BLE PUNJAB & HARYANA HIGH COURT WH ERE IT WAS HELD AS UNDER: EVEN AFTER THE NEW DISPENSATION FROM APRIL 1,1999, THE TEST OF PRE-DOMINANT OBJECT OF THE ACTIVITY CONTINU ES TO APPLY AS UNDER SECTION 1-(22) OF THE ACT. AS LONG AS AN INSTITUTION EXISTS SOLELY FOR EDUCATIONAL PURPOSES, IT WOULD QUALIFY FOR GRANT OF EXEMPTION U/S 10(23C)(VI ) OF THE ACT. MERELY BECAUSE PROFITS HAVE RESULTED FROM THE ACTIVITY OF IMPARTING EDUCATION, THAT WOULD NOT CHA NGE 14 THE CHARACTER OF THE INSTITUTION EXISTING SOLELY FO R EDUCATIONAL PURPOSE. AT THE INITIAL STAGE, WHEN THE APPLICATION FOR EXEM PTION IS FILED BY AN EDUCATIONAL INSTITUTION, THE SCOPE O F INQUIRY IS RESTRICTED ONLY TO ASCERTAINING THE GENUINENESS OF THE ACTIVITIES OF SUCH AN INSTITUTIO N. SUCH AN INQUIRY MAY EVEN EXTEND TO THE EXAMINATION OF ACCOUNTS OF THE INSTITUTION, APPLICATION OF ITS INC OME TO THE OBJECT AND PURPOSES OF EDUCATION AND THE OTHER COGNATE ASPECTS. ONCE ON THE BASIS OF GENUINENESS O F THE ACTIVITIES OF AN EDUCATIONAL INSTITUTION APPROV AL IS GRANTED FOR EXEMPTION THE WORDS NOT FOR THE PURPOSES OF PROFIT ACCOMPAN YING THE WORDS EXISTING SOLELY FOR EDUCATIONAL PURPOSES HAVE TO BE READ AND INTERPRETED IN VIEW OF THIRD PR OVISO TO SECTION 10(23C)(VI). 18. FURTHER, THE CIT FAILED TO BRING ANY COGENT MAT ERIAL ON RECORD TO SUBSTANTIATE HIS FINDING THAT IN CASES OF REGISTRATION UNDER THE SOCIETY ACT, ADDRESS OF THE SOCIETY IS MANDATORILY REQUIRED TO BE RECORDED. THE COMPETENT AUTHORITY, THE REGISTRAR HAS REGISTERED THE SOCIETY , AS INDICATED ABOVE, AND THE ASSESSEE SOCIETY IS CARRYI NG ON ITS ACTIVITIES AT JALANDHAR, ARE RELEVANT FACTORS TO SH OW THE GENUINENESS OF THE SOCIETY. THE CHANGE OF ADDRESS AND DIFFERENT ADDRESS FOR PROCURING LOANS FROM DIFFEREN T BANKS AT DIFFERENT PLACES HAS LED TO CONSTRUE THE SOCIETY AS NON- GENUINE, BY THE CIT IN THE FACE OF EXPLANATION, FIL ED BY THE ASSESSEE SOCIETY THAT SUCH ADDRESSES WERE CHANGED D UE TO UNAVOIDABLE EXIGENCY. SUCH CONCLUSION OF THE CIT I S NOT FOUNDED ON COGENT MATERIAL BROUGHT ON RECORDS. 15 19. AT THE TIME OF REGISTRATION PROCEEDINGS U/S 12A R.W. SECTION 12AA OF THE ACT, THE CIT IS STATUTORILY REQ UIRED TO EXAMINE AND SATISFY HIMSELF AS TO THE GENUINENESS O F THE ACTIVITIES OF THE TRUST OR INSTITUTION, CARRIED ON, IN CONSONANCE WITH ITS OBJECTS. THE OBJECTS OF THE TR UST OR INSTITUTION MUST CONFORM TO THE DEFINITION OF CHAR ITABLE PURPOSE AS DEFINED U/S 2(15) OF THE ACT. THE OBJEC TS OF THE ASSESSEE SOCIETY ARE COVERED BY THE DEFINITION CHA RITABLE PURPOSE AS PROVIDED U/S 2(15) OF THE OBJECT, AS TH E APPELLANT SOCIETY IS ENGAGED IN PROVIDING TECHNICAL EDUCATION AND MEDICAL RELIEF. THE FIRST PROVISO TO SECTION 2(15) OF THE ACT IS NOT APPLICABLE TO THE SOCIETY A S THE SAME COVERS THE LAST LIMB OF THE CHARITABLE PURPOSE, V IZ THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY, BEING LEGALLY SETTLED PROPOSITION. THE CIT HAS PRO CEEDED TO CONCLUDE THAT THE ACTIVITIES OF THE ASSESSEE SOCIET Y IS RUN ON COMMERCIAL LINE WITH PROFIT MOTIVE, IGNORING THE EX PRESS OBJECT OF PROVIDING MEDICAL FACILITIES ON THE LINE OF PGI, CHANDIGARH. THE TAINT OF COMMERCIALITY OR PROFITABI LITY IS COVERED BY THE FIRST PROVISO TO SECTION 2(15) OF TH E ACT. MERE EARNING OF SURPLUS INCOME IN CARRYING OUT CHAR ITABLE ACTIVITIES WITHIN THE MEANING OF SECTION 2(15) OF T HE ACT, WOULD NOT RENDER THE ACTIVITIES OF THE APPELLANT SO CIETY, AS NON-GENUINE, AND NON-CHARITABLE AS CONSTRUED BY THE LD. CIT, IN THE INSTANT CASE. THIS PROPOSITION IS FORT IFIED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF PINE GROVE INTERNATIONAL CHARITABLE TRUST (SUPRA). 16 20. THE SATISFACTION OF STATUTORY CONDITIONS OF SEC TIONS 11, 12 & 13 OF THE ACT, FOR THE PURPOSE OF GRANT OF REG ISTRATION U/S 12A R.W. SECTION 12AA OF THE ACT, ARE NOT RELEV ANT. HOWEVER, THE LD. CIT HEAVILY RELIED ON THE ISSUE OF CORPUS FUND AND SECURED LOANS, RAISED BY THE APPELLANT SOC IETY, IN CONCLUDING THE ACTIVITIES OF THE APPELLANT AS NON-G ENUINE. THE NATURE AND SOURCE OF CORPUS FUNDS AND SECURED L OANS ARE REQUIRED TO BE EXAMINED BY THE AO, IN THE LIGHT OF THE PROVISIONS OF SECTION 11, 12, 13 R.W. SECTIONS 2(24 ) (IIA) AND SECTION 15 BBC OF THE ACT. IT IS INCUMBENT UPON T HE CIT, TO DECIDE THE ISSUE OF GRANTING OR DECLINE OF REGIS TRATION, ONLY WITHIN STATUTORY PRECONDITIONS AS LAID DOWN U/ S 12A READ WITH SECTION 12AA OF THE ACT. NEEDLESS TO STA TE HERE THAT REGISTRATION PROCEEDINGS U/S 12A R.W. SECTION 12AA OF THE ACT BEFORE THE CIT, ARE NOT THE SAME AS ASSESSM ENT PROCEEDINGS BEFORE THE AO. BOTH THE PROCEEDINGS BEF ORE DIFFERENT REVENUE AUTHORITIES ARE DIFFERENT AND IN DEPENDENT, WITH DIFFERENT STATUTORY SUBJECT MATTER AND JURISDI CTION. FURTHER, THE GRANT OF REGISTRATION U/S 12AA OF THE ACT IS NOT IN ITSELF CONCLUSIVE AND THE SOLE STATUTORY CONDITI ON, FOR THE PURPOSE OF EXEMPTION OF INCOME OF THE TRUST OR THE INSTITUTION, AS STATUTORY CONDITIONS OF SECTION 11, 12 & 13 OF THE ACT ARE REQUIRED TO BE SATISFIED, FOR SUCH E XEMPTION. THEREFORE, GRANT OF REGISTRATION CONFERS MERELY ENT ITLEMENT TO SUCH EXEMPTION, ON SATISFACTION OF STATUTORY CON DITIONS PRESCRIBED UNDER OTHER RELEVANT PROVISIONS OF THE A CT. THE GRANT OF REGISTRATION U/S 12AA OF THE ACT, IS NOT E TERNAL IN NATURE, AS THE LEGISLATURE HAS PROVIDED SAFEGUARD U /S 17 12AA(3) OF THE ACT, TO PROTECT THE INTEREST OF REVE NUE AND THE CIT IS COMPETENT TO CANCEL SUCH REGISTRATION, I F HE IS SUBSEQUENTLY SATISFIED THAT ACTIVITIES OF THE TRUST OR INSTITUTION ARE NOT BEING CARRIED OUT, IN ACCORDANC E WITH ITS OBJECTS. IN THE PRESENT CASE, THE LD. CIT HAS REJE CTED GRANT OF REGISTRATION U/S 12A R.W. SECTION 12AA OF THE AC T, ON OBSERVATIONS NOT RELEVANT TO THE LEGISLATIVE INTENT , EMBODIED IN SUCH STATUTORY PROVISIONS. 21. IT IS INCUMBENT UPON THE CIT, WHILE CONSIDERING GRANTING OF REGISTRATION U/S 12AA OF THE ACT THAT H E SHOULD SATISFY HIMSELF ONLY ABOUT GENUINENESS OF ACTIVITIE S OF THE TRUST, IN ACCORDANCE WITH ITS OBJECTS AND NOT ABOUT CREDENTIAL, CAPACITY AND QUALIFICATION ETC. OF TRUS T AS HELD BY CHENNAI BENCH OF THE TRIBUNAL IN PRAYER FOR INDI A V ITO (2011) 7 ITR (TRIB) 201 (CHENNAI). IT IS HELD IN V IDHYA SIKSHAA EDUCATIONAL &CHARITABLE TRUST V CIT (2011) 111 ITR (TRIB) 236 (CHENNAI) THAT THE ACT SPECIFIES A METHODOLOGY WHERE ANONYMOUS RECEIPTS ARE RECEIVED B Y TRUST. SECTION 115BBC OF THE ACT SPECIFIES A METHOD FOR TAXING ANONYMOUS DONATIONS. THUS, EVEN IF THE TRUS TEES DIDNT HAVE THE WHEREWITHAL TO CONTRIBUTE THE SUMS MENTIONED AND EVEN IF SUCH DONATION WAS TREATED AS COMING FROM ANONYMOUS SOURCES, IT WOULD NOT BE REASON TO D ENY REGISTRATION U/S 12AA OF THE ACT. 22. IN VIEW OF THE ABOVE LEGAL AND FACTUAL DISCUSSI ONS, IT IS EVIDENT THAT THE ASSESSEE SOCIETY HAS FULFILLED STA TUTORY CONDITIONS, FOR GRANT OF REGISTRATION U/S 12A READ WITH 18 SECTION 12AA OF THE ACT, AS THE SOCIETY IS CARRYING OUT ITS ACTIVITIES, IN PURSUANCE OF ITS OBJECTS. THE OBSER VATION OF THE CIT THAT SOCIETY IS RUNNING ON COMMERCIAL LINES AND MAKING PROFIT, IS NOT ACCEPTABLE IN VIEW OF THE SET TLED LEGAL PROPOSITION THAT ELEEMOSYNARY ELEMENT IS NOT ESSEN TIAL FOR CHARITABLE PURPOSE, AS THE DEFINITION OF CHARITABL E PURPOSE HAS BEEN STATUTORILY DEFINED U/S 2(15) OF THE ACT A ND JUDICIALLY INTERPRETED BY THE COURTS. TO PROVIDE SO METHING MORE FOR NOTHING OR FOR LESS THAN IT COSTS OR LESS THAN ITS ORDINARY VALUE, IS NOT CONTEMPLATED UNDER THE DEFIN ITION OF CHARITABLE PURPOSE AS PROVIDED U/S 2(15) OF THE A CT. ACCORDINGLY, CIT IS DIRECTED TO PASS CONSEQUENTIAL ORDER, GRANTING REGISTRATION TO THE ASSESSEE APPELLANT U/S 12AA OF THE ACT. 23. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON OCT.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30 TH OCT.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH