Assistant Commissioner of Income-tax, Jalandhar V. M/s. Punjab Institute of Medical Sciences, Jalandhar

ITA 515/ASR/2009

• Counselvise Citation: 51520914 RSA 2009
• Duration Of Justice: 4 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-11-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 08-12-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: Y K SUD
• Keywords: Business income; Charitable institution; Principle of natural justice; Maximum Marginal Rate; Bonafide belief; Source of fund; Valuation report; Assessment record; Capital receipt; Benefit of exemption; Cancellation of registration; Capital expenditure
• Section: 143(3); 12A; 12AA; 56; 63; 144; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P. JAIN, ACCOUNTANT MEMBER I.T.A. NO. 504(ASR)/2009 ASSESSMENT YEAR: 2006-07 PAN: AAABP0193P M/S. PUNJAB INSTITUTE OF VS. DY. COMMISSIONER OF INCOME MEDICAL SCIENCES, GARHA TAX, RANGE-III, JALANDHA R ROAD, JALANDHAR CITY (APPELLANT) (RESPONDENT) AND I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 PAN: AAABP0193P ASSTT. COMMISSIONER OF INCOME VS. M/S. PUNJAB INSTITUTE OF TAX, RANGE-III, JALANDHAR MEDICAL SCIE NCES, GARHA ROAD, JALANDHAR CITY (APPELLANT) (RESPONDENT) ASSESSEE BY: SH. Y.K. SUD, CA DEPARTMENT BY: SH. MAHAVIR SINGH, SR. DR DATE OF HEARING: 27.11.2013 DATE OF PRONOUNCEMENT: 31.12.2013 ORDER PER BENCH 1. THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE AGAINST THE IMPUGNED ORDER DATED 25.09.2009 PASSED BY LEARNED 2 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 CIT(A), JALANDHAR, FOR THE ASSESSMENT YEAR 2006-07 . THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE IN I.T.A. NO. 504(ASR)/2009 A RE AS UNDER: I. THAT THE CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF RS. 6.50 CRORES OUT OF THE TOTAL THE TOTAL ADDITION OF RS. 25 CRORES MADE BY THE A.O. ON ACCOUNT OF CAPITAL RECEIPTS. II. THAT WHILE SUSTAINING THE ABOVE ADDITION THE CIT(A) HAS IGNORED THE FACT THAT CAPITAL RECEIPTS AS ADMITTED BY HIM AND T HE A.O. CANNOT BE BROUGHT TO TAX. HENCE THE ADDITION SUSTAINED BY CIT (A) DESERVES TO BE DELETED. III. THAT THE CIT(A) WAS NOT JUSTIFIED IN TREATING RS. 1 0 CRORES RECEIVED BY THE ASSESSEE DURING THE YEAR OUT OF THE TOTAL RS . 25 CRORES AS ASSISTANCE RECEIVED FROM THE CENTRAL GOVERNMENT AS INCOME AS THE SAME WAS CLEARLY A LOAN GRANTED BY THE CENTRAL GOVE RNMENT. IV. THAT THE CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE OF RS. 1004252/- OUT OF RS. 1098101/- MADE BY THE A.O. ON ACCOUNT OF RUNNING OF VEHICLES ON THE ON THE GROUND THAT EXPEN DITURE WAS EXCESSIVE AND NOT FOR THE PURPOSE OF THE TRUST. V. THE ORDER OF THE CIT(A) AND A.O. IS AGAINST LAW AND FACTS OF THE CASE. 2. GROUNDS OF APPEAL RAISED BY THE REVENUE IN I.T .A. NO. 515(ASR)/2009 ARE AS UNDER: I. THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS ) HAS ERRED IN RESTRICTING THE DISALLOWANCE AT RS. 10,04,252/- OUT OF TOTAL DISALLOWANCE OF RS. 10,98,101/- MADE ON ACCOUNT OF EXPENDITURE OF VEHICLE. II. THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS ) HAS ERRED IN RESTRICTING THE ADDITION AT RS. 6.5 CRORE OUT OF TO TAL ADDITION OF RS. 25 CRORE MADE ON ACCOUNT OF CAPITAL RECEIPTS WHICH WA S CLAIMED EXEMPT BY THE ASSESSEE FIRM. III. THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS ) HAS ERRED IN DELETING THE ADDITION OF RS. 1,72,80,372/- MADE BY DISALLOWING INTEREST, CLAIMED EXEMPT. 3 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 IV. THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS ) HAS ERRED IN DELETING THE ADDITION OF RS. 36,000/- MADE BY DISAL LOWING OTHER RECEIPTS WHICH WERE CLAIMED EXEMPT. V. IT IS PRAYED THAT THE ORDER OF THE LEARNED COMMISSI ONER OF INCOME TAX(APPEALS) BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. VI. THE APPELLANT REQUESTS FOR LEAVE TO ADD OR AMEND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED O F. 3. THE FACTS RELATING TO THE ISSUES INVOLVED IN THE PRESENT APPEALS ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME AT RS. NIL AFTER CLAIMING EXEMPTION UNDER SECTION 11 OF THE INCOME TAX ACT, 1 961 (HEREINAFTER REFERRED TO AS THE ACT). THE ASSESSEE HAS ALSO FI LED ITS AUDIT REPORT WITH THE RETURN. THE ASSESSING OFFICER PROCESSED THE CASE OF ASSESSEE UNDER SECTION 143(1)(A) OF THE ACT ON 09.03.2007 AND LATER ON, SE LECTED THE CASE OF ASSESSEE FOR SCRUTINY BY ISSUING NOTICES UNDER SECT IONS 143(3)/142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WHICH WAS SERVED UPON THE ASSESSEE AND IN COMPLIANCE OF THE SAME, THE AUTHORIZED REPRESENTATI VE OF THE ASSESSEE APPEARED IN THE ASSESSMENT PROCEEDINGS FROM TIME TO TIME AND FURNISHED THE INFORMATIONS, WHICH WERE PART OF ASSESSMENT RECORD. THE ASSESSING OFFICER EXAMINED THE INFORMATIONS FURNISHED BY THE ASSESSEE AND ISSUED SHOW CAUSE NOTICE ON 08.12.2008 FIXING THE CASE FOR 15.12.2008 AND IN RESPONSE TO THE SAME, THE ASSESSEE FILED ITS REPLY ON 19.12.2008. T HE ASSESSING OFFICER THOROUGHLY EXAMINED THE REPLY FILED BY THE ASSESSEE ON 19.12.2008 AND 4 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 ISSUED A SHOW CAUSE NOTICE, WHICH WAS SERVED UPON T HE ASSESSEE ON 24.12.2008 FOR 26.12.2008, WHICH THE ASSESSING OFFI CER HAS REPRODUCED AT PAGE NO. 2 OF THE ASSESSMENT ORDER AND MAINLY ASKED THE ASSESSEE THAT THE ACTIVITIES OF THE ASSESSEE ONLY CONSTRUCTING THE BU ILDING FOR A PERIOD OF MORE THAN A DECADE WITHOUT AN IOTA OF EFFORTS IN THE DIR ECTION OF PURPOSES FOR WHICH IT IS CONSTRUCTED, THEN THIS ACTIVITY ALSO EN TERS THE DARK ZONE OF NOT ONLY DOUBT BUT OF CONFIRMATION OF THE FACT THAT THE MAIN PURPOSES AND OBJECTS FOR ITS CONSTRUCTION ARE NOT ONLY SECONDARY , BUT DUMPED INTO COLD CHAMBER OF NON-ACTION AND PUTTING THE LOFTY OBJECTS OF THE TRUST INTO SUCH CHAMBER WAS PERHAPS NOT THE PURPOSE OF FORMATION OF SOCIETY/TRUST AND ABOVE ALL ITS REGISTRATION UNDER THE INCOME TAX ACT , 1961 BY THE CIT, CHANDIGARH. THE ASSESSING OFFICER HELD THAT THE TRU ST IS NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT FOR THE YEAR UNDER ASSESSMENT. THE ASSESSING OFFICER, IN PARA NO. 4 AT PAGE 3, CONFRON TED WITH THE NEWSPAPERS REPORT DATED 20.12.2008 IN THE HINDUSTAN TIMES OF 2 1.12.2008, IN WHICH THE OPPOSITION PARTIES LED BY CONGRESS ASKED CHIEF MINI STER SH. PRAKASH SINGH BADAL TO JUSTIFY THE DECISION TO STRIKE A LEASE OU T DEAL DESPITE THE PUNJAB INSTITUTE OF MEDICAL SCIENCES (PIMS) CAPACITY TO G ENERATE RS. 350 CRORE ON ITS OWN. THE ASSESSING OFFICE REPRODUCED THE NEWS I TEM AT PAGE NO. 4 AND 5 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 5 OF THE ASSESSMENT ORDER AND ASKED THE ASSESSEE FO R ITS DEFENCE ON 26.12.2008 AT 11 A.M. THE ASSESSING OFFICER THOROUG HLY EXAMINED THE REPLY FILED BY THE ASSESSEE ON 19.12.2008 BY DISTINGUISHI NG THE CITATION CITED BY THE ASSESSEE IN ITS REPLY AND WAS OF THE VIEW THAT WHETHER THERE IS A SINCERE MOVE IN THE DIRECTION OF THE MAIN OBJECTS CONTAINED IN CLAUSE 3.I.A TO 3.I.T OF THE MOA-ATTAINMENT OF WHICH WILL FOLLOW AS A RESULT OF SUCH SINCERE MOVES/KARAM- HAS BEEN MADE AND EXECUTED. WITHOUT MO VING IN THE DIRECTION OF THE ACTIVITY ZONE OF THE MAIN OBJECTS- WITH THE ONLY EXCEPTION OF THE CONTRIBUTORY PRELIMINARY OBJECT OF CONSTRUCTION OF BUILDING FROM 10.10.94 TO 31.03.06 TO BE USED- BUT NEVER USED NOR LIKELY TO BE USED- BUT NEVER USED NOR LIKELY TO BE USED EVER FOR THE MAIN AND REAL OBJECTS. THE STAGE APPEARS TO HAVE BEEN SET FOR AUCTION OF THE A SSETS OF THE TRUST/SOCIETY, IF NEWSPAPERS REPORTS OF INDIAN EXPRESS AND HINDUST AN TIMES DATED 11.11.2008 AND 21.12.2008 ARE ANY INDICATION. THE A SSESSING OFFICER ALSO OBSERVED AT PAGE 7 IN HIS COMMENTS THAT THE OBSERVA TIONS IN THE PRECEDING SENTENCE ARE JUST FOR THE SAKE OF CREATING THE SCEN ARIO AS IT EXISTS AT THE TIME OF FRAMING THIS ORDER. THESE OBSERVATIONS ARE NOT U SED AT ALL AS ANY EVIDENCE FOR ARRIVING AT THE CONCLUSION OF ASSESSMENT PROCEE DINGS AND VIEW TAKEN OF 6 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 THE FACTS COLLECTED FOR DECIDING THE ISSUE OF CLAIM OF THE ASSESSEE TRUST FOR EXEMPTION UNDER SECTION 11 OF THE ACT ON MERITS ONL Y. 4. AFTER CONSIDERING THE REPLY FILED BY THE ASSESSE E ALONG WITH DOCUMENTARY EVIDENCE AS WELL AS BY DISTINGUISHING T HE CASE LAWS RELIED UPON BY THE ASSESSEE, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAS NOT GIVEN ANY PLAUSIBLE REASON FOR THE DELAY OF 8 YEARS IN STARTING THE CONSTRUCTION OF BUILDING FROM 10.10.19 94 TO 2002 AND THE ASSESSEE HAS USED THE WHOLE OF THE FUNDS FOR THE PU RPOSE OF PLANNING AND CONSTRUCTING THE BUILDING DURING THE PERIOD OF MORE THAN 14 YEARS TILL DATE AND FOR 11 YEARS 5 MONTHS AND 22 DAYS TILL THE CLO SE OF THE FINANCIAL YEAR ON 31.03.2006, RELEVANT FOR THE YEAR UNDER ASSESSMENT. A SUM OF RS. 45,73,347/- IS SPENT ON SALARIES/ESTABLISHMENT/OFFI CE EXPENSES FOR THE YEAR UNDER ASSESSMENT. THERE IS NO TRACE OF THE MAIN OBJ ECTS FOR WHICH THE TRUST/SOCIETY WAS FORMED ON 10.10.1994. IT IS APPAR ENT AS IF THE CONSTRUCTION OF BUILDING WAS THE ONLY OBJECT DURING THE WHOLE PE RIOD AT A COLOSSAL COST OF RS. 956/- PER SQ. FT., UNHEARD OF IN ANY VALUATION REPORT FURNISHED BY THE GOVERNMENT VALUER OF THE DEPARTMENT IN RESPECT OF E VEN PALATIAL BUNGALOWS. AND THEREFORE THE ASSESSEE-TRUST IS ENTITLED FOR EX EMPTION UNDER SECTION 11 OF THE ACT ON THE IMPUGNED CLAIM AS EXEMPTED BY THE ASSESSEE TRUST. THE 7 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 ASSESSING OFFICER ALSO MADE THE ADDITION OF RS. 10, 98,101/-, WHICH THE ASSESSEE HAS INCURRED ON RUNNING THE VEHICLE DURING THE ASSESSMENT YEAR IN DISPUTE AS COMPARED TO TOTAL EXPENSES OF RS. 20,84, 373.76/- FOR THE PERIOD FROM 10.10.94 TO 31.03.05 ON ACCOUNT OF NON-FURNISH ING OF REQUIRED INFORMATION BY THE ASSESSEE. IN THE END, THE ASSESS ING OFFICER HAS HELD THAT THE ASSESSEE-TRUST HAS NOT APPLIED ANY PART OF THE INCOME OF THE YEAR FOR CHARITABLE PURPOSES AND AS SUCH DOES NOT DESERVE EX EMPTION OF ITS INCOME FOR THE YEAR UNDER ASSESSMENT AND HE REJECTED THE C LAIM OF THE ASSESSEE AND INITIATED THE PROCEEDINGS UNDER SECTION 271(1)(C) O F THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME FOR THE ASSESSMENT YEAR IN DISPUTE AND MADE THE ADDITION OF RS. 1,72,80,372/- FOR INTEREST INCOME; RS. 36,282/- FOR OTHER RECEIPTS; RS. 25,00,00,000/- FOR CAPITAL RECE IPTS; RS. 1,00,00,000/- FOR EXCESS DEPOSITS WITH CAPITAL LOCAL AREA BANK, JAL; AND RS. 10,98,101/- FOR EXPENSES ON VEHICLES; TOTALING RS. 27,84,14,760/- AND COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT ON 30.12 .2008. 5. AGGRIEVED BY THE ASSESSMENT ORDER DATED 30.12.20 08, THE ASSESSEE FILED AN APPEAL BEFORE LEARNED CIT(A), JALANDHAR, W HO VIDE IMPUGNED ORDER DATED 25.09.2009, PARTLY ALLOWED THE APPEAL. NOW, T HE ASSESSEE BEING AGGRIEVED WITH THE IMPUGNED ORDER, FILED THE PRESEN T APPEAL I.E. I.T.A. NO. 8 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 504(ASR)/2009 ON THE ADDITIONS MENTIONED IN THE GRO UNDS OF APPEAL, AND THE REVENUE HAS ALSO FILED THE CROSS APPEAL I.E. I.T.A. NO. 515(ASR)/2009 ON THE DELETION MADE BY THE LEARNED CIT(A), JALANDHAR, AS MENTIONED BY THE REVENUE IN THE GROUNDS OF APPEAL IN ITS CROSS APPEA L. 6. AT THE TIME OF HEARING, LEARNED AUTHORIZED REPRE SENTATIVE OF THE ASSESSEE DREW OUR ATTENTION TOWARDS WRITTEN SUBMISS ION FILED BY HIM. FOR THE SAKE OF CONVENIENCE, THE CONTENTIONS RAISED BY THE ASSESSEE IN THE WRITTEN SUBMISSION ARE REPRODUCED AS UNDER: THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH A MRITSAR IN RE: M/S. PUNJAB INSTITUTE OF MEDICAL VS. D.C.I .T. SCIENCES, JALANDHAR JALANDHAR (APPELLANT) (RESPONDENT) A.C.I.T. VS. PUNJAB INSTITUTE OF MEDICAL CIRCLE-III, JALANDHAR SCIENCES, JALANDHAR (APPELLANT) (RESPONDENT) ITA NO. 515(ASR)/09 ASST. YEAR: 2006-07 DATE OF HEARING: 11.02.2013 MOST RESPECTFULLY SUBMITTED AS UNDER: 1. THAT THE ABOVESAID APPEAL WAS HEARD BY THE HON'BLE BENCH ON 31.12.2012 AND AFTER THE COMPLETION OF THE HEARING A DIRECTION WAS GIVEN BY THE HON'BLE BENCH TO FILE THE WRITTEN SUBMISSIONS WHICH ARE BEING SUBMITTED IN FOLLOWING PARAS: 2. BRIEF FACTS 9 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 I. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLA NT TRUST WAS FORMED AS A SOCIETY BY THE GOVT. OF PUNJAB ON 10.10.1994 AND IT WAS REGISTERED WITH REGISTRAR OF SOCIETIES VIDE REGISTRATION CERTIFICAT E NO. 916 OF 94-95 THE COPY OF MEMORANDUM OF ASSOCIATION AND THE RULES AND REGULATIONS IS BEING ENCLOSED HEREWITH AS ANNEXURE A PAGE NO. 8 TO 32. THE SOCIETY WAS REGISTERED WITH THE MAIN OBJECT OF ESTA BLISHING TO CARRY ON THE ADMINISTRATION AND MANAGEMENT OF PB. INSTITUTE OF MEDICAL SCIENCES, JALANDHAR. THE OBJECTS AND THE FUNCTIONS OF THE SOCIETY ARE DULY REFLECTED IN THE MEMORANDUM OF ASSOCIATION FRO M PAGE 9 TO 12. THE SOCIETY IS FORMED UNDER THE CHAIRMANSHIP OF CHI EF MINISTER OF PUNJAB WITH HEALTH MINISTER AS VICE CHAIRMAN, CHIEF SECRETARY AND OTHER GOVERNMENT OFFICIALS AS MEMBERS WHO ARE REFLE CTED WITH MEMORANDUM OF ASSOCIATION FROM PAGE 13 TO 14. II. THE SOCIETY IS REGISTERED WITH THE REGISTRAR OF SOCIETIES AND THE CERTIFICATE OF REGISTRATION IS AVAILABLE ON PAPER B OOK, PAGE NO. 6. FURTHER THE SOCIETY IS REGISTERED U/S 12AA OF THE I NCOME TAX ACT, 1961 WITH THE CIT AND THE REGISTRATION CERTIFICATE IS AV AILABLE ON PAGE NO. 7 OF THE PAPER BOOK. III. THE ASSESSEE HAS BEEN FILING ITS RETURN OF INC OME IN THE STATUS OF A REGISTERED CHARITABLE TRUST AT NIL INCOME WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT TILL ASSESSMENT YEAR 2006-07 WHICH I S THE YEAR UNDER APPEAL. IV. THUS THE MAIN OBJECTIVE OF THE TRUST WAS TO EST ABLISH 500 BEDDED HOSPITAL AND MEDICAL COLLEGE FOR 100 STUDENTS FOR W HICH THE GOVERNMENT TRANSFERRED LAND MEASURING 104 ACRES AND 5 KANALS TO THE SOCIETY AFTER PAYING COMPENSATION OF RS. 15 CRORES TO PB. AGRICULTURE UNIVERSITY. THE CONSTRUCTION OF THE HOSPITAL STARTE D IN THE YEAR 2001. 3. WHILE FRAMING THE ASSESSMENT THE A.O. IN PARA 2 OF PAGE 3 HAS GIVEN A FINDING THAT SINCE THE TRUST HAS ONLY BEEN CARRYING ON CONSTRUCTION OF THE BUILDING ALTHOUGH THE SAME IS CHARITABLE IN NATURE BUT SINCE CONSTRUCTION WAS GOING ON FOR A LONG PERIOD, THEREFORE HE HELD T HAT THE TRUST WAS NOT ELIGIBLE FOR EXEMPTION U/S 11 FOR THE YEAR UNDER AS SESSMENT. THUS HE TRIED TO INTERFERE INTO THE REGISTRATION GRANTED BY THE C IT TO THE TRUST AS A CHARITABLE TRUST. 4. IN PARA 3 & 4 ON PAGES 3,4,5 & 6 OF THE ASSESSMENT ORDER THE A.O. HAS REPRODUCED CERTAIN NEWSPAPER REPORTS CONDEMNING THE ESTABLISHMENT OF PIMS WHICH ALTHOUGH HAS NO RELEVANCE TO THE CASE OF THE ASSESSEE. THESE NEWSPAPER REPORTS HAS NO MEANING IN THE EYES OF LAW AND CANNOT BE USED AS ANY KIND OF EVIDENCE AS PER THE SETTLED LAW. HOW EVER ON PAGE NO. 7 OF THE ASSESSMENT ORDER UNDER THE HEADING A.O. COMMENT S THE A.O. HAS 10 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 HIMSELF ADMITTED THAT HE IS NOT TAKING ANY COGNIZAN CE TO THESE NEWSPAPER REPORTS AND HIS OBSERVATIONS ARE REPRODUCED AS BELO W: THE STAGE APPEARS TO HAVE BEEN SET FOR AUCTION OF THE ASSETS OF THE TRUST/SOCIETY, IF NEWSPAPER REPORTS OF INDIAN EXPRE SS AND HINDUSTAN TIMES DATED 11.11.2008 AND 21.12.2008 ARE ONLY INDICATION , OBSERVATIONS IN THE PROCEEDING SENTENCE ARE JUST FOR THE SAKE OF CREATI NG THE SCENARIO AS IT EXISTS AT THE TIME OF FRAMING THIS ORDER. THESE OBS ERVATIONS ARE NOT USED AT ALL AS ANY EVIDENCE FOR ARRIVING AT THE CONCLUSION OF ASSESSMENT PROCEEDINGS AND VIEW TAKEN OF THE FACTS COLLECTED F OR DECIDING THE ISSUE OF CLAIM OF THE ASSESSEE TRUST FOR EXEMPTION U/S 11 OF THE INCOME TAX ACT, 1961 ON MERITS ONLY. THE A.O. IN PARA 9 PAGE 11 HAS SUMMED UP HIS FINDIN GS THAT THE SOCIETY HAS NOT APPLIED ANY PART OF ITS INCOME FOR CHARITAB LE PURPOSE AND AS SUCH DOES NOT DESERVE EXEMPTION OF ITS INCOME FOR THE YE AR UNDER ASSESSMENT. THEREAFTER THE A.O. ADDED ALL THE RECEIPTS OF THE T RUST CAPITAL AS WELL AS REVENUE AND DETERMINED THE ASSESSEE INCOME AS 27,84 ,14,760/-. 5. FROM THE ABOVE IT IS CLEAR THAT ALTHOUGH THE A.O. HAS NOT DISPUTED THAT DURING THE YEAR THE ASSESSEE HAS UTILIZED ITS FUND S ON THE CONSTRUCTION OF THE HOSPITAL AND MEDICAL COLLEGE WHICH EVEN HE ADM ITTED THAT CONSTRUCTION IS CHARITABLE IN NATURE BUT STILL HE TREATED ALL TH E FUNDS AS INCOME ON THE PRETEXT THAT ASSESSEE HAS TAKEN A LONG TIME TO CONS TRUCT THE HOSPITAL AND MEDICAL COLLEGE AND IS YET TO START ITS MEDICAL ACT IVITIES. 6. AN APPEAL BEFORE CIT(A) WAS FILED AGAINST THE ACTIO N OF THE A.O. AND HIS OBSERVATIONS THAT CONSTRUCTION OF HOSPITAL AND MEDI CAL COLLEGE BUILDING ALTHOUGH CHARITABLE IN NATURE BUT STILL THE ASSESS EE CANNOT BE GIVEN EXEMPTION U/S 11, SINCE THE CONSTRUCTION WAS TAKING A LONG TIME. 7. THE CIT(A) REPRODUCED THE WRITTEN SUBMISSIONS OF TH E ASSESSEE IN THIS REGARD IN PARA 2.1 FROM PAGE 3 TO 7 OF HIS ORDER W HICH MAY KINDLY BE REFERRED TO IN PARA 2.1 ON PAGE 7 TO 13 HE HAS REPR ODUCED THE COMMENTS OF THE A.O. AND ONE PECULIAR FACT IS THAT THE A.O. HAS ADMITTED THAT THE OBJECTS FOR WHICH THE SOCIETY IS ESTABLISHED ARE TO ESTABLI SH LAND CARRY ON THE ADMINISTRATION AND MANAGEMENT OF PIMS JALANDHAR. FU RTHER, HE HAS REFERRED TO THE VARIOUS CHARITABLE FUNCTION OF THE SOCIETY IN HIS COMMENTS. THE REJOINDER TO A.O.S COMMENTS WAS ALSO FILED BY THE ASSESSEE WHICH HAVE BEEN REPRODUCED BY THE CIT(A) IN PARA 2.3 TO 2 .14 ON PAGE 13 TO 16 OF THE CIT(A) ORDER. 8. THE CIT(A) HAS GIVEN HIS FINDINGS IN THIS REGARD ON PAGE 18 OF HIS ORDER AND HAS GIVEN A CLEAR FINDING THAT ONCE A COMMISSIO NER HAS GRANTED A 11 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 REGISTRATION U/S 12AA BY LOOKING INTO THE OBJECTS O F INSTITUTIONS AND ITS GENUINENESS OF ACTIVITIES THE INSTITUTION IS ELIGIB LE OF EXEMPTION U/S 11. HE FURTHER RELIED ON THE ORDER OF THE HON'BLE SUPREME COURT IN ACIT VS. SURAT CITY GYMKHANA, REPORTED IN 300 ITR 214 (COPY ENCLOSED) PAGE NO. 33 TO 35 WHICH WAS CITED BEFORE HIM BY THE ASSESSEE IN THIS REGARD AND THEREAFTER IN THE LAW LINES OF PARA 3.2 HE GAVE A F INDING THAT: THE HON'BLE SUPREME COURT HAS ALSO HELD IN THE CAS E OF ACIT VS. SURAT CITY GYMKHANA 300 ITR 214(SC) THAT REGISTRATION U/S 12A WAS FAIT ACCOMPLI TO HOLD THE A.O. BACK FROM FURTHER PROBE I NTO THE OBJECTS OF THE TRUST. CONSIDERING THE FACTS OF THE CASE AND THE DE CISIONS DISCUSSED ABOVE, I HOLD THAT A.O. IS PRECLUDED FROM EXAMINING THE EL IGIBILITY OF THE TRUST OR INSTITUTION FOR EXEMPTION U/S 11, THOUGH HE MAY EXA MINE IF THE INCOME HAS BEEN APPLIED FOR CHARITABLE PURPOSE. IN PARA 3.3 THE CIT(A) HAS FURTHER OBSERVED THAT T HE A.O. MAY AND SHOULD EXAMINE DURING ASSESSMENT IF ANY OF THE CONDITIONS OF SECTION 13 WERE ATTRACTED SO AS TO DENY EXEMPTION TO THE ASSESSEE I N FULL OR PART OF ITS INCOME. THE A.O. HAS NOT INVOKED SECTION 13 IN THE ASSESSMENT ORDER. THE A.O. HAS HELD THAT THE ASSESSEE HAD NOT APPLIED ANY PART OF ITS INCOME FOR CHARITABLE PURPOSES AND AS SUCH DID NOT DESERVE EXE MPTION (THOUGH HE HAS MENTIONED IN THE ASSESSMENT ORDER THAT CONSTRUCTION OF THE BUILDING WAS A CHARITABLE ACTIVITY) 9. IT WAS ARGUED BEFORE THE CIT(A) THAT FOR IMPARTING MEDICAL EDUCATION BY SETTLING UP A MEDICAL COLLEGE AND FOR GIVING MEDICA L TREATMENT ESTABLISHMENT OF THE HOSPITAL WAS REQUIRED. THEREF ORE, THE TRUST HAD TO CONSTRUCT A BUILDING FOR IMPARTING SUCH EDUCATION A ND FOR PROVIDING MEDICAL FACILITIES. THE ASSESSEE IN THIS REGARD REL IED UPON THE FOLLOWING JUDGMENTS OF SUPREME COURT AND VARIOUS HIGH COURTS WHICH AGAIN THE ASSESSEE IS RELYING UPON BEFORE THE HON'BLE BENCH T HAT ACQUIRING OF LAND AND CONSTRUCTION OF BUILDING FOR CARRYING OUT THE C HARITABLE OBJECTS OF THE TRUST/INSTITUTIONS, AMOUNTS TO APPLICATION OF FUNDS FOR CHARITABLE PURPOSES: A. 230 ITA 636 CIT VS. SRM MCT M. TIRUPPANI TRUST (COPY OF PAGE 1- 8 OF COMPENDIUM OF JUDGMENTS) B. 234 CTR (ALL)197 CIT VS MOOL CHAND SHARBATI DEV I HOSPITAL TRUST (COPY ALREADY FILED) C. 242 ITR 457(KARNATAKA) CIT VS. JANAMBHOOMI PR ESS TRUST (COPY ENCLOSED) PAGE NO. 36 TO 37. 12 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 D. 29 ITR 535 DIT(EXEMPTIONS) VS. ETERNAL SCIENC ES OF MORIS SOCIETY (COPY ENCLOSED) PAGE NO. 38 TO 40. E. 328 ITR (DELHI) 551 DIT(EXEMPTIONS) VS. MAHAR AGA AGGRSEN TECHNICAL EDUCATION SOCIETY (COPY ENCLOSED) PAGE NO . 41 TO 46. F. 150 TTJ(CHD) 877 SANDHYA EDUCATIONAL TRUST VS. CIT (COPY ENCLOSED) PAGE NO. 47 TO 61 10. THE CIT(A) IN PARAS 4.3 TO 4.9 ON PAGE 20 TO 22 OF HIS ORDER HAS GIVEN A FINDING IN PARA 4.9 THAT BASED ON THE DISCUSSIONS A BOVE IT IS HELD THAT APPELLANT IS ELIGIBLE FOR EXEMPTION FOR ITS INCOME UNDER THE PROVISIONS OF SEC. 11 OF THE ACT AND IT IS ENTITLED TO EXEMPTION U/S 11(1A) IN RESPECT OF THE EXPENDITURE INCURRED FOR CONSTRUCTION OF THE IN STITUTE OF BUILDING. 11. THE LEARNED DR HAD ARGUED THAT AS PER THE NEWSPAPER REPORT MENTIONED IN ASSESSMENT ORDER THE ORDER OF THE A.O. DESERVES TO BE SUSTAINED, IN THIS REGARD IT IS SUBMITTED THAT THE A.O. HIMSELF HAS AD MITTED IN HIS ORDER THAT NO COGNIZANCE IS BEING TAKEN BY HIM ON THESE NEWSPA PER REPORTS. HENCE NEITHER THE DR NOR THE BENCH CAN TAKE THE COGNIZANC E OF THE NEWSPAPER REPORT REPRODUCED BY HIM. FURTHER, THE DR HAS ARGUE D THAT IN THE SUBSEQUENT YEAR AFTER THE COMPLETION OF THE SETTLIN G UP OF THE COLLEGE AND HOSPITAL IT WAS GIVEN TO ANOTHER SOCIETY FOR RUNNIN G IT ON PUBLIC PRIVATE PARTNERSHIP BASIS, THEREFORE EXEMPTION OF THE INCOM E SHOULD NOT BE GRANTED. IN THIS REGARD IT IS SUBMITTED THAT FIRSTL Y THE SUBSEQUENT EVENTS CANNOT BE TAKEN INTO CONSIDERATION IN THE YEAR UNDE R APPEAL BECAUSE THE ONLY QUESTION DISPUTED BY THE DEPARTMENT IS THAT FI RSTLY THE TRUST DOES NOT DESERVE REGISTRATION WHICH HAS BEEN GRANTED BY THE CIT AND SECONDLY THE AMOUNT SPENT ON THE CONSTRUCTION OF THE INSTITUTION DOES NOT AMOUNT TO APPLYING THE FUNDS FOR CHARITABLE ACTIVITIES. THE C IT(A) HAS RIGHTLY HELD THAT WHEN THE REGISTRATION IS GRANTED BY THE CIT TH E A.O. CANNOT INTERFERE INTO THE OBJECTS OF THE SOCIETY BUT ONLY CAN SEE AT THE TIME OF ASSESSMENT THAT THE SOCIETY HAS APPLIED ITS FUNDS TOWARDS THE OBJECTS OF THE TRUST. IN CASE HE IS NOT SATISFIED HE CAN ONLY APPLY TO THE C IT FOR THE CANCELLATION OF THE REGISTRATION AND IN THE INSTANT CASE NO SUCH AC TION HAS BEEN TAKEN BY THE A.O. AND THEREFORE HE RIGHTLY ALLOWED THE APPEA L OF THE ASSESSEE IN THIS REGARD. THAT EVEN OTHERWISE FOR ARGUMENT SAKE EVEN IF THE A RGUMENT OF THE DR IS CONSIDERED THAT IN THE SUBSEQUENT YEAR THE ASSESSEE HAS ENTERED INTO THE PUBLIC PRIVATE PARTNERSHIP WITH PIMS, MEDICAL AND E DUCATION CHARITABLE SOCIETY. THIS SOCIETY IS ALSO REGISTERED U/S 12AA A ND THE REGISTRATION HAS BEEN GRANTED BY THE I.T.A.T. CHANDIGARH VIDE ITS JU DGMENT REPORTED IN 150 TTJ 891 (COPY ENCLOSED) PAGE NO. 62 TO 75. 13 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 12. IN VIEW OF THE SUBMISSIONS MADE ABOVE THE APPEAL OF THE DEPARTMENT DESERVES TO BE DISMISSED. APPEAL FILED BY THE ASSESSEE ITA NO. 504(ASR)/09 GROUND NO. 1,2 & 3 1. THAT THE CIT(A) VIDE DISPOSING OFF THE APPEAL OF TH E ASSESSEE OBSERVED ON THE SUBMISSIONS MADE BY THE A.O. THAT THE ASSESSEE TRUS T HAS INVESTED RS. 6.50 CRORES WITH CAPITAL LOCAL AREA BANK WHICH IS A NON SCHEDULED BANK AND HENCE HE SUSTAINED THE ADDITION OF RS. 6.50 CRORES ON ACCOUNT OF INFRINGEMENT OF SEC 13(1)(D) WHICH IS CHALLENGED BEFORE THE HON' BLE BENCH ON THE FOLLOWING GROUNDS: I. IT IS NOT DISPUTED THAT UNDER BONA FIDE BELIEF THE ASSESSEE INVESTED RS. 6.50 CRORES WITH CAPITAL LOCAL AREA BANK FOR A SHOR T DURATION OF 4 TO 12 MONTHS FROM 20.1.2006 TILL 12.5.2006, 31.5.2006, 30.12.2006, AND FINALLY 31.01.2007(COPY OF LEDGER ACCOUNT IS ENCLOS ED HEREWITH FOR YOUR KIND REFERENCE) PAGE NO. 76 TO 77. THE ASSESSEE NEV ER KNEW THAT CAPITAL LOCAL AREA BANK IS A NON SCHEDULED BANK. WH EN IT WAS POINTED OUT BY THE CIT(A) AT THE INSTANCE OF A.O. AT THE TI ME APPELLATE PROCEEDINGS IT WAS FOUND FROM THE CAPITAL LOCAL ARE A BANK THAT THE BANK HAD A LICENSE FROM RBI AND THE DEPOSITS OF THE CUSTOMERS WERE SECURED AS PER THE GUIDELINES OF THE RBI AND WAS RE GULARLY PARTICIPATING IN LOCAL CLEARING. THE CONFIRMATION O F THE BANK IN THIS REGARD IS AVAILABLE ON PAGE NO. 26 AND 27 OF PAPER BOOK WHICH MAY KINDLY BE REFERRED TO. HOWEVER, THE CIT(A) HAS WRON GLY UPHELD/MADE THIS ADDITION OF RS. 6.50 CRORES WITHOUT APPRECIAT ING THE PROVISIONS OF THE LAW. IF YOU GO THROUGH THE PROVISIONS OF SEC. 1 3 IT CLEARLY STATES THAT NOTHING CONTAINED IN SEC. 11 OR SEC. 12 SHALL OPERA TE SO AS TO EXCLUDE FROM THE TOTAL INCOME OF THE PREVIOUS YEAR IN RECEI PT THEREOF- FURTHER SUB SEC. 13(1)(D) ALSO STATES THAT IN THE C ASE OF A TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES, ANY INCOME THERE OF IF FOR ANY PERIOD DURING THE PREVIOUS YEAR. II. ANY FUNDS OF TRUST OR INSTITUTION INVESTED OR DEPOS ITED BEFORE THE 1 ST DAY OF MARCH, 1983 OTHERWISE THAN IN ANY ONE OR MORE OF THE FORMS OR 14 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 MODES SPECIFIED IN SUB SECTION (5) OF SEC. 11 CONTI NUE TO REMAIN SO INVESTED OR DEPOSITED AFTER THE 30 TH DAY OF NOVEMBER 1983. FURTHER SEC. 11(1) PROVIDES THAT SUBJECT TO THE PRO VISIONS OF SEC. 60 TO 63 THE FOLLOWING INCOMES SHALL NOT BE INCLUDED INTO THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE I NCOME. IN CLAUSE (D) INCOME IN THE FORM OF VOLUNTARY CONTR IBUTION MADE WITH A SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST/INSTITUTION. FROM THE ABOVE IT IS VERY CLEAR THAT IN ORDER TO AP PLY THE PROVISIONS OF SEC. 13 IT IS TO BE ESTABLISHED THAT AMOUNT INVESTED IN THE UNSCHEDULED BANK IS INCOME OF THE TRUST WHICH IS NOT THE CASE OF THE AS SESSEE. II. THAT IT IS NOT DISPUTED THAT RS. 25 CRORES HAS BEEN RECEIVED FROM THE GOVERNMENT ON ACCOUNT OF 18 CRORE AS LOAN AND 7 CRO RES ON ACCOUNT OF ASSISTANCE FOR SETTLING UP THE PIMS. IT IS ALSO NOT DISPUTED THAT RS. 6.50 CRORES DEPOSITED WITH CAPITAL LOCAL AREA BANK IS DEPOSITED OUT OF THESE 25 CRORES. THE DETAILS OF THE GRANT AND LOAN RECEIVED HAS ALREADY BEEN FILED IN 28 PAGES BOOKLET ON THE DIRECTIONS OF THE HON'BLE BENCH AND YOUR KIND ATTENTION WAS DRAWN TOWARDS THESE RE CEIPTS AT THE TIME OF HEARING. THUS IT IS CLEAR THAT LOAN AND GRANTS R ECEIVED FROM THE GOVERNMENT CANNOT BE TREATED AS INCOME OF THE TRUST . IN THIS REGARD YOUR KIND ATTENTION IS DRAWN TOWARDS THE TWO JUDGME NTS OF JURISDICTIONAL PB. & HARYANA HIGH COURT IN THE CASE OF CIT VS PB STATE E-GOVERNANCE SOCIETY CIT VS PB. STATE SPORTS COUNCIL COPIES OF THESE JUDGMENTS HAVE ALREADY FILED BEFORE YOUR GOODSELF AT THE TIME OF HEARING. FURTHER IT HAS BEEN HELD IN THE FOLLOWING CASES THA T TIED UP GRANT CANNOT BE TREATED AS INCOME OF THE TRUST: 96 ITD 480(CTK) (PAGE9 OF COMPENDIUM OF JUDGMENTS) 284 ITR 582 (KTK) ( PAGE 19 OF COMPENDIUM OF JUDGME NTS) 288 ITR 106 (ALLAHABAD) (PAGE 23 OF COMPENDIUM OF J UDGMENTS) 138 TTJ 714 (AHMEDABAD) (COPY ALREADY FILED AT THE TIME OF HEARING) 15 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 IN VIEW OF THIS IT IS SUBMITTED THAT ADDITION OF RS . 6.50 CRORES CANNOT BE SUSTAINED SINCE THE AMOUNT IS NOT THE INCOME OF THE TRUST. III. THE ASSESSEE MADE THE INVESTMENT OF FDR WITH CAPITA L LOCAL AREA BANK WITH A BONAFIDE BELIEF THAT BANK WAS A SCHEDUL ED BANK AND NONE OF THE MEMBERS OF THE GOVERNING BODY WHICH ARE ALL GOVERNMENT OFFICIALS AND CHIEF MINISTER AND HEALTH MINISTER HA D ANY KIND OF INTEREST IN THE CAPITAL LOCAL AREA BANK. THUS THERE WAS NO INTENTION OF THE ASSESSEE FOR VIOLATING THE PROVISIONS OF SECTIO N 13. IN THIS REGARD YOUR KIND ATTENTION IS DRAWN TOWARDS THE JUDGMENTS OF DELHI HIGH COURT REPORTED IN 253 ITR 593 AVAILABLE IN PAGE 27 TO 29 OF COMPENDIUM OF JUDGMENTS WHERE IN THE HON'BLE HIGH C OURT HAS HELD THAT INTENTION OF THE TRUSTEES FOR INVESTMENT IS TO BE SEEN. HENCE THE ADDITION CANNOT BE SUSTAINED ON THIS GROU ND ALSO. IV. YOUR KIND ATTENTION IS DRAWN TOWARDS THE PROVIS IONS OF SECTION 164(3) THIRD PROVISO WHICH STATES THAT IN A CASE WHERE THE WHOLE OR ANY PART OF THE RELEVANT INCOME IS NOT EXEMPT U/S 11 OR SECTION 12 BY VIRTUE OF THE PROVISIONS CONTAINED IN CLAUSE(C) OR CLAUSE (D) OF SUB-SECTION (1) OF SECTION 13 TAX SHALL BE CHARGED ON THE RELEVANT INC OME OR PART OF RELEVANT INCOME AT THE MAXIMUM MARGINAL RATE. HENCE IN CASE OF TAX WAS TO BE LEVIED AT THE MOST IT COULD HAVE BEEN LEV IED ON THE INTEREST INCOME GENERATED ON THE FDR OF RS. 6.50 CRORES AND IN THIS REGARD YOUR KIND ATTENTION IS DRAWN TOWARDS THE FOLLOWING JUDGMENTS: 34 ITD 489(BOMBAY)(PAGE 30 TO 33 COMPENDIUM OF JUDG MENT) 249 R 533(BOMBAY) (PAGE 34 TO 39 COMPENDIUM OF JUDGMENT ) V. THAT EVEN OTHERWISE THE HON'BLE SUPREME COURT IN THE FOLLOWING JUDGMENTS HAS HELD THAT 85% OF THE INCOME IS TO BE APPLIED FOR CHARITABLE PURPOSES AND ASSESSEE IS ALLOWED TO ACCU MULATE BALANCE 15% AS FREE INCOME WITHOUT ANY RESTRICTIONS AND THE SAME CAN BE INVESTED IN ANY MODE. 230 ITR 636 (PAGE 1 TO 8 OF COMPENDIUM OF JUDGMENT) 216 ITR 697 (PAGE 40 TO 51 OF COMPENDIUM OF JUDGMEN T) IN VIEW OF THE ABOVE SUBMISSIONS GROUND NO. 1,2,3 O F THE ASSESSEE DESERVE TO BE ALLOWED. GROUND NO. 4 16 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 THE A.O. HAD DISALLOWED RS. 1098101/- OUT OF CAR MA INTENANCE EXPENSES ON THE GROUNDS THAT LOG BOOKS OF THE CARS HAVE NOT BEE N MAINTAINED ALTHOUGH THESE CARS BELONG TO THE TRUST. THE CIT(A) IN PARA 6.1 HAS GIVEN A FINDING THAT EXPENSES ON 2 CARS WHICH WERE BEING USED BY THE CHA IRMAN AND THE VICE CHAIRMAN WAS QUITE HIGH AS COMPARE TO THE EXPENSES ON THE CAR USED BY THE DIRECTOR OF THE INSTITUTE. THEREFORE HE SUSTAINED T HE DISALLOWANCE OF RS. 1004252/- OUT OF THE DISALLOWANCE OF RS. 1098101/- MADE THE A.O. IT IS SUBMITTED THAT IT IS NOT THE CASE OF THE A.O. OR THE CIT(A) THAT CAR EXPENSES ARE NOT GENUINE BUT THEY HAVE WRONGLY FOUN D THE SAME TO BE EXCESSIVE. THEY FAILED TO APPRECIATE THAT THEY WERE MAKING THE ASSESSMENT OF CHARITABLE TRUST U/S 11 & 12 AND NOT COMPUTING ANY BUSINESS INCOME. THEREFORE SUCH DISALLOWANCE COULD NOT HAVE BEEN LEG ALLY MADE. THE CARS WERE DULY USED BY THE MEMBERS OF THE GOVER NING BOARD FOR CARRYING OUT THE ACTIVITIES OF THE TRUST. HENCE THIS DISALLO WANCE CANNOT BE SUSTAINED. COPIES OF AUDITED BALANCE SHEET AS DIRECTED BY THE HON'BLE BENCH AT THE TIME OF HEA RING COPIES OF AUDITED ACCOUNT IS ENCLOSED HEREWITH PAGE NO. 78 TO 92. FOR PUNJAB INSTITUTE OF MEDICAL SCIENCES SD/./- Y.K. SUD C.A. COUNSEL FOR THE ASSESSEE 7. LEARNED DR HAS ALSO FILED HIS WRITTEN SUBMISSION DATED 26.11.2013, THE CONTENTIONS RAISED BY HIM IN THE WR ITTEN SUBMISSION ARE REPRODUCED AS UNDER: BEFORE THE HONBLE I.T.A.T. AMRITSAR BENCH AMRITSAR 17 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 PUNJAB INSTITUTE OF MEDICAL SCIENCES, GARHA ROAD, J ALANDHAR ITA NO. 504 & 515/ASR/2009 DATE OF HEARING: 26.11.2012 WRITTEN SUBMISSIONS: ITA NO. 515/ASR/2009: IT IS SUBMITTED THAT THIS IS DEPARTMENT APPEAL. IN THIS APPEAL, GROUND WISE SUBMISSIONS ARE MADE HEREUNDER : GROUND NO. 1: IT IS SUBMITTED THAT THE A.O. HAD MADE DISALLOWAN CE ON ACCOUNT OF USE OF VEHICLE FOR PRIVATE USE CLAIMED AT RS. 10 ,98,101/-. DURING THE COURSE OF ASSESSMENT, THE ASSESSEE COULD NOT FURNISH ANY E XPLANATION AS TO WHO TRAVELLED IN THE VEHICLE AND WHAT PURPOSE WAS SERVE D. THE LEARNED CIT(A) HAS RESTRICTED THIS ADDITION TO RS. 10,04,252/- AND ALL OWED RELIEF OF THE REMAINING AMOUNT. THE LEARNED CIT(A)S FINDING IS GIVEN AT PA RA 6.1 PAGE 27 OF HIS ORDER. IT IS PERTINENT TO RECALL A VERY PERTINENT O BSERVATION MADE BY THE LEARNED CIT(A) THAT I AM OF THE VIEW THAT THE DIS ALLOWANCE HAS BEEN MADE CORRECTLY BY THE A.O. TO A LARGE EXTENT. BUT THEN THE LEARNED CIT(A) HAD HELD THAT THE EXPENDITURE ON CAR FOR THE DIRECTOR OF INS TITUTE AND FOR THE STAFF IS HELD TO BE ALLOWABLE BEING REASONABLE IN QUANTUM AND BEI NG FOR THE PURPOSE OF SETTING UP THE ASSESSEES INSTITUTE. IT IS SUBMITTE D THAT THE ASSESSEE HAS BROUGHT NOTHING ON RECORD THAT THE USE OF THESE VEHICLE BY THE DIRECTOR OF INSTITUTE AND THE STAFF HAD BEEN FOR THE PURPOSE OF THE ASSESSEE S BUSINESS. SIMPLY BECAUSE THE VEHICLES HAVE BEEN USED BY DIRECTOR OF STAFF, I T DOES NOT MEAN THAT THE EXPENDITURE HAS BEEN USED FOR THE ASSESSEES OBJECT IVES. IN THIS REGARD, IT IS FURTHER SUBMITTED THAT THE ASSESSEES REGISTRATION GRANTED UNDER SECTION 12AA(3) HAS BEEN CANCELLED BY THE WORTHY CIT-II, JALANDHAR VIDE HIS ORDER 24.10.2013 WITH RE TROSPECTIVE EFFECT FROM THE ASSESSMENT YEAR 2004-05 (COPY ENCLOSED MARKED AS AN NEXURE-A). THUS, THIS EXPENDITURE WAS NOT ADMISSIBLE AS EXPENDITURE AS TH E ASSESSEE HAD DONE NO BUSINESS DURING THE YEAR BESIDES THE ASSESSEES FAI LURE TO BRING ON RECORD ANY EVIDENCE THAT THE USE OF VEHICLE BY THE DIRECTOR AN D STAFF HAD BEEN FOR OBJECTIVES/BUSINESS OF THE ASSESSEE. 18 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 THEREFORE, IT IS PRAYED THAT THE RELIEF ALLOWED BY THE LEARNED CIT(A) MAY KINDLY BE REVERSED. GROUND NO. 2: IT IS SUBMITTED THAT THE CENTRAL GOVERNMENT HAD G IVEN GRANT OF RS. 25 CRORE AS ADDITIONAL CENTRAL ASSISTANCE TO GO VT. OF PUNJAB FOR SETTING UP MEDICAL INSTITUTE. THIS GRANT CONSISTED OF A LOA N PORTION AND A GRANT PORTION. THE LOAN PORTION CARRIES INTEREST AT THE R ATE OF 13% PER ANNUM. THE LEARNED CIT(A) HAS RECORDED A FINDING AT PARA 5.5 T HAT THE ASSESSEE HAS ALWAYS SHOWN THE ADDITIONAL CENTRAL ASSISTANCE AS I TS INCOME FOR THE PURPOSE OF COMPUTING THE AMOUNT OF INCOME TO BE ACCUMULATED UNDER SECTION 11(2) OF THE INCOME TAX ACT, 1961. SINCE THE ASSESSEES REGI STRATION HAS BEEN CANCELLED BY THE WORTHY CIT-II, JALANDHAR (SUPRA) W ITH EFFECT FROM ASSESSMENT YEAR 2004-05, THE ASSESSEES INCOME CEAS ES TO BE EXEMPT UNDER SECTION 11 OF THE INCOME TAX ACT, 1961 AND AS SUCH THE ADDITION OF RS. 25 CRORE MADE BY THE A.O. DESERVES TO BE CONFIRMED. GROUND NO. 3: IT IS SUBMITTED THAT THE INTEREST INCOME AT RS. 1 ,72,80,372/- CLAIMED AS EXEMPT HAD BEEN DISALLOWED BY THE A.O. O N THE GROUND THAT THE ASSESSEE IS NOT ENGAGED IN FURTHERANCE OF THE STATE D OBJECTIVES. NOW AFTER THE CANCELLATION OF REGISTRATION UNDER SECTION 12AA(3) BY THE WORTHY CIT-II, JALANDHAR, THE EXEMPTION STANDS WITHDRAWN AND AS SU CH THIS ADDITION DESERVES TO BE CONFIRMED. GROUND NO. 4. IT IS SUBMITTED THAT THE A.O. HAD MADE ADDITION O F RS. 36,282/- ON THE GROUND THAT THE ASSESSEE IS NOT ENGAGED IN F URTHERING ITS OBJECTIVES AND AS SUCH IT IS NOT ENTITLED TO EXEMPTION UNDER SECT ION 11. NOW WHEN THE WORTHY CIT-II, JALANDHAR HAS WITHDRAWN THE EXEMPTION, THE ADDITION MADE BY THE A.O. NEEDS TO BE CONFIRMED. GROUND NO. 5 & 6: THESE GROUNDS OF GENERAL NATURE AND HENCE NO COMMENTS ARE OFFERED. 19 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 BESIDES THE ABOVE, THE A.O. HAS RAISED AN ADDITIO NAL GROUND OF APPEAL WHICH READS AS UNDER:- THAT THE LEARNED CIT(A) HAS ERRED IN HOLDING THA T CONSTRUCTION OF INSTITUTE BUILDING IS APPLICATION OF INCOME FOR CHARITABLE AIMS AND OBJECTS OF THE SOCIETY IN VIEW OF THE FACT THAT RENDERING MEDI CAL RELIEF IS NO MORE THE DOMINANT OBJECT OF THE ASSESSEE SOCIETY. THIS GROUND OF APPEAL MAY KINDLY BE ALLOWED IN TH E FACE OF THE FACT THAT REGISTRATION GRANTED TO THE ASSESSEE HAS BEEN WITHDRAWN BY THE WORTHY CIT W.E.F. ASSESSMENT YEAR 2004-05 AND CONST RUCTION OF INSTITUTE BUILDING ASSUMES THE COLOUR OF CAPITAL EXPENDITURE. GROUND NO. 504/ASR/2000: THIS IS ASSESSEES APPEAL. GROUND-WISE SUBMISSION S ARE MADE HEREUNDER: GROUND NO.1: THIS GROUND HAS BECOME INFRUCTUOUS AFTER THE WITHD RAWAL OF REGISTRATION BY THE WORTHY CIT-II, JALANDHAR W.E.F. ASSESSMENT YEAR 2004-05 (SUPRA). SINCE REGISTRATION HAS BEEN WITHDRAWN, THE ISSUE OF INVESTING THE FUNDS IN MODES AS SPECIFIED IN SECTION 11(5) OF THE INCOME TAX ACT IS NOT RELEVANT. THEREFORE, THIS GROUND DESERVES TO BE REJ ECTED IN LIMINE. GROUND NO. 2: IN THE LIGHT OF THE LEARNED CIT(A) FINDING THAT TH E ASSESSEE HAD BEEN TREATING ADDITIONAL CENTRAL ASSISTANCE AS PART OF ITS INCOME AND SEEKING ITS ACCUMULATION UNDER SECTION 11(2) OF THE INCOME TAX ACT, 1961, IT IS CLEARLY PROVES THAT THE ASSESSEE HAS BEEN TREATI NG THE ASSISTANCE AS ITS INCOME AND AS SUCH THE ASSESSEE CANNOT CLAIM IN CON TRAVENTION OF ITS OWN HISTORY THAT IT IS NOW A CAPITAL RECEIPT. GROUND NO. 3: THIS GROUND IS NOT MAINTAINABLE IN THE LIGHT OF TH E OBSERVATION OF THE LEARNED CIT(A) THAT THE ASSESSEE HAS TREATED THIS AMOUNT GIVEN AS LOAN AS NON-RETURNABLE AND THE PUNJAB GOVT. VIDE ITS LET TER 17.09.2008 HAD DECIDED TO WAIVE THE CONDITION OF RETURN OF LOAN ON THE ASS ESSEE. THE LEARNED CIT(A) HAS OBSERVED THAT THE DE-FACTO TREATMENT OF THE GRA NTS BY THE ASSESSEE AS NON- RETURNABLE HAS BEEN CONFIRMED BY THE STATE GOVT. AN D AS SUCH THE ACA HAS TO 20 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 BE TREATED AS ITS INCOME. THERE IS NOTHING PERVERSE IN THIS FINDING OF THE HON'BLE CIT(A). THEREFORE, THE ASSESSEES APPEAL ON THIS GROUND ALSO DESERVES TO BE REJECTED. GROUND NO. 4: SINCE NO BUSINESS ACTIVITY HAD BEEN UNDERTAKEN DUR ING THE YEAR UNDER CONSIDERATION AND FURTHER IN THE LIGHT O F THE FACT THAT REGISTRATION HAS BEEN CANCELLED, THERE REMAINS NO MERIT IN THIS GROUND OF APPEAL. NONETHELESS, IT MAY BE MENTIONED THAT THE LEARNED C IT(A) HAS GIVEN A CATEGORICAL FINDING THAT TWO VEHICLES HAD NOT BEEN USED FOR THE AOP(TRUST) AS SUCH THE EXPENDITURE WAS NOT ALLOWABLE. RATHER, THE DEPARTMENTS APPEAL ON THIS COMMON GROUND MAY KINDLY BE ALLOWED FOR THE RE ASONS AS DILATED ABOVE. SD/- (MAHAVIR SI NGH) SR. DR(I.T.A.T.), AMRITSAR 8. LEARNED DR FURTHER SUBMITTED THAT LEARNED CIT-II , JALANDHAR, VIDE HIS ORDER DATED 24.10.2013 PASSED UNDER SECTI ON 12AA(3) OF THE ACT, CANCELLED THE REGISTRATION GRANTED TO THE ASSESSEE- TRUST ON 20.05.1994 BY HOLDING THAT THE ACTIVITIES OF THE ASSESSEE-TRUST A RE NOT GENUINE. HE HAS ALSO PRODUCED A COPY OF THE ORDER DATED 24.10.2013 PASSE D BY LEARNED CIT-II, JALANDHAR 9. LEARNED COUNSEL FOR THE ASSESSEE STATED THAT THE ASSESSEE IS GOING TO FILE AN APPEAL AGAINST THE ORDER DATED 24.10.201 3 BEFORE THE TRIBUNAL AND THE SAME IS NOT UNDER CHALLENGED BEFORE THIS BENCH ; THEREFORE, THE BENCH CANNOT COMMENT UPON THE CANCELLATION OF REGISTRATIO N GRANTED TO THE 21 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 ASSESSEE UNDER SECTION 12AA(3) OF THE ACT W.E.F. 20 .05.1994. IN SUPPORT OF THE ARGUMENT ADVANCED BY LEARNED DR ON THE CANCELLA TION OF REGISTRATION, LEARNED COUNSEL FOR THE ASSESSEE FILED HIS WRITTEN SUBMISSION DATED 26.11.2013. THE CONTENTS OF THE SAME ARE REPRODUCED AS UNDER:- IN THE INCOME TAX BENCH APPELLATE TRIBUNAL, AMRITS AR BENCH, AMRITSAR IN RE: PB. INSTITUTE OF MEDICAL SCIENCE, GARHA ROAD , JALANDHAR ITA NOS. 504 & 505/ASR/2009 DATE OF HEARING 27.11.2013 MOST RESPECTFULLY SUBMITTED AS UNDER: 1. AT THE TIME OF ARGUMENTS AND WRITTEN SUBMISSIONS FI LED BY THE DR IN THE ABOVESAID APPEALS HE HEAVILY RELIED UPON THE ORDER OF THE COMMISSIONER OF INCOME TAX-II, JALANDHAR, DATED 24.10.2013 WHEREIN THE REGISTRATION GRANTED TO THE ASSESSEE ON 06.04.1994 U/S 12AA WAS CANCELLED U/S 12AA(3). IN THIS REGARD IT IS SUBMITTED AS FOLLOWIN G: I. THE ASSESSEE WAS GRANTED REGISTRATION U/S 12AA IN THE YEAR 1994 AS ADMITTED BY CIT IN HIS ORDER DATED 24.10.2013 W.E.F . 6.4.1994. ON THE OTHER HAND, SECTION 12AA WAS INSERTED BY THE FI NANCE ACT NO. 2, 1996 W.E.F 1.4.1997 AND SECTION 12AA(3) WAS INSE RTED BY FINANCE ACT NO. 2, 2004 W.E.F. 01.10.2004. THE REGI STRATION GRANTED TO THE TRUST COULD ONLY BE CANCELLED W.E.F. 01.10.2 004 IN RESPECT OF REGISTRATION GRANTED U/S 12AA. IT IS PERTINENT TO M ENTION HERE AND ADMITTED BY CIT THAT REGISTRATION TO THE TRUST HAS BEEN GRANTED U/S 12AA W.E.F. 6.4.1994 AND HENCE IT COULD NOT BE CANC ELLED U/S 12AA(3) TILL 1.6.2010 WHEN FINANCE ACT 2010 MADE TH E AMENDMENTS IN SECTION 12AA(3) AND COVERED EVEN THE REGISTRATION GRANTED U/S 12AA W.E.F. 1.6.2010. HENCE WITHOUT GOI NG INTO THE MERITS OF THE ORDER OF CIT PASSED U/S 12AAA(3) IT I S VERY CLEAR THAT THE REGISTRATION GRANTED TO THE ASSESSEE TRUST COUL D NOT HAVE BEEN 22 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 CANCELLED U/S 12AA(3) W.E.F. 2004-05. IN THIS REGAR D, YOUR KIND ATTENTION IS DRAWN TOWARDS THE FOLLOWING JUDGMENTS : A. KAPOOR EDUCATION SOCIETY VS. CIT, LUCKNOW BENCH (13 4 TTJ (LUCKNOW) 250 IT HAS BEEN HELD BY THE HON'BLE BENCH THAT AMENDMEN T OF SECTION 12AA(3) BY THE FINANCE ACT 2010, W.E.F. 1.6.2010 IS PROSPECTIVE IN NATURE AND IF ANY TRUST/INSTITUTION HAS BEEN REGIST ERED PRIOR TO 1.10.2014, EITHER U/S 12A OR 12AA, CIT HAS NO POWER TO CANCEL THE REGISTRATION U/S 12AA(3). B. DIT EXEMPTION VS. SHRI N.H. KAPADIA EDUCATION T RUST, AHMEDABAD BENCH (148 TTJ 37) CHARITABLE TRUST REGISTRATION U/S 12AA CANCELLATION U/S 12AA(3). DIT (EXEMPTION) HAVING CANCELLED REGISTRATION ON GR OUNDS ON WHICH EXEMPTION U/S 11 AND 12 WAS DENIED BY A.O. AN D SAID ORDER OF A.O. HAVING BEEN SET ASIDE ON MERITS IN FAVOUR O F ASSESSEE BY CIT(A) BEFORE PASSING OF ORDER OF DIT(EXEMPTION), DIT(EXEMPTION)S ORDER WAS WITHOUT BASIS FURTHER, REGISTRATION U/S 12A HAVING BEEN GRANTED TO ASSESSEE W.E.F. 21.3 .1990, AMENDED PROVISIONS OF SECTION 12AA(3) COULD NOT BE APPLIED AGAINST ASSESSEE RETROSPECTIVELY PRIOR TO AMENDMENT W.E.F. 1.6.2010. C. CIT VS. MANAV VIKAS AVAM SEWA SANSTHAN, ALLAHABAD ( 336 ITR 250) CHARITABLE PURPOSES- REGISTRATION OF TRUSTS CANCELL ATION OF REGISTRATION LAW APPLICABLE EFFECT OF INSERTION OF SUB-SEC. (3) IN SEC. 12AA W.E.F. 1.10.2004 PROVIDING FOR CANCELLATION OF REGISTRATION PROVISIONS NOT RETROSPECTIVE TRUST GRANTED REGISTRA TION U/S 12A PRIOR TO AMENDMENT CANCELLATION OF REGISTRATION BY ORDER PASSED IN MARCH 2009 BY CIT NOT VALID INCOME TAX ACT, 1961 SS 12A, 12AA. D. DIT(EXEMPTIONS) VS MOOL CHAND KHAIRATI RAM TRUST DE LHI 243 CTR (DEL) 245 POWER OF CANCELLATION OF REGISTRATION OBTAINED U/S 12A CAME TO BE INCORPORATED BY WAY OF AMENDMENT INTRODUCED IN SEC. 12AA(3) BY 23 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 THE FINANCE ACT, 2010 W.E.F. 1.6.2010, DIT WAS NOT THEREFORE JUSTIFIED IN CANCELLING THE REGISTRATION U/S 12AA(3 ) W.E.F. DECEMBER 2002-03 VIDE HIS ORDER DATED 30.6.2009. WITHOUT PREJUDICE TO ABOVE IT IS SUBMITTED THAT THE ORDER PASSED BY CIT CANCELLING THE REGISTRATION IS AN APPEALABLE OR DER AND IF ANY COGNIZANCE IS TAKEN OF THAT ORDER WHILE DECIDING TH E APPEAL FOR ASSESSMENT YEAR 2006-07 IT WOULD AMOUNT TO EXPRESSI ON OF THE ORDER OF THE I.T.A.T., WITH REGARD TO CANCELLATION OF REGISTRATION W.E.F. 2004-05 WHICH IS AGAINST THE LAW OF NATURAL JUSTICE AND NOT PERMISSIBLE UNDER LAW. I.T.A.T. CANNOT COMMENT ON THE ORDER WITHOUT HEARIN G THE APPEAL AGAINST THAT ORDER AND WITHOUT GIVING OPPORTUNITY T O THE ASSESSEE FOR COMMENTING ON THAT ORDER. CONCLUSION: IT IS ONCE AGAIN REITERATED THAT THE ASSESSEE WAS G RANTED REGISTRATION WHICH WAS IN FORCE DURING ASSESSMENT Y EAR 2006-07 AND THEREFORE THE MERITS OF THE CASE FOR 2006-07 AR E TO BE DECIDED IN THE LIGHT OF THE FACT THAT REGISTRATION WAS GRAN TED TO THE ASSESSEE TRUST DURING THE YEAR UNDER CONSIDERATION. FOR PUNJAB INSTITUTE OF MEDICAL SCIENCES SD/- Y.K. SUD CA COUNSEL FOR THE ASSESSEE 26.11.2013 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE D OCUMENTARY EVIDENCE FILED BY BOTH THE PARTIES AS WELL AS THE O RDERS PASSED BY THE REVENUE AUTHORITIES. IN THE FIRST PAPER BOOK FILED BY THE LEARNED COUNSEL FOR THE ASSESSEE, INCLUDES COPY OF WRITTEN SUBMISSIONS DATED 13.03.2009 FILED 24 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 BEFORE THE CIT(A) WITH ANNEXURES (PAGE NOS. 1 TO 11 ); COPY OF COMMENTS OF THE A.O. TO THE SUBMISSIONS, DATED 20.03.2009 (P AGE NOS. 12 TO 20); COPY OF REPLICATION TO THE COMMENTS OF A.O. DATED 21.04. 2009 (PAGE NOS. 21 TO 23); COPY OF SUBMISSIONS BEFORE THE CIT(A) DATED 05 .06.2009 WITH REGARDS THE STATUS OF CAPITAL LOCAL AREA BANK WITH ITS ANNE XURES (PAGE NOS. 24 TO 27); COPY OF LETTER DATED 10 TH OCT. 97 ABOUT THE LOAN & CENTRAL ASSISTANCE OF RS. 25 CRORES AND THE UTILIZATION OF THE SAME (PAGE NOS. 28 TO 32); AND COPY OF LETTER OF PUNJAB GOVT. DATED 17.09.2008 CONVERTI NG THE LOAN INTO GRANT ALONGWITH ENGLISH TRANSLATION (PAGE NO. 33 TO 36). IN THE SECOND PAPER BOOK CONTAINING PAGES FROM 1 TO 51, LEARNED COUNSEL FOR THE ASSESSEE HAS ATTACHED SOME DECISIONS/JUDGMENTS I.E. S.RM. M. CT. M. TIRUP PANI TRUST VS. CIT [230 ITR 636 (S.C.)]; BHUBANESHWAR STOCK EXCHANGE V S. ACIT, CIRCLE-I (1), [96 ITD 480 (CUT)]; CIT & ANOTHER VS. KARNATAK A URBAN INFRASTRUCTURE DEVELOPMENT & FINANCE CORP. [284 ITR 582(KAR)]; CIT VS. U.P. UPBHOKTA SAHKARI SANGH LTD. [288 ITR 106 (ALL.)]; D.I.T. (EX EMPTIONS) VS. AGRIM CHARAN FOUNDATION [253 ITR 593 (DEL)]; GURDAYAL BER LIA CHARITABLE TRUST VS. FIFTH INCOME TAX OFFICER [34 ITD 489 (BOM)]; D. I.T. (EXEMPTIONS) VS. SHETH MAFATLAL GAGALBHAI FOUNDATION TRUST [249 ITR 533 (MUM.)]; AND 25 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 ADDL. CIT & ANOTHER VS. A.L.N. RAO CHARITABLE TRUST [216 ITR 697 (SC)]. 11. SH. Y.K. SUD, LEARNED COUNSEL FOR THE ASSESSEE, SENT ONE APPLICATION DATED 13.11.2013 TO THE ASSISTANT REGIS TRAR OF THIS BENCH, IN WHICH HE HAS WRITTEN THAT HE IS ENCLOSING A COPY OF THE ORDER PASSED IN C.W.P. NO. 14664 OF 2011 BY HON'BLE HIGH COURT OF P UNJAB AND HARYANA IN RESPECT OF THE APPEALS OF ASSESSEE, PUNJAB INSTI TUTE OF MEDICAL SCIENCES, JALANDHAR, PENDING BEFORE I.T.A.T. THE BENCH HAD AD JOURNED THE HEARING OF THE APPEAL FOR 26 TH NOVEMBER, 2013. HON'BLE HIGH COURT HAS DIRECTED T HE BENCH TO DECIDE THE APPEAL OF THE ASSESSEE AS WELL AS OF THE REVENUE WITHIN ONE MONTH AND HE HAS SENT A COPY OF THE ORDER FOR K IND PERUSAL AND INFORMATION. THIS BENCH HAS RECEIVED THE SAID LETTE R DATED 14.11.2013 ALONG WITH A PHOTOSTAT COPY OF THE HON'BLE HIGH COURTS O RDER ATTESTED BY LEARNED COUNSEL FOR THE ASSESSEE. 12. WE HAVE PERUSED THE ORDER DATED 30 TH OCTOBER, 2013 PASSED BY HON'BLE HIGH COURT OF PUNJAB & HARYANA IN C.W.P. NO . 14664 OF 2011, TITLING M/S PUNJAB INSTITUTE OF MEDICAL SCIENCES VS . DEPUTY COMMISSIONER OF I.T. RANGE-I AND ANOTHER, IN WHICH, THE HON'BLE HIGH COURT HAS DIRECTED I.T.A.T., AMRITSAR BENCH, AMRITSAR, TO DECIDE THE A PPEALS FILED BY THE 26 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 ASSESSEE AND THE REVENUE WITHIN ONE MONTH FROM THE DATE OF RECEIPT OF CERTIFIED COPY OF THE ORDER. THIS OFFICE HAS RECEIV ED THE CERTIFIED COPY OF THE ORDER OF HON'BLE HIGH COURT ON 05.12.2013 VIDE RECE IPT NO. 2125 DATED 05.12.2013. 13. IT IS PERTINENT TO MENTION HERE THAT THIS BENCH HAS ALREADY CONCLUDED THE ARGUMENT OF LEARNED COUNSEL FOR THE A SSESSEE ON 28.10.2013 AND ADJOURNED THE MATTER FOR 26.11.2013 ON THE REQU EST OF LEARNED DR FOR HIS ARGUMENT. ON 26.11.2013, LEARNED DR ARGUED THE MATTER AT SOME LENGTH AND FILED HIS WRITTEN SUBMISSION, IN WHICH HE HAS M AINLY STATED THAT THE ISSUE RAISED BY THE ASSESSEE IN THE PRESENT APPEAL HAS BECOME INFRUCTUOUS BECAUSE LEARNED CIT-II, JALANDHAR, VIDE ORDER DATED 24.10.2013, REJECTED THE REGISTRATION GRANTED TO THE ASSESSEE UNDER SECTION 12AA(3) OF THE ACT W.E.F. ASSESSMENT YEAR 2004-05. WE HAVE ALSO PERUSED THE O RDER DATED 24.10.2013 PASSED BY CIT-II, JALANDAHAR, UNDER SECTION 12AA(3) OF THE ACT. COPY OF THE WRITTEN SUBMISSION OF LEARNED DR, DATED 26.11.2 013 ALONG WITH THE ORDER DATED 24.10.2013 PASSED UNDER SECTION 12AA(3) OF THE ACT IN THE CASE OF ASSESSEE, WAS GIVEN BY THE BENCH TO THE LEA RNED COUNSEL FOR THE ASSESSEE AND HE REQUESTED THAT THIS CASE MAY BE ADJ OURNED FOR 27.11.2013 AS HE WANTED TO FILE THE REBUTTAL OF THE WRITTEN SU BMISSION FILED BY LEARNED 27 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 DR. ACCORDINGLY, THE BENCH ADJOURNED THE MATTER FOR 27.11.2013. ON 27.11.2013, SH. Y.K. SUD, CA, AGAIN FILED WRITTEN A RGUMENT MAINLY IN RESPECT OF THE CANCELLATION OF REGISTRATION VIDE OR DER DATED 24.10.2013 PASSED BY CIT-II, JALANDHAR, WHICH WE HAVE REPRODUC ED IN THE FOREGOING PARA NO. 9. 14. AFTER GOING THROUGH THE ASSESSMENT ORDER DATED 3 0.12.2008 PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF TH E ACT, THE ASSESSING OFFICER ISSUED A SHOW-CAUSE NOTICE UNDER SECTION 14 3(3) OF THE ACT ON 8.12.2008 FIXING THE CASE FOR 15.12.2008. THE ASSES SING OFFICER DISSATISFIED WITH THE REPLY GIVEN BY THE ASSESSEE ON 10.11.2008, 11.11.2008 AND 26.11.2008 AND FURTHER ASKED THE ASSESSEE FOR MORE CLARIFICATION ON VARIOUS ISSUES RAISED BY HIM FOR ESTABLISHING THAT THE ASSE SSEE IS DOING CHARITABLE ACTIVITIES AND ENTITLED FOR EXEMPTION UNDER SECTION 11 OF THE ACT. THE ASSESSING OFFICER ALSO INFORMED THAT THE ASSESSEE-T RUST HAS NOT APPLIED ANY PART OF THE INCOME FOR CHARITABLE PURPOSES AND THE BOOKS OF ACCOUNT BEING NOT RELIABLE FOR ARRIVING AT A TRUE AND CORRECT ASS ESSABLE INCOME, THUS THE SAME ARE TO BE REJECTED UNDER SECTION 145(3) OF THE ACT AND THE INCOME OF THE ASSESSEE TO BE COMPUTED UNDER SECTION 144 OF TH E ACT. IN RESPONSE TO THE NOTICE DATED 08.12.2008, THE ASSESSEE APPEARED BEFORE THE ASSESSING 28 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 OFFICER ON 15.12.2008 AND GAVE A SHORT REPLY TO THE QUERIES RAISED BY THE ASSESSING OFFICER AND REQUESTED FOR SOME TIME TO GI VE DETAILED REPLY TO THE SHOW-CAUSE NOTICE DATED 08.12.2008. THE ASSESSEE RE QUESTED TIME TILL 19.12.2008 AND THE ASSESSING OFFICER GRANTED THE SA ME AND FIXED THE CASE FOR 19.12.2008. ON 19.12.2008, THE ASSESSEE FILED I TS REPLY, WHICH IS AT PAGE NO. 128 OF THE ASSESSMENT RECORD. IN THIS REPLY, TH E ASSESSEE MAINLY STATED THAT THE ACCOUNTS OF THE ASSESSEE HAVE BEEN MADE ON MERCANTILE BASIS, KEEPING VIEW THE VARIOUS ACCOUNTING POLICIES. THIS HAS BEEN DONE KEEPING IN VIEW THE ONGOING WORK OF THE SOCIETY AND ALSO TO KNOW THE EXACT STATUS OF THE FINANCES AND WORK OF THE SOCIETY. HOWEVER, FOR THE INCOME TAX PURPOSE, IT IS NOT THE TOTAL INCOME BUT INCOME OF THE SOCIET Y, WHICH IS TO BE TAKEN INTO CONSIDERATION. TO ARRIVE AT THE INCOME FOR COMPLYIN G WITH THE SECTIONS 11, 12 AND 13 OF THE ACT, THE RECEIPT AND PAYMENT ACCOU NT HAS TO BE WORKED OUT AS THE ACCUMULATION OF INCOME AND APPLICATION O F INCOME IS FROM COMMERCIAL INCOME OF THE SOCIETY. THE ASSESSEE ALSO MADE IT CLEAR IN THE REPLY DATED 19.12.2008 THAT THE WORD INCOME USED IN SECTION 11(1)(A) OF THE ACT DOES NOT CONTAIN THE SAME MEANING AS HAS BE EN ASSIGNED TO THE WORD TOTAL INCOME IN SECTION 2(45) OF CBDT, CIRCULAR N O. 5, DATED 19.06.1968 AND THE INCOME OF THE TRUST MEANS BOOKS INCOME I.E. INCOME IN THE 29 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 COMMERCIAL SENSE, WITHOUT REFERENCE TO THE HEADS OF INCOME SPECIFIED IN SECTION 14. (I) THE ASSESSEE FURTHER STATED IN THE REPLY DATED 19.1 2.2008 THAT THE MEDICAL COLLEGE OF THE ASSESSEE IS STILL UNDER CONS TRUCTION AND PROJECT IMPLEMENTATION STAGE, THE DESIRED STAFF IS STILL UN DER CONSIDERATION FOR RECRUITMENT AND ADMISSION CAN BE MADE ONLY WHEN PRO JECT IS FULLY IMPLEMENTED AND CLEARED BY MCI. IT IS WRONG TO SAY THAT NONE OF THE OBJECTS HAS BEEN ACHIEVED DURING THE YEAR. THE BUIL DING IS UNDER CONSTRUCTION AND COMPLETION OF THE PROJECT IS UNDER CONSIDERATION. EVEN CONSTRUCTION OF BUILDING FOR THE SOCIETY IS PA RT OF CHARITABLE PURPOSE. IN REPLY TO THE POINT RAISED IN D-1, THE ASSESSEE S TATED THAT THERE IS NO DOUBT THAT THE RUNNING OF MEDICAL COLLEGE AND OTHER FACILITIES ON PRIVATE PUBLIC PARTICIPATION IS UNDER CONSIDERATION AS ONE OF THE PROPOSALS BUT THERE IS NO HARM IN IT AS IT HAS BECO ME NEED OF THE HOUR. EVEN THE GOVERNMENT HAD OPENED TELECOMMUNICATION, D EFENCE, POWER AND OTHER SENSITIVE SECTORS FOR THIS PURPOSE. SO GOING FOR PRIVATE PARTICIPATION KEEPING IN VIEW THE NEED OF T HE DAY. 30 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 (II) AS REGARDS TO OTHER QUESTIONS RAISED BY THE ASSESSI NG OFFICER, THE ASSESSEE MAINLY EMPHASIZED UPON THAT NO DOUBT THE I MPARTING OF EDUCATION COMES WITHIN THE SCOPE OF CHARITABLE PURP OSES, BUT CREATING INFRASTRUCTURE FOR THE SAME AS PER THE GUIDELINES O F THE AUTHORITIES CONTROLLING SUCH EDUCATION IS ALSO PART OF CHARITY. SO CREATING INFRASTRUCTURE AND CONSTRUCTION OF BUILDING IS ALSO A STEP TOWARDS THAT AND PART OF CHARITY. SO IT IS WRONG TO SAY THAT THE SOCIETY IS NOT DOING ANY OBJECT SPECIFIED IN THE DEED. IN SUPPORT OF ITS CONTENTION THE ASSESSEE HAS CITED SOME DECISIONS OF HON'BLE HIGH C OURTS IN THE REPLY DATED 19.12.2008, WHICH THE ASSESSING OFFICER HAS R EPRODUCED IN THE ASSESSMENT ORDER. 15. AFTER GOING THROUGH THE AFORESAID REPLY DATED 1 9.12.2008 TO THE NOTICE DATED 08.12.2008, THE ASSESSING OFFICER HAS GIVEN HIS OBSERVATION IN PARA NO. 2 AT PAGE NO. 3 OF THE ASSESSMENT ORDER DA TED 30.12.2008, THE SAME IS REPRODUCED AS UNDER: 2. ON THE ISSUES RAISED-RATHER THE ONLY ISSUE AS PER Q UERY NO. C AND D- WHICH RELATE TO FULFILLMENT OF THE OBJECTS OF TH E SOCIETY/TRUST, YOUR EXPLANATION DOES NOT MEASURE UPTO THE INTENSITY REQ UIRED FOR EXPLAINING THE UTTER FAILURE- RATHER NO MOVEMENT- IN THE DIREC TION OF ENTERING THE ZONE OF ACTIVITY WHICH IS GENERALLY ASSOCIATED WITH SUCH HOLISTIC, HOLY AND SACRED PURPOSES OF SERVING AND TAKING THE CARE OF HEALTH NEEDS OF THE HUMANITY FROM MEDICAL ANGLE AND ALSO FOR ADVANC EMENT OF FRONTIERS OF MEDICAL SCIENCE. 31 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 YOU HAVE LAID EMPHASIS ON THE ONLY ACTIVITY I.E. CONSTRUCTION OF BUILDING- HAVING BEEN AND BEING CARRIED OUT- BEI NG OF CHARITABLE NATURE. UNDOUBTEDLY IT IS. BUT IF IT GOES ON AS THE ONLY ACTIVITY FOR A WHOPPING PERIOD OF MORE THAN A DECADE WITHOUT AN IO TA OF EFFORTS IN THE DIRECTION OF PURPOSES FOR WHICH IT IS CONSTRUCTED, THEN THIS ACTIVITY ALSO ENTERS THE DARK ZONE OF NOT ONLY DOUBT BUT OF CONFI RMATION OF THE FACT THAT THE MAIN PURPOSES AND OBJECTS FOR ITS CONSTRUCTION ARE NOT ONLY SECONDARY, BUT DUMPED INTO COLD CHAMBER OF NON-ACTI ON AND PUTTING THE LOFTY OBJECTS OF THE TRUST INTO SUCH CHAMBER WAS-PE RHAPS-NOT THE PURPOSE OF FORMATION OF SOCIETY/TRUST AND ABOVE ALL ITS REG ISTRATION UNDER THE I.T. ACT, 1961 BY THE C.I.T. CHANDIGARH. 16. NO DOUBT, THE ASSESSING OFFICER HAS REFERRED SOM E NEWS PAPER REPORT DATED 20.12.2008 PUBLISHED IN HINDUSTAN TIM ES ON 21.12.2008 BUT THE ASSESSING OFFICER HAS NOT USED THIS REPORT AGAI NST THE ASSESSEE, THESE WERE ONLY FOR COMPLETING THE ASSESSMENT. 17. THE ASSESSING OFFICER THOROUGHLY CONSIDERED THE REPLY DATED 15.12.2008 AND 19.12.2008 FILED BY THE ASSESSEE, AN D AGAIN RAISED SOME QUERIES VIDE NOTICE DATED 24.12.2008 GIVING OPPORT UNITY TO THE ASSESSEE FOR REPLY ON 26.12.2008. IN RESPONSE TO THE SAME, THE A SSESSEE-TRUST HAS FILED A DETAILED REPLY DATED 26.12.2008 REGARDING DETAILS O F TERM DEPOSIT WITH THE BANK AS ON 31.03.2006 AMOUNTING TO RS. 6,50,00,000/ - AS WELL AS THE EXPENDITURE INCURRED DURING THE FINANCIAL YEAR 2005 -06; AND A COPY OF SOME ORDERS OF HON'BLE PUNJAB AND HARYANA HIGH COURT, IN SUPPORT OF ITS CLAIM. 32 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 18. ASSESSING OFFICER HELD THAT THE EXPLANATION GIV EN BY THE ASSESSEE ALONG WITH THE CASE LAWS CITED BY THE ASSESSEE ARE NOT HELPFUL TO THE ASSESSEE AND FINALLY HELD AT PAGE 10 TO 12, WHICH IS REPRODU CED AS UNDER: THE CITATION (1989) 30 ITD 23(AHD) RELIED UPON BY THE ASSESSEE IS ALSO OF NO HELP TO ENABLE ME TO ALLOW EXEMPTION U/S 11 FOR THE YEAR UNDER ASSESSMENT. THE LAST TWO LINES OF THIS CITATI ON ARE VERY IMPORTANT AND PREGNANT WITH SUBSTANCE AND AT THE SAME TIME BR EAKING-THROUGH. IN THE CASE OF THE RESPONDENT ASSESSEE BEFORE THE LEAR NED I.T.A.T. BENCH (AHD), AS PER OBSERVATIONS IN THE CITATION TO THE E FFECT- THERE WAS PLAY OF THE CIRCUMSTANCES AND NATURAL FORCES ALSO THAT CALL FOR ALLOWING FOR TIME PERIOD OF A FEW YEARS FOR DEVELOPING THE BOTAN ICAL GARDEN AND THE PLANTS TO GROW BECAUSE THE GROWTH OF PLANTS CANNOT BE ENHANCED BY A YEAR OR SO BY HUMAN EFFORTS ALONE OR TO USE SIMPLE WORDS A CHILD IN THE WOMB TAKES AROUND NINE MONTHS A LITTLE LESS OR A LITTLE MORE- TO TAKE BIRTH AND ENTER THIS VISIBLE WORLD. SO IS THE CASE OF THE RESPONDENT TRUST ENGAGED IN DEVELOPING BOTANICAL GARDEN. BUT EVEN TH EN ROLLER-COASTING THE PLAY OF NATURAL FORCED AND CIRCUMSTANCE BEYOND CONTROL OF THE RESPONDENT ASSESSEE TRUST THE PROJECT STARTED IN 1980 BECAME AVAILABLE FOR PUBLIC VIEWING IN THE END OF THE YEAR 1984, I.E . WITHIN A PERIOD OF 4 YEARS. THE LEARNED BENCH ALSO OBSERVED IN THIS CONT EXT IT IS A SIMPLE CASE OF MAN PROPOSES AND GOD DISPOSES. HERE IN THE CASE OF THE ASSESSEE TRUST WHAT WERE THE NATURAL FORCES AND CIRCUMSTANCES BEYOND ITS CONTROL THAT TH E DELAY IS JUSTIFIABLE?. SOME OF THE FUNCTIONARIES OF THE ASSESSEE TRUST IN THEIR OFFICIAL CAPACITY ARE AND HAVE ALWAYS BEEN AT THE HELM OF ADMINISTRAT ION OF THE STATE OF PUNJAB SINCE 10.10.1994, THE YEAR OF INCEPTION. A F EW ARE SPECIALISTS IN THE DIFFERENT FIELDS OF MEDICAL SCIENCES AND OTHERS ARE INDIVIDUALS OF HIGH INTELLIGENCE, FORCE-SIGHT AND STATUS. NO REASONS HA VE BEEN GIVEN FOR DELAY OF 8 YEARS IN STARTING CONSTRUCTION OF BUILDI NG. WHEN PLAY OF NATURAL FORCES IS NOT INVOLVED AT ALL IN THIS PROJE CT OF THE ASSESSEE TRUST AND THE CIRCUMSTANCES NEVER SPREAD BEYOND THEIR CON TROL TO MAKE IT DIFFICULT AND NOT POSSIBLE TO START THE PROCESS OF CONSTRUCTION OF BUILDING IMMEDIATELY AFTER 10.10.1994 OR SAY WITHIN A YEAR O R TWO, THEN WHERE THE THINGS WENT WRONG AND AWRY? HERE THE OBSERVATIONS O F THE LEARNED BENCH 33 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 REFERRED TO AT THE END OF THE COMMENTS IN THE PROCE EDING PARA THAT MAN PROPOSES AND GOD DISPOSES WILL HAVE TO BE TURNED U PSIDE DOWN TO CONVEY THE ACTUAL STATE OF AFFAIRS OF THE TRUST FOR THE PERIOD OF 10.10.1994 UP-TILL THE START OF CONSTRUCTION IN THE YEAR 2002. IT IS PURE CASE OF GOD PROPOSES AND MAN DISPOSES. AFTER ALL, SUCH A PROJE CT OF AWE-INSPIRING, HOLISTIC OBJECTS AND OF DIVINE MAGNANIMITY CAN ONL Y BE ORDAINED BY GOD HIMSELF AND THE SAME STANDS DISPOSED BY MAN. THERE IS PAUCITY OF WORDS TO EXPRESS THE TRUE STATE OF AFFAIRS GOING ON FROM 10.10.94 TO 31.03.2006 IN THE ADMINISTRATION OF THE ASSESSEE TR UST. PERHAPS, THERE IS NO NEED. 9. DURING THE YEAR UNDER ASSESSMENT EXPENSES OF R S. 10,98,101/- HAVE BEEN INCURRED ON RUNNING OF VEHIC LES AS COMPARED TO TOTAL EXPENSES OF RS. 2084373.76 FOR THE PERIOD FRO M 10.10.94 TO 31.03.05. AS TO WHO TRAVELLED IN THE VEHICLES, WHA T PURPOSES WAS SERVED OF THE ASSESSEE TRUST ETC, THE INFORMATION HAS NOT BEEN FURNISHED BY THE ASSESSEE. ONLY FIGURES OF AMOUNTS OF R.C. NO. WIS E EXPENSES OF THE CARS HAVE BEEN GIVEN ON A PAPER. THESE EXPENSES ARE DISALLOWED. PENALTY PROCEEDINGS U/S 271(1)(C) ARE INITIATED ON THIS ISS UE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE ASSESSEE TRUST/SOCIETY HAS NOT APPLIED ANY P ART OF THE INCOME OF THE YEAR FOR CHARITABLE PURPOSES AND AS S UCH DOES NOT DESERVE EXEMPTION OF ITS INCOME FOR THE YEAR UNDER ASSESSME NT. THIS CLAIM IS REJECTED AND PENALTY PROCEEDINGS ARE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME U/S 271(1)(C). AFTER DISCUSSI ON WITH SHRI NIRMAL MAHAJAN, CA, COUNSEL FOR THE ASSESSEE AND SHRI SAND EEP SINGH, ACCOUNT OFFICER OF THE TRUST, WHO ALSO ATTENDED THE ASSESSM ENT PROCEEDINGS FROM TIME TO TIME INCOME OF THE ASSESSEE IS COMPUTED AS UNDER:- IN RS. I. INCOME DECLARED AS PER RETURN 0 ADD:- II. INTEREST INCOME CLAIMED EXEMPT 1,72,80,372 /- III. OTHER RECEIPTS 36,282/- IV. CAPITAL RECEIPTS 25,00,00,000/- 34 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 V. EXCESS DEPOSITS WITH CAPITA LOCAL AREA BANK, JAL. (75000000- : RS. 465000000) ACTUAL : DEPOSIT AS PER DEPOSIT : BALANCE AS PER BANK : SHEET STATEMENT : BANK 1,00,00,000/- FURNISHED BY THE BANK ON 08.11.08 RECONCILIATION AS PER FRESH STATEMENT FROM THE BANK IS NOT SPEAKING AND NOTHING IS CLEAR. RS. 750000000/- IS TAKEN AS ACTUAL DEPOSIT AS ON 31.03.2006 VII. ADDITION AS DISCUSSED IN THE LAST 10,98,1 01/- PARA ON EXPENSES ON VEHICLES ASSESSED INCOME 27,84,14,755/- ROUNDED OFF U/S 288A 27,84,14,760/- PENALTY PROCEEDINGS U/S 271(1)(C) OF THE I.T. ACT , 1961 FOR FURNISHING INACCURATE PARTICULARS OF INCOME ARE SEPARATELY INI TIATED. 19. ASSESSEE AGGRIEVED WITH THE AFORESAID ORDER PASS ED BY THE ASSESSING OFFICER, DATED 30.12.2008 UNDER SECTION 1 43(3) OF THE ACT, FILED AN APPEAL BEFORE THE LEARNED CIT(A), JALANDHAR, WHO VIDE IMPUGNED ORDER DATED 25.09.2009, SUSTAINED THE ADDITION OF RS. 6. 50 CRORES OUT OF THE TOTAL ADDITION OF RS. 25 CRORES MADE BY THE ASSESSING OFF ICER ON ACCOUNT OF CAPITAL RECEIPTS AND DELETED THE BALANCE ADDITION O F RS. 18.50 CRORES. 35 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 SECONDLY, HE RESTRICTED THE DISALLOWANCE AT RS. 10, 04,252/- OUT OF TOTAL DISALLOWANCE OF RS. 10,98,101/- MADE ON ACCOUNT OF EXPENDITURE INCURRED IN RUNNING OF VEHICLES. THIRDLY, HE DELETED THE ADDITI ON OF RS. 1,72,80,372/- MADE ON ACCOUNT OF INTEREST AND RS. 36,282/- BEING OTHER RECEIPTS CLAIMED EXEMPTED. REVENUE IS ALSO AGGRIEVED WITH THE IMPUGN ED ORDER AND FILED THE CROSS APPEAL I.E. I.T.A. NO. 515(ASR)/2009 AGAINST THE DELETION OF AFORESAID ADDITIONS, FOR WHICH THE DETAILS HAVE BEEN MENTIONE D IN THE GROUNDS OF APPEAL FILED BY BOTH THE PARTIES. 20. AFTER GOING THROUGH THE IMPUGNED ORDER, WE ARE O F THE VIEW THAT LEARNED CIT(A) HAS CONCLUDED THE ISSUE IN DISPUTE I N PARA NOS. 3 TO 4.9 AT PAGE NOS. 16 TO 22, WHICH ARE REPRODUCED AS UNDER: 3. I HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND PERUSED THE ASSESSMENT RECORD. I HAVE ASKED FOR INFORMATION FRO M THE APPELLANT ABOUT THE ACTIVITIES UNDERTAKEN BY IT SINCE ITS INCEPTION , THE CONTRACTS AWARDED BY IT, ETC. A COPY OF THE ALL THE INFORMATION SUBMITTE D BY THE APPELLANT HAS BEEN FORWARDED TO THE A.O. AS AND WHEN RECEIVED FOR HIS EXAMINATION AND COMMENTS IF ANY. IT IS APPARENT FROM THE ASSESSMENT ORDER AND SUBSEQUENT SUBMISSION MADE BY THE A.O. THAT HE HAS MADE THE AD DITION ON THE GROUND THAT THE ASSESSEE WAS NOT TAKING ACTION TO ATTAIN I TS ULTIMATE OBJECT OF PROVIDING MEDICAL SERVICES TO THE INTENDED BENEFICI ARIES. HE HAS TAKEN SUPPORT FROM THE FACT THAT EVEN THOUGH TRUST WAS SE T UP ON 10.10.94 CONSTRUCTIONS OF THE INSTITUTE BUILDING STARTED ONL Y IN OR AROUND THE YEAR 2002 AND EVEN THEREAFTER, THE CONSTRUCTION HAS NOT BEEN COMPLETED. HE HAS ALSO TAKEN NOTE OF THE REPORT THAT STATE GOVT. WAS PLANNING TO TRANSFER THE HOSPITAL TO PRIVATE PERSONS EVEN THOUGH SUFFICIENT FUND WAS AVAILABLE WITH THE GOVT. AND MONEY FROM LAND SOLD BY THE PUDA HAD NOT BEEN TRANSFERRED FULLY TO THE ASSESSEE TRUST. 36 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 3.1 THE APPELLANT HAS CLAIMED EXEMPTION OF ITS INC OME U/S OF THE I.T. ACT. SECTION 11 ALLOWS EXEMPTION OF INCOME FROM PRO PERTY HELD UNDER TRUST WHOLLY FOR RELIGIOUS OR CHARITABLE PURPOSES IF THE SAME IS APPLIED FOR SUCH PURPOSES. SECTION 12(1) DEEMS VOLUNTARY DONATIONS T O BE INCOME TO BE TREATED AS SUCH U/S 11. SECTION 12A, INSERTED IN TH E STATUTE FROM 1.4.1973 PROVIDES THAT THE PROVISIONS OF SECTION 11 AND 12 S HALL NOT APPLY ANY RELATION TO THE INCOME OF ANY TRUST OR INSTITUTION UNLESS THE PERSONS IN RECEIPT OF INCOME HAS MADE AN APPLICATION FOR REGIS TRATION OF THE TRUST OR INSTITUTION IN THE PRESCRIBED FORM AND IN THE PRESC RIBED MANNER TO THE COMMISSIONER AND THE TRUST OR INSTITUTE FURNISH REP ORT OF ACCOUNTANT IN THE PRESCRIBED FORM. SECTION 12AA OF THE ACT LAYS DOWN THE PROCEDURE FOR REGISTRATION OF THE TRUST OR INSTITUTION REQUIRED U /S 12A. SECTION 12AA READS AS UNDER: 12AA. PROCEDURE FOR REGISTRATION (1) THE COMMISSIONER, ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUTION MADE UNDER CLAUSE(A) OR CLAUSE(AA) O F SECTION (1) OF SECTION 12A, SHALL (A) CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRU ST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTI ON AND MAY ALSO MADE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEH ALF; AND (B) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE T RUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, HE--- (I) SHALL PASS AN ORDER IN WRITING REGISTERING THE TRUST OR INSTITUTION; (II) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORDE R IN WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTION, AND A COPY OF SUCH ORDER SHALL BE SENT TO THE APPLI CANT: PROVIDED THAT NO ORDER UNDER SUB-CLAUSE (II) SHALL BE PASSED UNLESS THE APPLICANT HAS BEEN GIVEN A REASONABLE OPPORTUNITY O F BEING HEARD. (1A) (2) 37 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 (3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTE D REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) AND SUBSEQUENTLY THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INST ITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OB JECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN O RDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUST OR INSTIT UTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASSED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REASONABLE OP PORTUNITY OF BEING HEARD SECTION 13(1) OF THE ACT LISTS THE CONDITIONS UNDE R WHICH THE EXEMPTION TO THE WHOLE OR PART OF THE INCOME OF THE TRUST OR INSTITUTION WILL NOT BE ALLOWED. 3.2 SECTION 11 OF THE ACT GRANTS EXEMPTION TO TRUS TS AND INSTITUTIONS IN RESPECT OF THEIR INCOME TO THE EXTENTS THAT THE INC OME IS APPLIED FOR CHARITABLE PURPOSES. THE NECESSARY CONDITIONS FOR G RANT OF THE EXEMPTION U/S 11 ARE AS UNDER: A) INCOME SHOULD BE DERIVED FROM PROPERTY HELD UNDER T RUSTS FOR CHARITABLE OR RELIGIOUS PURPOSE; B) SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA. C) THE TRUSTEE OR INSTITUTION IS REGISTERED U/S 12AA. D) THE SURPLUS OF INCOME OF EXPENDITURE SHOULD BE INVE STED IN SPECIFIED ASSETS; E) INCOME IN THE FORM OF VOLUNTARY CONTRIBUTIONS MADE WITH A SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS O F THE TRUST OF INSTITUTION -11(1)(D)-276F) AUDITED ACCOUNT SHOULD BE SUBMITTED WITH THE RETURN OF INCOME- 12A(1) SECTION 12AA(1) OF THE ACT DEAL WITH THE PROCEDURE FOR DEALING WITH THE APPLICATION FOR REGISTRATION BY THE TRUST OR IN STITUTION MADE U/S 12A. THE COMMISSIONER IS REQUIRED TO SATISFY HIMSEL F ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND GENUINENESS OF ITS ACTIVITIES, AND, IF HE IS SATISFIED WITH THE SAME, HE SHOULD PA SS AN ORDER IN WRITING REGISTERING THE TRUSTS OR INSTITUTIONS; ELS E HE SHOULD REFUSE THE 38 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 REGISTRATION BY AN ORDER IN WRITING. SECTION 12AA(3 ) GRANTS POWER TO THE COMMISSIONER TO CANCEL THE REGISTRATION OF THE TRUST OR INSTITUTION IF HE IS SATISFIED THAT THE ACTIVITIES OF THE TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION. HENCE, ONCE THE COMMISSIO NER HAS GRANTED REGISTRATION U/S 12AA, IT HAS TO BE TAKEN THAT THE OBJECTS OF THE INSTITUTION AND THE GENUINENESS OF THE ACTIVITIES O F THE TRUST ARE SUCH THAT THE INSTITUTION IS ELIGIBLE FOR DEDUCTION OF I TS INCOME U/S 11. IF THE ACTIVITIES OF THE INSTITUTION ARE NOT GENUINE OR NO T IN ACCORDANCE WITH THE OBJECTS, THE COMMISSIONER MAY CANCEL THE REGIST RATION GRANTED EARLIER. THE POWER OF SUCH CANCELLATION IS VESTED O NLY WITH THE COMMISSIONER AND NOT WITH THE A.O. THE A.O. CANNOT DETERMINE THAT THE ACTIVITIES OF THE INSTRUCTION ARE NOT GENUINE O R NOT IN ACCORDANCE WITH THE OBJECTS OF THE INSTITUTE. IF THE A.O. BELI EVES SO, HE MAY BRING THIS BELIEF, ALONG WITH REASON THEREOF TO THE KNOWL EDGE OF THE COMMISSIONER FOR DETERMINATION AS TO WHETHER ACTIVI TIES WERE NOT GENUINE OR IN ACCORDANCE WITH THE OBJECTS OF THE IN STITUTION. HOWEVER, TILL SUCH TIME THAT THE REGISTRATION U/S 12AA IS NO T CANCELLED, IT HAS TO BE PRESUMED THAT THE OBJECTS HAVE BEEN VERIFIED AND THE ACTIVITIES OF THE INSTITUTION ARE GENUINE. ONCE THAT IS SO, THE A SSESSING OFFICER, DURING ASSESSMENTS, CANNOT HOLD THAT THE ACTIVITIES OF THE INSTITUTION ARE NOT GENUINE OR NOT IN ACCORDANCE WITH THE OBJEC TS OF THE INSTITUTION OR THAT IT IS NOT ELIGIBLE FOR DEDUCT ION U/S 11. HE CANNOT QUESTION THE ELIGIBILITY OF THE INSTITUTION REGISTE RED U/S 12AA FOR AVAILING DEDUCTION U/S 11 OF THE ACT. THE A.O. CAN, OF COURSE, EXAMINE IF THE INCOME FROM PROPERTY HELD UNDER TRUS T HAS BEEN APPLIED FOR THE STATED CHARITABLE OR RELIGIOUS PURP OSES AND IF THERE IS AN EXCESS OVER 15% OF THE INCOME NOT SO APPLIED, TH EN WHETHER THE OTHER CONDITIONS FOR ALLOWING DEDUCTION OF THE UNSP ENT AMOUNT HAVE BEEN FULFILLED. FOR THIS PROPOSITION, I DRAW SUPPOR T FROM THE DECISION IN THE CASE OF MADHYA PRADESH MADHYAN VS. CIT 256 I TR 277 (MP) IN WHICH IT HAS BEEN HELD THAT ONCE REGISTRATION HA S BEEN GRANTED U/S 12A, IT AUTHORITIES WERE BOUND BY THE SAME. THE HON 'BLE SUPREME COURT HAVE ALSO HELD IN THE CASE OF ACIT VS. SURAT CITY GYMKHANA 300 ITR 214 (SC) THAT REGISTRATION U/S 12A WAS A FA IL ACCOMPLI TO HOLD THE A.O. BACK FROM FURTHER PROBE INTO THE OBJE CTS OF THE TRUST. CONSIDERING THE FACTS OF THE CASE AND THE DECISIONS DISCUSSING ABOVE, I HOLD THAT THE A.O. IS PRECLUDED FROM EXAMINING TH E ELIGIBILITY OF THE 39 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 TRUST OR INSTITUTION FOR EXEMPTION U/S 11, THOUGH H E MAY EXAMINE IF THE INCOME HAS BEEN APPLIED FOR CHARITABLE PURPOSES . 3.3 THE A.O. MAY AND SHOULD EXAMINE DURING ASSESSM ENT IF ANY OF THE CONDITIONS OF SECTION 13 WERE ATTRACTED SO AS TO DE NY EXEMPTION TO THE ASSESSEE IN FULL OR PART OF ITS INCOME. THE ASSESSI NG OFFICER HAS NOT INVOKED SECTION 13 IN THE ASSESSMENT ORDER. THE A.O. HAS HE LD THAT THE ASSESSEE HAD NOT APPLIED ANY PART OF IT INCOME FOR CHARITABLE PU RPOSES AND AS SUCH DID NOT DESERVE EXEMPTION (THOUGH HE HAS MENTIONED IN THE A SSESSMENT ORDER THAT CONSTRUCTION OF THE BUILDING WAS A CHARITABLE ACTIV ITY). HE HAS DENIED EXEMPTION IN RESPECT OF INTEREST INCOME OF FDRS OF RS. 1,72,80,372/- AND OF MISC. RECEIPTS OF RS. 36,282/-. HE HAS ALSO ADDED T HE CAPITAL RECEIPT OF RS. 25 CRORES INCOME OF THE ASSESSEE, BESIDES ADDING A SUM OF RS. 10,98,101/- BEING EXPENDITURE ON RUNNING OF VEHICLES. A SUM OF RS. 1 CRORES HAS BEEN ADDED BY THE A.O. AS THE DIFFERENCE IN ACTUAL BALAN CE WITH BANK AND ACCOUNT BOOKS, WHILE HE HAS HELD AS NOT PROPERLY EXPLAINED. 3.4 THE A.O. HAS SUBSEQUENTLY CLARIFIED IN HIS LET TER DATED 20.03.2009 THAT IT WAS NOT HIS INTENTION TO STATE THAT THE ASS ESSEE WAS NOT ELIGIBLE FOR EXEMPTION U/S 11. RATHER, HE HAS STATED, IT WAS HIS INTENTION TO HOLD THAT THE INCOME OF THE ASSESSEE HAD NOT BEEN APPLIED FOR THE CHARITABLE PURPOSES AND WAS, THEREFORE, NOT ELIGIBLE FOR EXEMPTION. LET US, THEREFORE, EXAMINE IF THE CONTENTION OF THE A.O. THAT THE INCOME OF THE ASSES SEE FROM PROPERTY HELD UNDER TRUST HAS NOT BEEN APPLIED FOR CHARITABLE PUR POSE. 4. AS PER THE MEMORANDUM OF ASSOCIATION (MOA) OF THE SOCIETY, A SOCIETY IN THE NAME OF PUNJAB INSTITUTE OF MEDICAL SCIENCES, SOCIETY, JALANDHAR (SOCIETY, IN SHORT) WITH REGISTERED OFFIC E AT JALANDHAR WAS FORMED ON 10.10.1994 FOR SETTING UP AND MANAGING THE PUNJA B INSTITUTE OF MEDICAL SCIENCES, JALANDHAR (INSTITUTE, FOR SHORT). FROM TH E MOA IT APPEARS THAT THE SOCIETY HAS BEEN SET UP BY THE GOVT. OF PUNJAB. AS PER CLAUSE 9 OF THE MOA THE GOVERNING BODY OF THE SOCIETY, TO WHOM THE MANA GEMENT OF THE AFFAIRS OF THE SOCIETY HAS BEEN ENTRUSTED, HAS THE CHIEF MI NISTER AS ITS CHAIRMAN, AND SEVERAL OTHER MEMBERS OF THE GOVT. OF PUNJAB AS EX-OFFICIO MEMBERS. CLAUSES 5, 6 AND 8 OF THE MOA EXPLICITLY EMPOWER TH E STATE GOVT. TO MONITOR THE WORK OF THE SOCIETY AND OF THE INSTITUT E, TO TAKE OVER THE ASSETS AND THE ADMINISTRATION OF THE INSTITUTE UNDER CERTA IN CONDITIONS, AND TO ISSUE DIRECTIVES FOR THE MANAGEMENT OF THE INSTITUTE. AS PER CLAUSE 3(II)(K) AND 40 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 3(II)(M) THE SOCIETY IS TO TAKE THE APPROVAL OF THE STATE GOVT. FOR PURCHASE OF PROPERTY AND FOR INVESTING MONEY. 4.1 CLAUSE 3(I) OF THE MEMORANDUM OF ASSOCIATION ( MOA) OF THE SOCIETY LISTS ITS OBJECTS. CLAUSE 3(II) OF THE MOA LISTS THE FUNCTIONS OF THE SOCIETY. THE RELEVANT PORTIONS HAVE BEEN EXTRACTED IN THE A.O.S SUBMISSION ABOVE (PARA 2.2). THE SOCIETY IS REGISTERED WITH TH E REGISTRAR OF SOCIETIES VIDE REGISTRATION DATED 10.10.1994. 4.2 IT IS THE APPELLANTS CONTENTION THAT SETTING UP OF THE INSTITUTE WAS AN OBJECT OF THE SOCIETY WHICH WAS REGISTERED U/S 1 2AA AND CONSTRUCTION OF THE BUILDING WAS IN ACCORDANCE WITH THIS OBJECT; H ENCE, THE INCOME WAS BEING APPLIED FOR CHARITABLE PURPOSES AND WAS THERE FORE EXEMPT. I DO NOT ACCEPT THIS CONTENTION ABOUT THE OBJECTS OF THE S OCIETY. CONSTRUCTION OF BUILDING CANNOT, BY ITSELF, BE A CHARITABLE ACTIVIT Y. THE DEFINITION OF CHARITABLE ACTIVITY IN SECTION 2(15) OF THE IT ACT IS AS UNDER: (15) CHARITABLE PURPOSE INCLUDES RELIEF OF THE P OOR, EDUCATION, MEDICAL RELIEF, AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT.(NOR RELEVANT FOR OUR PURPOSE); THUS, CONSTRUCTION OF A BUILDING FOR ACHIEVING CHAR ITABLE PURPOSES CANNOT BE A CHARITABLE ACTIVITY IN ITSELF U/S 2(15). HOWEVER, SINCE THE SOCIETY HAS BEEN CREATED TO SET UP THE INSTITUTE, WHICH WOULD PROVID E MEDICAL EDUCATION, AND MEDICAL INSTITUTES NEED AN ATTACHED HOSPITAL TO STA RT FUNCTIONING, EDUCATION AND MEDICAL RELIEF, IN THE CONTEXT OF THE ASSESSE E MAY BE CHARITABLE ACTIVITIES UNDER SECTION 2(15) OF THE IT ACT. AN EX AMINATION OF THE MOA OF THE SOCIETY REVEALS THAT EDUCATION FEATURES IN THE MOA AT CLAUSE NO. 3(II)(A). THUS, THE APPELLANTS CONTENTION THAT CLAUSE 3(I) STATES THE CHARITABLE OBJECTS OF THE SOCIETY DOES NOT APPEAR TO BE CORRECT. SETTI NG UP OF AN INSTITUTE AND MANAGING THE INSTITUTE CANNOT BE CHARITABLE ACTIVIT IES IN THEMSELVES IN THE CONTEXT OF SECTION 2(15) OF THE ACT. THESE ACTIVITI ES CAN FACILITATE CHARITABLE ACTIVITIES OF PROVIDING EDUCATION OR MEDICAL CARE. IT IS THE PROVIDING OF MEDICAL EDUCATION MENTIONED IN CLAUSE 3(II)(A) OF T HE MOA THAT CAN BE AND IS THE CHARITABLE OBJECT OR PURPOSE OF THE SOCIET Y. THOUGH CLAUSE 3(II)(A) IS MENTIONED UNDER THE HEADING FUNCTIONS OF THE SO CIETY, IT IS, IN MY OPINION, THE MAIN CLAUSE IN THE MOA LAYING DOWN THE CHARITABLE PURPOSE AND OBJECT OF THE SOCIETY. THE OTHER OBJECTS AND FU NCTIONS DEAL WITH THE 41 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 POWERS OF THE SOCIETY TO ACHIEVE THIS MAIN CHARITAB LE PURPOSE OF THE SOCIETY. HENCE, I HOLD THAT SETTING UP OF THE INSTI TUTION AND MANAGING THE INSTITUTE (CLAUSE 3(I)) ARE INCIDENTAL AND NECESSAR Y FOR MEETING THE OBJECT OF PROVIDING MEDICAL EDUCATION (CLAUSE 3(II)(A)). A PE RUSAL OF THE MOA ALSO SHOWS THAT THE DOMINANT OBJECT OF THE SOCIETY IS TO PROVIDE HIGH QUALITY MEDICAL EDUCATION. 4.3 THE INSTITUTE, IS AS OBVIOUS, HAS NOT STARTED IMPARTING MEDICAL EDUCATION, WHICH IS THE MAIN CHARITABLE ACTIVITY FO R WHICH THE SOCIETY HAS BEEN FORMED. IT IS ENGAGED IN CONSTRUCTION OF A BUI LDING IN WHICH THE INSTITUTE IS SLATED TO START FUNCTIONING. THE A.O. S MAIN GROUSE IS THAT THE MAIN CHARITABLE PURPOSE OF THE INSTITUTE WAS NO BEI NG FULFILLED AND, HENCE, THE APPLICATION OF THE INCOME WAS NOT TOWARDS CHARI TABLE PURPOSES. 4.4 AS NOTED EARLIER, THE APPELLANT HAS SUBMITTED A SEQUENCE OF EVENTS AND ACTIVITIES SINCE ITS INCEPTION. AS PER THIS INF ORMATION, THE PROPOSAL TO SET UP PIMS WAS MADE IN THE YEAR 1993 BY THE STATE GOVT . LAND AND FUNDS WERE TO BE ARRANGED BY TRANSFERRING 165 ACRES OF LA ND FROM PUNJAB AGRICULTURAL UNIVERSITY (PAU) TO PIMS FOR THE INSTI TUTE AND FOR COMMERCIAL EXPLOITATION FOR FUNDS. IN 1994 IT WAS DECIDED TO H AVE THE SOCIETY REGISTERED, TO HAVE A GOVERNING COUNCIL HEADED BY T HE CHIEF MINISTER, AND TO APPOINT A DIRECTOR OF THE INSTITUTE ON CONTRACT BASIS. THE DIRECTOR WAS APPOINTED AND THE SOCIETY WAS REGISTERED IN 1994. A SUM OF RS. 3 CRORES WAS GRANTED BY THE STATE GOVT. TO PIMS. IN 1996 AN ARCHITECT CONSULTED WAS APPOINTED TO PREPARE THE MASTER PLANT. IN 1997 THE PRIME MINISTER ANNOUNCED ADDITIONAL CENTRAL ASSISTANCE(ACA) OF RS. 25 CRORES UNDER THE SCHEME OF 100% CENTRALLY SPONSORED SCHEMES OF THE 9 TH FIVE YEAR PLAN RS. 7.50 CRORES WAS RECEIVED ON 23.01.1998; RS. 7.50 CR ORES WAS RECEIVED ON 5.5.2000 AND THE BALANCE RS. 10 CRORES WAS RECEIVED ON 10.03.2006. IN 1997 ITSELF, 60.77 ACRES LAND WAS PURCHASES FROM PAU BY PIMS FOR RS. 3 CRORES TO SET UP THE MEDICAL COLLEGE AND HOSPITAL. IN 1998 AN AGREEMENT WAS MADE WITH A CONTRACTOR TO CONSTRUCT AN INITIAL BUILDING TO BE USED TO ACCOMMODATE SOME DEPARTMENTS OF THE INSTITUTE AND HOSPITAL. THE BUILDING WAS COMPLETED IN 2000. IN OCTOBER, 1999, A MASTER PLAN OF RS. 80 CRORES WAS APPROVED AND PROCESS OF SELECTING A CONTRACTOR WAS STARTED. THE PLAN PROPOSED 150 MBBS STUDENTS INTAKE EACH YEAR AND AN ATTACHED HOSPITAL OF 1000 BEDS, THOUGH IN A PHASED MANNER. THE SOCIETY WAS GRANTED REGISTRATION U/S 12AA ON 1.11.2000. IN OCTOBER, 2001 IT WAS DECIDED THAT THE MAIN SOURCE OF FUNDING 42 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 WOULD BE DEVELOPMENT OF AROUND 104 ACRES OF LAND PU RCHASED BY PIMS FROM PAU FOR RS. 15 CRORES. PUDA WOULD DEVELOP AND SELL THE LAND. IN 2001, L&T WAS SELECTED AS THE MAIN CONTRACTOR FOR T HE MAIN BUILDING AND THE CONSTRUCTION WAS STARTED. IN FEBRUARY 2002, SUP ERVISION OF THE WORK OF THE PROJECT WAS AWARDED TO PUNJAB HEALTH SYSTEMS CO RPORATION (A STATE GOVT. ENTERPRISE) BY PIMS. A TRIPARTITE AGREEMENT B ETWEEN STATE GOVT., PUDA AND PIMS FOR DEVELOPMENT AND SALE OF LAND OF 1 04 ACRES WAS ENTERED INTO. DURING F.Y. 2003-04, CONTRACT FOR OTHER WORKS WERE AWARDED. IN 2005- 06, IT WAS DECIDED BY THE GOVERNING BODY TO TAKE TH E PUBLIC PRIVATE PARTNERSHIP (PPP) MODE FOR OPERATIONALISING AND MAN AGING THE INSTITUTE. [THIS HAS BEEN FINALLY ACHIEVED IN AUGUST, 2009, AS PER INFORMATION SUBMITTED BY THE APPELLANT.] 4.5 IT IS OBVIOUS FROM THE SEQUENT OF EVENTS AND A CTIVITIES OF THE SOCIETY DESCRIBED ABOVE THAT THE SOCIETY WAS TAKING STEPS FOR CONSTRUCTING A BUILDING FOR SETTING UP THE INSTITUTE TO IMPART MED ICAL EDUCATION. THE MAJOR SOURCE OF FUNDING WAS ARRANGED IN THE YEAR 2001 WHE N LAND WAS TRANSFERRED TO THE ASSESSEE FOR DEVELOPMENT AND SALE. CONTRACTS FOR CONSTRUCTION AND WORKS WERE ALSO AWARDED THEREAFTER. NOT ALL NECESSA RY CONTRACTS FOR CONSTRUCTION AND WORKS WERE ALSO AWARDED THEREAFTER . THE QUESTION IS WHETHER THE EXPENDITURE ON CONSTRUCTION OF THE INST ITUTE BUILDING CAN BE SAID TO BE INCURRED FOR CHARITABLE PURPOSES DURING THE R ELEVANT YEAR UNDER THE GIVEN CIRCUMSTANCES? 4.6 IN MY OPINION, THE ANSWER TO THIS QUESTION HA S TO BE IN THE AFFIRMATIVE. WHILE THE SOCIETY HAS NOT YET STARTED IMPARTING MEDICAL EDUCATION, THE EXPENDITURE INCURRED BY IT IS CERTAI NLY AIMED AT FACILITATING MEDICAL EDUCATION. IT IS NOT THE CASE OF THE A.O. T HAT THE EXPENDITURE INCURRED DURING THE YEAR WAS FOR ANY PURPOSE OTHER THAN SETTING UP OF THE MEDICAL INSTITUTE. HIS ONLY GROUSE IS THAT THE EDUC ATION HAS NOT COMMENCED EVEN AFTER A NUMBER OF YEARS. HOWEVER, THAT SHOULD NOT DECIDE THE ISSUE. WHEN THE REGISTRATION U/S 12AA WAS GRANTED BY THE C OMMISSIONER IN 2000, THE INSTITUTE HAD NOT STARTED FUNCTIONING. YET, THE OBJECTS AND ACTIVITIES WERE FOUND TO BE GENUINE- WHICH EVEN THE A.O. AGREES TO. THE SITUATION HAS NOT CHANGED MUCH SINCE 2000 IN THIS RESPECT DURING THE RELEVANT PREVIOUS YEAR, EXCEPT THAT THE BUILDING HAS BEEN CONSTRUCTED TO A LARGE EXTENT. THE A.O. HAS REFERRED TO THE NEWSPAPER REPORTS THAT THE INSTITUT E WAS BEING GIVEN TO SOME PRIVATE PERSONS. HOWEVER, AS NOTED ABOVE, THAT DECI SION WAS TAKEN IN 2005 43 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 ITSELF IN PRINCIPLE; THOUGH NEITHER WERE THE OBJECT S CHANGED DURING THE YEAR, NOR WAS THE INSTITUTE GIVEN TO ANY PRIVATE PERSON D URING THE RELEVANT PREVIOUS YEAR. THE IMPACT, IF ANY, OF THE TRANSFER OF THE INSTITUTE TO PRIVATE HANDS ON THE EXEMPTION OF INCOME U/S 11 CAN BE EXAM INED ONLY IN THE YEAR OF THE TRANSFER. AS FAR AS THE PRESENT APPEAL IS CO NSIDERED, THE APPELLANT INCURRED EXPENDITURE ON CONSTRUCTION OF THE BUILDIN G FOR THE MEDICAL INSTITUTE. SINCE THE BUILDING WAS BEING CONSTRUCTED FOR THE PURPOSE OF IMPARTING MEDICAL EDUCATION, THE EXPENDITURE IS HEL D TO HAVE BEEN INCURRED FOR CHARITABLE PURPOSE WITHIN THE MEANING OF SECTIO N 11(1)(A) OF THE ACT. THE DELAY IN STARTING THE EDUCATION THOUGH WORRISOM E IT MAY BE, WILL NOT IMPACT THE EXEMPTION FOR THE REASON THAT THE EXPEND ITURE IS FOR STARTING THE MEDICAL EDUCATION AND THE SITUATION IS THE SAME AS IN THE YEAR 2000 WHEN THE REGISTRATION U/S 12AA WAS GRANTED. THERE WAS NO STIPULATION WHILE GRANTING THE REGISTRATION U/S 12AA AS TO WHEN THE I NSTITUTE SHOULD START FUNCTIONING. AS LONG AS THE REGISTRATION U/S 12AA I S VALID, THE ACTIVITIES OF THE SOCIETY CAN ONLY BE HELD TO BE GENUINE. EVEN TH E FACTS SHOW THAT THE EXPENDITURE HAS BEEN INCURRED FOR CONSTRUCTING THE INSTITUTE BUILDING, WHICH THE ASSESSING OFFICER HAS ACCEPTED IN THE ASST. ORD ER TO BE CHARITABLE ACTIVITY. ONCE THIS IS SO, EXEMPTION U/S 11(1)(A) IN RESPECT OF INCOME APPLIED TO SUCH CONSTRUCTION HAS TO BE ALLOWED. 4.7 THE A.O.S CONTENTION IS THAT THE ULTIMATE AIM OF DELIVERING CHARITABLE ACTIVITIES HAS TO BE SEEN. HOWEVER, IT M UST BE APPRECIATED THAT A MEDICAL INSTITUTE CANNOT START FUNCTIONING WITHIN T HE SHORT PERIOD OF A YEAR. CONSTRUCTION OF THE BUILDING MAY TAKE MORE TIME. IT HAS NOT BEEN CONTENDED DIRECTLY BY THE A.O. THAT INCOME OF THE SOCIETY WOU LD BE EXEMPT U/S 11 ONLY AFTER THE MEDICAL INSTATE STARTED FUNCTIONING. THE CONTENTION OF THE A.O. IS THAT THE SOCIETY WAS TAKING TOO LONG TO SET UP THE INSTITUTE, AND THEREFORE, NOT APPLYING ITS INCOME TO ITS OBJECTS. HOWEVER, THE PROVISION OF SECTION 11(2) OF THE ACT TAKE CARE OF THIS SITUATIO N. IF THE ASSESSEE ACCUMULATES ITS INCOME AND DOES NOT UTILIZE IT FOR THE STATED OBJECTIVES WITHIN THE PERIOD PROVIDED IN THE ACT, THE UNUTILIZ ED INCOME CAN BE TREATED AS THE ASSESSEES INCOME. IT IS NOT THE A.O.S CASE THAT THE INCOME ACCUMULATED U/S 11(2) HAS NOT BEEN UTILIZED FOR THE STATED PURPOSES. IT ALSO DOES NOT APPEAL TO BE THE CASE SINCE EARLIER THE PE RIOD FOR ACCUMULATION WAS TEN YEARS AND IT IS ONLY WITH EFFECT FROM THE FINAN CIAL YEAR 2001-02 THAT THE PERIOD OF ACCUMULATION HAD BEEN REDUCED TO FIVE YEA RS. AS NOTED EARLIER, APART FROM EXAMINING AS TO WHETHER THE INCOME OF TH E ASSESSEE HAS BEEN 44 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 APPLIED FOR CHARITABLE PURPOSES U/S 11(1)(A), THE A .O. SHOULD EXAMINE THE FULFILLMENT OF CONDITIONS U/S 11(2) OF THE ACT BESI DES THE VIOLATION OF THE PROVISIONS OF SECTION 13 OF THE ACT. IF HE FINDS TH AT THE ACTIVITIES OF THE TRUST OR SOCIETY ARE NOT BEING CARRIED OUT AS PER THE OBJ ECTS OF THE SOCIETY, HE SHOULD BRING THE MATTER TO THE NOTICE OF THE CIT FO R CANCELLATION OF THE REGISTRATION OF THE TRUST. 4 4.8 THE A.O. HAS REFERRED TO THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE ARTICLE OF SH. SOLI J. SORABJEE FOR PL EADING THAT THE DECISION SHOULD BE SUCH AS TO FURTHER THE CHARITABLE AIMS AN D OBJECTIVES OF THE SOCIETY. WHILE IT APPEARS THAT THE A.O. WOULD LIKE TO ALLOW EXEMPTION U/S 11 TO THE SOCIETY ONLY AFTER IT STARTS DELIVERING M EDICAL EDUCATION AND SERVICES, IN MY OPINION THE PROPER FORUM FOR EXERCI SING THIS AIM IS TO MOVE THE CIT FOR CANCELLATION OF REGISTRATION U/S 12AA. AS DISCUSSED EARLIER, ONCE THE SOCIETY IS REGISTERED U/S 12AA, WHAT CAN BE EXA MINED IS THE APPLICATION OF INCOME FOR CHARITABLE PURPOSES. CONSTRUCTION OF THE INSTITUTE BUILDING IS APPLICATION OF INCOME FOR SUCH PURPOSE. CONSTRUCTIV E INTERPRETATION OF THE STATUTE AND DIRECTIONS TO THE GOVT. FOR CARRYING OU T CERTAIN TASKS FOR THE BETTERMENT OF SOCIETY AT LARGE ARE, IN MY HUMBLE OP INION, BEYOND THE SCOPE AND THE POWERS OF THE CIT(A) UNDER THE I.T. ACT. 4.9 BASED ON THE DISCUSSION ABOVE, IT IS HELD THAT THE APPELLANT IS ELIGIBLE FOR EXEMPTION OF ITS INCOME UNDER THE PROV ISIONS OF SECTION 11 OF THE ACT AND THAT IT IS ENTITLED TO EXEMPTION U/S 11 (1)(A) IN RESPECT OF THE EXPENDITURE INCURRED FOR CONSTRUCTION OF THE INSTIT UTE BUILDING. 21. KEEPING IN VIEW THE AFORESAID FINDING OF LEARNE D CIT(A), ESPECIALLY IN THE SECOND LAST LINE OF PARA NO. 3.2 , IN WHICH HE HAS HELD THAT THE ASSESSING OFFICER IS PRECLUDED FROM EXAMINING T HE ELIGIBILITY OF THE TRUST OR INSTITUTION FOR EXEMPTION U/S 11, THOUGH H E MAY EXAMINE IF THE INCOME HAS BEEN APPLIED FOR CHARITABLE PURPOSES, WE ARE OF THE VIEW THAT THIS FINDING GIVEN BY LEARNED CIT(A) IN THE IMPUGNE D ORDER, IS TOTALLY 45 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 AGAINST THE LAW AND FACTS ON THE FILE WHICH DESERVE S TO BE CANCELLED AND WE ACCORDINGLY CANCEL THE SAME BY HOLDING THAT EVEN IF THE REGISTRATION IS GRANTED TO THE ASSESSEE-TRUST UNDER SECTION 12AA OF THE ACT, AS HAS BEEN GRANTED IN THE PRESENT APPEAL, THEN IT WILL NOT PRE CLUDE THE ASSESSING OFFICER TO EXAMINE IN DETAILS THE VERY OBJECTS OF THE ASSES SEE AND TO GIVE THE FINDINGS IN ASSESSMENT ORDER AS TO WHETHER THE ASSE SSEE HAS COMPLIED WITH REQUIREMENT OF SECTION 11 OF THE ACT OR NOT, AS AND WHEN ASSESSEE SEEKING EXEMPTION UNDER SECTION 11 OF THE ACT. THE REGISTRA TION GRANTED UNDER SECTION 12AA OF THE ACT TO THE ASSESSEE SHOULD NOT BE THE OBSTACLE IN THE WAY OF ASSESSING OFFICER AT THE TIME WHEN THE ASSES SMENT PROCEEDINGS ARE TO BE TAKEN AND TO DECIDE AS TO WHETHER THE ASSESSE E IS ENTITLED FOR BENEFIT OF SECTION 11 OR 12, AS THE CASE MAY BE. 22. AS PER THE FACTS NARRATED BY THE LEARNED CIT(A) IN PARA NO. 4.4 AT PAGE 20 OF THE IMPUGNED ORDER, THE ASSESSEE WAS PRO POSED TO BE SET UP IN THE YEAR 1993 BY THE STATE GOVERNMENT AND DECIDED T O HAVE SOCIETY REGISTERED IN 1994. THE ASSESSEE-SOCIETY GOT REGIST ERED UNDER SECTION 12AA OF THE ACT ON 01.11.2000. THE ASSESSEE-TRUST HAS GO VERNING COUNCIL HEADED BY THE CHIEF MINISTER AND TO APPOINT A DIRECTOR OF THE INSTITUTE ON CONTRACT BASIS. IN 1997, THE PRIME MINISTER ANNOUNCED ADDITI ONAL CENTRAL ASSISTANCE 46 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 (ACA) OF RS. 25 CRORES UNDER THE SCHEME 100% CENTRA LLY SPONSORED SCHEMES OF THE 9 TH FIVE YEAR PLAN RS. 7.50 CRORES WAS RECEIVED ON 23. 01.98; RS. 7.50 CRORES WAS RECEIVED ON 5.5.2000 AND THE BA LANCE RS. 10 CRORES WAS RECEIVED ON 10.03.2006. IN 1998, AN AGREEMENT WAS M ADE WITH A CONTRACTOR TO CONSTRUCT AN INITIAL BUILDING TO BE USED TO ACCO MMODATE SOME DEPARTMENTS OF THE INSTITUTE AND HOSPITAL. THE BUIL DING WAS COMPLETED IN 2000. IN OCTOBER, 1999, A MASTER PLAN OF RS. 80 CRO RES WAS APPROVED AND PROCESS OF SELECTING A CONTRACTOR WAS STARTED. THE PLAN PROPOSED 150 MBBS STUDENTS INTAKE EACH YEAR AND AN ATTACHED HOSPITAL OF 1000 BEDS, THOUGH IN A PHASED MANNER. THE SOCIETY WAS GRANTED REGISTRATION U/S 12AA ON 1.11.2000. IN OCTOBER, 2001 IT WAS DECIDED THAT THE MAIN SOURCE OF FUNDING WOULD BE DEVELOPMENT OF AROUND 104 ACRES OF LAND PU RCHASED BY PIMS FROM PAU FOR RS. 15 CRORES. PUDA WOULD DEVELOP AND SELL THE LAND. IN 2001, L&T WAS SELECTED AS THE MAIN CONTRACTOR FOR T HE MAIN BUILDING AND THE CONSTRUCTION WAS STARTED. IN 2005-06, IT WAS DE CIDED BY THE GOVERNING BODY TO TAKE THE PUBLIC PRIVATE PARTNERSHIP (PPP) M ODE FOR OPERATIONALISING AND MANAGING THE INSTITUTE. THIS HAS BEEN FINALLY A CHIEVED IN AUGUST, 2009. 23. KEEPING IN VIEW THE FACTS NARRATED BY LEARNED CI T(A), IT IS ADMITTED THAT THE ASSESSEE-SOCIETY HAS NOT YET STAR TED IMPARTING MEDICAL 47 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 EDUCATION AND THE EXPENDITURE INCURRED DURING THE Y EAR BY THE SOCIETY WAS NOT FOR ANY OTHER PURPOSE OTHER THAN SETTING UP OF THE MEDICAL INSTITUTE. HE FINALLY HELD THAT THE EXPENDITURE INCURRED BY THE A SSESSEE-TRUST IS FOR CHARITABLE PURPOSE AND THE ASSESSEE-TRUST IS ENTITL ED FOR EXEMPTION UNDER SECTION 11(1)(A) OF THE ACT IN RESPECT OF THE INCOM E APPLIED TO SUCH CONSTRUCTION, WHICH HAS TO BE ALLOWED TO THE ASSESS EE. I) IN OUR VIEW, AS PER THE FACTS NARRATED BY LE ARNED CIT(A) IN THE AFORESAID PARAGRAPH THAT IN THE YEAR 1998, AN AGREE MENT WAS MADE WITH A CONTRACTOR TO CONSTRUCT AN INITIAL BUILDING TO BE U SED TO ACCOMMODATE SOME DEPARTMENTS OF THE INSTITUTE AND HOSPITAL. THE BUIL DING WAS COMPLETED IN 2000. WE FAIL TO UNDERSTAND THAT IF THE BUILDING, A S STATED BY LEARNED CIT(A), COMPLETED IN 2000, THEN WHY THE ASSESSEE HA S NOT TAKEN ANY STEP TO IMPART THE MEDICAL EDUCATION AND TO PROVIDE FREE ME DICAL FACILITIES TO THE GENERAL PUBLIC OF THE CONCERNED AREA. FURTHER, LEAR NED CIT(A) HAS ALLOWED THE EXEMPTION BENEFIT TO THE ASSESSEE ONLY ON THE G ROUND THAT THE ASSESSEE HAS BEEN REGISTERED UNDER SECTION 12AA OF THE ACT, WHICH IS CONTRARY TO THE LAW AND FACTS ON THE FILE AND ARE NOT LOGICAL. II) AS REGARDS TO THE DEVELOPMENT OF 104 ACRES OF LAND PURCHASED BY ASSESSEE-TRUST FROM PAU FOR RS. 15 CRORES, IN THE Y EAR 2001 L&T WAS 48 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 SELECTED AS THE MAIN CONTRACTOR FOR THE MAIN BUILDI NG AND THE CONSTRUCTION WAS STARTED IN 2001. IN 2005-06, IT WAS DECIDED BY THE GOVERNING BODY TO TAKE PUBLIC PRIVATE PARTNERSHIP (PPP) MODE FOR OPER ATIONALISING AND MANAGING THE INSTITUTE. THIS HAS BEEN FINALLY ACHIE VED IN AUGUST, 2009. WE ARE OF THE VIEW THAT THE MOTIVE OF THE ASSESSEE BEH IND THE LONG PERIOD FOR ABOUT MORE THAN 8 YEARS SPENT ON CONSTRUCTION OF BU ILDING BY THE ASSESSEE- TRUST, IS TO TAKE PUBLIC PRIVATE PARTNERSHIP (PPP) MODE FOR OPERATIONALISING AND MANAGING THE INSTITUTE AND CAPITALIZING MORE AN D MORE ON THE PROJECT, WHICH THEY HAVE ACHIEVED FINALLY IN AUGUST, 2009 III) IT IS PERTINENT TO MENTION HERE THAT THE ASS ESSING OFFICER ISSUED A NOTICE DATED 18.12.2008 AND ASKED VARIOUS QUESTIONS FROM THE ASSESSEE AFTER DISCUSSING IN DETAIL THE REPLY FILED BY THE ASSESSE E ON 10.11.2008, 11.11.2008 AND 26.11.2008. THE ASSESSING OFFICER CO NVEYED THE MAIN OBJECTS OF THE ASSESSEE-TRUST TO THE ASSESSEE BY TH E SAID NOTICE AND ASKED THE ASSESSEE THAT NONE OF THE OBJECTS HAS BEEN ACHIEVED AT ALL DURING THE FOURTEEN YEARS. THE RELEVANT QUESTIONS ASKED BY THE ASSESSING OFFICER TO THE ASSESSEE ARE REPRODUCED AS UNDER: C. QUERY NO. 14:- ON FURNISHING OF DATA REGARDING ACHIEVEMENT OF OBJECTS WITH REFERENCE TO QUERY NO. 14 OF THE QUEST IONNAIRE, YOUR EXPLANATION APPEARS TO BE THE SAME AS IT COULD HAVE BEEN DURING THE FIRST ASSESSMENT YEAR AFTER INCEPTION OF THE SOCIETY/TRUS T ON 10.10.1994 I.E. 49 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 ASSESSMENT YEAR 1995-96. THESE OBJECTS REGARDING IM PARTING OF MEDICAL EDUCATION ARE REPRODUCED FROM ARTICLE 3 OF MEMORAN DUM OF ASSOCIATION AND THE RULES GOVERNING THE FUNCTIONIN G OF ASSESSEE SOCIETY/TRUST AS UNDER:- 3. I) THE OBJECTS FOR WHICH THE SOCIETY IS ESTA BLISHED ARE TO ESTABLISH AND TO CARRY ON THE ADMINISTRATION AND MA NAGEMENT OF PUNJAB INSTITUTE OF MEDICAL SCIENCES, JALANDHAR. A) TO PROVIDE FOR TRAINING, INSTRUCTIONS AND RESEARCH IN SUCH BRANCHES OF MEDICAL EDUCATION AND RESEARCH & TO INDUCT ADVANCED MEDICAL KNOWLEDGE AND TECHNIQUES INTO OUR MEDICAL EDUCATION SYSTEM AND TO SET UP PUNJAB INSTITUTE OF MEDICAL SCIENCES AT JAL ANDHAR AS THE INSTITUTE MAY THINK FIT AND FOR THE ADVANCEMENT OF LEARNING AND DISSEMINATION OF KNOWLEDGE AND PATIENT CARE IN SUC H BRANCHES. B) TO GET AFFILIATION TO THE MEDICAL COUNCIL OF INDIAN OR ANY OTHER AFFILIATING AGENCY FOR THE AWARD OF DEGREES, DIPLOM AS AND CERTIFICATES. C) TO INSTITUTE AND AWARD FELLOWSHIPS, SCHOLARSHIPS, P RIZES AND MEDALS IN ACCORDANCE WITH THE RULES AND BYE-LAWS. D) TO CONFER HONORARY AWARDS OR OTHER DISTINCTIONS. E) TO FIX, DEMAND AND RECEIVE SUCH FEES AND OTHER CHAR GES AS MAY BE LAID DOWN IN THE BYE-LAWS MADE UNDER THE RULES OF THE SO CIETY. F) TO ESTABLISH, MAINTAIN AND MANAGE HALLS AND HOSTELS FOR THE RESIDENCE OF STUDENTS. G) TO PROVIDE FOR THE MAINTENANCE OF UNITS OF THE NATI ONAL CADET CORPS WHEN ESTABLISHED FOR THE STUDENTS OF THE INSTITUTE. H) TO CREATE ADMINISTRATIVE, TEACHING/NON-TEACHING AND MINISTERIAL AND OTHER POSTS UNDER THE SOCIETY AND MAKE APPOINTMENTS THERETO AS NEEDED IN ACCORDANCE WITH RULES AND BYE-LAWS. 50 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 I) TO CO-OPERATE WITH EDUCATIONAL OR OTHER INSTITUTION S IN ANY PART OF THE WORLD HAVING OBJECTIVES WHOLLY OR PARTLY SIMILAR TO THOSE OF THE SOCIETY BY EXCHANGE OF TEACHERS, SCHOLARS & GENERAL LY IN SUCH MANNER AS MAY BE CONDUCTIVE TO THEIR COMMON OBJECTS . J) TO MAKE RULES AND BYE-LAWS FOR THE CONDUCT OF T HE AFFAIRS OF THE SOCIETY AND TO AMEND, VARY OR RESCIND THEM FROM TIM E TO TIME WITH THE APPROVAL OF THE STATE GOVT./ MEDICAL COUNCIL OF INDIA. K) TO Q ONLY ADMINISTRATIVE CLAUSES R) TO DO ALL SUCH THINGS AS MAY BE NECESSARY INCID ENTAL OR CONDUCIVE TO THE ATTAINMENT OF ALL OR ANY OF THE OBJECTS OF THE SOCIETY. S) TO CONTINUE SUCH COMMITTEE OR COMMITTEES AS IT MAY DEEM FIT FOR THE DISPOSAL OF ANY BUSINESS OF THE INSTITUTE OR FOR TE NDERING ADVICE IN ANY MATTER PERTAINING TO THE INSTITUTE. T) ----------------------------------------------- ----------------------------- PLEASE ALSO FURNISH. J) TO IV)--------------------------------------------- -------------------------- V) TOTAL NUMBER OF DEPARTMENT-WISE PROFESSORS, LEC TURES, MINISTERIAL AND OTHER TECHNICAL STAFF REQUIRED FO R A MEDICAL INSTITUTION OF THE STATURE OF P.I.M.S. VI) TOTAL NUMBER OF FACULTIES IN WHICH MEDICAL EDUCATION IS IMPARTED. VII) COMPLETE DETAILS OF LABORATORIES USED FOR P RACTICAL AND OTHER ANALYSIS ALONGWITH DETAILS OF MEDICAL EQUIPMENTS V IZ/YEAR(S) OF PURCHASE OF EACH EQUIPMENT, COST PRICE ETC. WITH COPIES OF BILLS OF PURCHASE. 51 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 IX) DETAILS OF RESEARCH DONE BY P.I.M.S. IN MEDICA L SCIENCES OF ITS RECOGNITION AT THE NATIONAL/INTERNATIONAL LEVEL WIT H EVIDENCE OF SUCH RECOGNITION. D. NONE OF THE OBJECTS HAVE BEEN NOT ONLY NOT ACHI EVED AT ALL DURING THE FOURTEEN YEARS BUT NO STEP HAS BEEN TAKEN IN TH AT DIRECTION WITH THE ONLY EXCEPTION OF CONSTRUCTION OF BUILDING WHICH IS STILL GOING ON AND WHAT-SO-EVER PART OF THIS BUILDING IS COMPLETE HAS NOT BEEN PUT TO USE AND IS LIKELY TO REMAIN SO FOR ANOTHER DECADE OR MO RE. THE SOCIETY/TRUST HAS NOT ONLY NOT FAILED IN ITS OBJECTIVES BUT HARDL Y ANY REAL EFFORT HAS BEEN MADE IN THAT DIRECTION IMPLYING THEREBY THAT T HE OBJECTS FOR WHICH THIS PRESTIGIOUS INSTITUTION WAS CONCEIVED UNDER TH E OVERALL CONTROL OF THE ASSESSEE SOCIETY/TRUST IS STILL STRUGGLING TO MADE THE LOFTY CONCEPTION OF SCHEMES/DESIGNS TO MOVE IN THE DIRECTION OF THEIR E XECUTION FROM ITS TIRED, INERT, STATIC, STILL, STALE AND SINKING STAT E OF HEALTH. D1. NOW THE FINAL BLOW APPEARS TO BE WAITING TO STR IKE AN SNUFF ANY RAY OF HOPE, IF THERE IS ONE: AS PER RECENT DEVELOP MENTS AS REPORTED IN THE THE INDIAN EXPRESS- A NATIONAL DAILY CONSIDER ED HAVING GOOD AUTHENTICITY THE LOFTY CONCEPT AND PROJECT, HAVING HOLISTIC DESIGNS AND OBJECTS OF IMPARTING MEDICAL EDUCATION IF NOT ALREA DY SUFFOCATED AND LYING BREATHLESS AT ITS EMBRYONIC STAGE ITSELF HAS FINALLY COME WITHIN THE GRAVITATIONAL PULL OF BLACK HOLES CREATED BY THE CALLOUSNESS AND STOICISM OF SHEER NON-ACTION OF THE SOCIETY/TRUST T O EVEN MADE A MOVE IN THE DIRECTION TO ACHIEVE ITS OBJECTS. THIS REPORT AS APPEARING IN THIS DAILY ON 11.11.2008 IS REPRODUCED AS UNDER:- SUKHDEEP KAUR CHANDIGARH, NOVEMBER 10 IT SEEMS TO BE THE FIRST CASE OF ITS KIND. A CORPOR ATE GROUP ASSERTING IN A COURT OF LAW THAT A CHIEF MINISTERS OWN MEN ARE NO T HEEDING HIS DIRECTIONS. WHEN THE HEARING OF THE WRIT PETITION FILED BY FORT IS HEALTHCARE AGAINST PUNJAB GOVERNMENT, CONTESTING ITS DISQUALIFICATION FROM THE PUNJAB INSTITUTE OF MEDICAL SCIENCES (PIMS) BIDDING PROCES S BEGINS TOMORROW, IT WILL BE CHIEF MINISTER PRAKASH SINGH BADALS WOR D AGAINST THE 52 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 DECISION OF PUNJAB INFRASTRUCTURE DEVELOPMENT BOARD (PIBD), CHAIRED BY THE CM HIMSELF. THE BOARDS REJOINDER IN THE PUNJAB AND HARYANA HIG H COURT STATES THAT FORTIS DID NOT FULFILL THE ELIGIBILITY CRITERIA AND WAS DENIED PRE- QUALIFICATION FOR CHANGING THE FOREIGN COLLABORATOR FROM NASSAU HEALTHCARE CORPORATION, USA, TO UNIVERSITY OF MINNE SOTA. ON THE OTHER HAND, FORTIS CLAIMS THAT THE CM HIMSEL F HAD GRANTED IT THE PERMISSION TO CHANGE THE TIE-UP AT A MEETING BETWEE N HIM AND THE RANBAXY CHAIRMAN. INTERESTINGLY, THE STANDING COMMITTEE APPOINTED BY THE BOARD IS HEADED BY DR. JS BAJAJ, A CLOSE CONFIDANTE OF THE CM. FORT IS TOO SHARE A GOOD RAPPORT WITH THE BADALS, AND THEY HAD TOGETHER RECE NTLY LAUNCHED THE CAMPAIGN TO SAVE ENVIRONMENT AND THE GIRL CHILD, N ANHI CHAAN. IN FACT, THE PUNJAB GOVERNMENT SEEMS TO BE DIVIDED HOUSE ON THE ISSUE. IN ITS LETTER DATED AUGUST 20 TO THE PRINCIPAL SECR ETARY, MEDICAL EDUCATION AND RESEARCH, ON OPINION REGARDING FORTIS , PUNJAB ATTORNEY GENERAL (AG) HS MATTEWAL HAD STATED THAT AS THE PR OJECT IS VERY LARGE, AND IT SEEMS THAT THE MAIN ENDEAVOUR OF THE GOVERNM ENT IS TO GIVE THIS PROJECT TO THE BEST PARTY/PARTICIPANT BIDDER. THERE FORE, IF THE RELEVANT INFORMATION HAS BEEN RECEIVED ON TIME, IN THE LARGE R PUBLIC INTEREST FORTIS MAY ALSO BE CONSIDERED AS THERE WOULD BE HEALTH COM PETITION IN THIS SPECIALIZED FILED. MEDICAL EDUCATION MINISTER TIKSHAN SUD IS ALSO LEAR NT TO BE PEEVED AT HAVING NO SAY IN ISSUES CONCERNING HIS DEPARTMENT. HE DECLINED TO MAKE ANY DIRECT COMMENT WHEN CONTACTED, AND SAID HE GETS TO LEARN ABOUT MATTERS ONLY WHEN THEY REACH THE EMPOWERED COMMITTE E OF THE GOVERNMENT. EARLIER, MAX HEALTHCARE HAD WRITTEN TO THE PUNJAB C HIEF SECRETARY IN DECEMBER 2007, PROTESTING THE CHANGED ELIGIBILITY C RITERIA. IT HAD STATED THAT THE CHANGED CRITERIA WILL HAVE SERIOUS IMPLICA TIONS. MAX CHAIRMAN ANALJIT SINGH HAD RECORDED THEIR RESERVATIONS, STAT ING THAT THE NEW CLAUSE WILL RESTRICT NEW PLAYERS FROM MANAGING AND OPERATI NG MEDICAL 53 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 INSTITUTIONS, AND EXPERIENCE IN EFFICIENTLY MANAGIN G HOSPITALS WILL BRING HIGHER STANDARDS INTO MANAGING EDUCATION IN A PROFI TABLE MATTER. D2. IMPARTING OF EDUCATION COMES WITHIN THE SCOPE OF CHARITABLE PURPOSES. SINCE NO WORTHWHILE MOVE/EFFORT HAS BEEN MADE IN THIS DIRECTION-AND IF ANY MADE AT ALL, WHICH IS ONLY CON STRUCTION OF BUILDING AND THAT TOO IS NO FUNCTIONAL FOR PURPOSES OF IMPAR TING EDUCATION EVEN AFTER 14 YEARS OF THE FORMATION OF THE ASSESSEE SOC IETY- AND THE GRAND PROJECT IS UNDER THE PROCESS OF AUCTION IN VIEW OF THE NEWSPAPER REPORT RELIED UPON, THEREFORE, OBJECTS OF THE SOCIETY ON T HE BASIS AND FOR FULFILLMENT OF WHICH IT WAS REGISTERED AND GIVEN TH E STATUS OF A TRUST, HAS BEEN TOTALLY NEGLECTED AND IGNORED. BENEFIT OF EXEM PTION OF INCOME U/S 11 OF THE ACT FROM TAXATION, TILL NOW THE ONLY SOUR CE OF INCOME I.E. INTEREST, HAS BEEN WRONGLY AND ILLEGALLY CLAIMED AN D ENJOYED FOR MANY YEARS AND THE YEAR UNDER ASSESSMENT. THE CONSTRUCTION OF BUILDING IS UNDOUBTEDLY A PR EREQUISITE OF FOREMOST PRIORITY FOR RUNNING AN EDUCATIONAL INS TITUTION. SHOULD THIS FOREMOST PRIORITY RATHER THE ONLY PRIORITY AND OB JECTIVE FOR MORE THAN 14 YEARS OF THE INCEPTION OF THE SOCIETY/TRUST WITH HARDLY ANY WORTHWHILE EFFORT MADE IN THE DIRECTION OF MOVING TOWARDS EDUC ATIONAL OBJECTS FOR WHICH IT WAS SET UP AND ON THE BASIS OF WHICH THE S OCIETY WAS REGISTERED AS A TRUST WAY BACK ON 10.10.1994 WITH EFFECT FROM ASSESSMENT YEAR 1995-96 BE ENOUGH FOR CLAIMING EXEMPTION U/S 11 O F I.T. ACT, 1961. THIS UNENDING AND INTRIGUING PRIORITY OF BUILDING C ONSTRUCTION FOR WHAT SO EVER REASONS BURIED THE SACRED AND HOLY PURPOS ES AND OBJECTS FOR WHICH THE SOCIETY/TRUST PIMS WAS SET UP IN THE CITY OF JALANDHAR FOR GIVING WORLD CLASS MEDICAL SERVICES TO THE PEOPLE O F PUNJAB, INDIA AND WORLD IN THE DEBRIS OF ITS SURPLUS MALWA AND NOW THE FINAL BURIAL FAREWELL HAS COME WITH THE ONGOING PROCESS FOR AUCT ION OF THIS SOCIETY/TRUST AS REPORTED IN THE PAPERS ON 11.11.08 AND REPRODUCED (SUPRA). IV) AFTER RECEIVING THE NOTICE DATED 08.12.2008, THE ASSESSEE HAS GIVEN ITS DETAILED REPLY DATED 19.12.2008, IN WHICH THE ASSESSEE STATED THAT COMPLETION OF COMPLETE PROJECT IS UNDER CONSIDERATI ON AND CONSTRUCTION OF 54 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 BUILDING FOR THE SOCIETY IS PART OF CHARITABLE PURP OSE. FURTHER, AT PAGE 5 OF THE REPLY DATED 19.12.2008, THE ASSESSEE ITSELF ADM ITTED THAT THERE IS NO DOUBT THAT THE RUNNING OF MEDICAL COLLEGE AND OTHER FACILITIES ON PRIVATE PUBLIC PARTICIPATION IS UNDER CONSIDERATION AS ONE OF THE PROPOSAL BUT THERE IS NO HARM IN IT AS IT HAS BECOME NEED OF THE HOUR. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PARAGRAPH AT PAGE NO. 5 O F REPLY DATED 19.12.2008 IS REPRODUCED AS UNDER: FURTHER THE POINT RAISED IN D1 IS OF NO RELEVANCE HERE, AS IT IS NOT BASED ON ANY FACTS AND THE PAPER QUOTED HAS NO RELIED ON ANY DOCUMENTARY EVIDENCE. THERE IS NO DOUBT THAT THE RUNNING OF MED ICAL COLLEGE AND OTHER FACILITIES ON PRIVATE PUBLIC PARTICIPATION IS UNDER CONSIDERATION AS ONE OF THE PROPOSAL BUT THERE IS NO HARM IN IT AS I T HAS BECOME NEED OF THE HOUR. EVEN THE GOVERNMENT HAS OPENED TELECOMMUN ICATION, DEFENCE, POWER AND OTHER SENSITIVE SECTORS FOR THIS PURPOSE. SO GOING FOR PRIVATE PARTICIPATION IS KEEPING IN VIEW THE NEED OF THE D AY. AS REGARDS WRIT FILED BY A GROUP, THE GROUP WHICH IS INTERESTED AND NOT BEING CONSIDERED HAS EVERY RIGHT TO GO TO COURT OF LAW. HOWEVER IT I S MENTIONED HERE THAT THE WRIT FILED BY THE GROUP HAS BEEN DISMISSED BY T HE HONOURABLE PUNJAB AND HARYANA HIGH COURT. (COPY OF THE OTHER ENCLOSED ). SO THIS HAS NO RELEVANCE WITH THIS CASE. 24. KEEPING IN VIEW THE NOTICE DATED 08.12.2008 ISSU ED BY THE ASSESSING OFFICER ASKING VARIOUS QUESTIONS FROM THE ASSESSEE AS WELL AS THE REPLY OF THE ASSESSEE DATED 19.12.2008, WHICH WE HA VE REPRODUCED ABOVE, WE ARE OF THE VIEW THAT THE ASSESSEE-TRUST ITSELF A DMITTED IN ITS REPLY DATED 19.12.2008 THAT RUNNING OF MEDICAL COLLEGE AND OTHE R FACILITIES ON PRIVATE 55 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 PUBLIC PARTICIPATION IS UNDER CONSIDERATION AS ONE OF THE PROPOSAL. THE ASSESSEE IS ALSO OF THE VIEW THAT THERE IS NO HARM IN RUNNING THE MEDICAL COLLEGE AND OTHER FACILITIES ON PRIVATE PUBLIC PART ICIPATION AND IT HAS BECOME NEED OF THE HOUR. KEEPING IN VIEW THE ADMITTED POSI TION BY THE ASSESSEE IN REPLY DATED 19.12.2008 REPRODUCED ABOVE, WE ARE OF THE VIEW THAT THE MOTIVE OF THE ASSESSEE IN PROLONGING THE CONSTRUCTI ON WORK OF BUILDING OF MEDICAL INSTITUTION, IS TO GIVE THE ASSESSEE TRUST TO RUN THE MEDICAL COLLEGE AND OTHER FACILITIES ON PRIVATE PUBLIC PARTICIPATIO N WHICH THE ASSESSEE-TRUST HAS ACHIEVED LATER ON. THEREFORE, THE ASSESSEE-TRU ST HAS NOT APPLIED ANY PART OF ITS INCOME OF THE YEAR FOR CHARITABLE PURPOSE. T HUS, THE ASSESSEE TRUST IS NOT ENTITLED FOR ANY EXEMPTION, AS CLAIMED. 25. LEARNED COUNSEL FOR THE ASSESSEE HAS FILED HIS WR ITTEN SUBMISSION IN BOTH THE APPEALS, WHICH WE HAVE REPRODUCED IN TH E ABOVE PARA NO. 6, AT PAGE 8 TO 16. IN HIS SUBMISSION, LEARNED COUNSEL MA INLY EMPHASIZED ON THE ISSUE THAT THE ASSESSEE TRUST WAS FORMED AS A SOCIE TY BY THE GOVERNMENT OF PUNJAB ON 10.10.1994 AND IT WAS REGISTERED WITH REG ISTRAR OF SOCIETIES. THE OBJECTS AND FUNCTIONS OF THE SOCIETY ARE DULY REFLE CTED IN THE MEMORANDUM OF ASSOCIATION. THE SOCIETY WAS FORMED UNDER THE CH AIRMANSHIP OF CHIEF MINISTER OF PUNJAB WITH HEALTH MINISTER AS VICE CHA IRMAN, CHIEF SECRETARY 56 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 AND OTHER GOVERNMENT OFFICIALS AS MEMBERS WHO ARE R EFLECTED WITH THE MEMORANDUM OF ASSOCIATION. HE FURTHER STATED THAT T HE MAIN OBJECTS OF THE ASSESSEE-TRUST WAS TO ESTABLISH 500 BEDDED HOSPITAL AND MEDICAL COLLEGE FOR 100 STUDENTS FOR WHICH THE GOVERNMENT TRANSFERRED L AND MEASURING 104 ACRES AND 5 KANALS TO THE SOCIETY AFTER PAYING COMP ENSATION OF RS. 15 CRORES TO PUNJAB AGRICULTURE UNIVERSITY. THE CONSTRUCTION OF THE HOSPITAL STARTED IN THE YEAR 2001. HE STATED THAT WHILE FRAMING THE ASS ESSMENT, THE ASSESSING OFFICER HAS GIVEN A FINDING THAT SINCE THE TRUST HA S ONLY BEEN CARRYING ON CONSTRUCTION OF THE BUILDING ALTHOUGH THE SAME IS C HARITABLE IN NATURE BUT SINCE CONSTRUCTION WAS GOING ON FOR A LONG PERIOD, THEREFORE HE HELD THAT THE TRUST WAS NOT ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT FOR THE YEAR UNDER ASSESSMENT. THUS, HE TRIED TO INTERFERE INTO THE RE GISTRATION GRANTED BY THE CIT TO THE TRUST AS A CHARITABLE TRUST. WITH RESPEC T TO THE REPLY TO THE AFORESAID ARGUMENT ADVANCED BY LEARNED COUNSEL FOR THE ASSESSEE, LEARNED CIT(A) HAS GIVEN HIS FINDING IN PARA NO. 4.4 AT PAG E 20 OF THE IMPUGNED ORDER, WHICH WE HAVE REPRODUCE IN THE ABOVE PARA NO . 21 AT PAGE 40 & 41 OF THIS ORDER, AND THIS SHOWS THAT AS PER THE ASSESSEE S INFORMATION GIVEN TO LEARNED CIT(A) THAT THE PROPOSAL TO SET UP THE ASSE SSEE-TRUST WAS MADE IN THE YEAR 1993 BY THE STATE GOVERNMENT AFTER COMPLET ING NECESSARY 57 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 FORMALITIES. IN 1997, THE PRIME MINISTER ANNOUNCED ADDITIONAL CENTRAL ASSISTANCE(ACA) OF RS. 25 CRORES UNDER THE SCHEME O F 100% CENTRALLY SPONSORED SCHEMES OF THE 9 TH FIVE YEAR PLAN RS. 7.50 CRORES WAS RECEIVED ON 23.01.1998; RS. 7.50 CRORES WAS RECEIVED ON 5.5.200 0 AND THE BALANCE RS. 10 CRORES WAS RECEIVED ON 10.03.2006. THE ASSESSEE- SOCIETY WAS GRANTED REGISTRATION UNDER SECTION 12AA OF THE ACT ON 01.11 .2000. 26. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF T HE PRESENT CASE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS NOT GIVEN ANY EXPLANATION AS TO WHY IT HAS NOT TAKEN ANY STEP FOR ABOUT 8 YEARS FROM 10 .10.1994 TO 2002 TO ACHIEVE THE OBJECTS OF THE ASSESSEE-TRUST AND ALSO HAS NOT GIVEN ANY EXPLANATION REGARDING ANY CHARITABLE ACTIVITIES DON E BY THE ASSESSEE DURING THESE PERIOD EXCEPT TO SPENDING TIME IN CONSTRUCTIO N OF BUILDING FOR MEDICAL INSTITUTE. AS PER PARA NO. 4.4 AT PAGE 20 OF THE IM PUGNED ORDER AS WELL AS THE REPLY DATED 19.12.2008 FILED IN RESPONSE TO THE NOT ICE DATED 08.12.2008, THE ASSESSEE ITSELF ADMITTED THAT IN 2005-06, IT WAS DE CIDED BY THE GOVERNING BODY TO TAKE PUBLIC PRIVATE PARTNERSHIP (PPP) MODE FOR OPERATIONALISING AND MANAGING THE INSTITUTE AND THIS WAS FINALLY ACH IEVED IN AUGUST, 2009, AS INFORMED BY THE ASSESSEE. THE INTENTION OF THE ASSE SSEE CLEARLY SHOWS THE MOTIVE BEHIND SPENDING A LONG PERIOD FOR CONSTRUCTI ON OF BUILDING OF 58 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 MEDICAL COLLEGE WHICH IS CERTAINLY NOT FOR CHARITAB LE PURPOSE TO ACHIEVE THE OBJECTS OF THE ASSESSEE-SOCIETY. SECONDLY, IF THE A SSESSEE-TRUST WAS GRANTED REGISTRATION UNDER SECTION 12AA OF THE ACT, IT DOES NOT MEAN THAT THE ASSESSEE IS AUTOMATICALLY ENTITLED FOR THE EXEMPTIO N UNDER SECTION 11 OF THE ACT. WE HOLD THAT THE ASSESSING OFFICER WILL NOT B E PRECLUDED FROM EXAMINING IN DETAIL THE VERY OBJECT OF THE ASSESSEE AND TO GIVE THE FINDINGS IN ASSESSMENT ORDER AS TO WHETHER THE ASSESSEE HAS COMPLIED WITH REQUIREMENT OF SECTION 11 OF THE ACT OR NOT, AS AND WHEN ASSESSEE SEEKING EXEMPTION UNDER SECTION 11 OF THE ACT. THE REGISTRA TION GRANTED UNDER SECTION 12AA OF THE ACT TO THE ASSESSEE SHOULD NOT BE THE OBSTACLE IN THE WAY OF ASSESSING OFFICER AT THE TIME OF COMPLETION OF ASSESSMENT PROCEEDINGS. THEREFORE, THE ARGUMENTS ADVANCED BY L EARNED COUNSEL FOR THE ASSESSEE ARE REJECTED. THE CITATIONS CITED BY THE L EARNED COUNSEL FOR THE ASSESSEE IN HIS WRITTEN SUBMISSION ARE NOT APPLICAB LE ON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE BECAUSE THE CASE- LAWS RELIED BY HIM ARE NOT IDENTICAL TO THE FACTS OF THE PRESENT CASE. LEA RNED COUNSEL FOR THE ASSESSEE HAS NOT SUPPLIED US ANY DECISION OF HON'BL E COURTS ON THE ISSUE IN DISPUTE, IN WHICH THE ASSESSEE IS INCURRING EXPENDI TURE ON CONSTRUCTION ONLY 59 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 FOR A VERY LONG PERIOD, AS IN THE PRESENT CASE AND ANY COURT OF LAW HAS GIVEN THE EXEMPTION UNDER SECTION 11 OF THE ACT. 27. WE HAVE PERUSED THE AUDITED BALANCE-SHEET ALSO P RODUCED BY THE ASSESSEE ALONG WITH HIS WRITTEN SUBMISSION AND FOUN D THAT THE ASSESSEE HAS INCURRED HUGE EXPENDITURE ON CONSTRUCTION OF THE BU ILDING AS WELL AS ON THE PAYMENT OF SALARIES TO THE EMPLOYEES. WE HAVE NOT S EEN ANY EXPENDITURE INCURRED BY THE ASSESSEE TO ACHIEVE THE OBJECTS OF THE ASSESSEE-SOCIETY OR FOR CHARITABLE PURPOSE, FOR WHICH THE ASSESSEE-SOCIETY HAS BEEN ESTABLISHED. 28. LEARNED CIT(A) IN THE IMPUGNED ORDER HAS GIVEN T HE RELIEF TO THE ASSESSEE-SOCIETY ONLY ON THE GROUND THAT THE ASSESS EE-SOCIETY HAS BEEN GRANTED REGISTRATION UNDER SECTION 12AA OF THE ACT BY THE COMMISSIONER IN 2000 AND THE EXPENDITURE INCURRED BY THE INSTITUTE FOR CONSTRUCTION OF BUILDING IS A CHARITABLE ACTIVITIES AND HELD THAT T HE ASSESSEE SOCIETY IS ENTITLED FOR EXEMPTION UNDER SECTION 11 OF THE ACT IN RESPECT OF THE INCOME APPLIED ON SUCH CONSTRUCTION. IN OUR VIEW, THIS IS CONTRARY TO THE LAW AND FACTS ON THE FILE, AS WE HAVE ALREADY HELD THAT THE ASSESSING OFFICER WILL NOT BE PRECLUDED FOR EXAMINING IN DETAIL THE VERY OBJEC TS OF THE ASSESSEE AS AND WHEN THE ASSESSEE SEEKING EXEMPTION UNDER SECTION 1 1 OF THE ACT WHILE MAKING THE REGULAR ASSESSMENT AND REGISTRATION GRAN TED UNDER SECTION 12AA 60 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 OF THE ACT TO THE ASSESSEE SHOULD NOT BE THE OBSTAC LE IN THE WAY OF THE ASSESSING OFFICER, AT THE TIME WHEN THE ASSESSMENT PROCEEDINGS ARE TO BE TAKEN. 29. LEARNED DR IN HIS WRITTEN SUBMISSION MAINLY EMPH ASIZED THAT THE REGISTRATION GRANTED TO THE ASSESSEE ON 20.05.1994 UNDER SECTION 12AA OF THE ACT HAS BEEN CANCELLED BY THE WORTHY COMMISSION ER OF INCOME TAX-II, JALANDHAR, VIDE HIS ORDER DATED 24.10.2013 W.E.F. ASSESSMENT YEAR 2004-05. HE HAS ALSO FILED A COPY OF THE ORDER DATED 24.10.2 013. HE STATED THAT THE ASSESSMENT YEAR IN DISPUTE I.E. 2006-07 HAS BEEN CO VERED BY ORDER DATED 24.10.2013, MEANING THEREBY, THERE IS NO REGISTRATI ON UNDER SECTION 12AA OF THE ACT WITH THE ASSESSEE-TRUST FOR THE ASSESSME NT YEAR IN DISPUTE AND THUS, THE ASSESSEE-TRUST IS NOT ENTITLED FOR ANY EX EMPTION, AS CLAIMED BY THE ASSESSEE UNDER SECTION 11 OF THE ACT. 30. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE WRITTEN SUBMISSIO N FILED BY BOTH THE PARTIES ON THIS ISSUE, WE ARE OF THE VIEW THAT THE ORDER DA TED 24.10.2013 PASSED BY WORTHY COMMISSIONER OF INCOME TAX-II, JALANDHAR, UN DER SECTION 12AA(3), IS NOT UNDER-CHALLENGED BEFORE USE, THEREFORE, WE C ANNOT COMMENT UPON THE ORDER DATED 24.10.2013, AS STATED BY LEARNED COUNSE L FOR THE ASSESSEE. WE 61 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 HAVE TO DECIDE WHETHER THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 11 OF THE ACT OR NOT IN THE PRESENT CASE, WHICH WE HAVE DISCUSSED IN THE FOREGOING PARAGRAPHS. 31. KEEPING IN VIEW THE ABOVE DISCUSSIONS, WE ARE OF THE CONSIDERED VIEW THAT LEARNED FIRST APPELLATE AUTHORITY HAS PAS SED THE IMPUGNED ORDER CONTRARY TO THE LAW AND FACTS ON THE FILE, WHICH DE SERVES TO BE CANCELLED AND ACCORDINGLY WE CANCEL THE SAME BY UPHOLDING THE ASS ESSMENT ORDER DATED 30.12.2008 PASSED BY THE ASSESSING OFFICER, UNDER S ECTION 143(3) OF THE ACT AND HOLD THAT WHEN THE REGISTRATION IS GRANTED, IT DOES NOT MEAN THAT THE ASSESSING OFFICER IS BARRED FROM EXAMINING THE DETA ILS OF VARIOUS ACTIVITIES/WORKS UNDERTAKEN BY THE TRUST TO ACHIEVE THE OBJECTS OF THE ASSESSEE-TRUST. THE ASSESSING OFFICER IS WITHIN HIS POWER TO CALL COMPLETE DETAILS OF INCOME AND EXPENDITURE OF THE ASSESSEE W HETHER THESE HAVE BEEN SPENT ON THE ACTIVITIES TO ACHIEVE THE OBJECTS OF T HE TRUST OR NOT. IN THE PRESENT CASE, THE ASSESSEE HAS NOT FILED ANY DOCUME NTARY EVIDENCE BEFORE THE REVENUE AUTHORITIES AS WELL AS BEFORE US TO EST ABLISH THAT THE ASSESSEE HAS INCURRED ANY EXPENDITURE ON CHARITABLE PURPOSE TO ACHIEVE THE MAIN OBJECTS OF THE ASSESSEE-TRUST. THE ASSESSEE HAS ALS O NOT SATISFIED THIS BENCH AS TO WHETHER ANY ACTION HAS BEEN TAKEN BY THE ASSE SSEE-TRUST 62 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 SIMULTANEOUSLY WITH THE CONSTRUCTION OF BUILDING TO ACHIEVE THE MAIN OBJECTS OF THE ASSESSEE-TRUST SINCE ITS INCEPTION T ILL THE ASSESSMENT YEAR IN DISPUTE. ALMOST 100% INCOME HAS BEEN SPEND ON CONST RUCTION OF THE BUILDING AND ON PAYMENT OF SALARY TO THE EMPLOYEES AS WELL AS FOR EXPENSES ON VEHICLE USED BY MEDICAL EDUCATION & RESEARCH MIN ISTER, PUNJAB; COORDINATOR, PIMS; DIRECTOR-PRINCIPAL, PIMS; AND F OR OFFICER STAFF AT JALANDHAR LOCAL OFFICIAL WORK AND CHANDIGAR FOR MEE TING ETC. (ACCORDING TO THE DETAILS OF VEHICLES USED BY THE OFFICERS DURING FINANCIAL YEAR 2005-06, ANNEXED AT PAGE NO. 134 OF THE ASSESSMENT RECORD). 32. KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF T HE PRESENT CASE, WE ARE OF THE VIEW THAT THE ASSESSEE-TRUST HAS NOT PROVED ITS CASE FOR SEEKING EXEMPTION UNDER SECTION 11 OF THE ACT BY PRODUCING ANY DETAILS OF EXPENDITURE INCURRED BY THE ASSESSEE-TRUST ON VARIO US ACTIVITIES UNDERTAKEN TO ACHIEVE ITS OBJECTS BEFORE THE REVENUE AUTHORITI ES AS WELL AS BEFORE US TILL THE CLOSING OF HEARING OF THE PRESENT APPEALS. THEREFORE, WE HOLD THAT THE LEARNED FIRST APPELLATE AUTHORITY HAS WRONGLY DELET ED THE ADDITION MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER DATED 30.12.2008 BY PASSING THE IMPUGNED ORDER, WHICH DESERVES TO BE CANCELLED AND ACCORDINGLY WE CANCEL THE IMPUGNED ORDER DATED 25.09.2009 PASSED B Y LEARNED CIT(A), 63 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 JALANDHAR, BY HOLDING THAT THE CONSTRUCTION OF BUIL DING OF THE MEDICAL INSTITUTE FOR A LONG PERIOD, LEAVING BEHIND THE MAI N OBJECT OF THE ASSESSEE- TRUST, DOES NOT QUALIFY THE ASSESSEE-TRUST FOR EXEM PTION UNDER SECTION 11 OF THE ACT AND THE SAME HAS RIGHTLY BEEN BROUGHT TO TA X BY THE ASSESSING OFFICER, AS PER THE PROVISIONS OF THE ACT BY MAKING THE ADDITIONS OF RS. 1,72,80,372/- ON ACCOUNT OF INTEREST INCOME; RS. 36 ,282/- FOR OTHER RECEIPTS; AND RS. 25 CRORE AS CAPITAL RECEIPTS FOR THE YEAR U NDER CONSIDERATION. WE ARE OF THE VIEW THAT DURING THE YEAR UNDER CONSIDERATIO N, EXPENSES OF RS. 10,98,101/- HAVE BEEN INCURRED ON ACCOUNT OF VEHICL E AS COMPARED TO THE TOTAL EXPENSES OF RS. 20,84,373.76 FOR THE PERIOD F ROM 10.10.94 TO 31.03.05 AND THE ASSESSEE HAS NOT FURNISHED ANY DOCUMENTARY EVIDENCE FOR SUBSTANTIATING THESE EXPENSES AND THE ASSESSING OFF ICER HAS MADE THE ADDITION OF RS. 10,98,101/-. LEARNED FIRST APPELLAT E AUTHORITY HAS REDUCED THESE EXPENSES TO 10,04,252/- MERELY ON ESTIMATION BASIS, WHICH IS NOT PERMISSIBLE UNDER THE LAW. THEREFORE, THE DELETION MADE BY THE LEARNED CIT(A) ON ACCOUNT OF EXPENDITURE INCURRED IN RUNNIN G OF VEHICLE IS DELETED AND ADDITION MADE BY THE ASSESSING OFFICE I.E. AMOU NTING TO RS. 10,98,101/- IS UPHELD. ACCORDINGLY, THE APPEAL FILE D BY THE ASSESSEE IS DISMISSED AND THE APPEAL FILED BY THE REVENUE IS AL LOWED. 64 I.T.A. NO. 504(ASR)/2009 & I.T.A. NO. 515(ASR)/2009 ASSESSMENT YEAR: 2006-07 33. IN THE RESULT, APPEAL FILED BY THE ASSESSEE I.E. I.T.A. NO. 504(ASR)/2009 IS DISMISSED AND THE APPEAL FILED BY THE REVENUE I.E. I.T.A. NO. 515(ASR)/2009 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DECEMBER, 2013 SD/./- SD/./- (B.P. JAIN) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31 ST DECEMBER, 2013 /RK/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: M/S PUNJAB INSTITUTE OF MEDICAL SCIE NCES, GARHA ROAD, JALANDHAR CITY. 2. DY. CIT, RANGE-III, JALANDHAR 3. THE CIT(A), JALANDHAR 4. THE CIT, JALANDHAR 5. THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.