M/s.Sree Anjaneya Medical trust, Calicut V. CIt, Calicut

ITA 85/COCH/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81320 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-07-2014
• Assessment Year: misc
• Appeal Filed On: 16-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: T M SREEDHARAN LD SENIOR
• Keywords: Charitable institution
• Section: 12AA; 12; 11

Judgement Text

1 ITA NO.85/COCH/2012 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI CHANDRA PO OJARI (AM) I.T.A NO. 85/COCH/2012 M/S SREE ANJANEYA MEDICAL TRUST VS CIT, NORTH BLOC K INDOOR STADIUM, KOZHIKODE KOZHIKODE PAN : AAHTS3844B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.M. SREEDHARAN LD.SENIOR COUNSEL RESPONDENT BY : SHRI M ANIL KUMAR, CIT DR. SMT. LATHA V KUMAR, JR DR DATE OF HEARING : 15-07-2014 DATE OF PRONOUNCEMENT : 14-08-2014 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE ADMINISTRATIVE COMMISSIONER DATED 30-12-2011 REJECT ING THE APPLICATION OF THE ASSESSEE FOR REGISTRATION U/S 12AA OF THE ACT. 2. SHRI T.M. SREEDHARAN, THE LD.SENIOR COUNSEL SUBM ITTED THAT THIS IS THE SECOND ROUND OF LITIGATION BEFORE THIS TRIBUNAL. I N THE FIRST ROUND, THIS TRIBUNAL REMITTED BACK THE MATTER TO THE FILE OF TH E COMMISSIONER FOR RECONSIDERATION BY AN ORDER DATED 21-10-2011. ACCO RDING TO THE LD.SENIOR 2 ITA NO.85/COCH/2012 COUNSEL, THIS TRIBUNAL DIRECTED THE COMMISSIONER TO EXAMINE THE TRUST DEED AND OTHER RECORDS SAID TO BE FILED BY THE ASSESSEE AND THEREAFTER DECIDE THE MATTER AFRESH. THE LD.SENIOR COUNSEL FURTHER S UBMITTED THAT THE COMMISSIONER HAS NOT CARRIED OUT THE DIRECTION OF T HE TRIBUNAL WHILE RE- EXAMINING THE MATTER. THE COMMISSIONER SIMPLY FOUN D THAT THE ASSESSEE HAS COLLECTED MONEY EVEN BEFORE COMMENCEMENT OF THE MEDICAL COLLEGE AND THEREFORE HE FOUND THAT THERE WAS A FINANCIAL I RREGULARITY. ACCORDINGLY, THE REGISTRATION WAS REJECTED. REFERRING TO THE ST ATEMENT SAID TO BE RECORDED FROM THE MANAGING DIRECTOR, SHRI ANIL KUMA R, THE LD.SENIOR COUNSEL SUBMITTED THAT THE ASSESSEE ADMITTEDLY COLL ECTED AROUND RS.4 CRORES FROM THE PROSPECTIVE EMPLOYEES. THE ASSESSE E HAS ALSO COLLECTED MONEY FROM FOUR PARTIES AND AN AGREEMENT WAS ENTERE D INTO TO PROVIDE ADMISSION UNDER NRI QUOTA FOR MEDICAL EDUCATION. I N CASE THE MEDICAL SEAT COULD NOT BE PROVIDED THE AMOUNT RECEIVED BY T HE ASSESSEE WOULD BE RETURNED WITH 12% INTEREST PER ANNUM. ACCORDING TO THE LD.SENIOR COUNSEL, THE ASSESSEE HAS TO MOBILIZE FUNDS FOR CONSTRUCTION OF MASSIVE BUILDING FOR MEDICAL COLLEGE AND HOSPITAL BEFORE GRANT OF RECOGN ITION BY THE MEDICAL COUNCIL OF INDIA (MCI). THEREFORE, THE ASSESSEE HA S MOBILIZED ALL THE RESOURCES UNDER ITS CONTROL FOR CONSTRUCTION OF THE MASSIVE BUILDING FOR THE MEDICAL COLLEGE AND HOSPITAL. ACCORDING TO THE LD. SENIOR COUNSEL, SINCE THE TRUST WAS ESTABLISHED FOR THE PURPOSE OF EDUCATION AND THE MEDICAL COLLEGE WAS IN FACT STARTED AFTER GETTING APPROVAL FROM THE MCI, THE ASSESSEE IS 3 ITA NO.85/COCH/2012 ENTITLED FOR REGISTRATION U/S 12AA OF THE ACT. THE LD.SENIOR COUNSEL TOOK US THROUGH THE IMPUGNED ORDER PASSED BY THE COMMISSION ER AND SUBMITTED THAT THE COMMISSIONER IS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE FOR REGISTRATION. 3. ON THE CONTRARY, SMT. LATHA V KUMAR, THE LD.DR S UBMITTED THAT IT WAS FOUND BY THE DEPARTMENT THAT A HUGE INVESTMENT WAS MADE EVEN THOUGH THERE WAS NO SOURCE FOR MAKING SUCH INVESTME NT. DURING EXAMINATION, THE REVENUE AUTHORITIES FOUND THAT THE ASSESSEE WAS COLLECTING MONEY FROM THE PROSPECTIVE EMPLOYEES AND THE STUDENTS EVEN BEFORE OBTAINING RECOGNITION FROM THE MCI. ACCORDI NG TO THE LD.DR, THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT FO R THE MONEY COLLECTED FROM THE PUBLIC AND THE EXPENDITURE INCUR RED. SINCE THERE WAS HUGE FINANCIAL IRREGULARITIES, THE COMMISSIONER FOU ND THAT MERELY BECAUSE THE ASSESSEE ULTIMATELY STARTED THE MEDICAL COLLEGE , THE END WILL NOT JUSTIFY THE MEANS. ACCORDING TO THE LD.DR, THE ASSESSEE CO LLECTED HUGE MONEY FROM THE PUBLIC BY THROWING ALL NORMS TO THE WINDS WITHOUT MAINTAINING ANY PROPER RECORDS. SINCE THE INSTITUTION COLLECTED MO NEY IN A COMMERCIAL MANNER FOR ADMISSION OF THE STUDENTS AND FOR PROVID ING EMPLOYMENT OPPORTUNITY TO THE PROSPECTIVE EMPLOYEES, ACCORDING TO THE LD.DR, THE INSTITUTION WAS ESTABLISHED ONLY FOR THE PURPOSE WI TH A PROFIT MOTIVE IN A COMMERCIAL MANNER. THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR 4 ITA NO.85/COCH/2012 REGISTRATION U/S 12AA OF THE ACT. THE LD.DR PLACED HER RELIANCE ON THE UNREPORTED JUDGMENT OF THE JURISDICTIONAL HIGH COUR T IN DAWN EDUCATION TRUST VS CIT I.T.A. NO.300 OF 2013 JUDGMENT DATED 1 2-02-2014, COPY OF WHICH IS FILED BY THE LD.DR. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE TRUST DEED. THE TRUST WAS ESTABLISHED BY A REGISTERED DEED DATED 27 -05-2005 BY CONTRIBUTING RS.10,000 AS NUCLEUS OF THE TRUST. AF TER ESTABLISHMENT OF THE TRUST, THE ASSESSEE ACQUIRED HUGE CHUNK OF LOAN AND STARTED CONSTRUCTING MASSIVE BUILDING. DURING THE COURSE OF CONSTRUCTIO N IF VYUKDUBGS , THE REVENUE AUTHORITIES FOUND THAT THE ASSESSEE HAS MOB ILIZED FUNDS BY COLLECTING MONEY FROM VARIOUS PERSONS INCLUDING THE SOCALLED PROSPECTIVE STUDENTS ASSURING ADMISSION FOR MEDICAL COURSE. ON EXAMINATION, THE MANAGING DIRECTOR OF THE ASSESSEE TRUST ADMITTED TH AT HE COLLECTED MONEY TO THE EXTENT OF RS.4 CRORES FROM THE PROSPECTIVE E MPLOYEES AND ALSO FROM 4 PROSPECTIVE STUDENTS ON THE ASSURANCE THAT THEY W OULD BE ADMITTED IN THE MEDICAL COURSE AFTER OBTAINING RECOGNITION FROM THE MCI. IN FACT, SHRI V ANIL KUMAR, THE MANAGING DIRECTOR OF THE ASSESSEE T RUST HAS ADMITTED AS FOLLOWS: 5 ITA NO.85/COCH/2012 I HAVE TAKEN PAYMENT FROM PROSPECTIVE EMPLOYEES MO STLY IN DEMAND DRAFT. ROUGHLY I CAN SAY THAT AN AMOUNT OF RS.4 CRORES HAVE BEEN COLLECTED TILL DATE. 5. FURTHER HE ADMITTED AS FOLLOWS: I HAVE TAKEN MONEY FROM 4 PARTIES. AN AGREEMENT H AS BEEN WRITTEN TO THE EFFECT THAT MEDICAL SEAT WOULD BE GI VEN UNDER NRI QUOTA ON GETTING PERMISSION FROM MEDICAL COUNCI L OF INDIA AND GOVERNMENT OF INDIA. IT IS ALSO STATED THAT IF THE PERMISSION IS DECLINED ON ANY GROUND FROM THE CONCE RNED AUTHORITIES FOR THE FY 2009-2010, THE AMOUNT WOULD BE RETURNED ALONG WITH 12% INTEREST PER ANNUM. 6. IN RESPONSE TO A QUERY WITH REGARD TO MAINTENANC E OF BOOKS OF ACCOUNT, SHRI V ANIL KUMAR, THE MANAGING DIRECTOR O F THE ASSESSEE TRUST HAS CLARIFIED THAT NO PROPER BOOKS OF ACCOUNT HAS BEEN MAINTAINED BY HIM FOR HIS CONSULTANCY BUSINESS AND MALABAR MEDICAL CO LLEGE, ALTHOUGH HE ADMITTED TO HAVE MAINTAINED BOOKS OF ACCOUNT FOR HI S BUSINESS CONCERN NIET. THE REVENUE AUTHORITIES FURTHER EXAMINED MR. V ANIL KUMAR, SHOWING CERTAIN LIST OF DOCTORS SAID TO BE WORKING UNDER HIM, WHERE HE CLARIFIED AS FOLLOWS: THE LIST SHOWN TO ME CONTAINS NAMES OF DOCTORS WOR KING IN THIS HOSPITAL AND PAYMENTS MADE TO THEM BY CHEQUE A RE ACCOUNTED. IT CAN BE ROUGHLY THAT SAID PAYMENTS TO THE TUNE OF 6 ITA NO.85/COCH/2012 50% (CASH PAYMENT) ARE NOT ACCOUNTED. I STATE THAT NO TAX HAS BEEN DEDUCTED FROM THIS PAYMENT. 7. FROM THE ABOVE ADMISSION OF SHRI V ANIL KUMAR, IT IS OBVIOUS THAT THE ASSESSEE TRUST COLLECTED MONEY FROM VARIOUS PER SONS ON THE ASSURANCE OF EMPLOYMENT AND ADMISSION FOR MEDICAL EDUCATION. IT IS PERTINENT TO NOTE THAT EVEN BEFORE OBTAINING RECOGNITION FROM THE MCI AND GOVERNMENT OF INDIA AND AFFILIATION FROM THE CONCERNED UNIVERSITY , THE ASSESSEE STARTED COLLECTING MONEY FOR EMPLOYMENT AND ADMISSION OF ST UDENTS. THE REASONS FOR COLLECTING MONEY APPEARS TO BE THAT ASSESSEE NE EDS HUGE MONEY FOR CONSTRUCTION OF A MASSIVE BUILDING FOR THE MEDICAL COLLEGE AND HOSPITAL. THE OBJECT IS LAUDABLE; BUT THE QUESTION IS WHETHER THE ASSESSEE TRUST CAN BE USED AS A MEANS FOR COLLECTION OF FUNDS FROM THE PUBLIC ON THE ASSURANCE OF EMPLOYMENT AND ADMISSION IN THE MEDICA L COLLEGE. IT IS NOT THE INTENTION OF THE PARLIAMENT TO GIVE TAX EXEMPTI ON FOR AN INSTITUTION LIKE THIS WHICH IS COLLECTING FUNDS FROM THE GENERAL PUB LIC ON THE ASSURANCE OF EMPLOYMENT AND ADMISSION IN THE MEDICAL COLLEGE THA T WOULD COME UP IN THE FUTURE. IT IS ALSO A FACT THAT THE ASSESSEE IS NOT MAINTAINING ANY BOOKS OF ACCOUNT FOR COLLECTION OF MONEY AND THE EXPENDIT URE INCURRED FOR CONSTRUCTION. THE MANAGING DIRECTOR VERY FAIRLY AD MITTED BEFORE THE AUTHORITIES THAT HE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT FOR THE MEDICAL INSTITUTION / COLLEGE. THE ASSESSEE HAS AL SO ADMITTED THAT 50% OF 7 ITA NO.85/COCH/2012 THE AMOUNTS PAID TO THE DOCTORS ARE IN CASH AND IT IS NOT ACCOUNTED FOR. THEREFORE, IT IS OBVIOUS THAT THE ASSESSEE TRUST IS COLLECTING UNACCOUNTED MONEY ON THE ASSURANCE FOR PROVIDING EMPLOYMENT AND ADMISSION IN MEDICAL COLLEGE. THE OBJECT OF THE ASSESSEE EVEN T HOUGH STATED TO BE ESTABLISHING A MEDICAL COLLEGE, THE PURPOSE IS TO R UN THE MEDICAL COLLEGE IN A COMMERCIAL MANNER WITH A PRIVATE MOTIVE. 8. THE OBJECT OF GRANTING REGISTRATION U/S 12AA OF THE ACT AND EXEMPTION U/SS 11 AND 12 IS TO ENCOURAGE THE NON GO VERNMENTAL ORGANIZATION TO ESTABLISH EDUCATIONAL INSTITUTION A ND TO RUN THE SAME IN A CHARITABLE MANNER AFTER COLLECTING THE FEES PRESCRI BED BY THE GOVERNMENT OR THE COMMITTEE APPOINTED BY THE STATE GOVERNMENT. IN THIS CASE, EVEN BEFORE STARTING THE COLLEGE AND EVEN BEFORE OBTAINI NG RECOGNITION FROM THE MCI AND AFFILIATION FROM THE CONCERNED UNIVERSITY, THE ASSESSEE MOBILIZED FUNDS ON THE ASSURANCE OF EMPLOYMENT AND ADMISSION IN THE MEDICAL COLLEGE. 9. THE APEX COURT IN THE CASE OF MOHINI JAIN VS STA TE OF KARNATAKA 1992 2 SCC 666 AFTER EXAMINING THE CONSTITUTION OF INDIA FOUND THAT COLLECTION OF MONEY FOR ADMISSION OF STUDENTS IN TH E PROFESSIONAL COLLEGES IS NOT ONLY INHUMAN BUT ALSO AGAINST THE SCHEME OF THE CONSTITUTION. IN THE CASE OF T.M.A. PAI FOUNDATION & ORS VS STATE OF KAR NATAKA 2002 8 SCC 8 ITA NO.85/COCH/2012 481 AND IN ISLAMIC ACADEMIC INSTITUTION VS STATE OF KERALA (2003) 6 SCC 697 THE APEX COURT FOUND THAT WHEN THE EDUCATIONAL INSTITUTION COLLECTS MONEY OVER AND ABOVE THE PRESCRIBED FEE FOR ADMISSI ON OF THE STUDENTS EITHER IN THE NAME OF BUILDING FUND, DONATION, AUDI TORIUM FUND, ETC. SUCH AN AMOUNT HAS TO BE TREATED AS CAPITATION FOR ADMISSIO N OF THE STUDENTS AND THE CONCERNED UNIVERSITY HAS TO WITHDRAW ITS AFFILI ATION AND THE REGULATORY BODY HAS TO WITHDRAW ITS APPROVAL. THE APEX COURT FURTHER OBSERVED THAT WHEN THE MONEY WAS COLLECTED FOR ADMISSION OF STUDE NTS THERE WAS NO ELEMENT OF CHARITY REMAINS IN SUCH AN ACTIVITY. A USEFUL REFERENCE CAN ALSO BE MADE IN P.A. INAMDAR VS STATE OF MAHARASHTRA 200 5 6 SCC 537. THE JURISDICTIONAL HIGH COURT HAD AN OCCASION TO EXAMIN E THE MATTER IN DAWN EDUCATIONAL CHARITABLE TRUST (SUPRA). IN FACT, THE JURISDICTIONAL HIGH COURT HAS OBSERVED AS FOLLOWS: .. IT IS WELL SETTLED THAT EVEN IF NOMENCLATURE OF THE TRUST MAY INDICATE IT IS MEANT FOR CHARITABLE PURPOSE, BU T IF ACTIVITIES REVEAL OTHERWISE, THAT SHOULD WEIGH WITH THE AUTHOR ITIES WHO GRANT REGISTRATION. SIMILARLY, WHILE CONSIDERING C LAIM OF EXEMPTION, AUTHORITIES UNDER THE ACT WOULD LOOK INT O THE ACTUAL ACTIVITY OF THE INSTITUTION, ESPECIALLY MAIN ACTIVI TY OF THE INSTITUTION. IN THE ABSENCE OF FACTS INDICATING TH AT THE ACTIVITIES CARRIED ON ATTRACTS DEFINITION OF CHARITABLE PURPOS E, ONE CANNOT FIND FAULT WITH REJECTION OF REGISTRATION. WHEN TH E SCHOOL IS RUNNING ON COMMERCIAL LINES UNDER THE CLAD OF CHARI TABLE 9 ITA NO.85/COCH/2012 PURPOSE, THE PARTIES WERE JUSTIFIED MAKING ENQUIRIE S AND REJECTING THE APPLICATION. 10. IN VIEW OF THE ABOVE FACTUAL SITUATION, THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT THE ACTIVITIES OF THE TRUST WAS NOT CARRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TRUST. THE ASSES SEE TRUST ADMINISTER AND MANAGE THE SO-CALLED MEDICAL COLLEGE IN A COMMERCIA L MANNER WITH PROFIT MOTIVE. THE ASSESSEE TRUST GONE TO THE EXTENT OF E NTERING INTO AGREEMENT FOR OFFERING EMPLOYMENT AND ADMISSION FOR MEDICAL E DUCATION AND COLLECTS MONEY. IT IS TO BE REMEMBERED THAT ADMISSION IN ANY EDUCATIONAL INSTITUTION INCLUDING MEDICAL COLLEGE HAS TO BE MADE ONLY ON ME RIT BASIS. THEREFORE, ENTERING INTO AGREEMENT FOR ADMISSION IN MEDICAL CO LLEGE AFTER COLLECTING MONEY IS NOT ONLY INHUMAN BUT ALSO AGAINST THE SCHE ME OF THE CONSTITUTION AS HELD BY THE APEX COURT IN MOHINI JAINS CASE (SU PRA). THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE IS NO GENUINEN ESS IN THE ACTIVITY OF THE ASSESSEE TRUST AND IT EXIST ONLY FOR PROFIT MOTIVE TO ADMINISTER AND MANAGE THE MEDICAL COLLEGE IN A COMMERCIAL MANNER, THEREFO RE, IT IS NOT ENTITLED FOR REGISTRATION AS A CHARITABLE INSTITUTION U/S 12AA O F THE ACT. THIS VIEW OF THE TRIBUNAL IS FORTIFIED BY THE DECISION OF THIS BENCH OF THE TRIBUNAL IN TRAVANCORE EDUCATIONAL SOCIETY IN ITA NO.134/COCH/2 014 ORDER DATED 26- 06-2014. 10 ITA NO.85/COCH/2012 11. IN VIEW OF THE ABOVE, THIS TRIBUNAL FINDS NO IN FIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONF IRMED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH AUGUST, 2014. SD/- SD/- (CHANDRA POOJARI) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 14 TH AUGUST, 2014 PK/- COPY TO: 1. M/S SREE ANAJANEYA MEDICAL TRUST, INDOOR STADIUM , KOZHIKODE 2. CIT, NORTH BLOCK, KOZHIKODE 3. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH