Reconstructive Surgery India, Hyd, Hyderabad V. CIT, (Exemptions), Hyd, Hyderabad

ITA 956/HYD/2015

• Counselvise Citation: [2015] 128 COUNSELVISE.COM (IT) 9783 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-11-2015
• Assessment Year: 2015-2016
• Appeal Filed On: 16-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VASUNDHARA SINHA
• Keywords: Charitable institution; Opportunity of being heard
• Section: 80G; 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 956/HYD/2015 ASSESSMENT YEAR: 2015-16 RECONSTRUCTIVE SURGERY INDIA, HYDERABAD. PAN AACTT 2569B VS. THE COMMISSIONER OF INCOME- TAX (EXEMPTIONS), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAVI BHARADWAJ REVENUE BY : SMT. VASUNDHARA SINHA DATE OF HEARING 12-11-2015 DATE OF PRONOUNCEMENT 27-11-2015 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(E), HYDERABAD, DATED 30/04/2015 FOR THE AY 2015-16. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A SECTION 25 COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956 WITH THE MAIN OBJECT OF NOT-FOR-PROFIT AND CREATING SOCIAL IMPACT ON A CHARITABLE/PHILANTHROPIC BASIS IN INDIA. IT IS A WH OLLY OWNED SUBSIDIARY OF RESURGE INTERNATIONAL (RESURGE) WHICH IS ALSO A NON-PROFIT CORPORATION REGISTERED IN CALIFORNIA, USA. 3. THE ASSESSEE HAD FILED APPLICATIONS IN FORM NO. 10A & 10G ON 07/10/2014, SEEKING REGISTRATION U/S 12AA OF THE IN COME-TAX ACT, 1961 ( IN SHORT ACT) AND APPROVAL U/S 80G(5) OF T HE ACT. AFTER DUE VERIFICATION, THE CIT(E) HAD GRANTED REGISTRATION U /S 12AA OF THE ACT ON 30/04/2015 BUT REJECTED THE APPROVAL U/S 80G(5)( VI) OF THE ACT. 2 ITA NO. 956 /HYD/2015 RECONSTRUCTIVE SURGERY INDIA, HYD. 4. IN BRIEF, THE CIT(E) REJECTED THE APPROVAL DUE T O THE FOLLOWING OBSERVATIONS: A) ASSESSEE HAD NOT EXPLAINED AS TO HOW THE COMPAN Y FULFILLED THE FIVE CONDITIONS AS PER CLAUSE (I) TO (V) TO SE CTION 80G(5) OF THE ACT. B) AFTER VERIFICATION OF THE FINANCIAL STATEMENT FOR THE YEAR ENDED 31/03/2013, CIT(E) NOTICED THAT ASSESSEE HAD EXPENDED ONLY RS. 23,572/- ON OPERATIVE AND OTHER EXPENSES . THE MAJOR PORTION WAS TOWARDS PAYMENT TO AUDITOR, AND REIMBU RSEMENT OF EXPENSES AND, THUS, IT WAS NOT KNOWN NOR ASCERTAIN ABLE AS TO WHAT CHARITABLE ACTIVITY HAS BEEN UNDERTAKEN BY THE APPLICANT. C) WITH REGARD TO ASSESSEES SUBMISSION TO THE APP LICATION IN FORM NO. 10A & 10G, IT WAS MENTIONED IN THE LAST P ARA AT PAGE 4, PERTAINING TO ACTIVITIES UNDERTAKEN IN FY 2013- 14, THAT IN THE SPAN OF ONE YEAR SINCE ITS INCEPTION, RECONSTRUCTI VE SURGERY INDIA HAD FACILITATED A TEAM TRIP IN DEHRADUN, UTT ARAKHAND FOR TWO WEEKS IN APRIL, 2012. IT WAS STATED THAT THE T EAM COMPRISED OF VOLUNTEERS FROM USA THAT INCLUDED SPECIALISTS. IT WAS FURTHER STATED THAT THE TEAM HAD CONDUCTED SURGERIES AT DE HRADUN WHILE THE PATIENTS CAME FROM ALL PARTS OF UTTARAKHAND. H OWEVER, THE EXPENSES WERE NOT REFLECTED IN THE FINANCIAL STATE MENT FOR THE YEAR ENDED 31/03/2013. THE CIT(E) OBSERVED THAT TH E ASSESSEE WAS NOT MAINTAINING ITS REGULAR ACCOUNTS OF RECEIPTS & EXPENDITURE. IN VIEW OF THE ABOVE, HE CONCLUDED THAT THE ASSESSE E HAD NOT FULFILLED THE CONDITION STIPULATED IN CLAUSE (IV) OF SECTION 80G(5) OF THE ACT, HAVING REGARD TO THE PROVISIONS OF RULE 11AA(5) OF THE INCOME TAX RULES, 1962 (IN SHORT RULE), IN WHICH CIT(E) HAS TO VERIFY THE FULFILLMENT OF THE CONDITIONS LAID DOWN IN SECTION 80G(5) OF THE ACT. 5. THE LD. AR SUBMITTED THAT GRANT OF REGISTRATION U/S 12AA IMPLIES THAT THE TRUST IS ESTABLISHED FOR A CHARITABLE PURP OSE, HENCE, CIT(E) 3 ITA NO. 956 /HYD/2015 RECONSTRUCTIVE SURGERY INDIA, HYD. CANNOT DENY THE APPROVAL U/S 80(G)(5) OF THE ACT LD . AR RELIED ON THE FOLLOWING CASE LAWS: 1. HEAL-A-CHILD FOUNDATION VS. DIT(E) [2012] 135 I TD 315 2. SONEPAT HINDU EDUCATIONAL AND CHARITABLE SOCIET Y VS. CIT & ANR., [2005] 278 ITR 262 3. SRI RAMANUJA SAHASRABDI VS. DIT(E) [2015] 37 IT R 303 4. CIT VS. RAJMALA EDUCATIONAL SOCIETY [2012] 65 D TR 309 5. BAIJNATH CHARITABLE AND EDUCATIONAL TRUST VS. C IT [2009] 125 TTJ 255 6. LD. CIT(E) HAD EXPRESSED THAT THE ASSESSEE HAD N OT COMMENCED ANY CHARITABLE ACTIVITIES. FOR THIS LD. A R SUBMITTED THAT COMMENCEMENT OF BUSINESS BY THE ASSESSEE IS NOT THE PREREQUISITE TO GRANT REGISTRATION U/S 12A AND APPROVAL U/S 80G OF THE ACT. HE RELIED ON THE FOLLOWING CASE LAWS: 1. M/S PENDURTHY VENKATA SUBBAIAH CHOWDHARY AND SA RADAMBA MEMORIAL TRUST VS. DIT(E), ITA NO. 598/HYD/2013. 2. JASODA DEVI CHARITABLE TRUST VS. CIT [2014] 4 I TR 547 7. LD. CIT(E) HAD EXPRESSED THAT THE ASSESSEE HAD N OT MAINTAINED ANY RECEIPT AND PAYMENT OF THE ACTIVITIES, FOR WHIC H THE LD. AR SUBMITTED THAT THE INSTITUTIONS MAIN OBJECTIVE SHO ULD BE CHARITABLE ACTIVITIES AND NOT THE MAINTENANCE OF BOOKS, AS HE RELIES ON THE CASE OF KARUNYA RURAL HEALTH CARE SOCIETY VS. DIT(E), [2 012] 209 TAXMAN 230. 8. LD. AR ALSO SUBMITTED THAT CIT(E) HAD NOT GIVEN OPPORTUNITY OF BEING HEARD BEFORE REJECTING THE APPROVAL U/S 80G O F THE ACT TO THE ASSESSEE. HE SUBMITTED THAT THE MATTER WAS REMITTED BACK TO THE CIT(E) BY THE VARIOUS JUDGMENTS FOR NOT GIVING THE OPPORTUNITY OF BEING HEARD BY THE RESPECTIVE AUTHORITIES. FOR THIS , HE RELIED ON THE FOLLOWING CASE LAWS: 1. PARAS PRERNA TRUST VS. DIT(E), ITAT MUMBAI IT A NO. 4648/MUM/2012. 2. TRI NETRA SEWA SANSHTA VS. DIT(E), ITAT DELHI ITA NO. 4819/DEL/2009 4 ITA NO. 956 /HYD/2015 RECONSTRUCTIVE SURGERY INDIA, HYD. 3. SARASWATI DEVI EDUCATIONAL AND CHARITABLE TRUST VS. CIT ITAT DELHI ITA NOS. 4641 & 4642/DEL/11 4. GYAN MAHAVIDHYALAYA SOCIETY VS. CIT-1, ITAT AGR A ITA NOS. 467 & 468/AGRA/2012. 9. LD. CIT(E) HAD ALSO EXPRESSED THAT THE DETAILS O F EXPENDITURE FOR THE CHARITABLE ACTIVITIES CARRIED ON BY THE ASS ESSEE IN DEHRADHUN WERE NOT REFLECTED IN THE FINANCIAL STATEMENTS SUBM ITTED BY THE ASSESSEE. FOR THIS, LD. AR SUBMITTED THAT THE INSTI TUTION DEPENDED ON THE CHARITY/DONATION FOR THE SAME. DURING THE FINAN CIAL YEAR 2012-13, THERE WERE NO DONATIONS, EVEN THOUGH, CHARITABLE AC TIVITIES WERE CARRIED ON BY THE ASSESSEE MAINLY BECAUSE OF THE VO LUNTARY SERVICES EXTENDED BY THE DOCTORS IN THE FIELD OF PLASTIC SUR GERY, BURN THERAPIST, PEDIATRICIAN AND OTHER RELATED SERVICES. HE ALSO SU BMITTED THAT THE RESURGE USA WERE INVOLVED IN THE CHARITABLE ACTIVIT IES FOR THE LAST FIVE YEARS AND THE ASSESSEE, BEING SUBSIDIARY OF RE SURGE USA, INCORPORATED ONLY DURING 2012-13. IT HAD EXTENDED I TS SERVICES AS FACILITATOR RATHER THAN PARTICIPATOR. 10. LD. AR ALSO SUBMITTED THE JV AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH M/S HELPING HANDS HOSPITAL, DEHRADUN, M/S PASRICHA HOSPITAL & MATERNITY HOME, JALANDHAR AND M/S VAATSA LYA HEALTH CARE SOLUTIONS IN SUPPORT OF CHARITABLE ACTIVITIES CARRI ED ON BY THE ASSESSEE (REFER PAGES 115 TO 291 OF THE PAPER BOOK) . 11. LD. AR ALSO SUBMITTED THAT DURING THE FY 2013-1 4, ASSESSEE RECEIVED DONATION OF RS. 2.5 LAKHS AND HE SUBMITTED THAT THE ASSESSEE IS FOLLOWING GOOD ACCOUNTING SYSTEM, WHICH HAD GOOD TRACEABILITY FOR THE CHARITABLE ACTIVITIES AND ALSO TRACK THE PERSONS, WHO ARE DONATING, FOR WHICH, HE SUBMITTED THE COPY OF THE DONATION RECEIPT AND PAN DETAILS OF THE DONOR AT PAGES 319 T O 321 OF THE PAPER BOOK. 12. LD. DR, ON THE OTHER HAND, SUBMITTED THAT GRANT OF REGISTRATION U/S 12AA DOES NOT LEAD TO GRANT OF APPROVAL U/S 80G . THE ASSESSEE 5 ITA NO. 956 /HYD/2015 RECONSTRUCTIVE SURGERY INDIA, HYD. HAS TO ESTABLISH THAT IT IS ACTUALLY RUNNING CHARIT ABLE INSTITUTION. SHE RELIED ON THE ORDER OF CIT(E). 13. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE P ARTIES AND MATERIAL FACTS ON RECORD, WE ARE OF THE VIEW THAT T HE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS DENIAL OF THE APPROVAL U /S 80G(5) OF THE ACT BY THE CIT(E). THE MAIN CONTENTION OF THE CIT(E) TH AT THE ASSESSEE HAD NOT CLARIFIED TO HIS SATISFACTION THAT IT FULFI LLS THE CONDITIONS LAID DOWN IN SECTION 80G(5), SUB-CLAUSE (I) TO (V), IN P ARTICULAR SUB-CLAUSE (IV), WHERE THE ASSESSEE HAD TO MAINTAIN REGULAR AC COUNTS OF ITS RECEIPTS AND EXPENDITURE. LD. CIT(E) EXPRESSED THAT HE WAS NOT SATISFIED ON THIS COUNT. IT IS A FACT THAT THE ASSE SSEE HAD SUBMITTED AUDITED BALANCE SHEET BEFORE CIT(E) WHILE SEEKING A PPROVAL ALONG WITH FORM 10G AS PER RULE 11AA OF THE INCOME TAX RU LES, 1962. THE ASSESSEES ABILITY IN SUBMITTING AUDITED BALANCE SH EET OF THE LAST TWO YEARS ESTABLISHES THAT IT HAS GOOD SYSTEM IN PLACE FOR MAINTAINING REGULAR ACCOUNTS OF ITS RECEIPTS AND EXPENDITURE. I T IS ALSO FACT THAT THE CIT(E) GRANTED REGISTRATION U/S 12AA OF THE ACT AND ALSO NOT EXPRESSED ANY DOUBT ABOUT THE CHARITABLE ACTIVITY O F THE ASSESSEE OR NON-SATISFACTION OF THE OTHER SUB-CLAUSES OF THE SE CTION 80G(5) OF THE ACT. THE ASSESSEE HAD ESTABLISHED JV WITH THREE INS TITUTIONS (SUPRA) TO CARRY OUT THE CHARITABLE ACTIVITIES FOR THE BENE FIT OF THE POOR AND ELIGIBLE PATIENTS, WHO ARE SUFFERING FROM BURN. ALS O, IT HAD CARRIED SURGERY TO FOUR PATIENTS IN M/S HELPING HANDS HOSPI TAL ( REFER PAGE 179 OF PAPER BOOK). ASSESSEE HAD CARRIED OUT THE CH ARITABLE ACTIVITIES MAINLY DURING FY 2013-14 (REFER FINANCIAL STATEMENT S OF FY 2013-14 PAGE 60 OF THE PAPER BOOK). CONSIDERING THE SUBMIS SIONS AND RECORDS SUBMITTED BY THE ASSESSEE AND ABOVE OBSERVA TIONS, WE ARE INCLINED TO REMIT THE MATTER BACK TO THE FILE OF TH E CIT(E) WITH A DIRECTION TO CONSIDER THE SUBMISSIONS OF THE ASSESS EE AFRESH AND DO THE NECESSARY ACCORDING TO THE PROVISIONS CONTAINED UNDER THE ACT AND RULES FOR THE GRANT OF APPROVAL U/S 80G(5) OF T HE ACT. 6 ITA NO. 956 /HYD/2015 RECONSTRUCTIVE SURGERY INDIA, HYD. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER, 2015. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAH MAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 27 TH NOVEMBER, 2015 KV COPY TO:- 1) RECONSTRUCTIVE SURGERY INDIA, PLOT NO. 564-A-26 -III, ROAD NO. 92, JUBILEE HILLS, OPPOSITE LOTUS POND, HYDERABA D 500 033 2) CIT (E), 3 RD FLOOR, AAYAKAR BHAVAN, BASHEER BAGH, HYDERABAD. 3 ITO (E), WARD 3, HYDERABAD 4) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON SR.P.S. 2. DRAFT PLACED BEFORE AUTHOR SR.P.S 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER VP 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S. 6. KEPT FOR PRONOUNCEMENT ON SR.P S. 7. FILE SENT TO THE BENCH CLERK SR.P.S. 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER