RAJASTHAN ADVANCE JOINT CARE TRUST, Jaipur V. CIT, Jaipur

ITA 990/JPR/2011

• Counselvise Citation: 99023114 RSA 2011
• Duration Of Justice: 2 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-04-2012
• Assessment Year: misc
• Appeal Filed On: 11-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUBHASH CHANDRA
• Keywords: Charitable institution; Diversion of income
• Section: 12AA; 12

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 990/JP/2011 ASSTT. YEAR- PAN NO. AABTR 5387 G RAJASTHAN ADVANCE JOINT CARE TRUST, THE COMMISSIONE R OF B-56, UNNATI TOWER, CENTRAL SPINE, VRS. INCOME TAX, VIDYADHAR NAGAR, JAIPUR JAIPUR-II, JAIPUR. (APPELLANT) (RESPONDENT) ASSESSEE BY :- SHRI P.C. PARWAL. DEPARTMENT BY :- SHRI SUBHASH CHANDRA. DATE OF HEARING : 23/07/2014 DATE OF PRONOUNCEMENT : 08/08/2014 O R D E R PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 29/09/2011 OF THE LEARNED C.I.T., JAIPUR-II, JAIPUR U/S 12AA OF THE INCOME TAX ACT, 1961. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UN DER:- (1) THE LEARNED COMMISSIONER OF INCOME TAX-II, JAIPU R HAS ERRED ON FACTS AND IN LAW IN REFUSING TO GRANT REGISTRATION U /S 12AA OF THE INCOME TAX ACT, 1961 TO THE ASSESSEE TRUST BY HOLDING THAT THE OBJECT OF THE TRUST ARE NOT CHARITABLE AND THE ACTIV ITIES OF THE TRUST ARE NOT GENUINE. (2) THE LEARNED COMMISSIONER OF INCOME TAX-II, JAIPUR HAS ERRED IN FACTS AND IN LAW IN REJECTING THE APPLICATION OF REG ISTRATION FILED U/S 12AA BY PRESUMING THAT CONSULTANCY CHARGES RECEIPTS SHOWN BY TRUST IS INCOME OF ITS SOLE TRUSTEE AND DRAWING INCORR ECT 2 INFERENCES FROM MATERIAL AVAILABLE ON RECORD IN HOL DING THAT ACTIVITIES OF TRUST ARE NOT GENUINE. 3. THE APPELLANT CRAVES TO ALTER, AMEND AND MODIFY A NY GROUND OF APPEAL. 2. BOTH THE MAIN GROUNDS OF APPEAL OF THE ASSESSEE ARE INTERLINKED FOR REFUSING TO GRANT REGISTRATION U/S 12AA OF THE INCO ME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT) BY HOLDING THAT O BJECT OF TRUST ARE NOT CHARITABLE AND ACTIVITIES OF THE TRUST ARE NOT GENUI NE. THE LEARNED CIT OBSERVED THAT THE ASSESSEE TRUST WAS CREATED ON 23/1 2/2009. THE ASSESSEE APPLIED FOR REGISTRATION IN FORM NO. 10A SEEKING RE GISTRATION U/S 12AA OF THE ACT ON 14/3/2011. IT IS OBSERVED THAT TRUST WAS SETTL ED BY SHRI KHEENWA RAM BAGARIA WITH RS. 2,100/- IN CASH AND HIS SON SHRI BH AGWANA RAM BAGARIA WAS APPOINTED AS SOLE TRUSTEE FOR LIFE. SOLE TRUSTEE SH RI BHAGWANA RAM BAGARIA IS A QUALIFIED DOCTOR HAVING EXPERTISE IN JOINT REPLACEM ENT IN ORTHOPEDIC DEPARTMENT. AS PER INCOME AND EXPENDITURE STATEMENT OF THE TRUST FOR THE F.Y. 2010-11, THERE ARE TOTAL RECEIPT OF RS. 14.23 LACS INCLUDING RS. 13,90,013 FROM CONSULTANCY CHARGES, RS. 31,000/- FROM DONATIO N AND RS. 2,122/- FROM INTEREST. ON THE BASIS OF DETAILS SUBMISSION BY THE ASSESSEE, IT WAS FOUND THAT CONSULTANCY FEES WERE RECEIVED FROM M/S PARKEL INTER NATIONAL SYNCHRON P. LTD, BANGLORE AGAINST THE CLINICAL RESEARCH WORK. THE RESE ARCH WORK WAS DONE BY SHRI BHAGWANA RAM BAGARIA, SOLE TRUSTEE AND GENERAL SURGEON. THE RESEARCH 3 WAS RELATED TO MEDICINE OF ORTHOPEDIC AREA AND ALSO TO JOINT REPLACEMENT OF KNEE. THE ASSESSEE DID NOT SUBMIT BILL/VOUCHER OR CO PY OF AGREEMENT FOR RESEARCH WORK BEFORE THE LEARNED CIT. IT WAS ALSO NOT CLARIFIED BEFORE HIM, HOW THE QUANTUM OF CHARGES WERE DETERMINED AND HOW AND WHERE THE SERVICES OF RESEARCH WORK WERE PROVIDED. IT WAS ALSO N OT CLEAR AS TO HOW THESE RECEIPTS ASSESSEE RELATED TO THE TRUST. IT HAS BEEN HELD THAT THESE CONSULTANCY CHARGES WERE RECEIVED FOR THE PROFESSIONAL SERVICE O F SOLE TRUSTEE SHRI BHAGWANA RAM BAGARIA IN HIS PERSONAL CAPACITY. THESE SERVICES RELATED TO PROFESSIONAL QUALIFICATION AND EXPERTISE OF DR. BAG ARIA. SERVICES GIVEN IN SHAPE OF RESEARCH WORK ARE ATTRIBUTABLE TO PERSONAL SKILL AND TRAITS OF DR. BAGARIA AND HIS KNOWLEDGE AND BRAIN HAVE BEEN USED FOR THESE SER VICES. IT HAS BEEN HELD BY THE LEARNED CIT THAT THESE CONSULTANCY CHARGES A RE INCOME OF DR. BAGARIA IN HIS INDIVIDUAL CAPACITY AND NOT THE INCOME OF TH E TRUST, BUT SHRI BHAGWANA RAM BAGARIA HAD TRIED TO SHIFT HIS INCOME AS INCOME OF THE TRUST TO AVOID PAYMENT OF DUE TAXES AND FOR ONLY THIS PURPOSE, THE TRUST WAS SETTLED. THUS, THE PURPOSE AND ACTIVITIES OF THE TRUST CANNOT BE SA ID TO BE CHARITABLE AND GENUINE. DR. BAGARIA IS NOT EMPLOYEE OF THE TRUST AS NO PAYMENT HAD BEEN MADE BY THE TRUST TO HIM. IT WAS FURTHER HELD THAT AS PER CLAUSE-12 OF THE TRUST DEED, SOLE TRUSTEE MAY AT ANY TIME DISSOLVE TH E TRUST AND SPEND THE ENTIRE INCOME AND CORPUS OF THE TRUST FOR CHARITABL E PURPOSES. THIS CLAUSE ALSO 4 SHOWS THAT ABSOLUTE POWER ARE VESTED WITH THE SOLE TRU STEE DR. BAGARIA AND HE IS THE SOLE AUTHORITY TO USE THE FUND OF TRUST AS HE DEEMS FIT. THE TRUST IS NOTHING BUT IS A SHELTER CREATED BY DR. BAGARIA THR OUGH HIS FATHER TO SHIFT HIS PROFESSIONAL INCOME TO THE TRUST TO AVOID TAXATION. THUS THE BASIC PURPOSE OF THE TRUST IS NOT CHARITABLE BUT TO PROVIDE TAX BENEF IT TO THE SOLE TRUSTEE DR. BAGARIA. AS PER SECTION 12AA OF THE ACT FOR GRANTIN G OF REGISTRATION, FOLLOWING CONDITION IS REQUIRED TO BE FULFILLED: A. THE OBJECTS OF THE SOCIETY/ASSOCIATION SHOULD BE CHARITABLE IN NATURE. B. THE ACTIVITIES OF THE SOCIETY/ASSOCIATION SHOULD BE GENUINE. AS PER SECTION 12AA(1)(A) OF THE I.T. ACT, 1961: CO MMISSIONER OF INCOME TAX SHALL:- A) CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST OR INSTRUCTION AS HE THINKS NECESSARY IN ORDER SATISFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OR THE TRUST OR INSTITUTIO N AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF; B) AFTER SATISFYING HIMSELF ABOVE THE OBJECTS OF T HE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, HE- I) SHALL PASS AN ORDER IN WRITING REGISTERING THE TR UST OR INSTITUTION; 5 II) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORDE R IN WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTION. AS PER THE OBSERVATIONS MADE BY THE LEARNED CIT, THE REGISTRATION SHOULD BE GIVEN TO THE TRUST OR INSTITUTION, WHO ARE SINCERELY PURSUING THEIR CHARITABLE/GENERAL PUBLIC UTILITY OBJECTS THROUGH G ENUINE ACTIVITIES. ACCORDINGLY, THE LEARNED CIT HAS TO BE SATISFIED ABOUT THE GENUIN ENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION. THUS, THE SATISFACTION OF T HE COMMISSIONER OF INCOME TAX IS OF THE PARAMOUNT IMPORTANCE BESIDES GENUINENE SS OF THE ACTIVITIES CARRIED OUT BY THE TRUST OR INSTITUTION. MERE OBJECT S OF CHARITABLE NATURE SHOULD BE SUFFICIENT FOR GRANTING SUCH REGISTRATION U/S 12 A(A) OF THE ACT BUT SUCH OBJECTS SHOULD BE TRANSLATED INTO DEEDS THROUGH GEN UINE ACTIVITIES. THE ASSESSEE TRUST HAS NOT CARRIED OUT ANY CHARITABLE AC TIVITY ON WHICH HE CAN FORM HIS OPINION FOR GENUINENESS OF THE TRUST. IT WAS FURTHER HELD THAT THE REGISTRATION CANNOT BE GRANTED MERELY ON THE BASIS OF ACTIVITIES PROPOSED TO BE CARRIED OUT OR IN VACUUM. HE FURTHER RELIED IN CASE OF CIT VS. RED ROSE SCHOOL (2007) 163 TAXMAN 19 (ALL.). AFTER CONSIDERING THE F ACT AND LEGAL POSITION, THE LEARNED CIT HAS NOT GRANTED REGISTRATION U/S 12AA OF THE ACT AND ACCORDINGLY, APPLICATION WAS REJECTED BY HIM. NOW THE ASSESSEE CHALLENGED THE REJECTION ORDER MADE BY THE LEARNED CIT BEFORE US. 6 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED TH AT THE TRUST ACTIVITY IS CHARITABLE AS PROVIDING RESEARCH WORK THROUGH EXPERT ISE PERSONAL AS PER TRUST DEED IN MEDICINE OF ORTHOPEDICS AND ALSO REPLACEMEN T OF KNEE. THE MAIN WORK HAS BEEN ASSIGNED BY M/S PARKEL INTERNATIONAL SYNCH ROM P. LTD., BANGALORE. THE TRUST HAS SHOWN THESE RECEIPTS UNDER THE HEAD CONS ULTANCY CHARGE, DONATION AND INTEREST IN INCOME AND EXPENDITURE STA TEMENT. THE ACTIVITY OF THE TRUST ARE GENUINE, WHICH CAN BE PROVED BY THE TRUST AC TIVITY THAT TRUST HAS ORGANIZED VARIOUS MEDICAL CAMPS AT AJMER, SIKAR AND NEEM KA THANA WHERE DR. B.R. BAGARIA, TRUSTEE OF THE TRUST HAD PROVIDED HIS SPECIALIZED SERVICES FOR TREATMENT OF VARIOUS DISEASE. THE ASSESSEE TRUST IN A FFILIATION WITH INDIA RED CROSS SOCIETY AND KRISHNA CHARITABLE TRUST HAD ORGAN IZED VARIOUS CAMPS WHEREIN DR. BAGARIA HAD RENDERED MEDICAL, SOCIAL AND HUMANITARIAN SERVICES. THESE ACTIVITIES CLEARLY DEPICTS THAT THE TRUST HAD G ENUINELY CARRIED OUT CHARITABLE ACTIVITIES IN PURSUANCE TO ITS OBJECT. I N SUPPORT OF THE SAME, IT HAD FURNISHED COMPLETE DETAILS BEFORE THE LEARNED CIT(A) . CLAUSE OF THE TRUST DEED PROVIDES THAT THE ASSESSEE TRUST CAN CARRY OUT OR AWA RD ANY SCIENTIFIC RESEARCH IN BASIS/APPLIED/MEDICAL SCIENCES AND THE ALTERATIV E SYSTEMS OF MEDICINE, SOCIAL SERVICE, EDUCATION SERVICE OR ANY OTHER WORK IN THE PUBLIC AND NATIONAL INTEREST. HE FURTHER RELIED UPON THE FOLLOWING CASE LAWS: 1. TOR STEEL RESEARCH FOUNDATION VS. ITO 42 ITD 39 (CA L.) (TRIB.). 2. ACIT VS. A.A. BIBIJIWALA TRUST 100 ITR 516 (GUJ.) ( HC) 7 3. SANJJVAMMA HANUMANTHE GOWDA CHARITABLE TRUST VS. D IT (EXEMP.) 285 ITR 327 (KAR.) (HC). 4. CIT VS. RED ROSE SCHOOL 163 TAXMAN 19 (ALL.)(HC). THE LEARNED A.R. FOR THE ASSESSEE REQUESTED TO DIREC T THE LEARNED C.I.T. TO GRANT REGISTRATION U/S 12AA OF THE ACT TO THE TRUST. 4. AT THE OUTSET, THE LEARNED CIT D.R. SUPPORTED THE ORDER OF THE LEARNED CIT AND ARGUED THAT IT IS A FAIRLY AFFAIRS IN THE GU ISE OF TRUST. THE TOTAL RECEIPTS FROM CLINICAL RESEARCH WORK WAS GENERATED THROUGH SOL E TRUSTEE SHRI BHAGWANA RAM BAGARIA. IT IS A DIVERSION OF INCOME TO EVADE T HE TAX, THEREFORE, THE LEARNED CIT HAD RIGHTLY REJECTED THE REGISTRATION OF TRUST U/S 12AA OF THE ACT. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS A FACT THAT SHRI BHAGWANA RAM BAGARIA IS SOLE TRUSTEE OF THE ASSESSEE TRUST FOR THE LIFE, IS A QUALIFIED DOCTOR AND AN EXPERT IN JOINT REPLACEMENT IN ORTHOPEDIC DEPARTMEN T. AS PER CLAUSE-12, THE SOLE TRUSTEE MAY AT ANY TIME, DISSOLVE THE TRUST AND SPEND THE ENTIRE INCOME AND CORPUS OF THE TRUST FOR CHARITABLE PURPOSES. THIS CLAUSE SHOWS THAT TRUSTEE HAS GIVEN ABSOLUTE POWER TO DISSOLVE THE TRUST AND UT ILIZE THE INCOME AS PER HIS SWEET WILL. PRIMA FACIE, IT APPEARS THAT DR. BAGA RIA, SOLE TRUSTEE HAS USED THIS DEVICE TO AVOID THE TAX PAYMENT OF HIS PROFESS IONAL INCOME. WHATEVER EVIDENCE AVAILABLE ON RECORD SHOWS THAT OBJECT OF TH E TRUST IS NEITHER 8 CHARITABLE NOR GENUINE. THEREFORE, WE UPHOLD THE ORDE R OF THE LEARNED COMMISSIONER OF INCOME TAX, JAIPUR-II, JAIPUR. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/08/2014. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 08 TH AUGUST, 2014 * RANJAN COPY FORWARDED TO :- 1. RAJASTHAN ADVANCE JOINT CARE TRUST, JAIPUR. 2. THE CIT, JAIPUR-II, JAIPUR. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 990/JP/2011) BY ORDER, AR ITAT JAIPUR.