TMI Blog2012 (7) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... ation or medical relief - cancellation of registration under section 12AA (3) and refusal to renew exemption u/s 80G is not warranted - in favour of assessee. - ITA Nos.427/Agr/2011 & 36/Agr/2012 - - - Dated:- 22-6-2012 - Bhavnesh Saini And A. L. Gehlot, JJ. Appellant by : Mahesh Agarwal, C.A. Respondent by : Suhail Akhtar, Jr. D.R. ORDER Per A. L. Gehlot, Accountant Member: These are two appeals filed by the assessee against two different orders dated 21.09.2011 and 19.12.2011 passed by the ld. CIT-II, Agra under sections 80G and 12AA of the Income Tax Act, 1961 ( the Act hereinafter) respectively. 2. In these appeals, one issue is against refusing to grant exemption under section 80G(5) of the Act and another issue is in respect of withdrawal of the registration granted to the assessee society under section 12AA of the Act. 3. As stated above, the effective ground raised in both the appeals pertain to withdrawal of registration granted to the assessee society under section 12A of the Act and refusing renewal of exemption under section 80G(5) of the Act. Both the grounds of appeal are on identical set of facts and, therefore, these are decided as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose as defined under section 2(15) of the Act. The CIT held that the assessee is not entitled for grant of exemption under section 80G(5) of the Act. 7. The ld. Authorised Representative submitted that there is no change or deviation in basic activities of the society i.e. medical relief which is very much covered by charitable purpose as enumerated in section 2(15) of the Act. The Ld. Authorised Representative submitted that the society has been formed by seven individuals from different sections, having no relation or connection amongst them, not controlled by any particular family or section of society. No particular individual or member has any vested interest. It is also submission of the Ld. Authorised Representative that no asset or income of the society was available for the benefit of the members of the society. Ld. Authorised Representative submitted that the society was registered as charitable society under Societies Registration Act, 1860, since 17.02.1992. He further submitted that since its formation, the society is carrying on various activities which are in the nature of medical relief. Ld. Authorised Representative submitted that the society is running ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the society the Ld. Authorised Representative drew our attention to page 47 to 56 where copies of brochures in respect of medical camps and others have been placed. 10. Ld. Authorised Representative submitted that after formation of the society, the society started a Blood bank under the name and style of Samarpan Blood Bank with the object of providing blood after proper examination to the needy patients on exchange basis. Ld. Authorised Representative submitted that the blood bank was inaugurated by the then Hon ble Governor of U.P. Ld. Authorised Representative drew our attention in respect of activities of the society which are stated at page no.176 of the Paper Book as under:- Providing blood, blood components, packed cells, FFP and platelets. Providing free blood, on regular basis, to the patients of Thalisemia and Hemophilia. Running X-ray centre where X-ray services are provided at substantially low rates. Running of Physiotherapy centre, providing various services to the patients at substantially low rates. Running 3 Homeopathic dispensaries where medicine is provided at ₹ 2/- per day only. Providing free medical Oxygen to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the requirement of definition charitable purpose would be fully satisfied. Ld. Authorised Representative submitted that the medical relief under section 2(15) does not stipulate that there should be actual facility for physical treatment of patients. Term medical relief has a wide meaning and covers all activities viz., diagnostic, pathological, curative, rehabilitation and all supportive services that may alleviate the sufferings of a patient or an ill person. Ld. Authorised Representative submitted that proving blood, medical oxygen, physiotherapy, Xray facility, medical check up, operation camps and running of Homeopathic dispensaries are all fully covered under the scope of medical relief . 15. In respect of surplus fund, Ld. Authorised Representative submitted that the Act no where provides that the activities carried out for charitable purposes should not generate any surplus. No charitable organization can manage its affairs in such a way that the activities terminate at zero figure or expenses should be equal to the receipts. The law, while providing for accumulation of surplus to the extent of 15% of the gross receipts, also recognizes his fact. 16. Ld. Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after grant of registration under section 12A/12AA, the CIT found that the assessee is not carrying out charitable activities in accordance with the amendment under section 2(15) of the Act. The CIT found that the assessee trust was carrying on activities which are business/trade in nature. Ld. Departmental Representative relied upon the order of CIT. 19. We have heard the ld. Representatives of the parties and records perused. The issue is to be examined in the case under consideration whether under the facts and circumstances the CIT was having power under section 12AA(3) for cancellation of registration of the trust, institution or Samiti granted under section 12A/12AA of the Act. To examine the relevant scheme of the act, we would like to refer section 12A and 12AA of the Act and relevant CBDT Circulars which are as follows:- 12A. Conditions for applicability of sections 11 and 12. 12A (1) The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely : (a) the person in receipt of the income has made an application for registration of the trust or insti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.] FINANCE (NO. 2) ACT, 1996 - CIRCULAR NO. 762, DATED 18.2.1998- Registration of charitable and religious trusts- 19.1 Under the existing provisions of the Income-tax Act, exemption from income-tax in respect of the income of a charitable or religious trust or institution is available only if the conditions specified in that section are satisfied. One of these conditions if that the person in receipt of the income shall make an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Chief Commissioner or Commissioner of Income-tax within the specified time. However, there was no provision in the Income-tax for processing of such an application and granting or refusal of registration to the concerned trust or institution. Finance (No. 2), Act, 1996 19.2 Hence the Act now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and on surmises that income derived by the trust is a surplus income cannot be the basis for cancellation of the registration granted under section 12A/12AA of the Act. As regards the application of income and surplus of the income, sufficient safe-guards having been given under sections 11, 12 13 of the Act assessing the income which has not been applied to the purpose of trust or institution, insertion of the law and maker and the scope and purport of provisions is apparent while considering the question of registration and cancellation of the registration. 22. In the case under consideration, the objects of the Samiti remain same since grant of registration under section 12A/12AA of the Act. The original trust deed is in Hindi of which copy has been placed at page nos. 9 to 28 of the assessee s Paper Book. The English translation of the same has been filed which is placed at page nos.186 to 195 of the Paper Book. For the purpose of ready reference the object of the Samiti is reproduced from memorandum of article of the Samiti from page 187 of the assessee s Paper Book is as under :- 1. Service to Humanity 2. Free help of poor/destitute 3. To create an atmospher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. SAMARPAN THALASSEMIA HEMOPHILIA RELIEF SOCIETY Thalessemia is genetic blood disease which a child inherits from its parents. In Thalassemia, the child lacks normal Hemoglobin count due to which it needs regular blood transfusion during whole life. There is no successful cure of this decease. A child s death is certain if blood is not transfused regularly. Samiti has registration of 65 children suffering from this decease and provides blood to them free of cost and without condition of exchange. Samarpan Blood Bank provides around 90 to 100 units of blood to these children per month. 3. SAMARPAN X-RAY CENTER Samarpan X-Ray Center was inaugurated in Dec., 2006. X-Ray service is provided at approximately 50% cost that of market rate i.e. ₹ 80/- and ₹ 90/- along with Doctor s report. About 5371 patents have already benefited from this service. 4. SAMARPAN PHYSIOTHERAPY CENTER It was inaugurated in Dec., 2008 physiotherapy service is provided under the guidance of qualified doctors at a well equipped and mechanized center at very concessional rates (only ₹ 150/- per week). Services are provided for Short wave diathermy 500W, Gout, Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inance Minister in paragraph no.180 of his Budget speech on 29.02.2008. The relevant portion of speech pointed out by the Ld. Authorised Representative is reproduced as below from page nos.178 to 179 of assessee s Paper Book:- 180. Charitable purpose includes relief of the poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under charitable purpose . Obviously, this was not the intention of Parliament and, hence, I propose to amend the law to exclude the aforesaid cases. Genuine charitable organisations will not in any way be affected. While replying to the debate on the Finance Bill, 2008 on 29th April 2008, the Finance Minister again clarified the position about this amendment as under:- Clause 3 of the Finance Bill, 2008 seeks to amend the definition of charitable purpose , so as to exclude any activity in the nature of trade, commerce or business, or any activity of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e institutions even if they incidentally carry on a commercial activity subject to the conditions mentioned above. 3. The newly inserted proviso to section 2(15) will apply only to entities whose purpose is advancement of any other object of general public utility i.e. the fourth limb of the definition of charitable purpose contained in section 2(15). Hence, such entities will not be eligible for exemption under section 11 or under section 10(23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. 27. After examination of the activities of the assessee, Samiti and after considering above C.B.D.T. Circular, we find that the admitted facts of the case under consideration are that the assessee, Samiti is carrying on the activities in respect of medical relief. We find that Samiti/ institution/entities whose object is education or medical relief would continue to be eligible for exemption as charitable institutions even if they incidentally carry on a commercial acti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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