TMI Blog2014 (8) TMI 834X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed an order u/s.12AA(3) of the Act during the course of discharge of her duty as CIT - While discharging her duty, her action might have caused some hardship to the assessee due to error of judgement but it does not warrant levy of cost on the department – relying upon Pooran Mal Vs. Director of Inspection (Investigation), Income Tax, New Delhi and others [1973 (12) TMI 2 - SUPREME Court] - even though the innocent is likely to be harassed by a raid for the purpose of search and seizure that cannot be helped - there is no such action of search and seizure which causes serious invasion in the privacy of the person - Commissioner was discharging her quasi-judicial duty - there is nothing on record to suggest that the action of the CIT was malafide. Approval u/s 80G(5)(vi) – Held that:- The trust was granted approval u/s.80G(5)(vi) of the I.T. Act. on 30-12-2009 for the period from 23-02-2009 to 31-03-2011 and valid in perpetuity unless specifically withdrawn in view of Board’s Circular No.07/2010 order dated 27-10-2010 - CIT subsequently withdrew the approval granted u/s. 80G(5)(vi) of the I.T. Act on the ground that the registration granted earlier u/s.12AA has been cancelled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal benefits, including education of Son and Daughter-in-law of the trustees. She, therefore, issued a show-cause notice to the assessee on 19-12-2011 under provisions of Sec. 12AA(1)(b)(ii) of the I.T. Act pointing out the above discrepancies and asked the assessee to explain as to why the registration granted earlier should not be withdrawn. 3. The assessee objected to the above show-cause notice on the ground that the same was based on observations of the A.O in the assessment orders for A.Ys. 2004-05, 2005-06 2008-09. It was explained that the assessee trust had advantage of well established hospital of the trustees, along with flourishing business. The founder trustees, being motivated by philanthropic consideration are taking only nominal portion of fees collected by the trust for their services rendered. It was argued that the surplus of the trust is not distributed amongst the trustees but is retained for the charity and expansion of the hospital. Relying on a number of decisions including the decision of Hon ble Kerala High Court in the case of CIT Vs. Pulikkal Medical Foundation (P) Ltd. reported in 210 ITR 299 and the decision of Hon ble Bombay High Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust. Further the assessee trust has given advance of ₹ 6,48,216/- to M/s. Image Diagnostics, a firm where the chief trustee is also a partner, and is conducting its business from the same premises. According to her there is a clear contravention of provisions of Sec. 11(5) of the I.T. Act, 1961. She further noted that the assessee trust is charging fixed amount of fees, depending on the basis of treatment given and facilities provided, from all the patients. There is a fixed schedule for various items of professional consultancy provided. According to Ld.CIT, the so called discount given by the assessee in the bills claiming to be charity has not been explained by the assessee as genuine charity. The assessee failed to substantiate its claim by providing concrete figures of the actual bill amount, the percentage of discount provided, and the final amount of bill collected from patients. It has not established, with sufficient evidence that such discount is substantial, when compared to the total turnover, running into Cores of Rupees. Further there are no set of governing rules for providing such discounts. According to her, it is not the case that such discounts are provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allenged before learned C.I.T.[A] Kolhapur] and being an outcome of non application of mind on the part of the learned C.I.T. the same is bad in law and being without jurisdiction the same may please be vacated. 3. In the facts and circumstances of the case and in law, the conclusions drawn by the learned C.I.T. that the appellant trust has violated the provisions of Section 13[l][c] 11 [5] of the I.T. Act 1961 being arbitrary, perverse, malicious and based on no evidence the same may please be vacated and the impugned order may please be quashed. 4. In the facts and circumstances of the case and in law the various alleged instances cited by the learned C.I.T. in support of the alleged violations of the provisions of Section 13[l][c] 11 [5] of the I.T. Act 1961 being arbitrary, perverse and based on no evidence the same may please be vacated and the impugned order may please be quashed. 5. In the facts and circumstances of the case and in law, the conclusion drawn by the learned C.I.T. that the appellant trust is running a Commercial Medical Establishment being arbitrary, perverse, malicious and based on no evidence the same may please be vacated and the impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is carried on in the course of the actual carrying out of the primary purpose of the Trust. Where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. For the above proposition, he relied on the following decisions: i. Additional CIT vs. Surat Art Silk reported in 121 ITR Page 1 [SC] ii. Vanita Vishram Trust vs. Chief CIT reported in 327 ITR Page 121 [BOM] iii. CIT vs. Pulikkal Medical Foundation [P] Ltd reported in 210 ITR Page 299 [Ker] iv. ITO vs. Dharamshils Cancer Foundation Research Centre reported in 128 ITD Page 1 [ITAT Delhi] v. Gulab Devi Memorial Hospital Trust vs. CIT reported in 132 TTJ Page 90 [Asr][UO] 6.2 He submitted that the CBDT in its Circular No. 11 of dt. l9/12/2008 has clarified that where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute charitable purpose even if it incidentally involves the carrying on of commercial activities. He submitted that the CIT has lost sight of the fact that for attaining its object, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 As regards the allegation that there is contravention of provisions of Section 13(1)(c) of the I.T. Act 1961 which warrants cancellation of registration granted to the trust u/s 12 AA of the I.T. Act 1961, he submitted that there are no alleged violations of Section 13(1)(c) of the I.T. Act 1961. Without prejudice to above and by way of an alternate submission, he submitted that under the provisions of Section 12AA(3) of the I.T. Act 1961, the powers of the CIT are confined to enquire about the activities of the trust and its genuineness. The C.I.T. cannot examine whether there is any violation of the provisions of Section 13(1)(c) of the I.T. Act 1961. In support of this contention he relied on the decision of the Pune Bench of the Tribunal in the case of Maharashtra Academy of Engineering Educational Research [MAEER] v/s C.I.T. reported in 133 T.T.J. Page 706 6.5 As regards various alleged instances cited by the learned C.I.T. in support of alleged violations of the provisions of Section 13(1) (c) and 11(5) of the I.T. Act 1961, the Ld. Counsel for the assessee referred to clause 31 of the Trust deed at page 104 of the paper book which reads as under : Any Trustee bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has failed to substantiate with evidence that the dominant part of the running of the hospital is charity. On the contrary the trustees who control the trust along with family members are charging for everything provided by them. The trust has even sponsored the PG Medical study of the son and daughter-in-law of the trustees. Relying on various decisions he submitted that the CIT was justified in cancelling the registration granted earlier u/s.12A of the I.T. Act, 1961. He also relied on the following decisions : 1. Jacob vs. Tahsildar (1989) 176 ITR 243 (Ker)] 2. Indian Chamber of Commerce vs. CIT 1975 CTR (SC) 271 : (1975) 101 ITR 796 (SC) 3. Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC). 4. Sri Aurobindo Annai Trust v.CIT-l, Madurai MT APPEAL NOs. 1773 and 1774(Mad.)/2009 order dated 18-03-2011 (ITAT Chennai Bench) 8. We have considered the rival arguments made by both the sides and perused the records. We have also considered the various decisions relied on by both the sides. We find in the instant case the assessee trust was granted registration u/s.12A of the I.T. Act by the CIT, Kolhapur vide Certificate No. KOP/HQ.III/217-P-123/62/247 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any event, as a plain reading of s. 12AA(3) would indicate that a registration granted under s. 12AA can only be withdrawn when the CIT is satisfied that (a) the activities of the trust or the institution are not 'genuine'; or (b) the activities of the assessee are not being carried out in accordance with the objects of the trust or the institution. There cannot be any other legally sustainable reason for cancelling or withdrawing the registration granted under s. 12AA. By no stretch of logic, the activities of the assessee can be said to be not genuine and the assessee is admittedly pursuing the objects for which it was established. When the assessee is engaged in bona fide activities, with the framework of law, to pursue its objectives, it cannot be said that the activities of the assessee are not genuine. Learned CIT has also not brought on record any material to demonstrate activities of the assessee are not being carried out in accordance with the objects of the trust or the institution. Under these circumstances, the withdrawal of registration granted under s. 12AA cannot be sustained in law. Learned CIT has extensively referred to as to why the assessee is not eligib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Supreme Court in the case of Union of India Vs. Raja Mohammed Amir Mohammad Khan (copy enclosed) and in the case of Urban Improvement Trust, Bikaner Vs. Mohanlal reported in 2010 (001-SCC-0512 (SC) and the decision of the Hon ble Rajasthan High Court in the case of Charanjilal Tak Shyam Parwani Party Vs. Union of India reported in 252 ITR 333 he requested that cost of the appeal may please be awarded to the assessee trust which will act as deterrent for illegal and malafide orders passed by the authorities causing irreparable loss to the assessee as well as to the society at large. 12. The Ld. Departmental Representative on the other hand strongly opposed the argument of the Ld. Counsel for the assessee. He submitted that the CIT-II, Kolhapur has passed a detailed speaking order u/s.12AA(3) of the I.T. Act in the course of discharging of her sovereign duty as CIT. He submitted that in this case there is no element which distinguishes activities of commercial run hospital with this foundation claimed to be medical relief at large. Referring to the order of the CIT he reiterated that the assessee trust is a purely commercial establishment with dominant object being c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorisation for the search cannot be in favour of any officer below the rank of an Income tax Officer. Fourthly, the authorisation is for specific purposes enumerated in (i) to (v) in sub section (1), all of which are strictly limited to the object of the search. Fifthly, when money, bullion, etc., is seized the Income tax Officer is to make a summary enquiry with a view to determine how much of what is seized will be retained by him to cover the estimated tax liability and how much will have to be returned forthwith. The object of the enquiry under sub section (5) is to reduce the inconvenience to the assessee as much as possible so that within a reasonable time what is estimated due to the Government may be retained and what should be returned to the assessee may be immediately returned to him. Even with regard to the books of account and documents seized, their return is guaranteed after a reasonable time. In the meantime the person from whose custody they are seized is permitted to make copies and take extracts. Sixthly, where money, bullion, etc., is seized, it can also be immediately returned to the person concerned after he makes appropriate provision for the payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the submission of the Ld. Counsel for the assessee to award cost for the action of the Commissioner cancelling the registration granted earlier u/s.12AA of the Act. 13.2 The two Supreme Court decisions relied on by the Ld. Counsel for the assessee are distinguishable and not applicable to the facts of the case. Those cases were related to property dispute for which cost was awarded for dereliction of duty by Govt. officers in their administrative capacity. However, in the instant case the officer was discharging her duty in a quasi-judicial matter. So far as the decision of the Hon ble Rajasthan High Court in the case of Charanjilal Tak Shyam Parwani Party (Supra) is concerned, there also facts were different. In that case, the respondent ITO issued illegal notice to the petitioner and later withdrew the same. Under these circumstances, the Court directed the respondent to pay for the advocate fee and litigation expenses incurred by the petitioner in prosecuting writ proceedings. However, in the instant case, there is no prima-facie illegality in issuing the notice. We, therefore, do not find any merit in the argument of the Ld. Counsel for the assessee to award cost. The g ..... 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