TMI Blog2013 (12) TMI 1542X X X X Extracts X X X X X X X X Extracts X X X X ..... he additions of ₹ 1,72,80,372/- on account of interest income; ₹ 36,282/- for other receipts; and ₹ 25 crore as capital receipts for the year under consideration. - Decided in favour of revenue. - I.T.A. No. 504(Asr)/2009 And I.T.A. No. 515(Asr)/2009 - - - Dated:- 31-12-2013 - SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P. JAIN, ACCOUNTANT MEMBER For the Petitioner : Sh. Y.K. Sud, CA For the Respondent : Sh. Mahavir Singh, Sr. DR ORDER PER BENCH 1. These are the cross appeals filed by the assessee as well as by the Revenue against the impugned order dated 25.09.2009 passed by learned CIT(A), Jalandhar, for the assessment year 2006-07. The grounds of appeal taken by the assessee in I.T.A. No. 504(Asr)/2009 are as under: i. That the CIT(A) was not justified in sustaining the addition of ₹ 6.50 crores out of the total the total addition of ₹ 25 crores made by the A.O. on account of capital receipts. ii. That while sustaining the above addition the CIT(A) has ignored the fact that capital receipts as admitted by him and the A.O. cannot be brought to tax. Hence the addition sustained by CIT(A) deserves to be deleted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of the same, the authorized representative of the assessee appeared in the assessment proceedings from time to time and furnished the informations, which were part of assessment record. The Assessing Officer examined the informations furnished by the assessee and issued show cause notice on 08.12.2008 fixing the case for 15.12.2008 and in response to the same, the assessee filed its reply on 19.12.2008. The Assessing Officer thoroughly examined the reply filed by the assessee on 19.12.2008 and issued a show cause notice, which was served upon the assessee on 24.12.2008 for 26.12.2008, which the Assessing Officer has reproduced at page no. 2 of the assessment order and mainly asked the assessee that the activities of the assessee only constructing the building for a period of more than a decade without an iota of efforts in the direction of purposes for which it is constructed, then this activity also enters the dark zone of not only doubt but of confirmation of the fact that the main purposes and objects for its construction are not only secondary, but dumped into cold chamber of non-action and putting the lofty objects of the trust into such chamber was perhaps not the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any plausible reason for the delay of 8 years in starting the construction of building from 10.10.1994 to 2002 and the assessee has used the whole of the funds for the purpose of planning and constructing the building during the period of more than 14 years till date and for 11 years 5 months and 22 days till the close of the financial year on 31.03.2006, relevant for the year under assessment. A sum of ₹ 45,73,347/- is spent on salaries/establishment/office expenses for the year under assessment. There is no trace of the main objects for which the trust/society was formed on 10.10.1994. It is apparent as if the construction of building was the only object during the whole period at a colossal cost of ₹ 956/- per sq. ft., unheard of in any valuation report furnished by the government valuer of the department in respect of even palatial bungalows. And therefore the assessee-trust is entitled for exemption under Section 11 of the Act on the impugned claim as exempted by the assessee trust. The Assessing Officer also made the addition of ₹ 10,98,101/-, which the assessee has incurred on running the vehicle during the assessment year in dispute as compared to total ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the completion of the hearing a direction was given by the Hon'ble Bench to file the Written Submissions which are being submitted in following paras: 2. Brief Facts i. The brief facts of the case are that the appellant trust was formed as a society by the Govt. of Punjab on 10.10.1994 and it was registered with Registrar of Societies vide registration certificate no. 916 of 94-95 the copy of Memorandum of Association and the Rules and Regulations is being enclosed herewith as Annexure A Page No. 8 to 32. The society was registered with the main object of establishing to carry on the administration and management of Pb. Institute of Medical Sciences, Jalandhar. The objects and the functions of the society are duly reflected in the Memorandum of Association from Page 9 to 12. The society is formed under the chairmanship of Chief Minister of Punjab with Health Minister as Vice Chairman, Chief Secretary and other Government Officials as members who are reflected with Memorandum of Association from Page 13 to 14. ii. The Society is registered with the Registrar of Societies and the certificate of registration is available on Paper Book, Page No. 6. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med up his findings that the society has not applied any part of its income for charitable purpose and as such does not deserve exemption of its income for the year under assessment. Thereafter the A.O. added all the receipts of the trust capital as well as revenue and determined the assessee income as 27,84,14,760/-. 5. From the above it is clear that although the A.O. has not disputed that during the year the assessee has utilized its funds on the construction of the hospital and medical college which even he admitted that construction is charitable in nature but still he treated all the funds as income on the pretext that assessee has taken a long time to construct the hospital and medical college and is yet to start its medical activities. 6. An appeal before CIT(A) was filed against the action of the A.O. and his observations that construction of hospital and medical college building although charitable in nature but still the assessee cannot be given exemption u/s 11, since the construction was taking a long time. 7. The CIT(A) reproduced the Written Submissions of the assessee in this regard in para 2.1 from page 3 to 7 of his order which may kindly be refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r providing medical facilities. The assessee in this regard relied upon the following judgments of Supreme Court and various High Courts which again the assessee is relying upon before the Hon'ble bench that acquiring of land and construction of building for carrying out the charitable objects of the trust/institutions, amounts to application of funds for charitable purposes: a. 230 ITA 636 CIT Vs. SRM MCT M. Tiruppani Trust (copy of page 1- 8 of compendium of judgments) b. 234 CTR (All)197 CIT Vs Mool Chand Sharbati Devi Hospital Trust (Copy already filed) c. 242 ITR 457(Karnataka) CIT Vs. Janambhoomi Press Trust (copy enclosed) Page No. 36 to 37. d. 29 ITR 535 DIT(Exemptions) Vs. Eternal Sciences of Moris Society (copy enclosed) Page No. 38 to 40. e. 328 ITR (Delhi) 551 DIT(Exemptions) Vs. Maharaga Aggrsen Technical Education Society (Copy enclosed) Page No. 41 to 46. F. 150 TTJ(Chd) 877 Sandhya Educational Trust Vs. CIT (Copy enclosed) Page No. 47 to 61 10. The CIT(A) in paras 4.3 to 4.9 on page 20 to 22 of his order has given a finding in para 4.9 that based on the discussions above it is held that appellant is eligible f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g off the appeal of the assessee observed on the submissions made by the A.O. that the assessee trust has invested ₹ 6.50 crores with Capital Local Area Bank which is a non scheduled bank and hence he sustained the addition of ₹ 6.50 crores on account of infringement of sec 13(1)(d) which is challenged before the Hon'ble Bench on the following grounds: i. It is not disputed that under bona fide belief the assessee invested ₹ 6.50 crores with Capital Local Area Bank for a short duration of 4 to 12 months from 20.1.2006 till 12.5.2006, 31.5.2006, 30.12.2006, and finally 31.01.2007(copy of ledger account is enclosed herewith for your kind reference) Page No. 76 to 77. The assessee never knew that Capital Local Area Bank is a non scheduled bank. When it was pointed out by the CIT(A) at the instance of A.O. at the time appellate proceedings it was found from the Capital Local Area Bank that the bank had a license from RBI and the deposits of the customers were secured as per the guidelines of the RBI and was regularly participating in Local Clearing. The confirmation of the bank in this regard is available on page no. 26 and 27 of Paper Book which may kindly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be treated as income of the trust: 96 ITD 480(CTK) (Page9 of compendium of judgments) 284 ITR 582 (KTK) ( Page 19 of compendium of judgments) 288 ITR 106 (Allahabad) (Page 23 of compendium of judgments) 138 TTJ 714 (Ahmedabad) (Copy already filed at the time of hearing) In view of this it is submitted that addition of ₹ 6.50 Crores cannot be sustained since the amount is not the income of the trust. iii. The assessee made the investment of FDR with Capital Local Area Bank with a bonafide belief that bank was a scheduled bank and none of the members of the governing body which are all government officials and Chief Minister and Health Minister had any kind of interest in the Capital Local Area Bank. Thus there was no intention of the assessee for violating the provisions of Section 13. In this regard your kind attention is drawn towards the judgments of Delhi High Court reported in 253 ITR 593 available in page 27 to 29 of compendium of judgments where in the Hon'ble High Court has held that intention of the trustees for investment is to be seen. Hence the addition cannot be sustained on this ground also. iv. Your kind attenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copies of audited account is enclosed herewith page no. 78 to 92. For Punjab Institute of Medical Sciences Sd/./- Y.K. Sud C.A. Counsel for the assessee 7. Learned DR has also filed his written submission dated 26.11.2013, the contentions raised by him in the written submission are reproduced as under: BEFORE THE HON BLE I.T.A.T. AMRITSAR BENCH AMRITSAR Punjab Institute of Medical Sciences, Garha Road, Jalandhar ITA No. 504 515/asr/2009 DATE OF HEARING: 26.11.2012 WRITTEN SUBMISSIONS: ITA No. 515/ASR/2009: It is submitted that this is department appeal. In this appeal, Ground wise submissions are made hereunder: GROUND NO. 1: It is submitted that the A.O. had made disallowance on account of use of vehicle for private use claimed at ₹ 10,98,101/-. During the course of assessment, the assessee could not furnish any explanation as to who travelled in the vehicle and what purpose was served. The learned CIT(A) has restricted this addition to ₹ 10,04,252/- and allowed relief of the remaining amount. The learned CIT(A) s finding is given at para 6.1 page 27 of his order. It is pertin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed by the A.O. on the ground that the assessee is not engaged in furtherance of the stated objectives. Now after the cancellation of registration under section 12AA(3) by the Worthy CIT-II, Jalandhar, the exemption stands withdrawn and as such this addition deserves to be confirmed. Ground No. 4. It is submitted that the A.O. had made addition of ₹ 36,282/- on the ground that the assessee is not engaged in furthering its objectives and as such it is not entitled to exemption under Section 11. Now when the Worthy CIT-II, Jalandhar has withdrawn the exemption, the addition made by the A.O. needs to be confirmed. Ground No. 5 6 : These grounds of general nature and hence no comments are offered. Besides the above, the A.O. has raised an additional ground of appeal which reads as under:- That the learned CIT(A) has erred in holding that construction of institute building is application of income for charitable aims and objects of the society in view of the fact that rendering medical relief is no more the dominant object of the assessee society. This ground of appeal may kindly be allowed in the face of the fact that registration gran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s order dated 24.10.2013 passed under Section 12AA(3) of the Act, cancelled the registration granted to the assessee-trust on 20.05.1994 by holding that the activities of the assessee-trust are not genuine. He has also produced a copy of the order dated 24.10.2013 passed by learned CIT-II, Jalandhar 9. Learned counsel for the assessee stated that the assessee is going to file an appeal against the order dated 24.10.2013 before the Tribunal and the same is not under challenged before this Bench; therefore, the Bench cannot comment upon the cancellation of registration granted to the assessee under Section 12AA(3) of the Act w.e.f. 20.05.1994. In support of the argument advanced by learned DR on the cancellation of registration, learned counsel for the assessee filed his written submission dated 26.11.2013. The contents of the same are reproduced as under:- In the Income Tax Bench Appellate Tribunal, Amritsar Bench, Amritsar In re: Pb. Institute of Medical Science, Garha Road, Jalandhar ITA Nos. 504 505/ASR/2009 Date of hearing 27.11.2013 Most Respectfully submitted as under: 1. At the time of arguments and written submissions filed by the DR i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Charitable purposes- Registration of trusts cancellation of registration Law Applicable effect of insertion of sub-sec. (3) in sec. 12AA w.e.f. 1.10.2004 providing for cancellation of registration provisions not retrospective trust granted registration u/s 12A prior to amendment cancellation of registration by order passed in March 2009 by CIT not valid Income Tax Act, 1961 ss 12A, 12AA. d. DIT(exemptions) Vs Mool Chand Khairati ram Trust Delhi 243 CTR (Del) 245 Power of cancellation of registration obtained u/s 12A came to be incorporated by way of amendment introduced in sec. 12AA(3) by the Finance Act, 2010 w.e.f. 1.6.2010, DIT was not therefore justified in cancelling the registration u/s 12AA(3) w.e.f. December 2002-03 vide his order dated 30.6.2009. Without prejudice to above it is submitted that the order passed by CIT cancelling the registration is an appealable order and if any cognizance is taken of that order while deciding the appeal for Assessment Year 2006-07 it would amount to expression of the order of the I.T.A.T., with regard to cancellation of registration w.e.f. 2004-05 which is against the law of natural justice and not permissible unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2013 to the Assistant Registrar of this Bench, in which he has written that he is enclosing a copy of the order passed in C.W.P. No. 14664 of 2011 by Hon'ble High Court of Punjab and Haryana in respect of the appeals of assessee, Punjab Institute of Medical Sciences, Jalandhar, pending before I.T.A.T. The Bench had adjourned the hearing of the appeal for 26th November, 2013. Hon'ble High Court has directed the Bench to decide the appeal of the assessee as well as of the Revenue within one month and he has sent a copy of the order for kind perusal and information. This Bench has received the said letter dated 14.11.2013 along with a photostat copy of the Hon'ble High Court s order attested by learned counsel for the assessee. 12. We have perused the order dated 30th October, 2013 passed by Hon'ble High Court of Punjab Haryana in C.W.P. No. 14664 of 2011, titling M/s Punjab Institute of Medical Sciences Vs. Deputy Commissioner of I.T. Range-I and another, in which, the Hon'ble High Court has directed I.T.A.T., Amritsar Bench, Amritsar, to decide the appeals filed by the assessee and the Revenue within one month from the date of receipt of certified copy of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income of the assessee to be computed under Section 144 of the Act. In response to the notice dated 08.12.2008, the assessee appeared before the Assessing Officer on 15.12.2008 and gave a short reply to the queries raised by the Assessing Officer and requested for some time to give detailed reply to the show-cause notice dated 08.12.2008. The assessee requested time till 19.12.2008 and the Assessing Officer granted the same and fixed the case for 19.12.2008. On 19.12.2008, the assessee filed its reply, which is at page no. 128 of the assessment record. In this reply, the assessee mainly stated that the accounts of the assessee have been made on mercantile basis, keeping view the various accounting policies. This has been done keeping in view the ongoing work of the society and also to know the exact status of the finances and work of the society. However, for the income tax purpose, it is not the total income but income of the society, which is to be taken into consideration. To arrive at the income for complying with the Sections 11, 12 and 13 of the Act, the Receipt and Payment Account has to be worked out as the accumulation of income and application of income is from commerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is reproduced as under: 2. On the issues raised-rather the only issue as per query No. C and D- which relate to fulfillment of the objects of the Society/Trust, your explanation does not measure upto the intensity required for explaining the utter failure- rather no movement- in the direction of entering the zone of activity which is generally associated with such holistic, holy and sacred purposes of serving and taking the care of health needs of the humanity from medical angle and also for advancement of frontiers of medical science. You have laid emphasis on the only activity i.e. construction of building- having been and being carried out- being of charitable nature. Undoubtedly it is. But if it goes on as the only activity for a whopping period of more than a decade without an iota of efforts in the direction of purposes for which it is constructed, then this activity also enters the dark zone of not only doubt but of confirmation of the fact that the main purposes and objects for its construction are not only secondary, but dumped into cold chamber of non-action and putting the lofty objects of the trust into such chamber was-perhaps-not the purpose of formation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... God disposes . Here in the case of the assessee trust what were the natural forces and circumstances beyond its control that the delay is justifiable?. Some of the functionaries of the assessee trust in their official capacity are and have always been at the helm of administration of the state of Punjab since 10.10.1994, the year of inception. A few are specialists in the different fields of medical sciences and others are individuals of high intelligence, force-sight and status. No reasons have been given for delay of 8 years in starting construction of building. When play of natural forces is not involved at all in this project of the assessee trust and the circumstances never spread beyond their control to make it difficult and not possible to start the process of construction of building immediately after 10.10.1994 or say within a year or two, then where the things went wrong and awry? Here the observations of the learned bench referred to at the end of the comments in the proceeding para that man proposes and God disposes will have to be turned upside down to convey the actual state of affairs of the trust for the period of 10.10.1994 up-till the start of constructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposit : balance as per bank : sheet statement : Bank 1,00,00,000/- furnished by the Bank on 08.11.08 reconciliation as per fresh statement from the bank is not speaking and nothing is clear. ₹ 750000000/- is taken as actual deposit as on 31.03.2006 vii. Addition as discussed in the last para on expenses on vehicles 10,98,101/- Assessed income 27,84,14,755/- Rounded off u/s 288A 27,84,14,760/- Penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 for furnishing inaccurate particulars of income are separately initiated. 19. Assessee aggrieved with the aforesaid order passed by the Assessing Officer, dated 30.12.2008 under Section 143(3) of the Act, filed an appeal before the learned CIT(A), Jalandhar, who vide impugned order dated 25.09.2009, sustained the addition of ₹ 6.50 crores out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statute from 1.4.1973 provides that the provisions of section 11 and 12 shall not apply any relation to the income of any trust or institution unless the persons in receipt of income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Commissioner and the trust or institute furnish report of accountant in the prescribed form. Section 12AA of the Act lays down the procedure for registration of the trust or institution required u/s 12A. Section 12AA reads as under: 12AA. Procedure for registration (1) The Commissioner, on receipt of an application for registration of a trust or institution made under clause(a) or clause(aa) of section (1) of section 12A, shall- (a) Call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also made such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he--- (i) shall pass an order in writing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner to cancel the registration of the trust or institution if he is satisfied that the activities of the trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution. Hence, once the Commissioner has granted registration u/s 12AA, it has to be taken that the objects of the institution and the genuineness of the activities of the trust are such that the institution is eligible for deduction of its income u/s 11. If the activities of the institution are not genuine or not in accordance with the objects, the Commissioner may cancel the registration granted earlier. The power of such cancellation is vested only with the Commissioner and not with the A.O. The A.O. cannot determine that the activities of the instruction are not genuine or not in accordance with the objects of the institute. If the A.O. believes so, he may bring this belief, along with reason thereof to the knowledge of the Commissioner for determination as to whether activities were not genuine or in accordance with the objects of the institution. However, till such time that the registration u/s 12AA is not cancelled, it has to be presumed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld as not properly explained. 3.4 The A.O. has subsequently clarified in his letter dated 20.03.2009 that it was not his intention to state that the assessee was not eligible for exemption u/s 11. Rather, he has stated, it was his intention to hold that the income of the assessee had not been applied for the charitable purposes and was, therefore, not eligible for exemption. Let us, therefore, examine if the contention of the A.O. that the income of the assessee from property held under trust has not been applied for charitable purpose. 4. As per the Memorandum of Association (MOA) of the society, a society in the name of Punjab Institute of Medical Sciences, Society, Jalandhar (Society, in short) with registered office at Jalandhar was formed on 10.10.1994 for setting up and managing the Punjab Institute of Medical Sciences, Jalandhar (Institute, for short). From the MOA it appears that the Society has been set up by the Govt. of Punjab. As per clause 9 of the MOA the Governing Body of the Society, to whom the management of the affairs of the Society has been entrusted, has the Chief Minister as its Chairman, and several other members of the Govt. of Punjab as ex-offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of medical education mentioned in clause 3(ii)(a) of the MOA that can be and is the charitable object or purpose of the Society. Though clause 3(ii)(a) is mentioned under the heading functions of the Society , it is, in my opinion, the main clause in the MOA laying down the charitable purpose and object of the Society. The other objects and functions deal with the powers of the Society to achieve this main charitable purpose of the Society. Hence, I hold that setting up of the Institution and managing the Institute (Clause 3(i)) are incidental and necessary for meeting the object of providing medical education (clause 3(ii)(a)). A perusal of the MOA also shows that the dominant object of the Society is to provide high quality medical education. 4.3 The Institute, is as obvious, has not started imparting medical education, which is the main charitable activity for which the Society has been formed. It is engaged in construction of a building in which the Institute is slated to start functioning. The A.O. s main grouse is that the main charitable purpose of the Institute was no being fulfilled and, hence, the application of the income was not towards charitable purposes. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Public Private Partnership (PPP) mode for operationalising and managing the Institute. [This has been finally achieved in August, 2009, as per information submitted by the appellant.] 4.5 It is obvious from the sequent of events and activities of the Society described above that the Society was taking steps for constructing a building for setting up the Institute to impart medical education. The major source of funding was arranged in the year 2001 when land was transferred to the assessee for development and sale. Contracts for construction and works were also awarded thereafter. Not all necessary contracts for construction and works were also awarded thereafter. The question is whether the expenditure on construction of the Institute building can be said to be incurred for charitable purposes during the relevant year under the given circumstances? 4.6 In my opinion, the answer to this question has to be in the affirmative. While the Society has not yet started imparting medical education, the expenditure incurred by it is certainly aimed at facilitating medical education. It is not the case of the A.O. that the expenditure incurred during the year was for any pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the building may take more time. It has not been contended directly by the A.O. that income of the Society would be exempt u/s 11 only after the medical instate started functioning. The contention of the A.O. is that the society was taking too long to set up the institute, and therefore, not applying its income to its objects. However, the provision of section 11(2) of the Act take care of this situation. If the assessee accumulates its income and does not utilize it for the stated objectives within the period provided in the Act, the unutilized income can be treated as the assessee s income. It is not the A.O. s case that the income accumulated u/s 11(2) has not been utilized for the stated purposes. It also does not appeal to be the case since earlier the period for accumulation was ten years and it is only with effect from the financial year 2001-02 that the period of accumulation had been reduced to five years. As noted earlier, apart from examining as to whether the income of the assessee has been applied for charitable purposes u/s 11(1)(a), the A.O. should examine the fulfillment of conditions u/s 11(2) of the Act besides the violation of the provisions of section 13 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when assessee seeking exemption under Section 11 of the Act. The registration granted under Section 12AA of the Act to the assessee should not be the obstacle in the way of Assessing Officer at the time when the assessment proceedings are to be taken and to decide as to whether the assessee is entitled for benefit of Section 11 or 12, as the case may be. 22. As per the facts narrated by the learned CIT(A) in para no. 4.4 at page 20 of the impugned order, the assessee was proposed to be set up in the year 1993 by the State Government and decided to have society registered in 1994. The assessee-society got registered under Section 12AA of the Act on 01.11.2000. The assessee-trust has governing council headed by the Chief Minister and to appoint a Director of the Institute on contract basis. In 1997, the Prime Minister announced Additional Central Assistance (ACA) of ₹ 25 crores under the scheme 100% centrally sponsored schemes of the 9th five year plan ₹ 7.50 crores was received on 23.01.98; ₹ 7.50 crores was received on 5.5.2000 and the balance ₹ 10 crores was received on 10.03.2006. In 1998, an agreement was made with a contractor to construct an initial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was selected as the main contractor for the main building and the construction was started in 2001. In 2005-06, it was decided by the Governing Body to take Public Private Partnership (PPP) mode for operationalising and managing the Institute. This has been finally achieved in August, 2009. We are of the view that the motive of the assessee behind the long period for about more than 8 years spent on construction of building by the assesseetrust, is to take Public Private Partnership (PPP) mode for operationalising and managing the Institute and capitalizing more and more on the project, which they have achieved finally in August, 2009 iii) It is pertinent to mention here that the Assessing Officer issued a notice dated 18.12.2008 and asked various questions from the assessee after discussing in detail the reply filed by the assessee on 10.11.2008, 11.11.2008 and 26.11.2008. The Assessing Officer conveyed the main objects of the assessee-trust to the assessee by the said notice and asked the assessee that none of the objects has been achieved at all during the fourteen years. The relevant questions asked by the Assessing Officer to the assessee are reproduced as under: C. Que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k) to q Only administrative clauses r) to do all such things as may be necessary incidental or conducive to the attainment of all or any of the objects of the Society. s) to continue such committee or committees as it may deem fit for the disposal of any business of the institute or for tendering advice in any matter pertaining to the Institute. t) ---------------------------------------------------------------------------- Please also furnish. j) to iv)----------------------------------------------------------------------- v) Total number of department-wise Professors, Lectures, Ministerial and other technical staff required for a medical institution of the stature of P.I.M.S. vi) Total number of faculties in which medical education is imparted. vii) Complete details of laboratories used for practical and other analysis alongwith details of medical equipments viz/year(s) of purchase of each equipment, cost price etc. with copies of bills of purchase. ix) Details of research done by P.I.M.S. in medical sciences of its recognition at the national/international level with evidence of such recognition. D. None of the objects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeting between him and the Ranbaxy chairman. Interestingly, the standing committee appointed by the Board is headed by Dr. JS Bajaj, a close confidante of the CM. Fortis too share a good rapport with the Badals, and they had together recently launched the campaign to save environment and the girl child, Nanhi Chaan . In fact, the Punjab government seems to be divided house on the issue. In its letter dated August 20 to the Principal Secretary, Medical Education and Research, on opinion regarding Fortis, Punjab Attorney General (AG) HS Mattewal had stated that as the project is very large, and it seems that the main endeavour of the government is to give this project to the best party/participant bidder. Therefore, if the relevant information has been received on time, in the larger public interest Fortis may also be considered as there would be health competition in this specialized filed. Medical Education Minister Tikshan Sud is also learnt to be peeved at having no say in issues concerning his department. He declined to make any direct comment when contacted, and said he gets to learn about matters only when they reach the empowered committee of the governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 08.12.2008, the assessee has given its detailed reply dated 19.12.2008, in which the assessee stated that completion of complete project is under consideration and construction of building for the society is part of charitable purpose. Further, at page 5 of the reply dated 19.12.2008, the assessee itself admitted that there is no doubt that the running of medical college and other facilities on private public participation is under consideration as one of the proposal but there is no harm in it as it has become need of the hour. For the sake of convenience, the relevant paragraph at page no. 5 of reply dated 19.12.2008 is reproduced as under: Further the point raised in D1 is of no relevance here, as it is not based on any facts and the paper quoted has no relied on any documentary evidence. There is no doubt that the running of medical college and other facilities on private public participation is under consideration as one of the proposal but there is no harm in it as it has become need of the hour. Even the Government has opened telecommunication, defence, power and other sensitive sectors for this purpose. So going for private participation is keeping in view the need ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kanals to the Society after paying compensation of ₹ 15 crores to Punjab Agriculture University. The construction of the hospital started in the year 2001. He stated that while framing the assessment, the Assessing Officer has given a finding that since the Trust has only been carrying on construction of the building although the same is charitable in nature but since construction was going on for a long period, therefore he held that the trust was not eligible for exemption u/s 11 of the Act for the year under assessment. Thus, he tried to interfere into the registration granted by the CIT to the trust as a charitable trust. With respect to the reply to the aforesaid argument advanced by learned counsel for the assessee, learned CIT(A) has given his finding in para no. 4.4 at page 20 of the impugned order, which we have reproduce in the above para no. 21 at page 40 41 of this order, and this shows that as per the assessee s information given to learned CIT(A) that the proposal to set up the assessee-trust was made in the year 1993 by the State Government after completing necessary formalities. In 1997, the Prime Minister announced Additional Central Assistance(ACA) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal to the facts of the present case. Learned counsel for the assessee has not supplied us any decision of Hon'ble Courts on the issue in dispute, in which the assessee is incurring expenditure on construction only for a very long period, as in the present case and any court of law has given the exemption under Section 11 of the Act. 27. We have perused the audited balance-sheet also produced by the assessee along with his written submission and found that the assessee has incurred huge expenditure on construction of the building as well as on the payment of salaries to the employees. We have not seen any expenditure incurred by the assessee to achieve the objects of the assessee-society or for charitable purpose, for which the assessee-society has been established. 28. Learned CIT(A) in the impugned order has given the relief to the assessee-society only on the ground that the assessee-society has been granted registration under Section 12AA of the Act by the Commissioner in 2000 and the expenditure incurred by the institute for construction of building is a charitable activities and held that the assessee society is entitled for exemption under Section 11 of the Act in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by the trust to achieve the objects of the assessee-trust. The Assessing Officer is within his power to call complete details of income and expenditure of the assessee whether these have been spent on the activities to achieve the objects of the trust or not. In the present case, the assessee has not filed any documentary evidence before the Revenue Authorities as well as before us to establish that the assessee has incurred any expenditure on charitable purpose to achieve the main objects of the assessee-trust. The assessee has also not satisfied this Bench as to whether any action has been taken by the assessee-trust simultaneously with the construction of building to achieve the main objects of the assessee-trust since its inception till the assessment year in dispute. Almost 100% income has been spend on construction of the building and on payment of salary to the employees as well as for expenses on vehicle used by Medical Education Research Minister, Punjab; Coordinator, PIMS; Director-Principal, PIMS; and for officer staff at Jalandhar local official work and Chandigar for meeting etc. (According to the details of vehicles used by the Officers during financial year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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