M/s. Fernandez Hospital Educational & Research Foundation, Hyderabad v. DIT (Exemptions), Hyderabad

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI G.C.GUPTA VICE-PRESIDENT AND SHRI AKBER BASHA ACCOUNTANT MEMBER ITA NO.15/HYD/10 : FERNANDEZ HOSPITAL EDUCATIONAL & RESEARCH FOUNDATION BOGGULKUNTA HYDERABAD. (PAN - AAATF0570G) VS DIRECTOR OF INCOME-TAX (EXEMPTIONS) AAYAKAR BHAVAN HYDERABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SRI SYED JAMEELUDDIN RESPONDENT BY : SHRI.H. PHANI RAJU O R D E R PER AKBER BASHA ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF THE DIT (E) HYDERABAD DATED 10-12-2009 REJECTING TH E APPLICATION OF THE ASSESSEE FOR RENEWAL OF APPROVAL UNDER S.80G OF THE INCOME TAX ACT [THE ACT]. 2. FOLLOWING ARE THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE IN THE PRESENT APPEAL- '1. THE ORDER OF THE DIT(E) HYDERABAD PASSED U/S 80G OF THE IT ACT 1961 IS OPPOSED TO LAW AND IS AGAINST THE FAC TS CIRCUMSTANCES AND PROBABILITIES OF THE CASE. 2. IT HAS BEEN CLEARLY LAID DOWN IN CLAUSE (V) OF THE TRUST DEED THAT THE ACTIVITIES ARE NOT LIMITED OR RESTRICTED T O PERSONS OF ANY PARTICULAR RELIGION COMMUNITY OR CASE. ACTIVITY R EPORTS WERE ALSO SUBMITTED TO SHOW THAT THE ACTIVITIES OF THE T RUST WERE NOT LIMITED OR RESTRICTED TO PERSONS OF ANY PARTICULAR RELIGION COMMUNITY OR CASTE. THEREFORE THE DIT(E) IS WRONG IN HOLDING THAT THE ASSESSEE TRUST HAS VIOLATED THE PROVISIONS OF SECTION 13(1)(B) OF THE IT ACT 1961. 3. AS PER THE PROVISIONS OF SECTION 11(1)(A) OF THE I T ACT THE INCOME OF THE TRUST IS ELIGIBLE FOR EXEMPTION TO TH E EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN IN DIA. THE TRUST HAS NEITHER CARRIED OUT ANY ACTIVITIES OUTSID E INDIA NOR APPLIED ITS INCOME OUTSIDE INDIA. HENCE THERE IS NO VIOLATION OF CONDITIONS MENTIONED IN SECTION 11(1)(A). THEREFOR E THE DIT(E) IS WRONG IN HOLDING THAT THE TRUST HAS VIOLA TED THE PROVISIONS OF SECTION 11 AND 12 OF THE I T ACT 196 1 SIN E THERE ARE SOME CLAUSES IN THE TRUST DEED WHICH INDICATE T HAT OBJECTS OF THE TRUST CAN BE CARRIED OUTSIDE INDIA. 4. THE ASSESSEE TRUST IS AN EDUCATIONAL AND RESEARC H FOUNDATION AND THE TRUST HAS NOT CARRIED OUT ANY ACTIVITY IN T HE NATURE OF TRADE COMMERCE OR BUSINESS OR ANY ACTIVITY OF REND ERING ANY SERVICES IN RELATION TO ANY TRADE COMMERCE OR BUSI NESS AND THEREFORE IT IS NOT HIT BY THE PROVISO TO SECTION 2(15) OF THE IT ACT. THEREFORE THE DIT (E) IS WRONG IN HOLDING TH AT THE ASSESSEE TRUST IS HIT BY THE PROVISO TO SUB-SECTION 15 OF SECTION 2 AND IS THEREFORE NOT ELIGIBLE FOR RENEWAL OF EXEM PTION U/S 80G OF THE ACT. 3. AFTER CONSIDERING THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT T HE DIT [EXEMPTIONS] REJECTED THE APPLICATION FOR RENEWAL OF E XEMPTION UNDER S.80G OF THE ACT MAINLY ON THE BASIS OF THE TECHNICAL DE FECT IN DRAFTING OF TRUST DEED. IN THE FIRST PART OF THE SENTENCE IN C LAUSE V OF THE TRUST DEED IT HAS BEEN STATED THAT IT IS TO SUPPORT AND PRO VIDE BENEFITS PRIMARILY TO PERSONS OR GROUPS BELONGING TO THE INDIAN CHRISTIAN MINORITY COMMUNITY BUT ON THE OTHER HAND IT HAS BE EN CLARIFIED IN THE SECOND PART OF THE SENTENCE THAT SUCH ACTIVITIES ARE NOT LIMITED TO OR RESTRICTED TO PERSONS OF ANY PARTICULAR CASTE OR CREED OR R ELIGION HENCE IT IS CLEAR THAT THE ACTIVITIES OF THE TRUST FROM THE LIST OF PARTICIPANTS IN VARIOUS PROGRAMS SUBMITTED TO US DURING T HE COURSE OF HEARING IS TO MEANT FOR VARIOUS COMMUNITIES AND CASTE. MOREOVER THE ASSESSEE TRUST IS A RESEARCH FOUNDATION AND THERE IS NO SCOPE TO SUSPECT THE INTENSION OF THE ASSESSEE AS SEEN FROM THE ACTIVIT IES CONDUCTED AND THE PERSONS PARTICIPATED IN THE PROGRAMS AN D THE SAME IS NOT HIT BY THE PROVISIONS OF SECTION 13 [1][B] OF TH E ACT. SIMILAR ISSUE WAS CONSIDERED BY THE TRIBUNAL IN ITA NO.1219/HYD/0 9 IN THE CASE OF NATIONAL ASSOCIATION OF MUSLIMS FOUNDATION HYDER ABAD DATED 16-4-2010 (TO WHICH ONE OF US WAS A PARTY TO THAT ORDE R) WHEREIN IT WAS HELD THAT THE BENEFICIARIES FROM HINDU COMMUNITY WO ULD NATURALLY BE IN SMALL NUMBERS AND IN SUCH A SITUATION SELECTING F ROM POOR PEOPLE BELONGS TO MUSLIM COMMUNITY CANNOT BE PRESUMED TO BE AN EXPRESSION TO EXTEND THE BENEFITS TO A PARTICULAR RELI GIOUS COMMUNITY. THE ONLY CONTENTION OF THE DEPARTMENT IS THAT THE MAJ ORITY OF BENEFICIARIES ARE FROM MUSLIM COMMUNITY AND THEREFORE THE PREDOMINANT OBJECT IS TO EXTEND THE BENEFITS TO A PART ICULAR RELIGIOUS COMMUNITY. THE TRIBUNAL WAS UNABLE TO AGREE WITH THE VIEW OF THE DEPARTMENT IN THIS REGARD AND HELD THAT SO LONG AS T HERE IS NO EXPRESSION EITHER IN WRITING OR ORALLY IT COULD NOT B E SAID THAT THE BENEFITS ARE EXPRESSED TO BE FOR THE BENEFITS OF A PART ICULAR RELIGIOUS COMMUNITY. 4. THE DEPARTMENT DID NOT BRING ANY MATERIAL ON RE CORD TO SHOW THAT THE ASSESSEE TRUST HAS CARRIED OUT ANY ACTIVITIE S OUTSIDE INDIA OR APPLIED ITS INCOME OUTSIDE INDIA. IN THE ABSE NCE OF THE SAME WE FIND NO VIOLATION BY THE ASSESSEE TRUST IN SECTION 11 AND 12 OF THE ACT. MOREOVER THE ISSUE WHETHER THE INCOME WAS APPLIED IN INDIA IS A MATTER WHICH COULD BE CONSIDERED AT THE TIME OF ASSESSMENT AND NOT AT THIS STAGE OF RENEWAL OF EXEMPTION UNDER SECTION 80G OF THE ACT. 5. IT APPEARS THAT THE DIT [EXEMPTION] ALSO REJECTED THE APPLICATION FOR RENEWAL OF EXEMPTION ON THE GROUND T HAT SOME FEE WAS COLLECTED BY THE ASSESSEE TRUST FROM THE PARTICIPANTS AND T HE SAME AMOUNTS TO CARRYING ON BUSINESS ACTIVITIES. WE SEE MERIT IN THE ARGUMENTS OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE TRUST WHICH IS A RESEARCH FOUNDATION DID NOT CONDUCT ANY MED ICAL TESTS AND THE QUESTION OF CHARGING ANY FEES FOR MEDICAL TESTS D OES NOT ARISE AT ALL. THE FEES COLLECTED FROM THE PARTICIPANTS ARE NOT A FIXED AMOUNT. THE FEE IS NOT COLLECTED WITH AN INTENSION TO EARN PROF IT FROM EDUCATIONAL PROGRAMS CONDUCTED. THE PROGRAMS FEES PAID BY THE SOME PARTICIPANTS WERE VERY MEAGER. WHATEVER THE FEES WHICH WAS VOLUNTARILY PAID WAS ACCEPTED BY THE TRUST. IN SOME CASE NO FEES WERE COLLECTED AT ALL. THE TRUST WAS NOT CONDUCTING ANY MEDIC AL TESTS AND CHARGING FEES. THE FEE PAID BY THE PARTICIPANTS VOLUN TARILY FOR THE PROGRAMS CONDUCTED IS UTILISED TO MEET THE EXPENDITURE INCURRED FOR CONDUCTING THE SAID PROGRAMS. THE DEPARTMENT DID NOT B RING ANY MATERIAL ON RECORD TO CONTROVERT THE ABOVE POSITION. IN OUR CONSIDERED VIEW TO TREAT AN ACTIVITY AS BUSINESS THERE MUST BE A COURSE OF DEALINGS EITHER ACTUALLY CONTINUED OR CONTEMPLATED TO B E CONTINUED WITH A PROFIT MOTIVE AND NOT FOR SPORT OR PLEASURE. T HERE IS NO DOUBT ABOUT THE FACT THAT THE ACTIVITIES OF THE RESEARCH FOUND ATION AMOUNTED TO ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY BUT AT THE SAME TIME THE ACTIVITIES CAN NOT BE TERMED AS BUSINESS ACTI VITIES OR COMMERCIAL ACTIVITIES BECAUSE THE ACTIVITIES ARE NOT CARR IED OUT FOR PROFIT MOTIVE. IN VIEW OF OUR FINDINGS ABOVE WE DI RECT THE DIT [EXEMPTION] TO GRANT RENEWAL OF EXEMPTION UNDER S.8 0G OF THE ACT AND THE ASSESSEE SUCCEED IN ITS APPEAL. 6. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER WAS PRONOUNCED IN THE COURT ON 23-4-2010. SD/- G.C.GUPTA SD/- AKBER BASHA VICE PRESIDENT ACCOUNTANT MEMBER. DT/- 23RD APRIL 2010 COPY FORWARDED TO: 1. C/O SYED JAMEELUDDIN IT CONSULTANT 16-7-302 ' ERRAM COTTAGE' AZAMPURA HYDERABAD. 2 DIT(E) HYDERABAD. 3. THE DR ITAT HYDERABAD. JMR*