Chinnamal ENT Medical and Research Foundation, CHENNAI v. ADIT (Exemptions), CHENNAI

ITA 821/CHNY/2010 | 1999-2000
Pronouncement Date: 08-07-2011 | Result: Dismissed

Appeal Details

RSA Number 82121714 RSA 2010
Assessee PAN AAATC0395G
Bench Chennai
Appeal Number ITA 821/CHNY/2010
Duration Of Justice 1 year(s) 1 month(s) 11 day(s)
Appellant Chinnamal ENT Medical and Research Foundation, CHENNAI
Respondent ADIT (Exemptions), CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 08-07-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 08-07-2011
Date Of Final Hearing 27-06-2011
Next Hearing Date 27-06-2011
Assessment Year 1999-2000
Appeal Filed On 28-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C CHENNAI (BEFORE SHRI U.B.S. BEDI JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER) .. I.T.A. NOS. 820 821 822 & 823/MDS/2010 ASSESSMENT YEAR : 1998-99 1999-2000 2001-02 200 2-03 M/S CHINNAMMAL ENT MEDICAL EDUCATION & RESEARCH FOUNDATION NO.827 POONAMALLE HIGH RD CHENNAI 600 010. PAN : AAATC0395G (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX (EXEMPTIONS) IV CHENNAI 600 034. (RESPONDENT) APPELLANT BY : SHRI T. BANUSEKAR RESPONDENT BY : SHRI R. VI SWANATHAN O R D E R PER BENCH : THESE APPEALS FILED BY THE ASSESSEE ARE AGAINST LE VY OF PENALTY UNDER SECTION 271(1)(C) OF INCOME-TAX ACT 1961 (IN SHORT THE ACT) FOR THE IMPUGNED ASSESSMENT YEARS WHICH WERE ALL CO NFIRMED BY LD. CIT(APPEALS). 2. FACTS GIVING RISE TO THIS LEVY OF PENALTY REST O N THE SAME FRAME WORK FOR ALL THESE YEARS. ASSESSEE A PUBLIC CHARI TABLE TRUST WAS FOR I.T.A. NO. 820 TO 823/MDS/10 2 THE IMPUGNED ASSESSMENT YEARS DENIED EXEMPTION UND ER SECTION 11 OF THE ACT FOR A REASON THAT A TRUST PROPERTY WAS U TILIZED FOR THE BENEFIT OF PERSONS MENTIONED IN SECTION 13(3) OF TH E ACT. MAIN OBJECT OF THE ASSESSEE WAS PROVIDING MEDICAL RELIEF AND AL SO FACILITATING MEDICAL RESEARCH AND TRAINING. ASSESSEE-TRUST WAS RUNNING AN ENT HOSPITAL IN THE NAME OF CHINNAMMAL ENT MEDICAL & R ESEARCH FOUNDATION AT NO.827 POONAMALLE HIGH ROAD CHENNA I-10. DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 1992- 93 ASSESSEE- TRUST HAD IMPORTED A PENTAX VIDEO ENDOSCOPE. DURIN G THE ASSESSMENT PROCEEDINGS IT WAS NOTED THAT THE SAID ENDOSCOPE WAS UTILIZED BY THE MANAGING TRUSTEE OF THE ASSESSEE IN HIS PRIVATE HOSPITAL. AGAINST THE RESULTANT DENIAL OF EXEMPTIO N UNDER SECTION 11 OF THE ACT ASSESSEE MOVED IN APPEAL BEFORE LD. CIT (APPEALS) WHO CONFIRMED THE ASSESSMENT ON THIS ASPECT. IN FURTHE R APPEALS FILED BY THE ASSESSEE IT WAS HELD BY THIS TRIBUNAL THAT THE RE WAS NO EVIDENCE TO SHOW SUCH EQUIPMENT TO HAVE BEEN USED IN FURTHER ANCE OF THE OBJECTS OF THE ASSESSEE. RELEVANT FINDING OF THE T RIBUNAL IN THIS REGARD APPEARING AT PARA 12 OF ITS ORDER DATED 26 TH NOVEMBER 2007 IN I.T.A. NOS. 1256 TO 1260/MDS/06 IS REPRODUCED HE REUNDER:- I.T.A. NO. 820 TO 823/MDS/10 3 12. TAKING INTO CONSIDERATION THE ENTIRE CONSPECTUS OF THE CASE WE ARE OF THE OPINION THAT THE ASSESSEE TRUST FAILED TO ESTABLISH THE REASON FOR SHIFTING THE EQUIPMENT FRO M HOSPITAL TO OTHER PLACE. THERE IS NO EVIDENCE TO SHOW THAT THE EQUIPMENT WAS USED IN FURTHERANCE OF THE OBJECTS OF THE ASSES SEE TRUST. EXEMPT CLAUSES OF THE TRUST DEED ARE TO BE STRICTLY INTERPRETED. EX FACIE IT APPEARS THAT THE EQUIPMENT WAS UTILIZED NOT FO R THE BENEFIT OF THE ASSESSEE TRUST. AS SUCH IN OUR OPIN ION THE CASE OF THE ASSESSEE CLEARLY COMES WITHIN THE AMBIT OF SECTI ON 13(2)(B). REVENUE AUTHORITIES WERE THEREFORE CORRECT IN DENYIN G THE EXEMPTION UNDER SECTION 11. WE THEREFORE UPHOLD TH E IMPUGNED ORDER ON THIS COUNT. THOUGH ASSESSEE PREFERRED APPEALS BEFORE HON'BLE JU RISDICTIONAL HIGH COURT VIDE ITS ORDER DATED 17.12.2008 IN TC(A ) NOS. 2179 TO 2183 OF 2008 THE SAID APPEALS WERE DISMISSED. THE FINDING OF THE HON'BLE JURISDICTIONAL HIGH COURT AS GIVEN AT PARA 9 OF THE ORDER IS REPRODUCED HEREUNDER:- 9. THE TRIBUNAL HAD CONSIDERED THIS MATTER EXTENSIV ELY AND FOUND THAT ON ENQUIRY THE EQUIPMENT WAS FOUND INST ALLED IN A ROOM BEARING THE BOARD CHINNAMMAL ENDOSCOPE ON TH E FIRST FLOOR OF K.K.R. ENT HOSPITAL. THERE WAS NO SPECIFI C NAME BOARD PERTAINING TO THE TRUST AND IT WAS ALSO FOUND THAT THE EQUIPMENT WAS NOT USED IN THE HOSPITAL BUT IT WAS FOUND TO BE USED IN THE PRIVATE HOSPITAL WHICH WAS OWNED BY THE TRUSTEE AND THE ASSESSEE COULD NOT PRODUCE EVEN AN IOTA OF EVIDENCE TO BUTTRESS THIS CLAIM. THEREFORE THE TRIBUNAL FOUND THAT THE ASSESSEE TRUST FAILED TO ESTABLISH THE REASON FOR SHIFTING T HE EQUIPMENT FROM THE HOSPITAL TO OTHER PLACE AND THE EQUIPMENT WAS CLEARLY FOUND IN THE PRIVATE HOSPITAL WHICH WAS OWNED BY TH E TRUSTEES OF THE TRUST. THESE ARE FACTUAL FINDINGS. NO SUBSTAN TIAL QUESTION OF LAW ARISES. WE FIND NO INFIRMITY IN THE FINDINGS. WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE TRIBUNA L. I.T.A. NO. 820 TO 823/MDS/10 4 3. PENALTY PROCEEDINGS WERE ALSO INITIATED AGAINST THE ASSESSEE AND SHOW CAUSE ISSUED AS TO WHY PENALTY UNDER SECTI ON 271(1)(C) OF THE ACT SHOULD NOT BE LEVIED. ASSESSEE RELYING ON THE DECISIONS OF HON'BLE APEX COURT IN THE CASE OF T. ASHOK PAI V. C IT (292 ITR 11) AND IN THE CASE OF DILIP N. SHROFF V. CIT (291 ITR 519) THAT OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF HARIGO PAL SINGH V. CIT (258 ITR 85) AND FINALLY ON JURISDICTIONAL HIGH COU RTS DECISION IN THE CASE OF CIT V. K.H. CHINNI KRISHNA CHETTY (246 ITR 121) SUBMITTED THAT PENALTY WAS NOT LEVIABLE. AS PER THE ASSESSEE THERE WAS NO MALAFIDE INTENTION IN CLAIMING EXEMPTION UNDER SECT ION 11 OF THE ACT AND THERE WAS NO FINDING THAT ANY OF THE TRUSTEES H AD USED THE EQUIPMENT FOR THEIR PERSONAL GAINS. HOWEVER THE A SSESSING OFFICER DID NOT ACCEPT THIS EXPLANATION. HE HELD AT PARA 6 OF HIS ORDER AS UNDER:- 6.1 THE ASSESSEE HAD IMPORTED A PENTAX VIDEO ENDOSC OPE SYSTEM WORTH RS.7 85 098/-. IT WAS EXEMPT FROM CUST OMS DUTY SUBJECT TO ITS USER IN A SPECIFIED HOSPITAL AS PER NOTIFICATION NO.64-88 DATED 01.03.1988. HOSPITAL WAS REQUIRED T O PROVIDE FREE TREATMENT ON AN AVERAGE 40% OF THE OUTDOOR PAT IENTS AND FREE TO POOR INDOOR PATIENTS AND TO RESERVE AT LEAS T 10% OF THE HOSPITAL BEDS FOR SUCH PURPOSES. 6.2 THE EQUIPMENT WAS INSTALLED IN THE HOSPITAL ONL Y FOR A SHORT TIME. THEREAFTER IT WAS SHIFTED TO THE REGISTERED OFFICE OF THE I.T.A. NO. 820 TO 823/MDS/10 5 TRUST AT 827 P.H. ROAD CHENNAI 10 WHICH IS ALSO TH E PREMISES WHERE THE MANAGING TRUSTEE RUNS HIS OWN CLINIC. 6.3 IT WAS HELD THAT THE IMPORTERS HAVE NOT FULFILL ED THE POST IMPORTATION CONDITIONS AND THE GOODS WERE THEREFORE HELD TO BELIABLE FOR CONFISCATION UNDER SEC.111 (O) OF THE CUSTOMS ACT 1962. A REDEMPTION FIND OF RS.315000/- WAS LEVIED. SUCH AN ORDER HAS REACHED FINALITY AND IS AGAINST THE ASSESS EE. 6.4 AN ENQUIRY WAS CONDUCTED BY THE AO ON 24.01.03 AT THE REGISTERED OFFICE OF THE TRUST. THE SAID EQUIPMENT WAS FOUND INSTALLED IN A ROOM BEARING THE BOARD CHINNAMMAL E NDOSCOPE ON THE FIRST FLOOR OF K.K.R.ENT HOSPITAL LTD. THERE W AS NO SPECIFIC NAME BOARD PERTAINING TO THE TRUST. NO SEPARATE OF FICE OF THE TRUST WAS FOUND TO BE FUNCTIONING OVER THERE. DR.K .K. RAMALINGAM AND HIS SON DR. RAVI RAMALINGAM THE TRUSTEES OF TH E TRUST WERE PRESENT DURING THE ENQUIRY. THEY STATED THAT THE EQU IPMENT WAS USED MAINLY FOR DIAGNOSTIC PURPOSES. 6.5 THE EQUIPMENT I.E. THE PENTAX VIDEO ENDOSCOPE S YSTEM WHICH WAS A PARTY OF THE PROPERTY OF THE TRUST WAS U SED DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF DR.K.K. RAMALINGAM THE MANAGING TRUSTEE WHO IS ALSO THE MANAGING DIRECTOR OF K.K.R . ENT HOSPITAL 827 P.H. ROAD CHENNAI 600010. PENALTY WAS LEVIED FOR THE IMPUGNED ASSESSMENT YEAR S BASED ON SIMILAR ORDERS. 4. ASSESSEE MOVED IN APPEALS BEFORE LD. CIT(APPEALS ) FOR RESPECTIVE ASSESSMENT YEARS. ITS ARGUMENT WAS THAT IT WAS ESTABLISHED FOR PROVIDING MEDICAL RELIEF AND ALSO F OR THE PURPOSES OF MEDICAL RESEARCH AND JUST BECAUSE AN EQUIPMENT WAS SHIFTED FROM ITS HOSPITAL TO A REGISTERED OFFICE FOR OPERATIONAL CON VENIENCE IT COULD I.T.A. NO. 820 TO 823/MDS/10 6 NOT BE CONSIDERED AS SUFFICIENT REASON FOR LEVYING OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. AS PER THE ASSESSEE IT HAD NOT COMMITTED ANY CONCEALMENT NOR HAD FURNISHED ANY INA CCURATE PARTICULARS OF ITS INCOME. ASSESSEE ALSO RELIED ON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CIT V. RELIANCE P ETROPRODUCTS PVT. LTD. (322 ITR 158). HOWEVER LD. CIT(APPEALS) WAS NOT IMPRESSED. ACCORDING TO HIM ASSESSEE DID NOT FULFIL THE CONDI TIONS LAID DOWN FOR CUSTOMS DUTY EXEMPTION FOR THE IMPORT OF PENTAX VID EO ENDOSCOPE BUT INSTEAD HAD INSTALLED IT IN A CLINIC WHERE A PR IVATE HOSPITAL OF THE TRUSTEE WAS FUNCTIONING. RELYING ON THE DECISION O F HON'BLE APEX COURT IN THE CASE OF UNION OF INDIA V. DHARMENDRA T EXTILES PROCESSORS AND OTHERS (306 ITR 277) LD. CIT(APPEAL S) CONFIRMED THE LEVY OF PENALTY. 5. NOW BEFORE US LEARNED A.R. STRONGLY ASSAILING THE ORDERS OF THE AUTHORITIES BELOW SUBMITTED THAT THERE WAS NO FINDING FROM ANY OF THE AUTHORITIES REGARDING USE OF ENDOSCOPE BY ANY O F THE TRUSTEES. ACCORDING TO HIM THE ONLY FINDING OF THE TRIBUNAL WAS THAT ENDOSCOPE WAS SHIFTED FROM THE HOSPITAL TO ANOTHER PLACE WITH OUT ANY REASON. AS PER THE LEARNED A.R. JUST BECAUSE THE EQUIPMENT WA S NOT USED IN FURTHERANCE OF THE OBJECTS A PENALTY WAS NOT LEVIA BLE. PLACING THE I.T.A. NO. 820 TO 823/MDS/10 7 ORDER OF THE CUSTOMS AUTHORITIES IN RELATION TO VIO LATION OF NOTIFICATION NO.64/88 DATED 1.3.88 WITH REGARD TO THE ENDOSCOPE IMPORTED BY THE ASSESSEE LEARNED A.R. POINTED OUT THAT THERE WAS N O FINDING BY SUCH CUSTOMS AUTHORITIES REGARDING USE OF SUCH EQUIPMENT BY THE TRUSTEES. ACCORDING TO LEARNED A.R. THE ONLY FINDING WAS THA T THE EQUIPMENT WAS INSTALLED AND USED IN THE HOSPITAL AND WAS ALSO USED FOR A PURPOSE OTHER THAN FOR THE USE OF PATIENTS IN THE H OSPITAL. AS PER THE LEARNED A.R. ASSESSEE MADE THE CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT WITH A BONAFIDE BELIEF THAT IT WAS EL IGIBLE FOR SUCH EXEMPTION BUT WAS DENIED FOR A REASON THAT THE ABO VE EQUIPMENT WAS KEPT IN THE REGISTERED OFFICE OF THE TRUST AND NOT IN THE HOSPITAL RUN BY THE TRUST. AS PER THE LEARNED A.R. JUST BE CAUSE THE CLAIM WAS DISALLOWED PENALTY OUGHT NOT HAVE BEEN LEVIED AND FOR THIS RELIANCE WAS ONCE AGAIN PLACED ON THE DECISION OF HON'BLE AP EX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA). 6. PER CONTRA LEARNED D.R. SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. THERE IS NO DISPUTE THAT THE SUBJECT ENDOSCOPE WAS FOUND ON THE FIRST I.T.A. NO. 820 TO 823/MDS/10 8 FLOOR OF K.K.R. ENT HOSPITAL LTD. AND ITS MANAGING DIRECTOR DR. K.K. RAMALINGAM WAS THE MANAGING TRUSTEE OF THE ASSESSEE -TRUST. THE NAME OF THE HOSPITAL RUN BY THE ASSESSEE-TRUST WAS CHINNAMMAL ENT MEDICAL & RESEARCH FOUNDATION. THE SAID HOSPI TAL WAS SITUATED AT POONAMALLE HIGH ROAD CHENNAI-77 WHERE AS THE ENDOSCOPE WAS FOUND IN THE PREMISES OF K.K.R. ENT H OSPITAL LTD. WHICH WAS SITUATED AT KILPAUK CHENNAI-10. IN REPL Y TO THE QUERIES RAISED AT THE TIME OF ASSESSMENT PROCEEDINGS ASSES SEE BY ITS LETTER DATED 21.1.2002 HAD ADMITTED THAT M/S K.K.R. ENT HO SPITAL LTD. OCCASIONALLY USED THE EQUIPMENT FOR CARRYING OUT IN VESTIGATION ON ITS OWN PATIENTS AND IN TURN IT HAD PERFORMED ALL OPER ATIONS ON PATIENTS REFERRED TO BY THE ASSESSEE-TRUST AT NOMINAL AND SU BSIDISED RATES. IT SEEMS ASSESSEE ALSO STATED THAT NO CHARGES WERE REC EIVED FROM K.K.R. ENT HOSPITAL LTD. THUS THERE IS A CLEAR AD MISSION BY THE ASSESSEE THAT EQUIPMENT OF THE TRUST WAS BEING USED BY A PRIVATE HOSPITAL RUN BY ITS TRUSTEES. IT WAS ALSO ADMITTED BY THE ASSESSEE THAT IT HAD RECEIVED NO CHARGES FOR SUCH USE. ASSESSEE S SUBMISSION THAT THE SAID PRIVATE HOSPITAL HAS AS QUID-PRO-QUO CARRIED ON OPERATIONS OF PATIENTS REFERRED TO IT BY THE ASSESSEE-TRUST WAS N EVER SUPPORTED BY ANY RECORDS. THOUGH DR. K.K.RAMALINGAM HAD STATED THAT THE I.T.A. NO. 820 TO 823/MDS/10 9 EQUIPMENT WAS UTILIZED FOR RESEARCH PURPOSES THERE WERE NO RECORDS AT THE PLACE OF INSTALLATION TO SUBSTANTIATE SUCH U SE. MAIN EXCUSE GIVEN BY THE ASSESSEE WAS THAT THE SAID PREMISES WA S ALSO WHERE THE REGISTERED OFFICE OF THE ASSESSEE-TRUST WAS SITUATE D. BUT ADMITTEDLY THE HOSPITAL OF THE TRUST WAS NOT SITUATED THERE AN D THE ENDOSCOPE WAS NOT AN OFFICE EQUIPMENT TO BE USED AT THE REGIS TERED OFFICE. THE ARGUMENT OF THE LEARNED A.R. THAT THE ASSESSEE HAD MADE A CLAIM FOR EXEMPTION UNDER SECTION 11 OF THE ACT WHICH WAS NOT ALLOWED MAY NOT ITSELF BE A GROUND FOR LEVY OF PENALTY IS OUT OF CONTEXT. IN THE FIRST PLACE ASSESSEE COULD NEVER SAY THAT IT WAS NOT AWA RE REGARDING THE LOCATION OF ENDOSCOPE. IN THE SECOND PLACE SECTIO NS 11 AND 12 OF THE ACT WHICH PROVIDE EXEMPTION FROM INCOME FOR PUB LIC CHARITABLE AND RELIGIOUS TRUST HAVE BEEN LEGISLATED FOR A LAUD ATORY OBJECT OF ENCOURAGING CHARITY AND PHILANTHROPY. A PERSON COU LD NOT BE ALLOWED TO MISUSE SUCH PROVISIONS AND SAY THAT HE HAD MADE THE CLAIM ON A BONAFIDE IMPRESSION. THERE IS NOTHING BENEFICIAL F OR THE ASSESSEE- TRUST IN PLACING THE EQUIPMENT IN A PRIVATE HOSPITA L RUN BY THE TRUSTEES. THE CLAIM FOR EXEMPTION FOR THE INCOME O F THE TRUST IN SUCH A SITUATION WAS CLEARLY NOT BONAFIDE. MISUSE OF E XEMPTION PROVISIONS GIVEN FOR CHARITY AND CONDUCT OF BUSINESS MASQUERAD ING AS CHARITY I.T.A. NO. 820 TO 823/MDS/10 10 ARE ACTS ON WHICH NO COURT CAN TURN A BLIND EYE. D ECISION OF HON'BLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PV T. LTD. WOULD NOT IN OUR OPINION COME TO HELP THE ASSESSEE IN ANY WA Y. AT PARA 9 OF ITS ORDER IN ASSESSEES APPEAL AGAINST DENIAL OF EXEMPT ION UNDER SECTION 11 OF THE ACT HON'BLE JURISDICTIONAL HIGH COURT HA D CLEARLY UPHELD THE FINDING OF THE TRIBUNAL. IF WE LOOK AT SUB-CLAUSE (C) IF CLAUSE (2) OF SUB-SECTION (1) OF SECTION 13 OF THE ACT IT CLEARL Y PROHIBITS APPLICATION OF PROVISIONS OF SECTION 11 AND 12 WHERE ANY PART O F INCOME OR ANY PROPERTY OF A TRUST IS USED OR APPLIED DIRECTLY OR INDIRECTLY FOR ANY PERSON REFERRED TO IN SUB-SECTION (3) THEREOF. SUB -SECTION (3) OF THE SAID SECTION WOULD CLEARLY BRING WITHIN ITS FOLD TH E TRUSTEES OF THE ASSESSEE-TRUST AS WELL AS THE PRIVATE HOSPITAL RUN BY THEM. WE FIND THAT THE ADDITIONAL COMMISSIONER OF CUSTOMS AIR CA RGO COMPLEX BY HIS ORDER DATED 7.1.99 HAD ORDERED CONFISCATION OF THE ENDOSCOPE UNDER SECTION 111 (O) OF CUSTOMS ACT 1962 ON A FIN DING THAT THE SAID ENDOSCOPE WAS NOT USED IN THE HOSPITAL OF THE ASSES SEE-TRUST. IN OUR OPINION EXPLANATION 1 OF SUB-SECTION (1) OF SE CTION 271 WAS CLEARLY ATTRACTED. ASSESSEE WAS LIABLE FOR THE PE NALTY UNDER SECTION 271(1)(C) OF THE ACT. THIS WAS RIGHTLY LEVIED. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDERS OF THE AUTHORIT IES BELOW. I.T.A. NO. 820 TO 823/MDS/10 11 8. IN THE RESULT APPEALS OF THE ASSESSEE FOR ALL T HE YEARS STAND DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 8 TH JULY 2011. SD/- SD/- (U.B.S. BEDI) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 8 TH JULY 2011. KRI. COPY TO: APPELLANT/RESPONDENT/CIT(A)-XII CHENNAI-3 4/ CIT CHENNAI-X CHENNAI/D.R./GUARD FILE