Income Tax Appellate Tribunal - Delhi
Society For Essential Health Action & ... vs Department Of Income Tax on 29 May, 2012
ITA No.4329/Del/2012
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES : G : NEW DELHI
BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER
AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
ITA No.4329/Del/2012
Assessment Year : 2009-10
ITO (E), Vs. Society for Essential Health Action
Trust Ward II, & Training,
Delhi. 45, Kalu Sarai,
New Delhi.
PAN : AABTS4273J
(Appellant) (Respondent)
Assessee By : Shri Rahul Khare, Advocate
Department By : Shri Shameer Sharma, Sr. DR
ORDER
PER A.D. JAIN, JUDICIAL MEMBER:
This is Department's appeal for Assessment Year 2009-10 against the order dated 29.05.2012, passed by the Ld. CIT(A)-XXI, New Delhi. The following grounds have been taken:-
"1. On the facts and in the circumstances of the case and in law, the ld. CIT (A) has erred in allowing exemption u/s 11 & 12 of the IT Act, 1961, whereas the activities carried out by the assessee fell outside the purview of charitable purpose as per section 2 (15) of the IT Act, 1961.
2. On the facts and in the circumstances of the case and in law, the ld. CIT (A) has erred in holding that the activities out by the assessee dos not falls under 4th limb of section 2 (15), as the research activity conducted by the society has been found to be in the nature of education which falls under 2nd limb of section 2 (15) of the IT Act."1 ITA No.4329/Del/2012
2. As per the material on record, the Memorandum of Association of the Society states the following to be the main aims and objects of the Society:-
"a) To facilitate and implement essential research for prevention of diseases, deficiencies and disabilities of public health significance with special emphasis on mothers and children.
b) To support activities for development and strengthening of man power through training, educational tool development and other related activities in the field of essential health and related research and in programme implementation.
c) To facilitate informal education and communication activities on health and nutritional issues for urban slums and rural communities.
d) To carry out research or other activities to improve the quality or impact of existing health care and social welfare programmes."
3. The Assessee Society is registered u/s 12A of the IT Act, vide Order dated 11.07.1994. It is also notified u/s 80G (5) (vi) of the Act, vide Order dated 25.02.2010. During the assessment proceedings, the Assessing Officer noted that the assessee had received contractual income of ` 42 lacs from Society for Applied Studies ('SAS' for short), which was having the same address as that of the assessee. On query, to justify its receipts in the light of the amended provisions of Section 2 (15) of the Act, the assessee, vide letters dated 09.11.2011 and 26.12.2011 justified the receipt as professional receipt stating that the assessee Society had entered into an agreement with SAS, which had its registered office in Kolkata and had been engaged in research activity on implications of various medicines related to children infections for the last more than twenty years; that since the SAS had been unable to do some part of the research work, they had entered into the agreement with the Assessee Society to give techno-medical research support in the project called "ROTA VIRUS"; and that the receipt in question could not be termed as a contract receipt.
4. The Assessing Officer, however, observed that a perusal of the agreement entered into by the assessee with SAS showed that SAS had provided expertise services to the assessee and had taken consideration for 2 ITA No.4329/Del/2012 the same from the assessee, rendering the transaction totally commercial in nature; that the Proviso to Section 2 (15) of the Act is applicable to charitable organizations engaged in the carrying on of 'any other public utility'; that the said Proviso is not applicable to charitable organizations engaged in either relief to the poor or medical relief or education; that the activities of the assessee did not fall within the ambit of either relief to the poor or medical relief or education; that therefore, it could safely be presumed that the activity of the assessee could fall under the 'general public utility'; that if the assessee was carrying on any activity falling under the category 'any other object of general public utility', receiving of contractual income, whether it resulted in profit or loss, was irrelevant; that as per Section 2 (15), advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trading, commerce or business, or any activity or rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration in excess of ` 10 lacs, irrespective of the nature of the use or application, or retention, of the income from such activity; and that thus, since the assessee had declared contractual income amounting to ` 42 lac, it did not fall within the scope of 'charitable purpose' defined in Section 2 (15) of the Act. The Assessing Officer, in this manner, held the assessee not to be eligible for the benefit of Sections 11/12 of the Act for the year under consideration, i.e., Assessment Year 2009-10.
5. By virtue of the impugned order, the Ld. CIT (A) held that research activity had been conducted by the assessee on 'ROTA VIRUS' project which was an activity in the field of medical research and this was found to be one of the main objects of the assessee Society; that the research activity conducted by the assessee Society was in the nature of education; and that the Assessing Officer was wrong in treating such activity of the assessee Society to be in the nature of advancement of any other object of general public utility.
3 ITA No.4329/Del/20126. Challenging the impugned order, the Ld. DR has contended that the Ld. CIT (A) has erred in allowing exemption under Sections 11 and 12 of the IT Act to the assessee, ignoring the fact that the activities carried on by the assessee fall squarely outside the purview of 'charitable purpose' within the meaning of Section 2 (15) of the IT Act; that while doing so, the Ld. CIT (A) has erred in holding that the activities of the assessee did not fall within the category of 'advancement of any other object of general public utility', but were covered within the category of 'education'.
7. The ld. Counsel for the assessee, on the other hand, has placed strong reliance on the impugned order. It has been contended that the activity of the assessee was that of a research in the 'ROTA VIRUS' project, which research is the main activity of the assessee Society even as per its Memorandum of Association; that the said activity, undisputedly, is a charitable activity; that the assessee is duly registered u/s 12A of the Act; that in such circumstances, the Ld. CIT (A) has correctly applied the decision of 'Harnam Singh Harbans Kaur vs. Director of Income-tax (Exemption), Delhi', 2011 (12) TMI 232-ITAT DELHI (copy filed); that as correctly observed by the Ld. CIT (A), the meaning of the term 'education' cannot be restricted to formal schooling or college and it must be understood in a broad sense, where knowledge is passed on through any means to the ultimate recipient; that the research activity conducted by the assessee Society is nothing other than in the nature of education and as such, it is a charitable activity within the meaning of Section 2 (15) of the IT Act and not an activity in the nature of advancement of any other object of general public utility.
8. The main aims and objects of the assessee Society, as per its Memorandum of Association, as reproduced at page 2, para 2 of the assessment order, are as follows:-
"a) To facilitate and implement essential research for prevention of diseases, deficiencies and disabilities of public health significance with special emphasis on mothers and children.4 ITA No.4329/Del/2012
b) To support activities for development and strengthening of man power through training, educational tool development and other related activities in the field of essential health and related research and in programme implementation.
c) To facilitate informal education and communication activities on health and nutritional issues for urban slums and rural communities.
d) To carry out research or other activities to improve the quality or impact of existing health care and social welfare programmes."
9. During the year, the assessee received an amount of ` 42 lacs from SAS, for research conducted on implication of various medicines related to children infections. This research was part of the research activity which was to be carried out by SAS, but which SAS could not carry out. This research was carried out by the assessee Society in pursuance of a written arrangement with SAS. As per the arrangement/agreement, the assessee provided techno-medical research support and compilation of data in a project called 'ROTA VIRUS'. In consideration thereof SAS agreed to pay the assessee a lumpsum amount of ` 50 lacs. It was termed as 'service fee'.
10. The Assessing Officer construed the abovesaid agreement between the assessee and SAS to be a commercial agreement. The services provided by the assessee to SAS were taken as being of commercial nature. The Assessing Officer held that the Proviso to Section 2 (15) of the Act is applicable to 'any other object of general public utility' and not to charitable organizations engaged in providing either relief to the poor or medical relief, or education; and that since the activities of the assessee did not fall under either relief to the poor or medical relief, or education, it could be safely presumed that they fell under the category of 'general public utility'; that for such activity, the assessee was receiving contractual income, irrespective of whether it resulted in profit or loss; and that as such, the assessee had violated the provisions of Section 2 (15) of the IT Act; that since the assessee did not fall within the scope of 'charitable purpose', as defined in Section 2(15) of the Act, the benefit of Sections 11/12 of the Act was being disallowed to the assessee for the year under consideration. The Assessing 5 ITA No.4329/Del/2012 Officer also sent a proposal for withdrawal of registration to the assessee u/s 12AA of the Act, to the DIT (E), separately.
11. By virtue of the impugned order, the Ld. CIT (A) deleted the disallowance, treating the activity carried on by the assessee as falling under 'education' within the meaning of Section 2 (15) of the Act and thus, a charitable activity. While doing so, the Ld. CIT (A) applied the decision rendered by the Delhi Bench of the Tribunal in 'Harnam Singh Harbans Kaur vs. Director of Income-tax (Exemption), Delhi' (supra).
12. The grievance of the department before us is that the Ld. CIT (A) has erroneously held the activity of the assessee Society to be falling under 'education' as defined in Section 2 (15) and not under 'advancement of any other object of general public utility' as defined therein.
13. In this regard, as noted hereinabove, the main aims and objects of the assessee Society, as per its Memorandum of Association, as reproduced at page 2, para 2 of the assessment order, include medical research and informal education and communication activities on health and nutritional issues for urban slums and rural communities. Now, the activities in question is undisputedly the activity of research, i.e., techno-medical research support for research and compilation of data on account of 'ROTA VIRUS' project, to SAS. Therefore, the activity carried on by the assessee cannot be said to be beyond its main aims and objects. It also remains irrefuted that the assessee Society continues to enjoy registration u/s 12A of the Act, as a Charitable Trust, confirming that the charitable purpose for which the assessee Society was established remains unchanged. The activity of the assessee during the year, as discussed, is in pursuance of such purpose.
14. In such facts, we find that 'Harnam Singh Harbans Kaur vs. Director of Income-tax (Exemption), Delhi' (supra) is squarely applicable and the Ld. CIT (A) has correctly applied it. As per this decision, as correctly noted by the Ld. CIT (A), charitable institutions registered u/s 12A of the IT Act and doing the 6 ITA No.4329/Del/2012 activity in the nature of charity, cannot be held to be engaged in the activity of advancement of any other object of general public utility. The Ld. CIT (A) has specifically noted that the research report of the assessee, which was published in medical journals, was in the nature of doing education activity. The department has not been able to refute this finding, as also the finding that the assessee is mainly engaged in the field of medical research and during the year under consideration, it has done research work in collaboration with various international organizations, like WHO, UNICEF and Research Council of Norway. Pertinently, this aspect was duly verified by the DIT at the time of granting registration to the assessee u/s 12AA of the Act. The Ld. CIT (A), in the detailed speaking order passed, has also taken into consideration CBDT Circular No.11/2008, as per which, where the purpose of a Trust or institution is, inter alia, relief to the poor, education on medical relief, it will constitute 'charitable purpose' even if it incidentally involves the carrying on of commercial activity.
15. In view of the above, finding no error whatsoever in the order of the Ld. CIT (A), the same is hereby confirmed, rejecting the grievance raised by the department.
16. In the result, the appeal filed by the department is dismissed.
The order pronounced in the open court on 21.02.2014.
Sd/- Sd/-
[SHAMIM YAHYA] [A.D. JAIN]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated, 21st February, 2014.
dk
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ITA No.4329/Del/2012
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT (A)
5. DR, ITAT
AR, ITAT, NEW DELHI.
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