Income Tax Appellate Tribunal - Jaipur
Rajasthan Advance Joint Care Trust , ... vs Assessee on 8 August, 2014
IN THE INCOMETAX APPELLATE TRIBUNAL
JAIPUR BENCH: JAIPUR
(BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA)
I.T.A. No. 990/JP/2011
Asstt. Year- ........................
PAN No. AABTR 5387 G
Rajasthan Advance Joint Care Trust, The Commissioner of
B-56, Unnati Tower, Central Spine, Vrs. Income Tax,
Vidyadhar Nagar, Jaipur Jaipur-II, Jaipur.
(Appellant) (Respondent)
Assessee by :- Shri P.C. Parwal.
Department by :- Shri Subhash Chandra.
Date of hearing : 23/07/2014
Date of pronouncement : 08/08/2014
ORDER
PER: T.R. MEENA, A.M. This is an appeal filed by the assessee against the order dated 29/09/2011 of the learned C.I.T., Jaipur-II, Jaipur U/s 12AA of the Income Tax Act, 1961. The effective grounds of appeal are as under:-
"(1) The learned Commissioner of Income Tax-II, Jaipur has erred on facts and in law in refusing to grant registration U/s 12AA of the Income Tax Act, 1961 to the assessee Trust by holding that the object of the Trust are not charitable and the activities of the Trust are not genuine.
(2) The learned Commissioner of Income Tax-II, Jaipur has erred in facts and in law in rejecting the application of registration filed u/s 12AA by presuming that consultancy charges receipts shown by Trust is income of its sole Trustee and drawing incorrect 2 inferences from material available on record in holding that activities of Trust are not genuine.
3. The appellant craves to alter, amend and modify any ground of appeal."
2. Both the main grounds of appeal of the assessee are interlinked for refusing to grant registration U/s 12AA of the Income Tax Act, 1961 (hereinafter referred as the Act) by holding that object of Trust are not charitable and activities of the Trust are not genuine. The learned CIT observed that the assessee Trust was created on 23/12/2009. The assessee applied for registration in form No. 10A seeking registration U/s 12AA of the Act on 14/3/2011. It is observed that Trust was settled by Shri Kheenwa Ram Bagaria with Rs. 2,100/- in cash and his son Shri Bhagwana Ram Bagaria was appointed as sole trustee for life. Sole trustee Shri Bhagwana Ram Bagaria is a qualified Doctor having expertise in joint replacement in orthopedic department. As per income and expenditure statement of the Trust for the F.Y. 2010-11, there are total receipt of Rs. 14.23 lacs including Rs. 13,90,013 from consultancy charges, Rs. 31,000/- from donation and Rs. 2,122/- from interest. On the basis of details submission by the assessee, it was found that consultancy fees were received from M/s Parkel International Synchron P. Ltd, Banglore against the clinical research work. The research work was done by Shri Bhagwana Ram Bagaria, sole trustee and general surgeon. The research 3 was related to medicine of orthopedic area and also to joint replacement of knee. The assessee did not submit bill/voucher or copy of agreement for research work before the learned CIT. It was also not clarified before him, how the quantum of charges were determined and how and where the services of research work were provided. It was also not clear as to how these receipts assessee related to the Trust. It has been held that these consultancy charges were received for the professional service of sole trustee Shri Bhagwana Ram Bagaria in his personal capacity. These services related to professional qualification and expertise of Dr. Bagaria. Services given in shape of research work are attributable to personal skill and traits of Dr. Bagaria and his knowledge and brain have been used for these services. It has been held by the learned CIT that these consultancy charges are income of Dr. Bagaria in his individual capacity and not the income of the Trust, but Shri Bhagwana Ram Bagaria had tried to shift his income as income of the Trust to avoid payment of due taxes and for only this purpose, the Trust was settled. Thus, the purpose and activities of the Trust cannot be said to be charitable and genuine. Dr. Bagaria is not employee of the Trust as no payment had been made by the Trust to him. It was further held that as per Clause-12 of the Trust deed, sole trustee may at any time dissolve the Trust and spend the entire income and corpus of the Trust for charitable purposes. This clause also 4 shows that absolute power are vested with the sole trustee Dr. Bagaria and he is the sole authority to use the fund of Trust as he deems fit. The Trust is nothing but is a shelter created by Dr. Bagaria through his father to shift his professional income to the Trust to avoid taxation. Thus the basic purpose of the Trust is not charitable but to provide tax benefit to the sole trustee Dr. Bagaria. As per Section 12AA of the Act for granting of registration, following condition is required to be fulfilled:
a. The objects of the Society/association should be charitable in nature.
b. The activities of the Society/association should be genuine.
As per section 12AA(1)(a) of the I.T. Act, 1961: Commissioner of Income Tax shall:-
a) Call for such documents or information from the Trust or instruction as he thinks necessary in order satisfy himself about the genuineness of activities or the Trust or institution and may also make such inquiries as he may deem necessary in this behalf;
b) After satisfying himself above the objects of the Trust or institution and the genuineness of its activities, he-
i) Shall pass an order in writing registering the Trust or institution; 5
ii) Shall, if he is not so satisfied, pass an order in writing refusing to register the Trust or institution.
As per the observations made by the learned CIT, the registration should be given to the Trust or institution, who are sincerely pursuing their charitable/general public utility objects through genuine activities. Accordingly, the learned CIT has to be satisfied about the genuineness of the activities of the Trust or institution. Thus, the satisfaction of the Commissioner of Income Tax is of the paramount importance besides genuineness of the activities carried out by the Trust or institution. Mere objects of charitable nature should be sufficient for granting such registration U/s 12 A(a) of the Act but such objects should be translated into deeds through genuine activities. The assessee Trust has not carried out any charitable activity on which he can form his opinion for genuineness of the Trust. It was further held that the registration cannot be granted merely on the basis of activities proposed to be carried out or in vacuum. He further relied in case of CIT Vs. Red Rose School (2007) 163 Taxman 19 (All.). After considering the fact and legal position, the learned CIT has not granted registration U/s 12AA of the Act and accordingly, application was rejected by him.
Now the assessee challenged the rejection order made by the learned CIT before us.
6
3. The learned counsel for the assessee submitted that the Trust activity is charitable as providing research work through expertise personal as per Trust deed in medicine of orthopedics and also replacement of knee. The main work has been assigned by M/s Parkel International Synchrom P. Ltd., Bangalore. The Trust has shown these receipts under the head consultancy charge, donation and interest in income and expenditure statement. The activity of the Trust are genuine, which can be proved by the Trust activity that Trust has organized various medical camps at Ajmer, Sikar and Neem Ka Thana where Dr. B.R. Bagaria, trustee of the Trust had provided his specialized services for treatment of various disease. The assessee Trust in affiliation with India Red Cross Society and Krishna Charitable Trust had organized various camps wherein Dr. Bagaria had rendered medical, social and humanitarian services. These activities clearly depicts that the Trust had genuinely carried out charitable activities in pursuance to its object. In support of the same, it had furnished complete details before the learned CIT(A). Clause of the trust deed provides that the assessee Trust can carry out or award any scientific research in basis/applied/medical sciences and the alterative systems of medicine, social service, education service or any other work in the public and national interest. He further relied upon the following case laws:
1. Tor Steel Research Foundation Vs. ITO 42 ITD 39 (Cal.) (Trib.).
2. ACIT Vs. A.A. Bibijiwala Trust 100 ITR 516 (Guj.) (HC) 7
3. Sanjjvamma Hanumanthe Gowda Charitable Trust Vs. DIT (Exemp.) 285 ITR 327 (Kar.) (HC).
4. CIT Vs. Red Rose School 163 Taxman 19 (All.)(HC).
The learned A.R. for the assessee requested to direct the learned C.I.T. to grant registration U/s 12AA of the Act to the Trust.
4. At the outset, the learned CIT D.R. supported the order of the learned CIT and argued that it is a fairly affairs in the guise of Trust. The total receipts from clinical research work was generated through sole trustee Shri Bhagwana Ram Bagaria. It is a diversion of income to evade the tax, therefore, the learned CIT had rightly rejected the registration of Trust U/s 12AA of the Act.
5. We have heard the rival contentions of both the parties and perused the material available on the record. It is a fact that Shri Bhagwana Ram Bagaria is sole trustee of the assessee Trust for the life, is a qualified Doctor and an expert in joint replacement in orthopedic department. As per clause-12, the sole Trustee may at any time, dissolve the Trust and spend the entire income and corpus of the Trust for charitable purposes. This clause shows that trustee has given absolute power to dissolve the Trust and utilize the income as per his sweet will. Prima facie, it appears that Dr. Bagaria, sole trustee has used this device to avoid the tax payment of his professional income. Whatever evidence available on record shows that object of the Trust is neither 8 charitable nor genuine. Therefore, we uphold the order of the learned Commissioner of Income Tax, Jaipur-II, Jaipur.
6. In the result, appeal of the assessee is dismissed.
Order pronounced in the open court on 08/08/2014.
Sd/- Sd/-
(R.P. TOLANI) (T.R. MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Jaipur, Dated : 08th August, 2014
* Ranjan
Copy forwarded to :-
1. Rajasthan Advance Joint Care Trust, Jaipur.
2. The CIT, Jaipur-II, Jaipur.
3. The CIT (A)
4. The CIT
5. The D/R
Guard file (I.T.A. No. 990/JP/2011)
By Order,
AR ITAT Jaipur.