TaxTMI 
TaxTMI 
2014 (7) TMI 772
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.... 2. Facts in brief:- The assessee is a public charitable trust registered with the Charity Commissioner, under the Bombay Public Trust Act, 1950, vide certificate dated 12th September 2001. The assessee was also granted registration under section 12A, by the learned DIT(E), vide certificate dated 23rd January 2002, looking to its charitable objects which were within the meaning of section 2(15). Later on, the assessee has changed its name to "Cancer Aid and Research Foundation" and in pursuance thereof, certificate was issued by the Charitable Commissioner on 29th December 2005, amending the name of the Trust. Similar certificate was issued for registration under section 12A, amending the new name of the trust vide certificate dated 9th January 2006. The trust was also recognised and granted certificate under section 80G, from time-to-time. The aims and objects of the trust for which it was granted registration under section 12A, were as under:- AIMS & OBJECTS OF THE TRUST: 1. To provide monetary, medical and other assistance and help to the needy, deserving and poor people who are suffering from the dreaded disease of Cancer in particular and other diseases in general and ca....
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....pecialized training for treatment of cancer etc. in India or abroad. X. To join other NGOs in eradicating dreaded disease of cancer from the country. XI. To organize and arrange seminars, symposiums conferences, lectures, meeting, debates, discussions, retreat for providing useful scientific knowledge on the subject relating to dreaded disease of cancer. XII. To start, conduct, maintain, manage and establish sanatorium and / or temporary residential accommodation, shelter for poor, needy and deserving cancer patients and their relatives at such places as may be decided by the trustees in their absolute discretion. XIII. To establish, maintain, manage and control X-ray clinics, dispensaries for indoor and outdoor patients, hospitals, sanatorium, mobile dispensaries, medical college, nursing homes, ambulance in cancer care aspects as the trustees may decide in their absolute discretion. XIV. To establish, run, maintain, manage hospitals with necessary medical facilities in rural areas, exclusive for women and children upto 12 year of age. 3. It appears that during the course of assessment proceedings of the assessee for the assessment year 2009-10, the Assessing Off....
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....herefore, there was violation of the provisions of section 13 of the Act. Against the said assessment order, the assessee had preferred an appeal before the first appellate authority, wherein the learned Commissioner (Appeals), vide order dated 31st March 2013, after accepting the assessee's explanation, held that there is no contravention of provision of section 13. The relevant findings of the learned Commissioner (Appeals) were as under:- "The appellant stated that the car was purchased for the purpose of the trust and not for the personal use of the trustee. The loan was applied in the name of the trust. The loan was also granted in the name of the trust. It is only by mistake that the car dealer mentioned the trustee as the purchaser. The AO had also not conducted any independent inquiries as regards the actual user of this vehicle. He merely depended on one fact, ie, the name mentioned in the invoice raised by M/s Navnit Motors. Further, the AD states that buying of such luxury car for the use of influential donor is against the basic concept of charity and nothing stopped the assessee trust from purchasing a decent car In the Rs. 10-12 lakhs range such as a Honda City or ....
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....his trust. Hence, the registration under section 12AA, cannot be cancelled simply on this ground. 6. Lastly, as regards the advertisement on sale of land allotted to the assessee trust for the purpose of hospital as commercial land, it was stated that the said property was situated in Ratnagiri Industrial area which was allotted by MIDC for construction of a hospital for treatment of cancer patients. The assessee had invested huge sums in the construction of the hospital in various years the details of which are as under:- F.Y. Amount of Expenditure 2007-08 Rs. 1,08,45,933.80 2008-09 Rs. 98,64,796.14 2009-10 Rs. 1,17,58,294.00 2010-11 Rs. 98,19,907.50 2011-12 Rs. 45,63,601.79 7. However, due to financial constraints and unavoidable circumstances, the construction of the hospital could not go ahead. In these circumstances, the trustees were of the opinion that it would be prudent to sell the property and recover the amount rather than block its funds. The proceeds of sale, if realized, would have been utilized for the objects of the trust. The decision to sell the property does not imply a commercial intention, but a prudent step for recover....
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....e funds and resources of the assessee trust have been used for the benefit of the other trust where one of the trustees is common, which cannot be said to be in accordance with the objects of the assessee trust. He further observed that PAAK Foundation is neither an educational institution nor it is a welfare project. The assessee was unable to bring on record any evidence to show that why the scholarship was routed through PAAK Foundation and it has also not been brought on record as to how many scholarships have been given independently by the PAAK Foundation without the use of the funds given by the assessee trust; and iv) Lastly, he noted that the assessee had given temporary advance of Rs. 20.50 lakhs to PAAK Foundation on 1st November 2011, which was recovered on 17th November 2011 and 27th December 2011. This advance does not serve the object of the assessee trust. On these grounds, he cancelled the registration granted to the assessee under section 12AA(3). 9. Before us, the learned Counsel, Mr. Vijay Mehta, on behalf of the assessee, submitted that none of the objections, as raised by the learned DIT(E), can be said to be maintainable so as to hold that either the....
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....of the fund of the trust which was lying dead in the unfinished project. Lastly, he submitted and clarified that till date, the said plot and the partly constructed hospital has not been sold. Thus, the very inference drawn by the learned DIT(E) becomes redundant. 10. Regarding the second objection of the learned DIT(E) i.e., purchase of BMW car, he submitted that, first of all, this issue was raised by the Assessing Officer in the assessment year 2009-10, for denying the exemption under section 11, after invoking the provisions of section 13, which now stands reversed by the learned Commissioner (Appeals) in the first appeal. The learned Commissioner (Appeals) has held that there is no violation of provisions of section 13, as the car was used for the trust and it was only the car was bought in the name of the trustee. Otherwise also, the purpose for buying the car has duly been explained not only before the learned DIT(E) but also before the Assessing Officer and the learned Commissioner (Appeals) in the proceedings for the assessment year 2009-10. By way of an alternative argument, he submitted that assuming there is a violation of the provisions of section 13, though which h....
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....lier given for the purpose of distribution of scholarship but later on decided that the said amount should directly be given to the educational institutions. 13. Thus, he submitted that none of the objections raised by the learned DIT(E) can be sustained for coming to the conclusion that either the activities of the trust are not genuine or they are not being carried out in accordance with the objects. In support of his above contention, he strongly relied and referred to the decisions of the Tribunal, Delhi Bench, in Aggarwal Mitra Mandal v/s DIT(E), [2007] 109 TTJ (Del.) 128, for the proposition that the scope of the enquiry under section 12AA(3), are limited with the view to satisfy about the genuineness of the activities and the objects of the trust. If there is a violation of the provisions of section 13, then the same should be examined by the Assessing Officer during the course of the assessment proceedings. On the scope of enquiry by the Commissioner or the DIT(E) under section 12AA, he also relied upon the decision of the Allahabad High Court in CIT v/s Red Rose School, [2007] 212 CTR (All.) 394. Lastly, on the issue of purchase of BMW car for the purpose of utilisation....
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....t Act, 1950. Looking to the objects of the trust, which were within the ambit of "charitable purposes" as defined in sub-section (15) of section 2, registration under section 12A, was granted by the learned DIT(E). It has also been granted certificate under section 80G, from time to time. Once a registration under section 12A, or under section 12AA, has been granted, then it is axiomatic that the income of the trust has to be computed in accordance with the provisions laid down in section 11 to 12. Mere grant of registration under section 12A or 12AA, does not give blanket exemption to the trust, albeit lot of conditions and restrictions have been provided within the section 11 itself for availing the exemption. The income, which has been derived from the property held under the trust, has to be applied for the purpose of charitable or religious purpose only. Such a utilisation of income has to be upto 85% in the previous year and the balance 15% which is permitted to be accumulated and allowed to be carried forward for certain years has to be utilised ultimately for the charitable purpose only. All the deductions / exemptions are to be computed under section 11 and 12, which are s....
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....f the objects only, the trustees decided to sell the property to recover its funds. In pursuance thereof, it had put up an advertisement in the Times of India and Economic Times mentioning as sale of Ratnagiri hospital. The assessee has also displayed on its website the information about selling of the said plot, stating it to be a commercial land wherein it has partly developed / constructed hospital building. Such a display or advertisement for selling its property to recover funds already invested cannot be presumed to be for commercial purpose or to hold that the assessee's activities have become commercial. It is also an admitted fact that the said plot has not been sold till date. This fact itself negates the entire presumption of the learned DIT(E). He has drawn the adverse inference on the ground that it is not the object of the assessee to acquire the land and the sell the same instead of using it for its own charitable purpose. Such a finding is wholly vitiated, firstly, because the land was acquired for the purpose of constructing the hospital only, secondly, already substantial amount was invested towards the construction of the hospital for the cancer patient; and last....
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.... that the entire activities of the trust have been rendered non-genuine or its activities are not carried out in accordance with the objects of the trust. Similar issue had also come up for consideration before the Bangalore Bench of the Tribunal in Krupanidhi Educational Trust (supra), (as relied upon by the learned Counsel for the assessee), wherein on similar purchase of the BMW car purchased in the name of the trustee, the Tribunal held that it cannot be the basis for cancellation of registration under section 12AA(3), at the most, it can be a violation of provisions of section 13. Thus, this objection of the learned DIT(E) cannot be held to be sufficient ground for cancellation of the registration. 19. Now, coming to the third objection that the assessee had routed the payment of scholarship to the students through PAAK Foundation, wherein, the trustee of both the trusts were common and, secondly, the PAAK Foundation is neither an educational institution nor it is a welfare project. Besides this, it has also been observed by the learned DIT(E) that it was not been brought on record as to how much scholarship was given independently by the PAAK Foundation without the use of ....