TaxTMI 
TaxTMI 
2019 (11) TMI 83
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....of the IT Act on the basis of various facts noted by him during the course of assessment proceedings for the assessment year 2008-09. Accordingly, the DIT (E) issued a notice u/s 12AA(3) of the Act on 18.11.2011 requiring the assessee to explain why registration granted u/s 12A should not be withdrawn for violation of the provisions of the Act. The relevant portion of the notice reads as under:- "F.No.DIT(E)/12A/2011-12/ Dated 18.11.2011. To The Principal Officer, Devki Devi Foundation, 10-B, K.G. Marg, New Delhi. i) In Addition to the amounts mentioned in sub-clause (i) above, the Owner shall pay to the contractor every FY a sum equivalent to 2% of the Gross Annual Turnover of the Hospital as defined in clause 8.03 for each Financial year as consideration for completion of the construction of the building (including civil construction, finishing work, plumbing, electrical works etc,) till such time that the amounts under clause 8.02 (i) is liquidated. ii) As a consideration for carrying out the Building's maintenance and repairs after the Building is handed over to the Owner for the entire term of this ....
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....expenditure incurred for free treatment / Concessional treatment to patient of EWS category A.Y Total revenue from hospital (in crores) Discount and free treatment Percentage of discounts to 2006-2007 67.71 4.05 5.98% 2007-2008 108.25 4.19 3.87% 2008-09 143.68 6.36 4.42% 5) Keeping in view the facts narrated above and huge payments to the group concerns under various agreements shows that the assessee concern was working only for the monetary benefit of its group concerns and not working as a philanthropic organization which is further strengthened by the fact that it had not rendered even the minimum statutory services towards the persons of economically weaker section of society as mentioned is above chart. As per the criteria notified by the Delhi High Court to be implemented by the Health Department of Delhi such organisations which have been provided land for hospital at concessional rate have to be provide free treatment/Concessional treatment to patient of EWS category. As per the criteria notified 25% of patients of OPD and 10% of beds in the IPD are to be provided treatment free of all charges. 6) There is, ....
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....over date occurs a minimum sum equal to the total amount spent by the contractor for completing the construction of the building at the project site (including civil construction, finishing work, plumbing, electrical works, etc.) divided by the number of remaining months of this agreement commencing from the month immediately succeeding the month on which the handover date occurs, towards repayment of the principal sums expended by the Contractor towards constructing of the building at the project site. Another clause in the agreement states that the owner shall pay to the contractor every financial year a sum equivalent to 2% of the Gross Annual Turnover of the Hospital for each Financial year as consideration for completion of the construction of the building (including civil construction, finishing work, plumbing, electrical works etc,) till such time that the amounts is liquidated. 4. As a consideration for carrying out the Building's maintenance and repairs after the building is handed over to the Owner for the entire term of this Agreement, the owner shall be liable to pay to the Contractor a sum equivalent to 6% of the Gross Annual Turnover of the hospital as defined ....
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....o entities of the same group, namely Max Health Institute Ltd and Max Medical Services, one for construction and maintenance of building and supply of medical equipment and another for providing medical support by way of providing medical services. Prima facie, the assessee foundation according to him has not been operating as a charitable institution as the trustees allowed the property/hospital of the society to be taken over by the Max Group by creating various financial and legal obligations. He was of the opinion that the hospital is virtually run by the Max Group of concerns which are corporate bodies established with the clear intention of profit motive. This according to DIT(E) is against the basic principles of the charitable organization where in as per law if, such charitable body is unable to function for any reason, the assets and liabilities are transferred to any other charitable organization having the same aims and objects. 8. Keeping in view the facts narrated above and huge payments to the group concerns under various agreements the DIT(E) was of the opinion that the assessee concern was working only for the monetary benefit of certain corporate concerns and` ....
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....ous financial and legal obligations. Through the artifice on a maze of contractual obligations, the management of the hospital has been virtually handed over to the Max group of concerns which are corporate bodies established with the clear intention of profit motive. This, according to the ld.DIT (E) is against the basic principles of the charitable organizations. He, therefore, held that the assessee is not entitled to the exemption u/s 11 as its activities cannot be classified as charitable activities since inception. Therefore, the registration granted u/s 12A was cancelled by him since inception. 11. The assessee approached the Tribunal and the Tribunal, vide order dated 31st March, 2015 in ITA No.1027/Del/2012 upheld the action of the DIT(E) in cancelling the registration of the assessee granted u/s 12A of the Act since its inception. The assessee approached the Hon'ble High Court against the order of the Tribunal and the Hon'ble High Court vide ITA No.484/2015, order dated 15th February, 2016, restored the issue to the file of the Tribunal for fresh decision in accordance with law. It was further directed that while rendering a fresh decision, the Tribunal will be....
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....et aside by this order." 12. Hence, this is the second round of litigation before the Tribunal. 13. The grounds raised by the assessee are as under:- "1. That the Director of Income Tax (Exemptions), New Delhi ['DIT(E)'] erred on facts and in law in passing order, dated 28/12/2011, under section 12AA(3) withdrawing the approval/registration granted to the Appellant Society under section 12A of the Income-tax Act, 1961 ("the Act"). 2. That the DIT(E) erred on facts in law in alleging holding that Appellant Society was not a charitable organization, as the property/hospital of the Appellant -Society were taken over by Max Group, by creating various financial and legal obligations on the Appellant Society and the Max Group was running the hospital with a profit motive. 2.1 That the DIT(E) erred on facts in law in observing that the Appellant Society undertook huge/adverse financial obligations by entering into agreements for construction and maintenance of hospital building, supply of medical equipments, provisions of medical staff/services with companies belonging to Max Group, which was a colourable device to transfer profits to such companies. ....
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....iled an application for admission of the following additional evidences in terms of Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963 by mentioning as under:- "Re: Application for admission of additional evidence in terms of Rule 29 of the Income-tax (Appellate Tribuna1) Rules. 1963 It is respectfully submitted as under: The applicant/ assessee craves leave for admission of the following documents (placed in volume I of supplementary paper book - from pages 1 to 52 and 136 to 427) filed on 2.5.2018 as additional evidences under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963 in connection with the captioned appeals: Sl. No. Particulars Page No. Filed before Re: Addendums to existing agreement with Max Group Entities 1. Copy of Supplementary Construction & Maintenance Agreement dated 24.7.2013 entered into between the appellant and Max Medical Services Ltd, whereby, inter alia, building repairs/ maintenance services availed by the appellant from the latter were discontinued 1-3 Additional Evidence 2. Copy of Supplementary Equipment Use Agreement dated 22.7.2013 entered into between the appellant and Max ....
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....rom FYs 2006-07 to 2016-17 175 Additional evidence 13. Statement showing bifurcation of expenditure incurred by the appellant into (i) payments made towards contractual payments to Max entities; and (ii) other payments, for financial years 2006-07 to 2009-10 176-177 14. Statement showing percentage application of revenue of the appellant in lieu of services availed from Max entities 178 15. Statement showing financial impact of transactions (construction/repair/equipment use) between appellant and Max Medical Services Ltd. considering interest/ IRR of 15% and 20% 179-180 Re: Research objective carried out/fulfilled by the appellant 16. Details of various research/ studies carried out by the appellant through its Doctors 181-192 Additional evidence - 17. Copy of recognition/ registration letter granted to the appellant by Scientific and Industrial Research Organization (SIRO) 193-237 18. Copy of 'Clinical Study Agreement' dated 5.3.2010 entered into between the appellant and Daiichi Sankyo Pharma Development 238-253 19. Copy of 'Grant Agreement' dated 20.09.2010 ....
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....esh adjudication in accordance with law. In this regard, it is respectfully submitted that the aforesaid additional evidences are being placed on record to buttress the consistent submissions/ contention/ arguments of the applicant already on record that applicant was engaged in carrying on charitable activities and is not related nor was working for the benefit of Max Group entities. Certain documents (S.No. 16 to 21) have been placed on record to rebut the observations of the Hon'ble Tribunal in the original order (first round- set aside by High Court) that the applicant had not earned on research activities in the medical field. The aforesaid documents were could not be placed on record before the DIT(E) for the following reasons; - Impugned order was passed by DIT (E) without considering the detailed submissions of the applicant and providing adequate opportunity of being heard to the applicant in gross violation of principles of natural justice which is evident from the fact that the impugned order was passed by the DIT(E) in undue haste on 28.12.2011, i.e., on the very next day of applicant filing submissions and paperbook(s) running into 4300 pages....
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.... 21.02.2009 24.07.2013 Agreement with Max Medical Services Ltd. [formerly known as MMK Investments (P) Ltd.] ["MMS"] [refer pages 48-67 of paperbook] for constructing hospital building on land allotted to assessee and carrying out repair and maintenance thereof post completion of construction, at following consideration, at following considerations: (a) Total construction of the main building to be paid in equal installments over 26.5 years, from the date of handover of the completed building; (b) 2% of gross annual turnover of the hospital as consideration for construction of building for a period of 26.5 years; (c) 6% of the adjusted turnover of the hospital for each financial year as a consideration for carrying out the repair and maintenance of the building during the term of the agreement. Subsequently, the aforesaid was reduced to 5% of adjusted turnover vide supplementary agreement dated 21.02.2009 [refer pages 76-79 of paper book]. Later, the said building repairs/ maintenance services availed by the appellant from the MMS were discontinued vide Supplementary Construction &....
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.... and sharing of new knowledge concerned with initiation, causation, diagnosis, treatment and rehabilitation of disease and disability in humans in general and with reference to: - Cardiac Speciality - Cancer detection and care - Communicable Diseases - Nutritional and Deficiency Disease - Diseases of Pregnancy & Newborn - Diseases of Poverty and Illiteracy." 20. Referring to the objects incidental or ancillary to the attainment of the main object as per clause 3 and 4 of the Memorandum of Association, he drew the attention of the Bench to the same which are as under:- "3. To promote, establish, maintain and manage Centres/Institutions of Health/Medical Sciences to provide necessary infrastructure with required physical facilities, equipment, staff, labourers and other inputs including scientific work environment and logistics support for the design, conduct and evaluation of research programs for the accomplishment of the objects of the Society." "4. To establish collaborative linkages with national and international philanthropic, benevolent and other organizations to share experience and expertise through ....
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.... was not operating towards achieving 'charitable purposes' basically for two reasons:- "1. the appellant through entering into various agreements with two companies belonging to the Max Group mentioned supra, had virtually handed over the hospital to that group and, therefore, the hospital was operated on commercial basis as opposed to charitable basis; 2. the appellant did not meet the minimum statutory criteria of providing free treatment to economically weaker sections (EWS) of the society." 22. He submitted that the order passed by the DIT(E) is not based on correct appreciation of the facts and the legal position and, therefore, the same needs to be quashed. 23. The ld. counsel for the assessee submitted that the withdrawal of registration is beyond the scope of section 12AA(3) of the Act. Referring to the relevant provision of section 12AA(3) of the Act as amended by the Finance Act, 2010 w.e.f. 01.06.2010, he submitted that the said provisions read as under:- "(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (I) or has obtained registration at any time under section 12A as it stood before its a....
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....iation Educational Institute vs. CBDT, 301 ITR 86, decision of the Hon'ble Patna High Court in the case of St. Michaels Educational Association vs. CIT vide Miscellaneous Appeal No.438 of 2015, order dated 13th August, 2019 and various other decisions, he submitted that the question whether exemption u/s 11 of the Act would be admissible to the assessee would be a question to be gone into in the assessment of each year. Referring to the following decisions, he submitted that registration u/s 12AA(3) of the Act can only be withdrawn on satisfaction of either of the twin conditions specified in the said section:- • Maharashtra Housing & Area Development Authority vs. ADIT(E): 58 SOT 196 (Mum.) • Urmila Devi Charitable Trust v. CIT(E): ITA No.4136/Del/2017 (Del Trib.) • Project Management Institute v. DIT(E): 142 ITD 239 (Hyd.) • Guru Gobind Singh Educational Society vs. CIT: 118 ITD 207 (Asr.) • Chaturvedi Har Prasad Educational Society v. CIT: 134 TTJ 781 (Lucknow) • H.P. Government Energy Development Agency vs. CIT: 134 TTJ 33 (Chd.) 26. He accordingly submitted that the DIT(E) was not correct in w....
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....nization carrying on trade/commercial activity is only applicable to the last/residual limb of the charitable activities, i.e., to organization carrying on activities towards advancement of any other object of general public utility and not to other limbs of activities such as relief to the poor, education, medical relief, preservation of environment, etc. For the above proposition, he relied on the following decisions:- - Central Board of Direct Taxes (CBDT) Circular No. 11 dated 19th December, 2008 reported in 221 CTR (St) 1 - India Trade Promotion Organization vs. DIT(E): 371 ITR 333 (Del.) - Hamdard Laboratories India v. ADIT: 379 ITR 393 (Del.) - Bureau of Indian Standard vs. DGIT(E) : 358 ITR 78 (Del.) - GS1 India vs. DGIT(Exemptions): 262 CTR 585 (Del.) - Institute of Chartered Accountants of India v. DGIT (Exemptions): 347 ITR 99 (Del.), - DIT (Exemptions) v. Commerce Teachers Association: 203 Taxman 171 (Del.) - CIT v. Sri Magunta Raghava Reddy Charitable Trust: 395 ITR 663 (Mad.) - Society for Participatory Research In Asia Vs. ITO: ITA No. 1553/Del/2015 (Del Trib.), - India HIV/AIDS....
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.... in order to see whether the applicant exist for the purpose of charity or not what is relevant is the predominant objective of the assessee. If the predominant object of the assessee is to carry out a charitable purpose and does not exist for the purpose of profit, then, the assessee is entitled to claim registration/approval u/s 12A of the Act. For the above proposition, the ld. counsel for the assessee relied on the following decisions:- i) CIT vs. Surat Art Silk Cloth Manufacturers, 121 ITR 1 (SC); ii) Queen's Educational Society vs. CIT, 372 ITR 699 (SC); iii) CIT vs. Pulikkal Medical Foundation Pvt. Ltd., 210 ITR 299 (Ker); iv) Breach Candy Hospital Trust vs. CCIT, 322 ITR 246 (Bom); v) CIT vs. Bar Council of Maharashtra, 130 ITR 28 (SC); vi) CIT vs. Andhra Pradesh State Road Transport Corporation: 159 ITR 1 (SC) vii) Victoria Technical Institute vs. CIT: 188 ITR 57 (SC) viii) Aditanar Educational Institution V. ACIT: 224 ITR 310 (SC) ix) Samaritan Society vs. CIT : 225 ITR 652 ( SC ) x) Thiagarajar Charities vs. Addl. CIT: 225 ITR 1010, 1026 (SC) xi) CIT v. St. Peter's Educatio....
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.... (3) The services relating to running of the hospital, including deputation of doctors was provided by MHC, pursuant to Medical Services Agreement dated 30.6.2004 involving huge payment and the said agreement, too, could not be terminated at the option of the appellant. The appellant was also required to provide at least 1500 sq. ft (erroneously mentioned as sq. metres) of space for the exclusive use of MHC's personnel, for which no charges were payable by MHC to the appellant. The hospital was, therefore, virtually being run by Max group of companies. (4) The appellant did not render the meet the minimum notified criteria of providing 25% of OPD and 10% of beds in IPD, as free treatment to EWS." 33. So far as the first objection of the ld. DIT (E) that the assessee is availing services from commercial entities to achieve its objectives is concerned, he submitted that there is no bar for availing services from commercial entities to achieve its objectives. He submitted that entering into agreements/contracts by a charitable organization with unrelated third party, private/commercial entities not falling within the prohibited category of persons specified u/s 13(3)....
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....companies and alleging that the control of the assessee's hospital vested with such companies without appreciating that the said agreements were for availing certain specific services in order to fulfill the charitable object of providing medical relief for which such unrelated companies were remunerated at arm's length and none of the companies are covered u/s 13(3) of the IT Act. He also relied on the decision of the Delhi Bench of the Tribunal in the case of DCIT vs. Wood Stock School, ITA No.3838/Del/2014, order dated 25th February, 2019. 34. So far as the allegation of the ld. DIT(E) that the assessee has not rendered minimum statutory free medical services to EWS is concerned, he submitted that the assessee had displayed the relevant information. He drew the attention of the bench to the following written synopsis:- "......the appellant had displayed relevant information at the Reception of the hospital building to inform the public that the aforesaid free services were available to patients from EWS categories. The appellant always entertained patients from such category as and when they visited the appellant's hospital. The actual percentage of discount/ free tr....
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....the financial year 2004-05 i.e., assessment year 2005-06 wherein the entire receipt has been shown. Referring to page 103 to 124 of the paper book, he drew the attention of the Bench to the service agreement between the assessee and Max Healthcare Institute Ltd., according to which the assessee was to receive know-how for the medical services. Referring to page 106 of the paper book i.e., page 3 of the agreement, he drew the attention of the bench to clause 1 of the agreement i.e., scope of services, which reads as under:- "Subject to overall control and supervision and management of the hospital by DDF, DDF hereby agrees to engage MHC to render medical services including but not limited to as enumerated hereinbelow (the services) and MHC agrees to render the same subject to the terms and conditions contained herein." 36. Referring to various object clauses of the agreement, the ld. counsel for the assessee submitted that the control of the hospital was always with DDF. Referring to indemnity clause at page 14 of the agreement, the ld. counsel for the assessee drew the attention of the Bench to the same and submitted that it was clearly mentioned that DDF shall be respo....
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....al and not from an earlier date, much less retrospectively from the date of inception. He also relied on the decision of the Hon'ble Madras High Court in the case of Auro Lab vs. ITO, 411 ITR 308 (Mad) and the decision of the Delhi Bench of the Tribunal in the case of Urmila Devi Charitable Trust vs. CIT(E), vide ITA No.4136/Del/2017. He accordingly submitted that the registration granted u/s 12AA can, if at all, be withdrawn only from the date of issue of show cause notice and not from any preceding period. Since, in the present case, the proceedings for withdrawal of registration granted u/s 12A were initiated vide show cause notice dated 18.11.2011, therefore, in view of the decisions cited (supra), the registration could have been withdrawn only w.e.f. 18.11.2011 and not from an earlier date, much less from the date of inception. He accordingly submitted that the DIT (E) is not justified in withdrawing the registration since inception. 37 The ld. DR, on the other hand, heavily relied on the order of the DIT(E). He submitted that having regard to the financial and legal obligations created by the assessee in favour of the Max group of companies under the various agreement....
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....n the land allotted by DDA and, further, to acquire and install necessary and essential medical equipment and was not in a position to take loans for the said purpose and to service interest payments thereon, therefore, the assessee entered into agreement with MMS for construction and maintenance of the hospital building. In addition to the above agreement for construction, the assessee had also entered into operating lease agreement with MMS on 10th December, 2001 to take on lease plant & machinery, office equipment, medical equipment and fixtures. Under the terms of the lease agreement MMS was responsible for acquisition of new equipments, repair, maintenance and servicing of the said equipments, ensuring adequate insurance coverage for the equipment replacement of any existing equipment. The consideration for the aforesaid services/obligations/activities undertaken by MMS was linked with reference to percentage of turnover of the hospital which saved the society from undertaking any financial obligation of making fixed interest payment in a situation where the hospital was not to run successfully post commencement of activities. This according to the assessee is a commercially p....
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....building. • Under clause 7.04, it was provided that it was the responsibility of the Appellant to obtain electricity, water and telephone connections at the hospital site. • Under clause 8.07, it had been provided that the appellant was entitled to withhold any payment on account of following: (a) Defective work not remedied; (b) Third party claims filed, or reasonableness evidence indicating a probable filing of such claims; (c) Failure of the Contractor to make payment promptly to subcontractors or for labour, materials, or equipment; (d) Reasonable indication that the Work would not be completed within the contracted time; or (e) Unsatisfactory execution of the Work by the Contractor. • Further, by virtue of obligation undertaken under the Agreement, MMS deposited a sum of Rs. 7,83,00,000 as performance guarantee with the appellant." 39. He accordingly submitted that the ownership of the hospital at all times vested in the assessee and MHC was acting as a contractor. Therefore, it cannot be said that the control over the hospital was abdicated by the assessee in favour of the MMS. 40. So fa....
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....ll be responsible for performing and discharging services agreed under the agreement; - - All the properties in the hospital including land, moveable and immovable properties shall continue to absolutely vest in the assessee, and MHC shall have no right, title and interest therein by virtue of any provision of the agreement; - It was also provided that appellant shall not be liable to indemnify MHC for any claim made against MHC on account of MHC's own proven willful misconduct or gross negligence. • The duties to comply with all the statutory guidelines/compliances with respect to environment, health standards, professional ethics, etc. were vested in the appellant and MHC was not responsible for violation of the same. • Vide clause 9, the Appellant had the responsibility to undertake expense on account of all insurances required by any law. • Vide clause 1, the MHC also paid deposit of Rs. 50 lacs on account of performance guarantee to the appellant." 41. He accordingly submitted that the allegation of the ld. DR that the assessee is working for the benefit of Max group which is virtually running the hospital is....
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....ospital, etc. were taken by the Governing Body of appellant itself, without any involvement of representatives of companies belonging to Max Group- refer pages 53-135 of supplementary paperbook. - Detail of segregation of employees (Dept, and grade wise) employed by the appellant trust for FYs 2008-09, 2009-10 and 2010-11- refer pages 136-141 of supplementary paperbook. The said detail clearly shows that major employees relating to various Departments including doctors and head of Departments etc. were directly employed by the appellant society on its own account, and balance were deputed by MHC. - Statement showing bifurcation of workforce and salary cost relating to employees of (i) the appellant; and (ii) MHI for financial year 2007-08 to 2010- 11- refer page 142 of supplementary paperbook. The said detail clearly shows that about 90% to 98% of employees were on payroll of the appellant society and corresponding salary cost of such employees on payroll of the appellant varied in the range of 65% to 93% (increasing over year) of the total salary cost and only the balance cost was towards reimbursement of salary of doctors/ staff deputed from MHC. The aforesaid e....
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....s Ltd. It would be appreciated that the payments made by appellant to MMS were much lower than the IRR of 15- 20% of funds invested by MMS in the appellant- refer pages 179- 180 of supplementary paperbook. Thus, the whole allegation that the appellant was paying compensation at %age of turnover and was, therefore, excessive, is clearly flawed, if viewed from the aforesaid perspective. The aforesaid basis of determining compensation was only a mode of computation, which was much less than the IRR of 15%, had funds being lent on interest by MMS to the appellant. - Appellant is directly placing order and buying all its requirement for drugs. Payments are also being made directly to the vendors. - Since July 2013, appellant is taking care of the repairs and maintenance of its equipment, building and infrastructure at its own - Appellant is no longer dependent on MHC for replacement and addition to equipment/technology. The appellant had invested Rs. 23Cr from its own kitty in last 3 years. - Appellant was not dependent on Max Group for any of its non medical services like legal, taxation, bio-medical etc. It had either developed expertise in-house or....
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.... in the absence of any change in facts and circumstances, the accepted position should not be disturbed in other years on changing mood of the Revenue authorities [refer Radhaswaomi Satsangv. CIT: 193 ITR 321 (SC), CITv. Excel Industries: 358 ITR 295 (SC), DIT v. Lovely Balshiksha Parishad: 266 ITR 344 (Del.), DITv. Apparel Export Promotion Council: 244 ITR 735 (Del.), DIT v. Escorts Cardiac Diseases Hospital Society: 300 ITR 75 (Del.)]" 42. So far as the allegation of the ld. DR that the assessee has entered into agreement for construction of hospital at Saket and for use of medical equipment employed therein with MMS, huge payments were made which was terminable only at the option of MMS and in the event of termination by the assessee in certain situations, severe penalties were imposable on the assessee is concerned, the ld. counsel drew the attention of the bench to the following written submission:- "The right of termination accrued to MMS only if the appellant failed to make payment for a continuous period of three years (refer clause 4.02 to 4.03.3 of the agreement at pages 52-43 of paperbook). It was but natural for MMS to reserve such right considering that the....
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....minated at the option of the assessee and that the assessee also required to provide 1500 sq. ft. of space for the exclusive use of MHCs personnel for which no charges were payable by MHC to the assessee is concerned, the ld. counsel drew the attention of the Bench to the following synopsis:- "As regards the quantum of compensation agreed to be paid by the appellant to MHC, the same having regard to the volume and nature of services to be provided by the latter, as discussed in detail supra, was justified and cannot be held to be excessive. The aforesaid originally agreed fee was subsequently reduced, when the scope of services to be availed from MHC was reduced. Refer supplementary agreement dated 24.7.2013 [refer pages 10-17 of supplementary paperbook] whereby non-medical services earlier availed from MHC were terminated and fee for medical services was revised. As regards the allegation that no provision was made in the Services Agreement for compensation to appellant in respect of the area of 1500 sq. feet (erroneously mentioned as sq. meters in the impugned order) in the hospital provided for exclusive use of MHC and its personnel, it is submitted, t....
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....ria of providing 25% of OPD and 10% of beds in IPD as free treatment to the economically weaker section. Under these circumstances, we have to decide as to whether on the basis of the facts available on record, the assessee trust is operating as a charitable institution or not and whether the assessee trust has virtually handed over the affairs of the trust to the Max group of concerns which are corporate bodies established with the clear intention of profit motive and as to whether the assessee has violated the mandatory provisions of treating particular number of patients from the economically weaker section category both under OPD and IPD. 46.1 We find from the order of the DIT(E) as well as the argument of the ld. DR that the allegation of the Revenue regarding diversion of the activity of running the hospital in favour of Max group of entities by creating various financial and legal obligations is based on three agreements, namely, (a) the hospital construction and maintenance agreement; (b) equipment agreement; and (c) leasing agreement and medical service agreement. Apart from the above agreements, there is nothing on record to suggest that the hospital is operated by the....
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....d against any and all claims actions and demands whatsoever including costs, expenses and fees payable to any lawyer or attorney or the like in defending such claims. MHC shall not be liable to DDF or to any third party under any circumstances whatsoever, for any loss with respect to the Services rendered except for any loss caused to DDF due to MHC's own proven willful misconduct or gross negligence." 48. From the above, it is crystal clear that the activities of the hospital were always under the control and supervision of the management and trustees and Max entities were only service provider/contractor to the extent of activities agreed with them under the agreements which are similar to the agreements for other services entered with various other parties. A perusal of the analysis of the percentage of payment made by the assessee to Max group of companies vis-àvis the total expenditure incurred by the assessee in various years shows that the same was maximum of 25% in the financial year 2005-06 which has gradually reduced to 20% in financial year 2013-14. The above details furnished by the assessee in the paper book suggest the independence of the assessee vis-&agrav....
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....entities not falling within the prohibited category of persons specified u/s 13(3) to avail the services for achieving the purpose of charitable object does not militate against the charitable nature of the organisation and to deny exemption u/s 11 or withdraw registration u/s 12AA (3) of the IT Act. We find the Delhi Bench of the Tribunal in the case of ADIT(E) vs. R.P. Seth Jessa Ram Charitable Hospital, vide ITA No.1721/Del/2008 has upheld the order of the CIT(A) directing the Assessing Officer to allow exemption u/s 11 of the Act under somewhat similar circumstances. In that case, the respondent entered into operation and maintenance agreement with Fortis Healthcare Private Limited, whereby the assessee trust was obliged to pay consideration of 35% of the gross billing of the hospital to Fortis Healthcare Private Limited. Further the right to terminate the said agreement vested only with Fortis Healthcare Pvt. Ltd. Having regard to the aforesaid facts (pari materia to the case of the appellant) exemption under section 11 of the Act was denied by the assessing officer holding that the assessee trust had no role in carrying out the charitable activities of the hospital which was ....
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....is Healthcare Ltd./Onus Healthcare Pvt. Ltd. were not all against the interest of the assessee and it in no way reduced the charitable character of the assessee. The agreements have augmented the resources of the assessee to be able to pursue its object to be more effective and efficiently. He, accordingly, directed the Assessing Officer to allow exemption u/s 11 of the Act. 5. Before us, Ld. Sr. DR supported the order of the Assessing Officer while LD AR of the Assessee submitted that for assessment year 2003-04, the Revenue has not filed any appeal against the order of Ld. CIT(A). Therefore, on identical facts, exemption u/s 11 of the Act is to be allowed for assessment year 2004-05 also. 6. We have heard rival submissions of both the parties and have gone through the material available on record. From the above facts, it is clear that the decision of the CIT(A) for assessment year 2003-04 has been accepted by the department as no appeal against the same was filed. Before us Revenue has not pointed out any fact indicating the misuse o f funds by the management or the activities were not carried out for the objects of the trust. The assessee as held by the Ld. CI....
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....hat case, exemption under section 11 of the Act was denied to the assessee, inter alia, on the grounds that - (i) by entering into agreement with Max Healthcare Institute Ltd. (MHC) for operating the assessee's own hospital, was for the benefit of MHC as the hospital was in de-facto control of that company; (ii) motive was to earn profit in garb of charitable activity; and (iii) hospital was not providing free treatment to EWS category patients. 52. On appeal before the Tribunal, considering the factual position and the documents (which are similar to the appellant's case) it was held that since - (a) the assessee had provided free treatment to patients which was also corroborated by the appreciation letters of Directorate of Health Services; (b) the assessee was not in the default category list issued by relevant authority in respect of EWS patients; (c) payments made to MHC constituted only 50% expense of the hospital and balance expenditure was done on other accounts by the assessee trust; and (d) assessee enjoyed registration under section 12A of the Act; no adverse inference could be drawn from agreement between MHC and the assessee. It was accordingly held that exemption u....
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....ries in private hospitals in pursuance of directions of Hon'ble High Court of Delhi in W.P.(C) No. 2866/2002 in the matter of Social Jurist vs. JNCT, Delhi; letters to the Director of Health Services regarding provisions of free beds/treatment during the year; inspection report dated 29.2.2008 issued by the Director of Health Sciences, Govt, of NCT of Delhi stating that the assessee's hospital is providing free treatment to patients including supply of free medicines, letter dated 14.9.2010 from Mr. Ashok Aggarwal, a social activist, appreciating the assessee's efforts in providing free quality treatment with respect of free/discounted treatment provided to late Shri Vijay Kumar Verma, Smt. Asmeen Begum and Master Sidhu along with their affidavits and the copies of report furnished by the assesses to the Medical Superintendent of Director of Free Treatment to the patients; service agreement dated 16.12.2010 entered into between the assessee and Max Health Care Institute Ltd; letter dated 16.12.2010 from Max Health Care Institute Ltd. certifying the amounts charged from the assessee during the previous year relevant to the assessment year; letter to Registrar of Societies dated 25.9....
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....institution applying profits wholly and exclusively to object for which is established is to be seen. So far as the allegation that control over running the hospital was given in favour of MHC is concerned, we find it relevant to reproduce hereunder the unrebutted finding of the Learned CIT(Appeals) in this regard; "..................... The aforesaid expenditure is less than 50% of the total expenditure incurred by the appellant during the year in relation to running and maintenance of the Hospital. That apart, the appellant incurred expenditure aggregating to Rs. 1,44,51,598 towards purchase of various medical equipment's/plant and machinery/other fixed assets for the hospital and incurred equipment's/plant and machinery/other fixed assets for the hospital and incurred expenditure of Rs. 8,49,54,122 towards capital work in progress. It would be appreciated that MHC had no say whatsoever in the incurrence of aforesaid expenses. In view of above, no inference can be drawn that the control over running the hospital was given in favour of MHC. The finding of the A.O. and MHC was in de facto control of the hospital with a motive of profit earning was not bas....
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....eties represented on general body of society and education to be given to youth of sexes as well as Americans and Europeans, Anglo Indians and Indian Christians. It is also maintaining a school as a non-profit Christian minority institution in order to provide and promote education, which is Christian, international and internationally accredited. It is also serving children of all nationalities, communities, and religions. It is maintaining a lodging and boarding school in Mussoorie. School entered into agreement with Marsh enterprises a partnership firm, which is engaged in business of developing and operating foodservice facilities including restaurants, providing food, and catering services. Assessee society wanted to upgrade its foodservice department to offer a high level of quality catering services and therefore it has entered into an agreement with Mars catering services. School was to provide above facilities at four different places, including a hotel, which is used as a hostel by the society, and obligation of Mars catering services is mentioned in clause 5 of agreement entered into between societies as well as Mars Catering services dated 17/07/2007. According to this ....
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....t of lodging and boarding for staying in Mussoorie and studying in the assessee society. It is not denied or can be disputed that assessee is providing education to students and lodging and boarding facilities are incidental to education. No violation of section 13 has been pointed out by learned AO. In view of this, it cannot be said that expenditure incurred by assessee is not for purpose of education. For all these considerations as stated above learned CIT - A has deleted addition. Merely because some celebrities are holding shareholding in one of entities to which assessee society has engaged for provision of services does not make any difference in allowance or disallowance of a expenditure for object of society. Further, merely because a hotel is rented by assessee society for using, as a hostel for student, does not make any difference, as far as student of the society exclusively uses the same. These facts do not exclude assessee from provision of section 2 (15) of the act. It is also not the case of AO that assessee is carrying on business activity, which is tainted with profit motives and is not an educational activity. The LD AO in this appeal does not dispute further r....
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....rat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC), Aditanar Educational Institution [1997] 224 ITR 310 (SC) and American Hotel and Lodging Association Educational Institute [2008] 301 ITR 86 (SC) would apply to determine whether an educational institution exists solely for educational purposes and not for purposes of profit. The thirteenth proviso to section 10(23C) is of great importance in that assessing authorities must continuously monitor from assessment year to assessment year whether such institutions continue to apply their income and invest or deposit their funds in accordance with the law laid down. Further, it is of great importance that the activities of such institutions be looked at carefully. If they are not genuine, or are not being carried out in accordance with all or any of the conditions subject to which approval has been given, such approval and exemption must forthwith be withdrawn. For assessment years 2000-01 and 2001-02, the assessee showed a net sur-plus of Rs. 6,58,862 and Rs. 7,82,632, respectively. Since the assessee was established with the sole object of imparting education, it claimed exemption under section 10(23C)(iiiad). ....