Case Law Details

Case Name : Heart Care Management Vs Director of Income-tax (E) (ITAT Delhi)
Appeal Number : IT Appeal Nos. 5241 and 5242 (Delhi) of 2011
Date of Judgement/Order : 31/05/2012
Related Assessment Year :
Courts : All ITAT (5168) ITAT Delhi (1162)


Heart Care Management


Director of Income-tax (E)

IT Appeal Nos. 5241 and 5242 (Delhi) of 2011

Date of Pronouncement- May 31, 2012


R.P. Tolani, Judicial Member – These are two appeals by the assessee assailing refusal of registration u/s 12A and 80-G of the Income-tax Act. Common effective grounds in both the appeals are as under:

“1.  The learned DIT has erred on facts and in law in refusing to grant registration u/s. 12AA to the appellant.

 2.  The learned DIT has erred on facts and in law in failing to appreciate the noble objects of the society to conduct research and training in the specialized area of cardiac rhythm disorders and to create awareness in the public about the same, without which the research itself would be of no use, unless people avail the benefit thereof.

 3.  The learned DIT has erred on facts and in law in failing to understand that the objects of the society are research for the medical benefit of the humanity at large, which is a charitable activity. The organization cannot function without donations and no body would give donations without the benefit of S. 80-G.

 4.  The learned DIT has erred on facts and in law in failing to link the papers of his own file and coming to the incorrect conclusion that the appellant has not complied with the requirements, which had already been complied.

 5.  The learned DIT has erred on facts and in law in failing to understand that for attracting the conference for medical development, there was no fee to be paid by delegates. It was an educational conference without fee. The sponsors donated the funds to the trust which was utilized for meeting the expenses of the conference, which is a common practice recognized by law for such charitable activities.

2. Brief facts are: The assessee is a registered charitable trust, created on 28-11-2011 by eminent cardiologist Dr. Balbir Singh Makkar, Patron Dr. Naresh Trehan along with other renowned cardiologists. The trust was constituted with object of research in the field of medicines in general and cardiac medicines in particular by way of research, experiment, treatment and awareness about the latest trend in medical field. The objects as enshrined in the Trust deed are as under:

(i)  To carry out medical research and experiments by engaging in the research and development of all fields of medical sciences, and in all therapies of medical treatment, so as to afford medical relief in a better way.

(ii)  To provide research facilities for carrying on research, basic and applied in all system and disciplines of medical and surgical knowledge, keeping in view the socio-medical and socio-economic needs of the afflicted community.

(iii)  To found, establish or take over and/or otherwise conduct research institutions in all discipline of medical and surgical knowledge.

(iv)  To encourage and develop biological and pharmacological standardization of indigenous medical plants.

(v)  To encourage the discovery of new medical and/or surgical management of diseases and afflictions and to investigate and make known the nature and merits of investigations and findings and research in the aid field and to acquire any patent and licenses or other protective devices relating to the results of any discovery, investigations, findings or researches and to acquire any processes upon such terms as to manufacture and distribute for charitable purposes of any product developed, discovered or improved.

(vi)  To provide, encourage, initiate or promote facilities for the discovery, improvement or development or new methods of diagnosis, understanding and prevention and treatment of diseases.

(vii)  To conduct research and training in specialized areas of cardiac rhythm disorders’ for the diagnosis and treatment of arrhythmias.

(viii)  To hold periodic scientific meetings and live demonstration workshops particularly on ‘Treatment of cardiac rhythm disorders.

(ix)  To formulate teaching and training programs in centers owned/designated by the Trust to go through various aspects of electro physiology.

(x)  To create a national course on ‘Heart Rhythm Disorders’.

(xi)  To hold/organize public awareness workshops, lectures, programs, film shows etc. in any part of the world for public education, prevention, diagnosis and treatment of various dreaded diseases including Aids, Heart Disease, Heart Rhythm Disorders, cancer etc.

(xii)  To create a link in the world for exchange programs in medical research and education.

(xiii)  To invite eminent doctors from abroad for increasing the quality of medical services and training of Indian doctors.

(xiv)  To publish a journal/Newsletter for disseminating knowledge and expertise in the field of medical and surgical research and treatment.

(xv)  To do all such other things as are cognate to the objectives of the Trust or are incidental to or conducive to the attainment of the above objectives.”

2.1. Apart from these main objects, there are various incidental and ancillary objects. Assessee trust applied for registration u/s 12AA and 80G respectively on 31-3-2011 along with relevant documents, which reflected that the assessee trust had received donation of Rs. 81 lacs from various companies. Substantial part of the donation was utilized by the assessee trust in holding a two day conference on 19/20-2-2011 of the doctors called as “Rhythm to revival 2011”.

2.2. The Director of Income-tax (Exemptions) [“DIT(E)”], asked for the details about the donations and the expenditure, incurred for two days’ annual conference at hotel Leela, Gurgaon, where physicians from Rajasthan, Punjab, Haryana, Utter Pradesh, Uttrakhand and J&K participated. The assessee had incurred expenditure on accommodation and holding of the conference which are summarized as under:


 accommodation and banquet charges

Rs. 43,99,236/-


 Tour & Travelling

Rs. 5,26,314/-


 Professional charges

Rs. 32,000/-

2.3. DIT(E) queried as to how the conference held by the assessee can be termed as charitable activity and how it was beneficial to the common masses. Assessee replied that main objective of organizing this conference was to build awareness amongst the medical fraternity regarding heart ailments, diagnosis and effective treatment; along with insights on cardiac Rhythm Disorder diseases, symptoms and diagnostic etc. Further DIT(E), found that some of the donors had deducted TDS from the donation amount. The relevant details about donation are as under:

S. No.

Name of the donor

Cheque Amount

TDS deduction

Gross receipts.


 India Meditronic Pvt. Ltd.




 Boehringer Ingelheim



 Merck Limited




 Sonofi Syntheiabo India Ltd.




 Ranbaxy Laboratories Ltd.




 USV Limited



 Johnson and Johnson Ltd.




 Maakali Enterprises



 Cadila Health Ltd.



 MDS Pharmaceuticals Pvt. Ltd.



2.4. DIT(E) by various observations, mainly held as under:

(i)  The holding of conference of doctors was not of charitable nature as the same was sponsored by the donors which are commercial pharmaceuticals organizations.

(ii)  The donations were in fact commercial receipts, after deducting TDS by the donors. In case of a donation, the donor will not deduct TDS. Therefore, they were to be held as commercial receipts.

(iii)  The assessee does not have past history of carrying out any charitable work.

(iv)  The donors will claim it as business expenditure in P&L A/c in the relevant year and avail 100% deduction. .

(v)  The donors were themselves capable of holding such conference.

(vi)  The conference does not provide any help or relief to the poor masses.

2.5. In view of these observations, it was held that the activities of the trust were hit by the proviso to Sec. 2(15) of the I.T. Act as amended by the Finance Act, 2008 w.e.f. A.Y. 2009-10, thereby inserting a proviso that the charitable institutions engaged hither to in the activities of general public utility, if engaged in any activity of trade, commerce or business or providing services in respect of any trade, commerce or business; benefits of exemption u/s 12A will not be available. It was held that assessee’s activity of holding conference being commercial in nature, it was not qualified to be registered u/s 12A as well as u/s 80G.

2.6. Aggrieved, assessee is before us.

3. Learned counsel for the assessee contends that:

(a)  the entire issue has been misconceived by the DIT(E). It has been projected as if holding the conference was the only object of the trust. It is reflected by the trust deed that there are various objects of the trust which are all charitable in nature. The charitable objects of the trust empowers the trustees to hold research, medical education, periodical scientific meetings including live demonstration workshops particularly on treatment of cardiac rhythm disorders. It has not been disputed that the conference in question was for providing economical methods for treatment of cardiac rhythm disorders. This conference is not the only object of the trust Apart from the above specific objects, various other objects like (iii), (v), (ix), (xiii), (xv), reproduced above, empower the trust to hold such conference, research etc. and incur expenditure thereon. Therefore, it cannot be held that the conference was only object, not charitable and not an activity authorized by the objects.

(b)  Apropos the donors being pharmaceutical organizations, ld. counsel contends that if the trust is created by eminent doctors, there is no illegality for trust which is a distinct entity in receiving donations from pharmaceutical companies for charitable purposes. The Act does not provide any particular category of persons being debarred as donors. Therefore, there is no irregularity or illegality in assessee’s trust having received donations from pharmaceutical companies for its charitable purposes.

(c)  Apropos deduction of TDS by the donors, it is pleaded that if due to perception of a donor it deducts TDS, assessee cannot refuse to accept the donation as in any case the trust was receiving the amount in two forms i.e. cheque amount and the TDS certificate. In case of refusal it losses donation. Therefore, merely because some of the organizations deducted TDS will have no decisive role on the nature of amount being donated.

(d)  The assessee has given donation receipts only and not any bill or vouchers to the donors. DIT(E) has assumed that the donors will claim this amount as business expenditure and this assumption which may be exercised by some other officer in the hand of some other assessee has been inferred against assessee. According to ld. counsel the assumption of DIT(E) has no legs to stand as the assessee has given only donation receipts. How the donor claims it in its tax return and how some other ld. Income-tax Officer perceives it is not the responsibility of the assessee trust. Besides, that AO cannot be assumed to ignore the donation receipt and provisions of law and allow the amount of donation as business expenditure. Therefore, an unfounded future possibility of a subsequent assessment in the hands of donor cannot be held as disqualifying feature and to hold the amount received by the assessee as commercial receipt and not donation by such baseless assumptions, the adverse inference is grossly inappropriate. Thus, the activity of the assessee while organizing the conference is only charitable in nature duly authorized by its objects enshrined in the trust deed. The conference was widely advertised and reported by the newspapers about its utility in awareness about cardiac rhythm disorders and its early detection, copy of which is on the paper book.

(e)  There was no ban for attending the conference and the conference was organized with a particular object that the general public goes to govt. hospitals and other hospitals at smaller places instead of going to costly private and big city hospitals. This could have been possible by training the field doctors in the latest techniques and studies of cardiac diseases and disorders by holding this conference. The conference was held for equipping small town cardiologist which will help in reducing the cost of medical treatment for general public. It aimed to spread awareness for early detection and economical local treatment for cardiac patients. Conference intended to increase the confidence of field doctors and boost the confidence of the general public about their capacity. A purpose of general public utility holding the cardiac patients and their families quick recourse to local treatment and lesser cost thus reducing their suffering and saving on medical expenses cannot be held as commercial activity. The conference thus cannot be called as commercial activity as conceived by the ld. DIT(E).

(f)  The work shop was arranged for the doctors who are highly educated and eminent citizens of the society, therefore, it was desirable that the participants are provided with appropriate accommodation and food arrangements. Merely because conference is held in a five star hotel, cannot be held to be tainted with extravagance or to hold the workshop a commercial activity and the trust a commercial organization. Many conferences are held by various trusts and reputed institutions in the field of engineering art, politics, law, with staying facilities in five star hotels, which are allowed as in furtherance of their charitable work. There is no law which prohibits the holding of conference hosted by charitable organizations in five star hotels.

(g)  Apropos applicability of sec. 2(15), the same reads as under:

“2(15) – :Charitable purpose” includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest] and the advancement of any other object of general public utility.”

It is pleaded that the charitable purpose is an inclusive definition and spreading education and awareness among the maffusil doctors about latest and economical cardiac treatment effective and cheaper heart techniques which can be used for vocal patients in turn gets reflected in treatment of a common man, cannot be held to be a commercial activity. The assessee trust has not rendered any service in relation to any trade or business for a cess or fee or any other consideration. The amount received by donation have been validly applied for the authorized objects of the trust. Objects do not provide carrying out any commercial activity.

3.1. Ld. counsel contends that DIT(E) has not referred even a single instance where assessee has charged any cess, fee of any kind for arranging the conference and rendering of services, which are commercial in nature. .

4. Ld. DR, on the other hand, vehemently argues that ld. DIT(E) while examining the accounts found that large amount of trust money has been spent on doctors and not on common man. He has specific powers to enquire the affairs of the trust u/s 12AA, which includes:

(a)  call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and

(b)  after satisfying himself about 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;

(ii)  shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution.

4.1. It is pleaded that –

(i)  the DIT(E) was not satisfied about the objects of the trust being charitable in nature as the activity of conference amounts to a commercial activity.

(ii)  The donors were found to be pharmaceutical companies who otherwise please doctors by giving advertisements and offering free bees. The receipts were in fact commercial receipts and not donations which is reflected by TDS deducted by the donors.

(iii)  Trust is nothing but a device adopted by some eminent cardiologists to promote their own brand/ profile by arranging the comfortable stay, food and entertainment for other doctors. This will only end up in increasing the earning of the doctors and cost of medical treatment, which cannot be called a charitable activity. The eminent doctors instead of spending from their pockets for enhancing their brand value have done that by holding this conference offering hospitalities to their founder doctors in the garb of charitable activity of the trust. Thus, it amounts to creating commercial organization in the name of a trust and use it for their own promotional purposes. Therefore, 12A registration has been denied on valid reasons.

(iv)  The amount spending in holding the conference in a five star hotel is exorbitant and not concomitant to the declared objects. The law cannot be a moot spectator to such agendas and cannot come to the help for unscrupulous gains by the doctors.

(v)  In the name of the trust, many organizations who do not have charitable purposes at heart are wily inlay branded as charitable trusts seeking registration u/s 12A and getting 80G certificate and claim tax relaxations. They do not serve for the common man or general public utility but only advance the interests of the trustees of the organizations Therefore, it is a fit case where the activity of brand promotion of organizing doctors the name of trust and charitable cause should be exposed.

5. We have heard rival contentions and gone through the relevant material available on record. As the facts emerge, the assessee is a registered society with specified objects, as mentioned herein above. The objects are mainly towards medical research, experiments workshops etc. in the field of medical sciences in general and heart ailments in particular and take in their fold the ways and means for affordable medical relief. The objects include holding of scientific meetings, workshops, research and training programs and create public awareness, lecture programs among doctors and the general public.

5.1. A plain reading of the objects does not reflect that any object is non-charitable in nature. The main issue raised by the DIT(E) is in respect of holding of conference of doctors at a five star hotel and the fact that the donors are pharmaceutical companies and some of them have deducted TDS. Adverse inference has also been drawn from extravagance of expenses the fact that the conference was of doctors and there is no benefit to the common public. Except holding of this conference and corresponding donation, the charitable objects, as per the trust deed, have not been challenged by the DIT(E). If the objects of the trust are duly incorporated and charitable in nature and conform to the various rules and regulations; the assessee trust maintains its books of account and the genuineness of the account is established by the society, in normal circumstances the registration should be granted to the Trust u/s 12AA and 80-G of the I.T. Act. The scheme of the Income-tax Act provides – (i) procedure at the time of registration and thereafter (ii) rules for assessment of trusts. Since at the time of registration assessee trust is newly formed, therefore, only the objects of the trust and the accounts of the trust and activities of the trust till registration are to be inquired into. In the given facts and circumstances the conference organized by the assessee is authorized by the objects of the Trust; there is no ban or embargo whether conference can be held in five star hotel or not. Therefore, the adverse inference drawn by the DIT(E) is not proper inasmuch as the trustees will have a discretion to organize the conference at a place and in the manner which is befitting into the participants and objects. Consequently, we are unable to draw any adverse inference only because the conference was organized in a five star hotel.

5.2. Coming to the issue about some of the donors being pharmaceutical companies and having deducted TDS. In our view while accepting donation, a donee has limitations and if the donor offers the donation in cash kind or in a manner which it thinks legal, generally the donee would not refuse the donation. This is so because TDS can be claimed by trust towards the tax paid. It has not been disputed that for these amounts only donation receipts were issued. There was no loss to trust as on application of income i.e. utilization of donation, the TDS becomes refundable to it. Only because donors are pharmaceutical companies and they deducted TDS, will not convert a donation into a commercial receipt on the basis of presumptive inferences. As long as the assessee has credited the amount as donations and issued donation receipts, in our view, the same cannot be held to be commercial receipt.

5.3. Assessee has demonstrated that no cess or fee was charged from the participants of conference, therefore, there is no contravention of sec. 2(15). Besides, even if the delegates are charged with some fee it goes to the defraying of the expenses on conference, thus, on this issue also nothing turns against the assessee.

5.4. DIT(E)’s apprehension that the donors may claim it as the business expenditure in their assessment, is premature and do not concern the assessee and will be decided by their AO. In any case, if there is any issue about application of expenses, the same can be verified by the AO while framing the regular assessment on the trust.

5.5. In view of the foregoings, we hold that the assessee is eligible for registration u/s 12AA and 80-G, which is granted. Orders of DIT(E) are reversed.

6. In the result, both the appeals filed by the assessee are allowed.

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