Matter resorted back to prove genuineness of activities via-a-vis application for registration u/s 12AB

World welfare Health Federation Vs CIT (ITAT Jaipur)

ITAT Jaipur restored the matter back to CIT(E) as application for registration u/s. 12AB of the Income Tax Act was rejected solely due to alleged non-genuineness of the activities as charitable nature of activities of assessee not disputed.

Facts- The assessee, World Welfare Health Federation, filed an application in Form No. 10AB seeking registration u/s. 12AB of the Income Tax Act, 1961. Thereafter, a letter/ notice was issued at the e-mail/address provided in the application requiring the applicant to submit certain documents/explanations.

In response to the same, the applicant furnished a response which was duly examined and not found tenable. Since it is a limitation matter, the case is decided on the basis of material placed on record and application of the applicant in Form 10AB for registration u/s. 12A is liable to be rejected. Being aggrieved, the present appeal is filed.

Conclusion- Held that the assessee was deprived of the justice to be decided the merits of the registration on account of the shortage of time and the application was dismissed considering that aspect as main and the reasons for denial was only to consider the activities were genuine or not and therefore, considering the peculiar set of facts on hand and without going into the merits of the case it is imperative that the assessee should be given a fair chance to present the merits for registration. In view of the matter, the bench feels that the assessee should be give one more chance to contest the merits of the case before ld. CIT(E) and assessee is directed to produce all the relevant details as may be require by the ld. CIT(E) so as to consider the application for registration of the assessee trust. Before parting, we may make it clear that our decision to restore the matter back to the file of the ld. CIT(E) shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be decided by the ld. CIT(E) independently in accordance with law.

FULL TEXT OF THE ORDER OF ITAT JAIPUR

This appeal is filed by assessee and is arising out of the order of the Commissioner of Income Tax Exemption, Jaipur dated 28/03/2023 [here in after (CIT(E))].

2. In this appeal, the assessee has raised following grounds: –

“1. That the Ld. CIT(Exemption) has erred in appreciating the complete facts and holding the activities of the assessee-trust as ‘ingenuine’ for rejecting the application u/s 12AB. Rejection order is based on conjectures and surmises.

2. That the Ld. CIT(Exemption) failed in affording the reasonable opportunity of being heard before rejecting the application for registration u/s 12AB. No show cause notice before the rejection of the application was issued to the assessee.

3. That the ld. CIT(Exemption) has not given adequate time for submitting responses to notices u/s 133(6). Notices were issued on 24/03/2023 (Friday) to three parties and without waiting for their responses, the order of rejection was issued on 28/03/2023 (Tuesday) in a hurried manner.

4. Appellant craves the right to add, alter, modify or amend in any manner the grounds of appeal on or before the hearing.”

3. Succinctly, the fact as culled out from the records is that the application in Form No. 10AB seeking registration u/s 12AB of the Income Tax Act, 1961 was filed by the applicant online on 22.09.2022. Thereafter, a letter/notice No. ITBA/EXM/F/EXM43/2022-23/1048185640(1) dated 23.12.2022 was issued at the e-mail/address provided in the application requiring the applicant to submit certain documents/explanations by 09.01.2023. In response to the same, the applicant furnished its reply on 13.01.2023 which was duly examined and few discrepancies were found. Thereafter, a show cause letter was issued vide letter/notice No. ITBA/EXM/F/EXM43/2022-23/1050653174(1) dated 12.03.2023 requesting to submit the response by 16.03.2023. In response to the above, the applicant requested for adjournment. Hence, in view of principle of natural justice, another opportunity was provided to the applicant vide letter/notice No. ITBA/EXM/F/EXM43/2022-23/1050874693(1) dated 17.03.2023 requesting to submit the response by 20.03.2023. In response to the same, the applicant furnished a response on 20.03.2023 which was duly examined and not found tenable. Since it is a limitation matter, the case is decided on the basis of material placed on record and application of the applicant in Form 10AB for registration u/s 12A is liable to be rejected based on the reasons given in the order of the ld. CIT(E) order. The main issue based on which the registration was rejected is reiterated here in below :

“The above summon was duly delivered on the email-id of Shiven Bhandari ( [email protected]) on 24.03.2023 at 6.23PM. However, Dr. Shiven Bhandari, Director didn’t appear before the undersigned on 27.03.2023. Therefore, it can be concluded that the salary given to Dr. Shiven Bhandari, Director is not justifiable in any way as he has not been doing any significant work. Further, Dr. Shiven Bhandari is a renowned doctor and has other good sources of income. In spite of this fact, huge amounts are being paid to him. As it has already been accepted by the applicant that no other charitable work is being done by the applicant and the same is also visible from the accounts furnished by the applicant as discussed in 2.1 above, the question of paying such a high salary to the Director does not arise. It is further concluded that the impugned institution has been established only for providing services to various business such as Sun Pharmaceutical Limited, Vedic Lifesciences Pvt. Ltd. Etc. for which Dr. Shiven Bhandari, Director is taking enormous amounts as salary. This whole act of the institution is completely against the spirit of a charitable institution and thus the applicant is not eligible for registration u/s 12AB on the ground of in genuineness of activities.

4. In view of above discussion at length, applicant’s claim of registration under section 12AB is being rejected on following grounds:-

• Genuineness of activities.”

4. Feeling dissatisfied the assessee has preferred this appeal on the grounds as reiterated here in above para 2. To support the various grounds so raised the ld. AR appearing on behalf of the assessee has placed their written submission which is extracted in below;

“Factual Background:

a) `Worldwelfare Health Federation’ was incorporated on 16th May, 2017 as a `Section 8 company’ under the Companies Act, 2013. Main objectives of the assessee-trust are as under:

S. No.	Nature of objective
1	To provide, guide, educate and to create health awareness program and to make, develop, build and promote Health Care Centre for the underprivileged public.
2	To provide primary health care to slum dwellers at a nominal cost, if and when required, and to make it accessible to all by providing the same at their doorsteps with particular attention to the child health care, adolescent girls, women and to create health awareness among the underprivileged children, girls and women.
3	To provide, assist and to create helpline/helpdesk for secondary and other complicated cases of health problems, networking with various related agencies in the local area and supporting it with whatever is necessary for providing medical aid and guidance.
4	To create awareness about a clean environment, Planned Parenthood, and immunizations of all children against most dreaded communicable diseases and to impart knowledge about health, economical food, proper diet, clean drinking water and improvisation.
5	Early intervention to children with special needs in integrated manner with proper education and guidance to the public enabling them to be competent to take care of themselves.
6	To carry out AIDS and other diseases/syndromes awareness programs in the community targeting the adolescent boys and girls in urban and rural areas with special camps and education centres for the subject.
7	To establish, promote, support, maintain, manage and run dispensaries, hospitals, nursing homes, maternity homes, child welfare centers, sanatoriums, clinics laboratories, mobile medical units, ambulances, research centers, medical and/ or surgical camps, blood banks and other establishments for giving medical relief to the public and to establish and maintain hospitals and /or other health institutions & health consultancy firm, & for the reception and treatment of persons suffering from illness or mental defect for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation.
8	To spread the public awareness about diseases and its treatment, modes of prevention of different communicable & non communicable diseases like Malaria, Tuberculosis, Polio, Jaundice, Respiratory diseases, Cancer, AIDS, Hypertension & others etc by way of academic programme, camps and other functions and also to give information to the public about latest innovations & Research in bio-medical field & to do community based biomedical research.
9	To organize health related camps
10	To work as quality enhance unit for hospitals & to ensure proper hygiene & waste management in hospitals.
11	To ensure that all bio medical research involving human subjects should be conducted according to proper guidelines from govt. & other regulatory authorities like Good Clinical Practices, Schedule-Y etc.
12	To work as guide for the medical students and graduates and to work as quality control organization for hospitals and medical institutions.
13	To establish, promote, support, maintain schools, colleges, hostels, libraries, study circles, reading rooms, lecture halls and other establishment and institutions for the development of education and diffusion of knowledge in the field of Medical Science.
14	To grant scholarships, stipends, free-studentship, prizes, rewards and allowances, financial or other assistance to students, lecturers, professors, teachers etc
15	To organize training and employment for women, men and youth and particularly to motivate female literacy and to ensure Maternal Health and Child Health.
16	To provide comprehensive, up-to-date environmental solutions, to monitor carbon modeling, greenhouse gas emission inventories, forest resource management, rainwater harvesting, effluent treatment and recycling, to help/aware about the use of economics for conservation of environmental biodiversity by inspiring, informing and enabling nations and people to improve their quality of life. Prevent pollution and abuse of earth’s ocean, land, air and fresh water; promote peace, global disarmament and non-violence.
17	To provide medicines, food, clothing, water, light and /or shelter for the poor and / or needy persons and to give help to them either in cash or in kind or otherwise.
18	To publish bulletins, journals, books and other reading materials of public use.
19	To give assistance and /or grant-in-aid to trusts, institutions, funds, individuals and / or other organizations engaged in the furtherance of similar objectives and activities.
20	To establish and maintain Relief homes and orphanages or other establishments for relief of and to give help to the poor patients and destitute orphans and widows and otherwise to provide help for them.
21	To do any other act for the advancement and welfare of general public not involving the carrying on of any activity for profit.
22	To organize event, seminars/workshops at national & international level.

Thus, the main objectives of the assessee-trust are centred around `Medical relief’ including `Medical Research’, `Medical Education’ and `Help of poor patients’ etc.

b) No activities could be conducted by the assessee-trust during the FY 2017-18, 2018­19, 2019-20 and 2020-21. There was a significant rise in the demand for medical research studies in the post-covid era and assessee-trust was contacted by pharma companies to undertake such research studies. The research activities of the trust commenced after the joining of Dr Shiven Bhandari wef 15/11/2021 in the capacity of Trustee-Director.

c) Assessee had incurred following expenses for performing the activities during FY 2021-22:

S. NO.	HEAD OF EXPENSE	AMOUNT (Rs.)	Remarks
1.	Audit Fees	15000.00	For Audit of Expenses
2.	Bank Charges	175.82	Charged by bank
3.	Clinical Trial Exp	967500.00	For Medical Research
4.	Consultancy fees	12000.00	GST matters
5.	Conv. Expenses	2000.00	For official purposes
6.	Honorarium	360000.00	Paid to trustee-director
	TOTAL	1385715.82

d) Provisional registration under Sub clause (vi) of clause (ac) of sub-section (1) of section 12A was granted for the AY 2022-23 to 2024-25. In compliance to the provisions of section 12AB of the Act, the assessee had applied for regular registration u/s 12A (1)(ac)(iii) on 22nd September 2022.

e) In-depth inquiry was made by Ld. CIT( E), while processing the application for registration. A detailed reply running into 21 pages alongwith 27 annexures and the photographs of the Trust premises was furnished on 13/01/2023 ( Please see PB No. 23 to 43). Second reply running into 16 pages with 13 annexures was furnished on 20/03/2023 (Please see PB No. 44 to 59 )

f) While passing the order of rejection, Ld. CIT(E ) had not disputed the charitable nature of the activities of the assessee, but the application for registration has been rejected solely due to alleged non-genuineness of the activities of the assessee.

Assessee is making the submissions on each of the grounds raised:

GROUND NO. 1

That the Ld. CIT(Exemption) has erred in appreciating the complete facts and holding the activities of the assessee-trust as `ingenuineç for rejecting the application u/s 12AB. Rejection order is based on conjecture and surmises.

Submissions:

Ld. CIT(Exemption) had made several allegations and pointed out the deficiencies, and finally held the activities of the assessee as `ingenuine’.

Genuineness of the activities should normally mean that the activities are not bogus or artificial or camouflaged by some means and whether the activities are in accordance with the object of the institution. The appellant takes the liberty to submit that these allegations/deficiencies are not true/correct as under:

ALLEGATION NO. 1 :

As per Ld. CIT( E):

“From the above, it is evident that an amount of Rs. 4,68,655/- has been deducted as TDS u/s 194JB of the Income Tax Act by Sun Pharmaceutical Ltd. TDS u/s 194JB is deducted on fees provided for professional or technical services which means that the applicant has provided professional services to Sun Pharmaceutical Ltd. Moreover, assessee himself has shown receipts as sales and has also shown trade receivables in the balance sheet for the FY 2021-22. Therefore, such receipts are receipts from trade and commerce and cannot be termed as charitable within the ambit of section 2(15) of the Act.” (Page No. 6 of the CIT order)

Submission of the appellant:

1.1.1 Section 12AB (1) (b) (ii) lays down that:

“after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A) and compliance of the requirements under item (B), of sub-clause (i),—

(A) pass an order in writing registering the trust or institution for a period of five years; or

(B) if he is not so satisfied, pass an order in writing”

In the present case before your honours, Ld. CIT(Exemption) has questioned the genuineness of the activities of the Trust while denying the registration u/s 12AA of the Act and not objected to the charitable nature of objectives .

1.1.2 Whether deduction of TDS u/s 194JB is absolute proof of receipts being ` Professional Receipts’/ Business Receipts:

Ld. CIT ( E) has mentioned that TDS has been deducted u/s 194JB by Sun Pharma and others which means that the applicant has provided professional services. Such conclusion is without basis, because:

a) The deductor/payer of the bill has the discretion/responsibility to deduct TDS either u/s 194JB, 194C or any other appropriate section. Deductee i.e. appellant has to claim the TDS Credit appearing in 26AS /TDS certificate by filing the ITR, irrespective of the Section used for TDS.

b) Secondly, the deduction u/s 194JB or any other section, can not determine/change the nature of the transaction in the hands of trust. For example, the appellant has also deducted the TDS u/s 194JB for the payments due to Jaipur National University(JNU) which can not imply that JNU is not working for `Charitable Purposes’ u/s 2(15).

ALLEGATION NO. 2 :

As per Ld. CIT( E):

“The applicant has also failed to furnish the detailed explanation on exactly what services are being provided to Sun Pharmaceutical Ltd. and has also not produced any agreement/MOU etc. which can depict the terms and conditions of working with Sun Pharmaceutical Ltd. In the absence of such documents, the charitable nature of the activities of the applicant could not be established. It is important to mention here that the applicant has received major amounts from Sun Pharmaceutical Ltd. Out of the total receipts amounting to Rs. 49,90,964/- an amount of Rs. 46,86,550/- has been received from Sun Pharmaceutical Ltd in the FY 2021-22. Few amounts have also been received from Vedic Life Sciences Pvt. Ltd ………..” (Page No. 6 of the CIT order) Submission of the appellant:

1.2.1 Relations with the Sun Pharmaceuticals Ltd. / other companies

Medical research studies are used by the pharmaceutical companies for the purposes of Research and Development (R&D) to develop new medicines/molecules for better healthcare of the humanity at large. Our nation could successfully develop vaccines to fight the Covid-19 pandemic on the back of medical research only.

Medical Research needs two essential facilities:

a) Scientific laboratory and data analysis tools

b) Behavioral and drug studies on patients of the hospitals

Sun Pharmaceuticals Ltd. and other companies approached the assessee-trust for conducting medical research on following subjects and availed the services of worth Rs. 4990964/- from assessee-trust during the FY 2021-22:

i) Sun Pharmaceutical Industries Ltd., Gurgaon R&D-III, Sarhaul Village, Sector-18, Vdyog Vihar Industrial Area, Near IFFCO Chowk, Gurgaon-122 015

Subject of Medical Research	Amount in Rs.
A Phase 2, Dose-Ranging, Multicenter, Randomized, Double Blind, Placebo Controlled Study to Evaluate the Safety and Efficacy of AQCH Tablets in Adult Patients with Dengue Fever	4686550

ii) Vedic Lifesciences Pvt. Ltd. 118, Morya House, Off New Link Road, Near Infinity Mall, Andheri West, Mumbai – 400053

S. NO.	Subject of Medical Research	Amount in Rs.
I	Principle Investigator/ Clinical Research Coordinator/ Institutional Overhead approval Charges for as per Protocol NMN Covid clinical study Fee.	165000
II	Evaluating the safety and efficacy of the probiotic Bifidobacterium longum ES1 and the post biotic Heat-Treated B. longum ES1 (HT-ES1) on IBS symptom severity in patients with diarrhoea- predominant Irritable Bowel Syndrome	50000
III	Lab Charges under (NMN Study)	34875
	Total	249875

iii) Iqvia RDS (India) Private Limited, Omega Embassy Tech Square Marathahalli-Srajapur outer Ring Road, Kadubeesanahalli, Bengluru-560 103

S. NO.	Subject of Medical Research	Amount in Rs.
I	Ad-hoc Start-up payment for the research	54539/-

ALLEGATION NO. 3 :

As per Ld. CIT( E):

“ Hence, it is evident from the above and bank account statement of the applicant that the applicant is receiving major amount from Sun Pharmaceutical Ltd. out of which few payments have been made to JNU Institute for Medical Sciences on account of Clinical Research Fee, some amounts have been paid as rent for the premises which is also the registered address of the institution…”

(Page No. 8 of the CIT order)

Submission of the appellant:

1.3.1. Applicant is receiving major amount from Sun Pharma and others: Allegation is absolutely false. Not a single rupee was received from Sun Pharmaceuticals Ltd. in the bank statements during the FY 2021-2022. All invoices were unpaid as on 31/03/2022. Therefore, bank account did not have any receipts during the period under examination i.e. FY 2021-22 either from Sun Pharma or any other party.

1.3.2. Payments made to JNU for Clinical Research:

As assessee was not having its own medical infrastructure during the FY 2021-2022, Assessee conducted the Medical Research with the assistance of Jaipur National University(JNU) – Institute of Medical Science and Research Centre, Jagatpura, Jaipur, which is a multi-specialty, 800-bedded hospital and a Charitable organisation.

JNU has raised the invoice No. 4 dated 23/04/2022 for Rs. 967500/- plus GST aggregating Rs. 1141650/-. As the assessee-trust is maintaining books of account on `Accrual/Mercantile’ basis, the liability of Rs. 967500/- was provided and TDS @ 10% was deducted u/s 194J on 31/03/2022. (Please see the copy of the invoice at PB No. 79 and TDS Certificate at PB No. 80 to 81 ).

1.3.3 Further the JNU had submitted the reply to the letter issued by Ld. CIT( E) vide reply dated 28/04/2023 which has replied the queries raised by the revenue and provided the copy of agreement entered by them. (Please see PB No. 61 to 78 )

1.3.4 Rent of the office premises:

Allegation is absolutely false. No rent has been paid by the assessee as the Trustees had agreed to waive the rent of the accommodation, despite the execution of a rent agreement. Ld. CIT(Exemption) has wrongly alleged that rent @ Rs. 2000/-per month is being paid for the use of the registered office.

ALLEGATION NO. 4 :

As per Ld. CIT( E):

“As, it is evident from the reply of the applicant, it still failed to justify the exact nature of work done by Dr. Shiven Bhandari, Director and has stated that Dr. Shiven Bhandari, Director is responsible for day to day management of the trust. A salary of Rs. 80,000/- per month is not at all justifiable for just day to day management.

(Page No. 12 of the CIT order)

Therefore, it can be concluded that the salary given to Dr. Shiven Bhandari, Director is not justifiable in any way as he has not been doing any significant work. Further, Dr. Shiven Bhandari is a renowned doctor and has other good sources of income. In spite of this fact, huge amounts are being paid to him”

(Page No. 13 of the CIT order)

Submission of the appellant:

1.4.1. Honorarium paid to Dr. Shiven Bhandari, Director/Trustee:

Dr. Shiven Bhandari was paid the honorarium of Rs. 360000/- during the FY 2021-22. Trust was established in 2017 and since then, no activity was pursued in the absence of a reputed and experienced doctor. Under the able guidance of Dr. Shiven Bhandari since 15/11/2021, and his continued efforts, the assessee-trust’s receipts for `Medical Research Studies’ went up to Rs. 49.91 Lacs in 2021-22 from the NIL receipts in earlier years.

Further the Section 13(2)(c) permits the payment of `what may be reasonably paid for such services’. Dr. Bhandari who is Trustee-director was paid Rs. 360000/-during the AY 2022-23, which appears to be reasonable looking to the revenue of the trust for the said financial year.

It was held by the Hon’ble High Court of Karnataka in the case of [2015] 55 taxmann.com 516 Commissioner of Income-tax, Exemptions, Bangalore v. CMR Jnanadhara Trust that where assessee-trust was availing services of trustees and on account of such services there was substantial growth in trust and its activities, payments for such services could not be said in contravention of section 13(1)(c) and benefit u/s section 11 could not be denied to assessee.

In the order passed by Ld. CIT (Exemption), he himself has admitted that “Dr Shiven Bhandari is a renowned doctor and has other good source of income”. Therefore, honorarium of Rs. 360000/- to Dr. Bhandari is not excessive looking to his valuable services. Dr. Bhandari himself was managing the all affairs of trust, as no other salary/honorarium was paid to other persons.

1.4.2. Other incomes of Dr. Shiven Bhandari –

Following is the summary of ITRs (under PAN: CGVPB0988B) filed by Dr. Bhandari in last 3 years:

Assessment Year	Salary Income	Other Income	Deduction of Chapter VI	Total Income
	Rs.	Rs.	Rs.	Rs.
2019-20	370000/-	11491/-	160000/-	221490/-
2020-21	380000/-	8031/-	158031/-	230000/-
2021-22	380000/-	130532/-	153323/-	357210/-
Average Total Income of 3 Years				269567/-

Therefore, the allegation of Ld. CIT(Exemption) that Dr. Shiven Bhandari has `other good source’ of income is baseless and appears to be a result of imagination.

1.4.3. Surplus arising from the activities:

Assessee-trust earned a surplus of Rs. 36,05,248/68 during the FY 2021-22 out of its research activities. However, the Assessee-Trust did not have actual funds in hand, as the invoices raised upon Sun Pharmaceuticals Ltd. were not realized till 31/03/2022.

Therefore, the surplus was carried forward for succeeding year by filing form 9A for exercising the option under clause (2) of the Explanation to sub-section (1) of section 11 of the Income – tax Act, 1961 for deeming the application.

ALLEGATION NO. 5 :

As per Ld. CIT( E):

“……………………………………… Therefore, such receipts are receipts from trade and commerce and cannot be termed as charitable within the ambit of section 2(15) of the Act.”

(Page No. 6 of the CIT order)

1.5.1. Whether `Medical research’ is `Medical Relief’ for being Charitable Purpose’ within the definition of Section 2(15):

Ld. CIT(E ) has alleged that assessee has provided professional services covered by section 194JB and, therefore such professional services are receipts from trade/commerce not covered by Section 2(15) as `Charitable’.

Assessee has provided `Medical Research Studies’ to the users of such studies. It is now judicially settled that such studies are covered under `Medical Relief’ and, fall in the definition of `Charitable Purpose’, which includes relief of the poor, education, yoga, medical relief etc.

‘Medical relief’ includes medical research which also constitutes charitable purpose within the section 2(15) of the Income Tax Act, 1961. The following medical activities would are regarded as `Medical Relief’:

(i) To establish, promote, organize and run, research laboratories to conduct research in all types of diseases including AIDS, Cancer, Cardiac ailments, Urology, Neurology, etc.

(ii) To set up, promote, organize, and manage, the medical research institutions and research programme in any branch of medical science by engaging or employing doctors, scientists, consultants, technicians, experts.

(iii) To conduct experiments and to undertake and carry on research experiments and tests related to various medical branches

(iv) To promote, develop and improve scientific exchange of knowledge as well as technical cooperation between research institutions with similar interests and objectives.

(v) To conduct conferences, refresher courses, lectures, seminars, public health education and promotion activities, demonstrations and exhibitions relating to the research done, knowledge generated and results obtained.

(vi) To give advice on, publish research papers and promote utilization of research results in the medical fields.

1.5.2. Assessee relies upon the following case law where Medical Research has been held to be a `Charitable Purpose’:

i) Artemis Education & Research Foundation v. Commissioner of Income-tax (Exemptions), Chandigarh [2021] 132 com 277 (Delhi – Trib.). It was held by the Hon’ble Bench that: (Please see at PB No. 83 to 95)

“13. So far as second reason of rejections u/s 12A of the Act by the ld. CIT (E) that the intention to create global infrastructure is in contravention of section 11(1)(a) of the Act and even after 4 years of incorporation, applicant has not carried out any research/outcase is concerned, when applicant has come up with specific aims and objects to carry out medical research as one of the aims and objects which can only be carried out within the premises of the hospital, creating infrastructure is a sine qua non to carry out the research in the medical field. Medical research can always be carried out in the infrastructure created within or near to the hospital which cannot always lead to the conclusion that it is for the purpose of pursue the commercial activities. Because there are numerous aims and objects sought to be pursued by the applicant in order to carry out its charitable activities.” “16. So far as third ground taken by the ld. CIT (E) for rejection of application u/s 12A of the Act that the applicant has failed to bring on record how its activities are meant to percolate down to the public at large is concerned, again it is a matter of common knowledge that medical research carried out in any corner of the world is in the larger interest of the general public one way or the other……………. ”

1.5.3. Whether `Medical research’ is `Education’ for being Charitable Purpose’ within the definition of Section 2(15):

`Research studies’ have also been held as `Education’ to fall under Charitable purpose u/s 2(15). Assessee places his reliance on the judgement of Income Tax Officer (E), Trust Ward -II, Delhi v. Society for Essential Health Action & Training* [2014] 45 taxmann.com 399 (Delhi – Trib.).

Head note of the case law reads as under:

“Section 2(15) of the Income-tax Act, 1961 – – Charitable purpose – (Education) – Assessment year 2009-10 – Assessee, a society registered under section 12A, was formed to carry out research or other activities to improve quality or impact of existing health care and social welfare programmes – During relevant year, assessee entered into an agreement with Society for Applied Studies (SAS) to give techno-medical research support in project called ‘ROTA VIRUS’ – In terms of agreement, assessee received certain amount from SAS – Assessing Officer opined that since activities of assessee did not fall within scope of ‘charitable purpose’, as defined in section 2(15), benefit of sections 11/12 could not be allowed to it – It was noted that research report of assessee, which was published in medical journals, was in nature of doing ‘education’ activity – It was also undisputed that assessee was mainly engaged in field of medical research and during year under consideration, it had done research work in collaboration with various international organizations, like WHO, UNICEF- Whether on facts, activity carried out by assessee constituted ‘charitable purpose’ in terms of section 2(15) and, thus, assessee’s claim for exemption of income was to be allowed – Held, yes [Para 14] [In favour of assessee]”

In above judgement, the research studies on `Rota Virus’ was held be providing `Education’ within the meaning of Section 2(15)

1.5.4. License of Assessee-Trust as Section 8 Company under the Companies Act, 2013 is granted after satisfaction of Central Govt.

Before forming a Section 8 company, following have to be proved to the satisfaction of the Central Government that:

(a) its objects includes promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;

(b) the company after incorporation intends to apply its profits, if any, or other income in promoting such objects only; and

(c) the company intends to prohibit the payment of any dividend to its member Ministry of Corporate Affairs (MCA) had issued the license (Please See PB No. 60 ) to the assessee-trust. Further the Central Govt. has the power to revoke the license if any violation of the objectives is noticed after granting license.

Thus, the status which is granted by the Government itself, is the recognition of the fact that assessee-trust is essentially established for the charitable purpose.

GROUND NO. 2

That the Ld. CIT(Exemption) failed in affording the reasonable opportunity of being heard before rejecting the application for registration u/s 12AB. No show-cause notice before the rejection of the application was issued to the assessee

Submissions:

2.1 The appellant assessee had made submissions on 20/03/2023 (Please see PB No. 44 to 59) in response to the notice dated 12/03/2023 by the Ld. CIT(Exemption). Before rejection of the application of the assessee on 28/03/2023, Ld. CIT(Exemption) did not grant reasonable opportunity of being heard.

Such action of the Ld. CIT(Exemption), while being in violation of the `Principles of Natural Justice, is also in direct contravention of Section 12AB(1)(b)(ii)(B ) which lays down specifically :

“If he is not so satisfied, pass an order in writing rejecting such application and also cancelling its registration after affording a reasonable opportunity of being heard”

In case of refusal to grant the registration, the principles of audi alterm partem i.e. hearing the other side is necessary. Therefore, in the event of passing adverse order to the applicant, reasonable opportunity should had been granted by the Ld. CIT(Exemption).

2.2 Ld. CIT(Exemption) had pointed out several defects/shortcomings in the application of the assessee-trust vide notices dated 23/12/2022 and 12/03/2023 which were rectified by the assessee to their satisfaction.

2.3 The grounds which were never put to the assessee have been relied upon to reject the assessee’s application. The rejection order shows that some enquiries were conducted behind the back of the assessee and those parties could not reply within the period of 3 days. This non-reply by third parties has been made the basis to reject the assessee’s application. So, the order has been passed in violation of the principles of natural justice. Assessee relies upon the case of Adharsha Vidyanidhi

Trust Vs. CIT 292 ITR 465 (Ker). where it was held that such decision making process by the Ld. CIT(Exemption) is vitiated and held to be invalid.

GROUND NO. 3

That the Ld. CIT(Exemption) has not given adequate time for submitting responses to noticees u/s 133(6). Notices were issued on 24/03/2023(Friday) to three parties and without waiting for their responses, the order of rejection was issued on 28/03/2023(Tuesday) in a hurried manner.

Submissions:

3.1 The application for registration u/s 12AB was submitted online by assessee on 22nd September, 2022. Section 12AB(3) lays down that order of rejection or granting registration must be passed within 6 months from the end of the month in which application was received. Accordingly, the due date was to expire on 31st March, 2023.

3.2 Ld. CIT(Exemption) had ample time (i.e. 6 months) at his disposal to call for the information from the parties u/s 133(6). However, the notices were issued to following parties at the fag end of the proceedings i.e. on 24th March, 2023(Friday):

a) Sun Pharmaceuticals Industries Ltd:

Letter dated 24/03/2023 was sent to Sun Pharmaceuticals Industries Ltd, Mumbai to furnish information till 27/03/2023. The address used for sending such letter was:

Sun Pharmaceutical Industries Ltd. (SPIL) SUN HOUSE, CTS No. 201 B/1, Western Express Highway, Goregaon (E), Mumbai 400063

Assessee-trust had working relationship with SPIL’s research centre at Gurgaon located at following address:

Sun Pharmaceutical Industries Ltd., Gurgaon R&D-III, Sarhaul Village, Sector-18, Vdyog Vihar Industrial Area, Near IFFCO Chowk, Gurgaon-122 015

Ld. CIT(Exemption) never asked or checked the address from the assessee and probably copied the address/e-mail from the internet/google. Thus, the address used for sending the notice u/s 133(6) was not valid for this purpose and letter might have never reached to the person responsible for replying.

Secondly the e-mail IDs used by the Ld. CIT (Exemption) are `[email protected]’ and ‘[email protected]’. These mail IDs are related to Link Intime Pvt. Ltd. which is a `Share Transfer Agent’ of Sun Pharmaceuticals Ltd. These IDs are used for redressing the grievances of shareholders of company. Replies cannot be expected from such mail IDs.

b) Jaipur National University (JNU)-Institute of Medical Science and Research Centre, Jagatpura, Jaipur

Letter dated 24/03/2023 was sent to JNU to furnish information till 27/03/2023, not giving them sufficient time to comply with the issued letter. JNU submitted their reply on 28th April, 2023 to the office of CIT(Exemption). Assessee is furnishing the copy of the same at PB page No. 61 to 78

c) Summon u/s 131 to Dr. Shiven Bhandari:

Summon dated 24/03/2023 was issued to Dr Shiven Bhandari to be present himself on 27/03/2023 (Monday) at 12 PM. Dr Bhandari was out of station during that period and therefore, could not appear before the Ld. CIT(Exemption). He has replied and requested for granting another opportunity. Copy of the letter is being furnished at PB No. 82

3.3 Though Section 133(6) does not specify the minimum time of replying but as a matter of fair treatment with the taxpayer, it can be expected from quasi-judicial authorities that a minimum period of 7 working days should had been granted to the notices for replying.

Hence, the appeal of the assessee deserves to be allowed.”

5. In addition to the written submissions, the ld. AR of the assessee submitted that the ld. CIT(E) has given very short notice to appear Dr. Shiven Bhandari. Therefore, he could not represent or submit the details on account of not given sufficient opportunity or the time for appearing in person was very short and prayed that if given a chance all the details that may be required and shall be provided by the assessee.

6. Per contra, the ld. DR representing the revenue categorically submitted that the assessee was given sufficient time and assessee miserably failed to support the requirement of registration and the ld. CIT(E) has rightly rejected the claim of the assessee for registration. The ld. DR also submitted that key person Dr. Shiven Bhandari was summoned by the ld. CIT(E) but could not appear.

7. We have heard both the parties and perused the material available on record. It is not disputed that the summon was duly delivered on the email-id of Shiven Bhandari ([email protected]) on 24.03.2023 at 6.23 PM. However, Dr. Shiven Bhandari, Director didn’t appear before the ld. CIT(E) on 27.03.2023 and therefore, the ld. CIT(E) could not decide the issue about the genuineness of the activities of the assessee trust. The ld. AR of the assessee pleaded that Dr. Shiven Bhandari is a renowned doctor and has other good sources of income and the time given to him to appear before the ld. CIT(E) was very short and the he could not appear for this reason. The ld. CIT(E) noted that the impugned institution has been established only for providing services to various business such as Sun Pharmaceutical Limited, Vedic Lifesciences Pvt. Ltd. Etc. for which Dr. Shiven Bhandari, Director is taking enormous amounts as salary. This whole act of the institution is completely against the spirit of a charitable institution and thus the assessee in the absence of examination of Dr. Bhandari registration was denied. The ld. AR of the assessee has submitted that summon dated 24/03/2023 was issued to Dr Shiven Bhandari to be present himself on 27/03/2023 (Monday) at 12 PM. Dr Bhandari was out of station during that period and therefore, could not appear before the Ld. CIT(Exemption). He has replied and requested for granting another opportunity. Though Section 133(6) does not specify the minimum time of replying but as a matter of fair treatment with the taxpayer. Thus, the crux as it is emerging that ld. CIT(E) directed the personal presence of Dr. Bhandari so as to determine the genuineness of the activities and the same was not establish due to shortage of time given. In light of these facts on record, we note that the assessee was deprived of the justice to be decided the merits of the registration on account of the shortage of time and the application was dismissed considering that aspect as main and the reasons for denial was only to consider the activities were genuine or not and therefore, considering the peculiar set of facts on hand and without going into the merits of the case it is imperative that the assessee should be given a fair chance to present the merits for registration. In view of the matter, the bench feels that the assessee should be give one more chance to contest the merits of the case before ld. CIT(E) and assessee is directed to produce all the relevant details as may be require by the ld. CIT(E) so as to consider the application for registration of the assessee trust. Before parting, we may make it clear that our decision to restore the matter back to the file of the ld. CIT(E) shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be decided by the ld. CIT(E) independently in accordance with law.

In the result the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 12/09/2023.