PER SUSHMA CHOWLA, JM The assessee has filed the appeal against the order of Commissioner of Income Tax-I, Ludhiana dated 25.05.2012 relating to assessment year 2012-13 against the order passed under section 80G(5) of the I.T. Act, 1961.
2. The assessee has raised following grounds of appeal:
1. That the Ld. Commissioner of Income Tax-l, Ludhiana has erred in withdrawing exemption granted to the society u/s 80G(5) of the Income Tax Act, 1961 by passing order u/s 80G (5) r.w. Rules 11AA (5) of the Income Tax Act, 1961.
2. That the Ld. CIT-I, Ludhiana has erred in not considering that The Christian Medical College, Ludhiana is an Educational and Research Institution serving humanity irrespective of caste and creed and not religious Society.
3. That the Ld. CIT-I, Ludhiana has also erred in not considering that the Christian Medical College, Ludhiana Society was established since 1949-50 and had been granted Registration u/s 12A as well as exemption u/s 80G since then from time to time. 2
4. That the Ld. CIT-I, Ludhiana has erred in giving his finding that the Society does not fulfill the necessary conditions for continuation of exemption u/s 80G(5)(iii) read with explanation-3 and read with Rule 11 AA (5) of the Income Tax Act, 1961.
5. That the various decision cited by the Ld. CIT-I to give his finding that the society in question is religious in nature and not charitable Institution are not applicable in the case of assessee society.
6. That the CIT-I has failed to appreciate that as per regular returns filed before the Income Tax department, no part of the funds have been spent ever on the religious activities as alleged by the CIT while withdrawing the exemption u/s 80G(5).
7. That the CIT-I has failed to appreciate the true spirit of the aims and objections of the Society which has been enumerated in detail at page-1 of the Memorandum and Article of Association.
8. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.
3. The issue in the present appeal is against the withdrawal of exemption granted to the assessee society u/s 80G(5) of the Act by the Commissioner of Income-tax-I Ludhiana.
4. The brief facts of the case are that the assessee society was established in the financial year 1949-50 and had been granted registration u/s 12A of the Act. The assessee had also been granted exemption u/s 80G of the Income-tax Act and the last exemption was granted vide order dated 28.07.2008 upto assessment year 2011-12. The assessee filed application in form No. 10G for renewal of exemption u/s 80G of the Act on 22.12.2010. The Commissioner of Income-tax Ludhiana, on the perusal of Memorandum of Association and bye-laws found that the aims and objects of the society were in violation of Explanation 3 to Section 80G(5)(iii) of the Act. Show Cause Notice dated 09.04.2012 was issued to the assessee for withdrawal of exemption granted u/s 80G(5) of the Act. The reply of the assessee is incorporated at pages 2 to 5 of the order of the Commissioner of Income-tax. The Commissioner of Income-tax in para 3.1 at page 5 & 6 of the order referred to the aims and objects of the Society and observed that the object/aim was of religious nature. The Commissioner of Income-tax 3 was of the view that as per Explanation-3 under section 80G(5C) of the Act, charitable purpose does not include any purpose, the whole or substantially the whole, of which is of a religious nature. Reliance was placed upon Arsha Vijnana Trust Vs D.P.Sharma, IRS, Director of Income Tax (Exemptions) (2007) 295 ITR 437 (A.P) and Upper Ganges Sugar Mills Ltd. Vs CIT, reported in 227 ITR 578 (S.C) wherein it has been held that the trust was of a religious nature and hence, not eligible for exemption u/s 80G(5) of the Income-tax Act,1961. The Commissioner of Income-tax, thus held as under :
4. The Society is running a medical college and hospital. From above it is clear that many parts in the aims & objects of Society are religious in nature. The decision of the Honble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust Vs. Commissioner of Income Tax, Mysore, 101 ITR 234 (S.C.) is entirely applicable to such aims & objects and also the case of Arsha Vijnana Trust v. D.P. Sharma, IRS, Director of Income Tax (Exemptions) (2007) 295 ITR 437 (AP).
5. In view of the above discussion, it is clear that the Society does not fulfill the conditions necessary for continuation of exemption u/s 80G(5)(iii) read with Explanation 3 and read with Rule 11AA(5)of the l.T. Act,1 961.
5. In view of the above, the exemption u/s 80G(5) of the Act granted to the assessee society was withdrawn vide order dated 25.5.2012. The assessee is in appeal against the order of the Commissioner of Income- tax-I, Ludhiana.
6. The ld. AR for the assessee referred to the show cause notice issued by the Commissioner of Income-tax placed at pages 28 & 29 of the Paper Book under which it was alleged that the activities carried on by the assessee society were religious in nature. Our attention was drawn to the aims and objects of the assessee society placed at pages 5 onwards of the Paper Book and it was pointed out by the ld. AR for the assessee that the assessee society was recognized as charitable trust u/s 12A of the Income-tax Act till date. The said registration has not been 4 withdrawn upto date. Further, it was pointed out by the ld. AR for the assessee that there is no merit in the reliance placed upon by the Commissioner of Income-tax on different case laws wherein no charitable activity was being carried out. In the alternative, it was submitted by the ld. AR for the assessee that at best, the activities of the trust could be said to be both charitable and religious as some portion of the medical seats were reserved for Christian students. However, the hospital run by the assessee society catered to all persons of all religions and creed and there was no bar. The ld. AR for the assessee elaborately took us through the list of free patients which reflected the free medical services provided to even non-christians.
7. The ld. DR for the revenue pointed out that the primary aims and objects of the Memorandum of Association were to take care of the Christians and the said primary object was achieved by running a hospital, which could not be so run only for the treatment of minorities and hence, persons of other religions were trained and also engaged in the hospital for giving services. However, while granting the exemption u/s 80G(5) of the Act, it is the primary object which had to be considered, was the contention of the ld. DR.
8. We have heard the rival contentions and perused the record. The assessee society was established since 1949-50. The assessee society was granted registration u/s 12A of the Income-tax Act vide order dated
21.10.1999. The assessee was also granted exemption u/s 80G(5) of the Act and the last renewal of the said exemption was vide order dated
28.2.2008 upto 31.3.2011. The application for renewal of exemption u/s 80G of the Act was made by the assessee in form No. 10G on 22.12.2010 which was refused by the Commissioner of Income-tax-I, Ludhiana on the ground that the objects of the assessee society were religious in 5 nature, which were not eligible for exemption u/s 80G(5) of the Act.
9. The aims and objects of the society are as under :
III. "The Society, is an educational and research institution of an all India character established and run by the Minority Christian community. Its primary aim is to educate and train Christian men and women as health professionals, in the spirit of Jesus Christ for the healing ministry of the Church in India. a) The main objectives of the Society shall be as follows:
1. To manage, maintain and run the Christian Medical College, Christian Dental College Christian College of Nursing, Christian College of Physiotherapy, Institute of Allied Health Sciences and similar such other institutions which might be established by the Society in future, in Ludhiana, in the true spirit of Christian service, ideals and principles in order to equip men and women for service in the promotion of health and the relief of suffering.
2. To establish, manage, administer, maintain, control and own Institutions of Health Services, Research Centres, Allied Hospitals, Universities and rural dispensaries in any state of India or abroad.
3. To affiliate, collaborate and enter into agreements, arrangements and contracts, with Institutions of health services, research centres and Universities in India or abroad. Further, allied objects of the assessee society are as under :
b) Without prejudice to the generality of the above and to that end in furtherance of the alms and objectives of the Society.
1. To provide medical, nursing and paramedical education according to standards Said down from time to time by the Government, University or other Statutory bodies, and to arrange for the admission of students and their courses of instruction and to provide all necessary facilities possible in connection therewith.
2. To provide non-formal and continuing education programmes in the health sciences.
3. To provide facilities for research into the causes of disease, their prevention and treatment
4. To care for the sick and the suffering with love and compassion as commanded by Jesus Christ, and to restore them to health of body and mind, giving due recognition to spiritual need in its relation to health without consideration of caste, race, creed, religion and language. Provided further that the facilities of health professional training and medical care are also available to all others without consideration of caste, race, creed, language and religion.
10. The issue arising in the present appeal is in relation to the renewal of registration granted under section 80G(5) of the Act. The ld. AR for 6 the assessee fairly pointed out that in view of the provisions of section 293C of the Income Tax Act, the Commissioner of Income Tax is empowered to look into the renewal of registration already granted under section 80G(5) of the Act. In the present case, the CIT had issued a show cause notice dated 09.04.2012 for withdrawal of exemption granted under section 80G(5) of the Income Tax Act. The Commissioner of Income Tax was of the view that the primary aim of the assessee society was to educate and train the Christian men and women as professionals in the spirits of Jesus Christ. The Commissioner of Income Tax, Ludhiana, in view of the point No.5 of Memorandum of Association observed that the assessee was engaged in training primarily Christians in medical, dental, nursing and other health professional students by providing health services to the community and the nation. As per the Commissioner of Income Tax, the assessee society was being run for providing the health services to particular community of Christians only and the main object of the assessee society was observed to be welfare of particular religion and community i.e. Christians. The main object of the society was held to be religious under section 80G(5)(iii) read with Explanation 3 below section 80G(5C). The society was held to be not covered under charitable purposes. Rejecting the explanation of the assessee, the Commissioner of Income Tax held the society of not having fulfilled the conditions necessary for continuation of exemption under section 80G(5)(iii) read with Explanation 3 under section 80G(5C) of the Act and Rule 11AA(5) of the Income Tax Rules.
11. Section 80G(5) provides as under : 80G(5) This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfils the following conditions, namely : 7 (i) where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and or clause (23AA)] [or clause (23C)] of section 10 : [Provided that where an institution or fund derives any income, being profits and gains of business, the condition that such income would not be liable to inclusion in its total income under the provisions of section 11 shall not apply in relation to such income, if (a) the institution or fund maintains separate books of account in respect of such business; (b) the donations made to the institution or fund are not used by it, directly or indirectly, for the purposes of such business; and (c) the institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not be used, directly or indirectly, for the purposes of such business;]] (ii) the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose; (iii) the institution or fund is not expressed to be for the benefit of any particular religious community or caste; (iv) the institution or fund maintains regular accounts of its receipts and expenditure; (v) the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India or under section 25of the Companies Act, 1956 (1 of 1956), or is a University established by law, or is any other educational institution recognised by the Government or by a University established by law, or affiliated to any University established by law, or is an institution financed wholly or in part by the Government or a local authority [(vi) in relation to donations made after the 31st day of March, 1992, the institution or fund is for the time being approved by the Commissioner in accordance with the rules made in this behalf and] [(vii) where any institution or fund had been approved under clause (vi) for the previous year beginning on the 1st day of April, 2007 and ending on the 31st day of March, 2008, such institution or fund shall, for the purposes of this section and notwithstanding anything contained in the proviso to clause (15) of section 2, be deemed to have been, (a) established for charitable purposes for the previous year beginning on the 1st day of April, 2008 and ending on the 31st day of March, 2009; and (b) approved under the said clause (vi) for the previous year beginning on the 1st day of April, 2008 and ending on the 31st day of March, 2009.] 8
12. Explanation 3 under section 80G(5C) reads as under :
In this section charitable purpose does not include any purpose the whole or substantially the whole of which is of religious nature.
13. In the facts of the present case, we find that the assessee was registered as charitable institution under section 12A of the Income Tax Act and the said registration is being continued to be granted to the assessee society even for the year under consideration. The primary aim of the assessee society was to train men and women as health professionals in the spirit of Jesus Christ and the said facility of training health professionals and medical care was to be provided without consideration of cast, race, creed, language and region. Though in the primary para of the objects of the assessee society, it is mentioned that the primary aim was to educate and train Christians men and women as health professionals but in actual fact, the assessee society has been running and maintaining the Christian Medical College, Christian Dental College, Christian College of Nursing and other institutions, though on the ideals and principles in the spirit of Christian services, but for training the professionals of any caste, creed, race, religion etc. Similarly, the medical care is being provided by the assessee society to all irrespective of their caste, creed or religion etc. The ld. AR for the assessee was directed to furnish the information in respect of the concessions being allowed to the patients by the assessee society and necessary evidence has been filed on record in this regard which clearly establish the case of the assessee that the said facilities of providing concessional medical and health care is provided to persons of any caste, creed or religion. The assessee society was established and run by a minority Christian community, but as the aim and object of the assessee society is to train professionals in the field of medical and health-care 9 and also to provide medical facilities in their hospitals to all persons of any caste, creed, race, religion etc., we are of the view that the activities carried out by the assessee society are charitable in nature and consequently, the assessee is entitled to the registration under section 80G(5) of the Act. We find no merit in the order of the Commissioner of Income Tax in this regard and reversing the same, we hold that the renewal of registration under section 80G(5) is to be granted to the assessee society. The grounds of appeal raised by the assessee are, thus allowed.
14. In the result, appeal of the assessee is allowed. Order Pronounced in the Open Court on this 30 th day of August, 2013. Sd/- Sd/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 30 th August,2013 Poonam Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR By Order Assistant Registrar, ITAT, Chandigarh
