ARTEMIS EDUCATION & RESEARCH FOUNDATION ,GURGAON vs. CIT(E), CHANDIGARH

PER KULDIP SINGH, JUDICIAL MEMBER :

Since common questions of facts and law have been raised

in both the inter-connected appeals, the same are being disposed

off by way of consolidated order to avoid repetition of discussion.

(hereinafter referred to as ‘the applicant’) by filing the present

appeals being ITA Nos.7425/Del/2017 & 8/Del/2021 sought to set

aside the impugned orders dated 20.09.2017 & 29.09.2017

2 ITA No.7475/Del./2017 ITA No.8/Del./2021 respectively passed by the Commissioner of Income-tax

(Exemptions), Chandigarh on the grounds inter alia that :-

“ITA No.7425/Del/2017

“ITA NO.8/Del/2021

3 ITA No.7475/Del./2017 ITA No.8/Del./2021 3. Briefly stated the facts necessary for adjudication of the

controversy at hand are : Application in Form No.10A seeking

registration u/s 12A of the Income-tax Act, 1961 (for short ‘the

Act’) and for approval u/s 80G of the Act respectively moved by

the Appellant/Applicant being a Trust registered under Societies

Registration Act has been rejected by ld. CIT(E) on the ground that

the prime intent of the applicant is to pursue only medical research

which is not covered under the term ‘education’.

Tribunal by way of filing the present appeals.

parties to the appeal, gone through the documents relied upon and

orders passed by the revenue authorities below in the light of the

facts and circumstances of the case.

& Research Foundation’ has following aims and objects to pursue

its alleged charitable activities :-

(i) to coordinate and support clinical & medical research and development for pharmaceuticals, drugs and medical equipments within and outside India in order to continuously improve the standards of medical relief;

(ii) to acquire and establish or maintain one or more professional colleges as Engineering Colleges,

4 ITA No.7475/Del./2017 ITA No.8/Del./2021 Medical Colleges, Dental Colleges, Pharmacy Colleges, Management Colleges, etc.;

(iii) to promote, assist and adopt the development of advanced training/study courses in the arena of medicine, nursing, pharmacology, paramedical and medical administrative courses across the globe;

(iv) to generate advanced knowledge through research related education and training, social, communication, medical, biological, genetic, population education, demography, etc.;

(v) to publish, print and circulate books, papers research journals, periodicals and other materials in reference with motto of the trust.

furnish details/clarifications, which applicant has filed. After

examining the details/documents furnished by the applicant, ld.

CIT(E) proceeded to hold inter alia that firstly, all medical research does not qualify for the label ‘education’ in the sense of the term

explained by the Hon’ble Apex Court in the case of Sole Trustee, Loka Sikshan Sansthan 101 ITR 234; secondly, 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; thirdly, that the

applicant has failed to bring on record how its activities are meant

to percolate down to the public at large; and fourthly, that there is

5 ITA No.7475/Del./2017 ITA No.8/Del./2021 possibility that researches which would be carried out in future

within the premises of settler company would in turn further

enhance commercial potential of the hospital; and thereby rejected

the application u/s 12A of the Act.

the applicant/assessee u/s 12A of the Act by the ld. CIT(E) that all

medical research does not qualify for the label ‘education’ in the

sense of the term explained by the Hon’ble Apex Court in the

case of Sole Trustee, Loka Sikshan Sansthan 101 ITR 234 is

concerned, when we examine the aims and objects of the applicant

trust it is not only established for medical research rather for

various other charitable aims and objects viz. establishing

professional colleges, hospitals, health promotion facilities like

health club, nature club facilities, yoga and meditation facilities,

entertaining facilities and community centre/religious centers.

to be seen for the purpose of according approval u/s 12A of the

Act. So, we are of the considered view that application moved u/s

12A of the Act cannot the throttled merely by relying upon

selective aims and objects by making observation that there is a

possibility that researches being carried out by the applicant within

the premises of the settler company would in turn further enhance

6 ITA No.7475/Del./2017 ITA No.8/Del./2021 the commercial potential of the hospital. These are mere

perceptions entirely based upon surmises, particularly in view of

the undisputed fact that applicant research foundation is

inextricably linked with the Artemis Hospital to carry out its

research. When it is a harsh reality that medical research being one

of the aims and objects of the applicant is to be carried out in the

hospital/settler company merely declining the registration u/s 12A

of the Act on the ground only does not augur well with the intent

and purpose of the Act. Because of all these factors, if applicant is

being used for accelerating its commercial activities of the

Hospital, the same are to be separately and independently

examined by the AO at the time of assessment in the light of the

provisions contained u/s 11 & 12 of the Act.

Hon’ble Allahabad High Court in case cited as CIT (E) vs.

Yamuna Expressway Industrial Development Authority – (2017) 395 ITR 18 (All.) has held that, “it is not within the purview of

Commissioner to examine whether the assessee was entitled to

exemption u/s 11 or 12 since that was within the jurisdiction of AO

and not the Commissioner (E).” Hon’ble High Court further held

that, “A body or institution which is functioning for advancement of

objects of general public utility and whose activities are not in the

7 ITA No.7475/Del./2017 ITA No.8/Del./2021 nature of trade, business or commerce or sheer profit making, is

entitled to claim itself to be constituted for "charitable purposes"

and seek registration under section 12A(1) of the Income-tax Act,

1961. Charitable purpose primarily means that the predominant

object must be to promote welfare of general public. An ancillary

activity, if any, to that general one performed by the institution

would not render such institution "non-charitable".

for registration as to how ld. CIT (E) will provide registration after

getting satisfaction with the aims and objects of the society and not

to sit on the chair of AO as all these facts ought to be taken care by

the AO at the time of assessment. Declining the registration on the

ground that medical research to be carried out in the hospital of

settler company would convert the charitable activities into

commercial activities is mere surmises, hence not sustainable in the

eyes of law.

ld. CIT(E) to cancel the registration of the Trust if activities of

Trust are not in consonance with its charitable aims and objects

enshrined in the constitution. So, at the stage of according

registration u/s 12AA of the Act examining the aims and objects

like AO is not permissible.

8 ITA No.7475/Del./2017 ITA No.8/Del./2021 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.

years of its incorporation as put forth by the ld. CIT(E) is

concerned, applicant has brought on record details of funds in and

out since its inception showing that the applicant is at the initial

stage and carrying out research activities might not have taken

place at full swing because of rejection of the application by the ld.

CIT (E) u/s 12A of the Act. Details of funds given by the applicant

for FYs 2013-14 to 2020-21 are as under :-

9 ITA No.7475/Del./2017 ITA No.8/Del./2021

Particulars FY FY FY 2015- FY 2016- FY 2017- FY 2018- FY 2019- FY 2020- 2013- 2014- 16 17 18 19 20 21 14 15

Initial 500000 - - - - - - - contribution by the settler of Trust Income Donation* 650 - 5000000 5100000 4000000 4000000 4150000 1800000 Education Training - - 55130 - - - - - Income Total income 650 - 5055130 5100000 4000000 4000000 4150000 1800000 from all sources EXPENDITURE Audit Fees 5618 5618 5700 29482 - 29800 42400 34000 Consumption of re-agents - - - - 4703 99554 138271 106701 for testing Salary 650 - 4976995 5080154 4231253 3799600 3938470 1743450 expenses Building rent - - 11 12 12 12 12 12 Registration - - - - - - - - charges Rates & Taxes - - - 12200 860 3987 - - Legal & - - - 5000 45000 70000 - 5900 professional Bank Charges - - - 230 - - - - Travelling & - - - - 7565 2250 - 3354 Conveyance Expenses Total 6268 5618 4982706 5127078 4289393 4005203 4119153 1893417 Expenditure Net (5618) (5618) (72424) (27078) (289393) (5203) (30847) (93417)

*All the donations are from Artemis Medicare Services Limited (PAN AAFCA0130M)

the applicant Trust is not merely on the paper but keeping its

activities alive for further carrying out the charitable activities

enshrined in its aims and objects. So, the reason recorded by the

ld. CIT (E) is not sustainable to reject the application moved by the

applicant.

10 ITA No.7475/Del./2017 ITA No.8/Del./2021 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. But, in the instant case, applicant Trust is not pursuing one

activity rather many of charitable aims and objects are there on its

Board as enshrined in its constitution. Again, all these facts and

queries raised by the ld. CIT(E) are to be taken care of at the time

of examining Income-tax return filed by the applicant in due course

in the light of sections 11 & 12 of the Act.

applicant u/s 12A that there is possibility that researches which

would be carried out in future within the premises of settler

company would in turn further enhance commercial potential of the

hospital is concerned, again we are of the considered view that all

these findings are based on surmises because at this stage

commercial angle of any activities can only be assumed but can

only be decided during the assessment proceedings. It is a matter

of fact that medical research has to be carried out in the premises of

Artemis Hospital/settler company and any such medical research

11 ITA No.7475/Del./2017 ITA No.8/Del./2021 would otherwise facilitate the general public to have a specialized

treatment in the hospital of their choice. We would like to record

that medical research cannot be branded as a mode of

advertisement to enhance the profitability of the hospital because

both are existing in entirely separate domain.

Chamber of Commerce – (1965) 55 ITR 722 (SC) has enhanced

the scope of charitable purpose for a Trust under the Income-tax by

holding that it was not necessary that the object should be to

benefit the whole of the mankind or even all persons living in a

particular country or province. It was sufficient if the intention

was to benefit a section of the public as distinguished from

specified individuals by returning following findings :-

“That the expression "object of general public utility" was not restricted to objects beneficial to the whole of mankind. An object beneficial to a section of the public was an object of general public utility. To serve a charitable purpose, it was not necessary that the object should be to benefit the whole of mankind or even all persons living in a particular country or province. It was sufficient if the intention was to benefit a section of the public as distinguished from specified individuals. The section of the community sought to be benefited must undoubtedly be sufficiently defined and identifiable by some common quality of a public or impersonal nature: where there is no common quality uniting the potential beneficiaries into a class, it might not be regarded as valid.”

12 ITA No.7475/Del./2017 ITA No.8/Del./2021

Procedure sought to condone the delay of 1462 days on the ground

that the delay is attributed to bonafide mistake under the bonafide

belief that challenge of rejection of section 12A of the Act would

suffice to cover the rejection of section 8G approval. Ld. DR for

the Revenue has opposed the application that when the matter is

being pursued by trained tax practitioner it is not a ground to

condone the delay.

issue of delay in the light of the fact that the appeal challenging the

order passed by the ld. CIT (E) u/s 12AA of the Act has been filed

well within time it can be taken as a bonafide mistake that

challenging the rejection of approval u/s 80G is automatic. Even

otherwise negligence or indolence on the part of a trained

practitioner who has been hired to protect the interest of the

applicant, cannot be attributed to the litigant by declining the relief

in the interest of justice. So, we find it a reasonable ground to

condone the delay and appeal against the order passed u/s 80G is

ordered to be registered to be put up for hearing.

considered view that ld. CIT (E) has erred in rejecting the

13 ITA No.7475/Del./2017 ITA No.8/Del./2021 application for registration u/s 12AA of the Act and consequent

approval u/s 80G of the Act filed by the applicant, hence ld.

CIT(E) is directed to grant registration u/s 12AA of the Act to the assessee/applicant forthwith with approval u/s 80G of the Act.

Consequently, both the appeals filed by the assessee/applicant are

allowed. Order pronounced in open court on this 24th day of November, 2021.

Sd/- sd/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated the 24th day of November, 2021. TS