M/S. PUBLIC HEALTH TECHNOLOGIES TRUST,NEW DELHI vs. ITO(E), NEW DELHI

O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the assessee against the order of the ld CIT (Exemptions), New Delhi dated 29.09.2014 wherein on an application made by the assessee for registration u/s 12AA of the Income Tax Act was rejected. 2. The assessee has raised the following grounds of appeal:-

1. (a) That the Ld. AO has acted arbitrarily, whimsically and on presumptive basis, contrary to the principles of natural justice and provisions of law, in conducting the assessment/registration proceedings and framing the assessment, a guess work without applying the mind independently and framing the assessment mechanically, and the same stands vitiated being bad in law and liable to be quashed.

1. (b) That the Ld. AO has passed the order without there being any basis for the same and the assessment order so passed is bad in law and void ab-initio.

2. That the Ld. AO has mis-conducted the proceedings and has not followed the procedures laid down in the Act, but has conducted the proceedings in a predetermined, biased manner with the sole intention of rejecting the Exemption without affording proper and just opportunity to the appellant.

Page 2 of 8 3 That the main objective of our Trust is to provide Medical Relief to the poor masses & the same is covered under Public Charitable purpose. 4. That the main objective of our Trust is to provide our Device Swasthya Slate Tab to every nook & corner of the country for the benefit of the poor & the Common Man.” 3. On reading of the grounds of appeal filed by the assessee raising four grounds of appeal, It is apparent, that only grievance of the assessee is rejection of its application u/s 12AA of the Income Tax Act.

4. Brief facts of the case is that the assessee is a charitable trust formed by one Shri Kanav Kahol by deed of declaration of trust 6.012.2013 as a settler for carrying out following objects: i. To promote, organize and support activities undertaken for providing medical relief to the marginalized community, especially to the economically and socially weaker sections of people ii. To promote education in general and more particularly to advance the education of the public in general on" health care, conduct workshops and training facilities for nurses, healthcare workers etc and to increase the general awareness of public on the same. iii. To provide medical relief to the poor and needy through cheaper diagnostic and healthcare apparatus by developing and providing affordable healthcare products, solutions, including technology, diagnostic tools and other products for charitable purposes, through study, evaluation, research and development through its endeavours and linkages with Public Health Foundation of India, to develop and provide affordable healthcare products, solutions, including technology, diagnostic tools and other products for charitable purposes through study, evaluation, research and development through its endeavours and linkages with Public Health Foundation of India iv. To develop products and solutions that would empower and enable the grassroots level health workers in India and in similarly placed countries for the benefit of India, to ensure access and affordability of modern healthcare technology to the economically and socially weaker sections of people v. to undertake, organize, assist, promote, support and /or co-ordinate all activities aimed at creating and stimulating an awareness to address the increasing health challenge faced by India vi. to evolve, devise, undertake implement, promote, participate, support and/or coordinate the strategy and plan through the help of various individuals, corporate houses, bilateral and multilateral agencies, institutions, universities, associations, international and national bodies and countries, non-governmental organizations, governments including government departments, federal organization, state governments, provincial and municipal bodies, government undertaking of India and other countries focusing on but not limited Page 3 of 8 to creating higher standards of public health addressing capacity, driving health oriented research, consultancy and affordable technology initiative for shaping public health policies in India and other countries, offering customized programs and solutions to approach public healthcare needs as allowed under laws of India vii. to open, found, establish, promote, set-up, maintain, assist, support and, or help in setting up, running and, or maintaining of libraries, research centers, laboratories and information services to promote and facilitate the objectives of the trust as allowed under laws of India viii. to undertake, organize, establish, promote, setup, maintain, assist, support and/or - facilitate study courses, workshops, conferences, lectures, internships and other similar activities in furtherance of the trust as allowed under laws of India ix. the objects of the trust hereby created shall be for charitable purposes for public at large as outlined above and shall be maintained and administered as such within the territory of India without and distinction or discrimination as to caste, creed, religion, nationality, color, race, gender or status.”

5. Thereafter, on 26.03.2014, assessee filed an application in form No. 10A of the Income Tax Rules for registration of charitable or institution u/s 12A (a) of the Income Tax Act 1961. Along with the application, assessee submitted notes on activities claiming that it has launched reproductive maternal newborn child and adolescent health programme in 6 districts of Jammu and Kashmir through ‘Swasthya Slate’, a diagnostic tool. It was further stated that on installation of 4200 systems across the districts it is the largest mobile diagnostic and mobile health project in the world. In support of the activities carried out, it filed income and expenditure account for the period March 2014 to August 2014. The ld CIT on perusal of the accounts noted that assessee has received many advances and the natures of such advances were examined. It was noted by him that applicant could not produce the documentary evidences with regard to the advances particularly the nature of transaction and further advances given to service providers and suppliers. The ld CIT further asked for the copy of the MOU with the public health foundation of India (PHFI), largest lender to the trust, which was not furnished. Further, it was noted by the ld CIT (E) that assessee intends to work in the field of developing diagnostic tools and other health care products. As according to the ld CIT the above activities were manufacturing, assembling and trading in Swasthya Slate for price therefore, the activities are in the nature of advancement of any other object Page 4 of 8 of general public utility and are in the nature of trade, commerce and business within the meaning of section 2(15) of the Income Tax Act. However, it was also noted that applicant though claims to be manufacturing diagnostic tools has not carried out any such activities and no such manufacturing facilities were developed. In the end, it was noted that as Mr. Kanav Kahol who is a team leader of public health foundation of India (PFHI) who transferred funds to the applicants trust when that entity received 5 million dollars development grant from Norway India partnership initiative in December 2013. Therefore, it was inferred from this financial transaction by ld CIT that the applicant trust is only going to be a trading channel for Swathya Slate and applicant trust merely will act as an agent. Hence, he held that the activities of the applicant were under the category of objects of general public utility and is in the nature of business. As the gross receipt of the assessee for the period was exceeding Rs. 1 crore he held that assessee is not eligible for registration u/s 12AA of the Act in view of the proviso to section 2 (15) of the act. He further held that when the registering authority feels that the trust is not created for charitable purposes he can refuse the registration at the threshold. He further referred to the amendment made in the provisions of section 2(15) from AY 2009-10. Ultimately, he held that while granting the registration both the objectives as well as the actual activities including the genuineness of the activities is to be seen and he held that the whole transaction does not appear to be genuine. He further held that there are no reasons as to why the PHFI choose to give advances to the trust, which was created by one of its own employees. Further, on examination of the income and expenditure account he held that Rs. 60 lakhs has been spent on administrative expenses and the opening stock and purchases are Rs. 5572960/- which has resulted in excess of income on expenditure of Rs. 5561888/-. Therefore, it was held that assessee has not done any charitable work and the only activity that is carried out was for generating of income, which cannot be held to be carrying out its Charitable objective. Therefore, he held that since the assessee has not applied any part of its income on objective stated in MOA which were claimed to be ‘charitable’ in nature assessee does not fulfill the criteria laid down u/s 12AA and 12 read with section 11 and it is premature to grant registration at this stage. Consequently, he rejected the application Page 5 of 8 for grant of registration u/s 12AA of the assessee vide order dated 29.09.2014. Aggrieved by this the assessee is in appeal before us.

6. The ld Authorised Representative of the assessee submitted that while granting registration u/s 12AA, ld CIT cannot go on the presumption and surmises. He submitted ld CIT has inferred about the trading and manufacturing activities of the trust without evidence. He stated that trust does not have any such activities. He referred to the objects of the trust and submitted that they are charitable in nature as all the objects are related to medical relief and healthcare. He submitted that the ld CIT should have examined only the objects of the trust whether they are charitable or not. He further stated that trust was formed on 6th December 2013 and filed its application on 26.03.2014 therefore, there are no major activities undertaken by the assessee and as assessee is going to promote the Swasthya Slate in the Govt. organization it has incurred professional charges, staff salary, rent etc. and for supply to got has stock in hand. As an income, it has received grant only. None of this expenditure can be said to be spent on any other object other than the medical relief. The mere incident of excess of income over expenditure cannot lead to the fact that assessee is carrying on business. He therefore submitted that rejection of the application of the assessee by the ld CIT is erroneous.