2015 (9) TMI 440 - AT - Income Tax

Grant of registration u/s 12AA denied - as per DIT(E)objects of assessee do not come under the purview of charitable purpose as defined u/s 2(15) and the entire activity of collecting sperm/egg, arranging facility for surrogacy, etc, which is in the nature of medical services are actually undertaken by M/s Diana Medical Services Pvt. Ltd. and assessee has been created only on paper - Held that - Unless corroborative evidences are brought on record to establish that the entire activity of bringing donors, collecting sperm/egg, storage etc., has been solely undertaken by hospital, assessee s role cannot be ignored. Therefore, without making any enquiry to find out the exact nature of activity of assessee and the hospital, it cannot be presumed that the entire activity of collection of sperm/egg and utilization in treatment of infertile couples is the activity of hospital. For the aforesaid reasons, we are unable to approve the decision of ld. DIT(E) in refusing to grant registration u/s 12AA of the Act to assessee. As far as the first condition is concerned, there cannot be any doubt that aims and objects of assessee society are of charitable nature. The only other condition which is required to be satisfied is genuineness of its activities. On perusal of income and expenditure statement of assessee as well as other materials, it is not visible how assessee has created awareness amongst general public whether by holding seminars, workshops etc. or through any other mode, for collecting sperm/egg from donors. Assessee has also to explain how it maintains the sperm/egg bank, since, according to its own admission it does not have infrastructure facility for storage gametes. That being the case, assessee has to bring on record the terms and conditions on which it has utilized the facilities of a third party and the consideration paid for such utilization. Similarly, though, ld. AR submitted before us, the amount collected from childless couples, who undergo treatment for infertility are only voluntary contribution but he has not furnished details as to how many patients have received sperm/egg and what is the contribution made by each patient. This is very much essential to prove the fact that assessee is not undertaking any commercial activity of trading in sperm/egg, and it is a no profit organisation. Further, nature and purpose of operational grant received by assessee from hospital also needs to be explained clearly because the MoU between the assessee and the hospital provides for payment of consideration to assessee at mutually agreed rate for utilization of items taken from the bank. All these facts have to be brought on record by the society to dispel the doubts entertained by ld. DIT(E) that entire activity relating to collection and storage of gametes and utilization in treatment of infertility is carried on by the hospital and the activity is of a purely commercial nature. Since all these aspects have not at all been examined by ld. DIT(E) while rejecting assessee s application for grant of registration u/s 12AA matter requires re-examination by ld. DIT(E). - Decided in favour of assessee by way of remand.

Summary

Issues Involved:
1. Whether the objects of the assessee society fall under the definition of "charitable purpose" as per section 2(15) of the Income Tax Act.
2. Whether the activities of the assessee society are genuine and not merely a name lender for M/s Diana Medical Services Pvt. Ltd.

Issue-wise Detailed Analysis:

1. Objects of the Assessee Society as Charitable Purpose:
The primary contention was whether the activities of the assessee society, which involve maintaining a sperm and egg bank and creating awareness for gamete donation, fall within the definition of "charitable purpose" under section 2(15) of the Income Tax Act. The assessee argued that their activities are aimed at medical services and are essential for treating infertility, which is a significant medical issue. The society claimed that creating awareness and facilitating gamete donation are activities that serve the general public utility and are thus charitable. The Tribunal observed that the aims and objects of the society, as mentioned in the Memorandum of Association (MoA), indeed involve creating awareness and setting up facilities for gamete donation, which align with the definition of medical services. Therefore, the Tribunal found that the activities of the assessee society come within the purview of "charitable purpose" as defined under section 2(15) of the Act.

2. Genuineness of Activities and Allegation of Being a Name Lender:
The second issue was whether the assessee society was genuinely carrying out its claimed activities or merely acting as a name lender for M/s Diana Medical Services Pvt. Ltd. The Director of Income Tax (Exemptions) [DIT(E)] had rejected the application for registration under section 12AA on the grounds that the entire activity of collecting sperm/egg and arranging surrogacy was undertaken by M/s Diana Medical Services Pvt. Ltd., and the assessee society was created only on paper. The Tribunal noted that the DIT(E)'s conclusion was based on presumptions and lacked corroborative evidence. The Tribunal emphasized that the relationship between the President of the society and the Managing Director of the hospital, or the use of hospital facilities by the society, does not necessarily imply that the society is a mere name lender. The Tribunal highlighted the need for a detailed examination of the society's activities, including how it creates awareness, maintains the sperm/egg bank, and the terms of its collaboration with the hospital. The Tribunal also pointed out that the society must provide evidence of its activities, such as conducting seminars or workshops, and details of contributions received from childless couples. The Tribunal concluded that the matter requires re-examination by the DIT(E) to determine the genuineness of the society's activities.

Conclusion:
The Tribunal set aside the impugned order of the DIT(E) and remitted the matter back for a fresh decision after providing the assessee society an opportunity to explain its case. The Tribunal directed the DIT(E) to re-examine the objects and activities of the society in detail, ensuring that all relevant aspects are considered to determine whether the society qualifies for registration under section 12AA of the Act.

Result:
The appeal of the assessee was treated as allowed for statistical purposes. The Tribunal pronounced its decision in the open court on 26.8.2015.