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TMI Blog2020 (9) TMI 196X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity of providing education through the medical college run by the appellant which is a charitable activity as per the provisions of section 2(15 ) of the Act, and there is no change in the aforesaid activity and hence withdrawal of registration u/s 12AA(3) of the Act on the ground that the activities of the trust are not in accordance with the objects of the trust are wholly erroneous and unsustainable in law. 3. That the Pr. CIT erred on facts and in law in alleging that appellant trust was engaged in the nefarious activities for inducting of fresh batch of students for academic session without requisite infrastructure which is in violation of clause (ii) para 4 of the trust deed, simultaneously the same was in violation of section 2(15 ) of the Act which is factually incorrect and hence misconceived. 4. That various adverse findings recorded in the impugned order are factually incorrect, legally misconceived and untenable. 5. Without prejudice to the aforesaid grounds, that the Pr. CIT erred on facts and in law in withdrawing registration under section 12 AA(3) of the Act since inception and same is without jurisdiction and contrary to the statutory provisions." 3. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2010: The Gian Sagar Medical College and Hospital submitted a compliance report by stating that all the deficiencies as pointed in the inspection have been removed. Further with regard to the deficiency of non availability of the auditorium, it was submitted that the auditorium is under construction and will be made available by the institution as per the phase wise requirement at the time of inspection of 4th renewal. Along with the compliance report, the evidences with regard to the construction of the auditorium was also submitted. 10. 22.03.2010: In view of the compliance report submitted by the assessee trust, a further inspection was carried out, and it was reported that all the deficiencies as pointed out at the time of first inspection have been removed. 11. The executive committee of the MCI on 05.04.2010 recommended for granting permission to the Gian Sagar Medical College and Hospital for admission in 4th year MBBS Course in the said medical college. 12. 22.04.2010: An FIR was lodged against Dr. Ketan Desai, President of MCI, Sh. J.P. Singh and Dr. Sukhwinder Singh, Vice-Chairman of Gyan Sagar Medical College on the allegation that for permission for admission of 4t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nduct undergraduate medical teaching. However, there is scope for improvement of clinical and laboratory services within the existing infrastructure." 18. 16/17.06.2010: On 15.05.2010, the MCI was superseded by issuing an amendment in the MCI act and replaced by Boards of Governors of 7 persons. As per this amendment the Board of Governor was to carry out the function as council. The Board of Governors had also conducted the inspection by team of 3 inspectors of the Gian Sagar Medical College & Hospital on 16/17.06.2010. In this report, it is stated that the auditorium is not available and is required at the time of admission of 5th batch. 19. 12.07.2010: The Board of Governors had after considering the said report decided to grant the permission to admit the 4thbatch of 100 MBBS students in said college for the academic year 2010-11 and accordingly the permission letter was issued on 12.07.2010. 20. 2014: An assessment under section 143(3) of the Act was framed for the AY 2011-12, wherein on the aforesaid allegation of alleged payment of illegal gratification of Rs. 2 Cr. to Dr. Ketan Desai, an addition was made by treating the same as income earned from undisclosed sources in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fourth year, since the assessee was not having requisite infrastructure, as such, Dr. Ketan Desai entered into criminal conspiracy with Sh. J.P. Singh, the New Delhi and consequently, Shri Ketan Desai was discharged by the Hon'ble Court. 25. It was argued that at time of first inspection on 11/12.01.2010, 14 deficiencies including the non availability of auditorium was pointed out, however, on 27.02.2010 when the Gian Sagar Medical College and Hospital submitted compliance report, all the deficiencies as pointed out earlier were removed, and in respect of the auditorium it was submitted that same is under construction and relevant documentary evidences with regard to the same was also furnished alongwith the compliance report. It was submitted that on the basis of the aforesaid compliance report, a further inspection was carried out on 22.03.2010 and accordingly on 05.04.2010, permission was granted to the Gian Sagar Medical College and Hospital for admission in 4th year MBBS Course in the said medical college. It was argued that, therefore, permission was granted to the Gian Sagar Medical College and Hospital purely on merits and as such, question of any quid pro quo does not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture for the approval and recommendations made by the Executive Committee of the MCI at its meeting on 05.04.2010 to grant permission for admission of 100 students in the year 2010-11 for the fourth batch of MBBS Students at the Gian Sagar Medical College & Hospital, Patiala was justified on the basis of the report of the Council of Inspectors. In such circumstances, cancellation of the registration of the assessee trust by the Pr. CIT is wholly unsustainable in law. It was submitted that u/s 12AA(3) of the Act, registration can be cancelled only when the Principal Commissioner is satisfied that activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution. In this case, the ld. AR argued that it would be seen that the learned Pr. CIT without any tangible material and purely on the basis of the allegation has held that assessee trust was involved in the nefarious activities which allegation is factually incorrect and without any material. 29. It was argued that exemption u/s 11/12 of the Act has been withdrawn on the reason that the learned Pr. CIT has withdrawn the registration granted to the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not retrospectively as had been done by the Commissioner in this case. Thus, question no. 1 is answered in the negative that is in favour of the assessee and against the revenue." 30. In view of the aforesaid facts and circumstances of the case, it was argued that order of the ld. Pr. CIT cancelling the registration be held unsustainable in law. 31. The ld. DR relied on the orders of the ld. PCIT. The order of the ld. PCIT is as under: " The assessee trust, M/s Gian Sagar Education & Charitable Trust (Regd.) is running a medical college & hospital under the name of M/ s Gian Sagar Medical College & Hospital at Banur, Punjab and Mohali. The assessee trust was registered u/s 12A of the Income Tax Act, 1961 vide CIT- XI, Chandigarh-II, Chandigarh letter F. No. CIT/ CHD- II/Tech/3612 dated 02.04 .2005 and registered at S.No. 89. It is also eligible for tax relief u/ s 80G of the I.T. Act, 1961 vide F.No. CIT- II/CHD/809/Tech 187/471 dated 07.05.2007 . 2. During the course of enquiry conducted by DDIT(Inv.), Patiala in the case of M/s PACL group of cases on 22.03 . 2010, it was brought on record that CBI had arrested Sh. Kamaljit Sing, CEO of M/s Gian Sagar Medical College & Hospi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR, material available on record, it is noticed that CBI team had arrested Sh. Kamaljit Singh, CEO of M/s Gian Sagar Medical College & Hospital while on his official duty on 22.04.2010 on the allegations that he has delivered an amount of Rs. 2 crore to Sh. Ketan Desai, President of Executive Committee of MCI through a middleman Mr. J.P. Singh. And also on the same date, Dr. Sukhwinder Singh, Vice Chairmna of M/s Gian Sagar Medical College & Hospital was chargesheeted and arrested by CBI team. The assessee trust was engaged in the nefarious activities for inducting of fresh batch of students for academic session without the requisite infrastructure. It is clearly violation of (ii) of para 4 of trust deed, simultaneously, violating the provision of Section 2(15 ) of the I.T. Act while carring out of its activity. The society was established with the sole intention of helping charitable and philanthropic venture of running of medical college and thereby seeking to claim exemption on the income so generated under section 11 and 12 of the I.T. Act. It is further noted that due to nexus of corruption by way of bribe and criminal misconduct by the assessee trust, registration of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sagar Medical College and Hospital appear more than adequate to conduct undergraduate medical teaching. However, there is scope for improvement of clinical and laboratory services within the existing infrastructure." 34. Further, we also observe that the Board of Directors, MCI vide their letter No. MCI-NO-35(41 )/2010 -MED/682 has renewed permission for admission of fourth batch of 100 MBBS students for the academic year 2010-2011 . The letter of granting approval is as under: ROARD OF GOVERNOKS IN SJUPER - SESSION OF MEDICAL COUNCIL OF INDIA MCI-NO.35(41 )/2010-MED./682 THE DEAN/PRINCIPAL Gian Sagar Medical College & Hospital, Ram Nagar, Banur, Distt. Patiala Punjab-140601 Ph.01762-520006, 507741 Fax: 01762 -520007 Email: principaloffice@ giansagar. com Sub: Gian Sagar Medical College Patiala- Renewal of permission for admission of 4 th batch of students for the academic session 2010-2011. Sir, I am directed to convey the approval of Board of Governor of Medical Council of India for renewal of permission for admission of 4t h batch of 100 (one hundred) MBBS students for academic year 2010-2011 at Gian Sagar Medical College, Patiala. The Board of Governors has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secute the sole public servant who was also charge sheeted on the same date. Learned senior counsel further submits that since the sole public servant, who was arrayed as an accused, is not being prosecuted, the charge as was framed, cannot stand. 4. Learned senior counsel, under instructions, seeks leave to withdraw the petition with l iberty to approach the trial court for inter alia modification of the charge on the ground that the sole public servant is not being prosecuted as the sanction has not been granted for his prosecution. 5. In view of the above, the petition is dismissed as withdrawn with l iberty to the petitioners, as prayed for. It is clarified that this court has neither considered nor expressed any opinion on the merits of the contentions of either of the parties. 6. The petition is disposed of in the above terms." 36. At this juncture, we have specifically asked the representative of revenue about the ongoing case. The reply of the revenue is reproduced as under: " Respected Madam, As per the records available with this office, no prosecution matter is pending against the above mentioned assessee at any stage." Regards, Piyush Kothari DCIT, CC 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ganizations which do not carry any charitable activity, cannot be granted registration. In these facts & circumstances, I am satisfied that the activities of the trust axe not genuine and not being carried out in accordance with the objects of the trust. Accordingly, after affording reasonable opportunity to the trust, registration granted u/ s 12 A vide order dated 02 .04.2005 to the assessee trust is cancelled since inception." 38. In the background of all these developments, the case of the assessee is being examined. 39. The aims & objects of the trust are as under: " i) To, establish, maintain, run, develop, improve, extend, undertake, promote, assist in all kind of research & development work to promote; assist or engage in setting up Educational institutions. Hospitals, Dispensaries, Clinics, laboratories, Medical Colleges for the welfare and uplift of the general public, particularly the socially backward group and award scholarship In India for study, research, training, apprenticeship for all or any of the above said ii) To arrange promotion of general health including sanitation and environment. iii) To organize School health programs in coordination with local doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the curses of poverty, hunger, illiteracy and diseases by starting and carrying out concentrated and intensive programmes. 4. i) To borrow, raise loans from any person, bank or financial institution in such a manner as the Trustees shall think proper or convenient for the furtherance of objects of the Trust and for this purpose the Trustees may secure repayment of these loans. To reach this objective Trustees will always try to have a balanced budget, so that revenues and expenses balance and not produce losses. The objective of the operations of the Trust is not to create a losing operations, but to operate the minimum charges for the services rendered, so as not be forced to borrow from financial institutions. ii) Trust shall not be involved in any activity which promotes violence, terrorism, fanaticism or political favouritism between the political party verses another. Trust's objective is strictly humanitarian with no political agenda of any sort whatsoever. iii) To receive grants, or aid in the form of money or material for the fulfillment of the objects of the Trust from the Central Government, State Government, Social services organizations and individuals. iv) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.] [(4 ) Without prejudice to the provisions of sub- section (3 ), where a trust or an institution has been granted registration under clause ( b) of sub-section (1) or has obtained registration at any time under section 12 A [as it stood before its amendment by the Finance ( No. 2 ) Act, 1996 (33 of 1996 )] and subsequently it is noticed that the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub- section (1 ) of section 13 , then, the Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution: Provided that the registration shall not be cancelled under this sub- section, if the trust or inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year;]]" 44. The ld. PCIT, did not have record of activities which are not in accordance with the objects of the trust. The entire order of the ld. PCIT is based on the appraisal report of DDIT( Inv.) only. We do not find mention of any material being referred by the ld. PCIT and its applicability to any of the provisions of Section 2(15 ) and/or Section 12AA(3 ) while revoking the registration. The Act envisages where a trust or an institution has been granted registration u/ s 12AA(1 )(b) or has been obtained registration at any time u/ s 12A. The ld. PCIT can cancel the registration if the conditions mentioned therein are not satisfied or the activities of the trust are not genuine or the activities are not carried out in accordance with the objects of the trust. We do not find that the ld. PCIT has brought out any of the conditions laid down as above. 45. Hence, keeping in view the entire facts of the case, that there have been deficiencies in the infrastructure as found by the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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