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TMI Blog2019 (7) TMI 1914X X X X Extracts X X X X X X X X Extracts X X X X ..... substance. - ITA No. 1504 & 1505/JP/2018 - - - Dated:- 22-7-2019 - SHRI RAMESH C. SHARMA, AM SHRI VIJAY PAL RAO, JM Assessee by : Shri PC Parwal (CA) Revenue by: Shri BK Gupta (CIT) ORDER PER VIJAY PAL RAO, JM : These two appeals by the assessee are directed against two separate orders of the ld. CIT (Exemptions), Jaipur both dated 29.10.2018 passed under section 12AA(3) and (4) read with section 293C of the IT Act as well as section 80G(5)(vi) of the IT Act whereby the registration granted under section 12AA was withdrawn by the ld. CIT (Exemptions) and consequently the application filed for approval of exemptions under section 80G was also rejected. First, we take up the appeal challenging the order of ld. CIT (Exemptions) withdrawing/cancellation of the registration granted under section 12AA of the IT Act. The assessee has raised the following grounds :- 1. The ld. CIT (E) has erred on facts and in law in cancelling the registration granted to the assessee trust u/s 12AA(3) of the IT Act, 1961 by incorrectly holding that activities of the trust are not as per its objects and therefore not genuine. 2. The appellant craves to alter, amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would result in invention of medicines which would provide relief from the particular disease for the whole society and public at large. The ld. A/R has submitted that it does not make any difference whether such clinical trial is conducted for MNCs and assessee received fees from the MNCs when the said fee is utilized for incurring expenditures for conducting such trials and for organizing various medical camps free of costs. The activity of the assessee is philanthropic in nature and merely because the said activity would be beneficial for the MNCs it cannot be held that the activities of the assessee are not charitable. The ld. A/R has pointed out that there is no change in the objects of the assessee when it is granted registration till the impugned order is passed by the ld. CIT (Exemptions). Therefore, once the registration is granted and there is no change in the objects of the assessee, the same cannot be withdrawn by drawing incorrect inference that the activity of carrying out clinical trials which ultimately help in invention of medicines for treatment of incurable diseases is not a philanthropic activity. In support of his contention he has relied upon the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her charitable activity has been carried out by the assessee. The ld. D/R has pointed out that since the assessee's activities are not carried out in accordance with the objects on which the registration was granted, therefore, the ld. CIT (Exemptions) is justified in withdrawing/cancellation of the registration granted under section 12AA of the IT Act. 5. In re-joinder, the ld. A/R submitted that the assessee is providing medical aids to the patients through these clinical trials and then even if the life of a patient is saved due to such clinical trial, it is a charitable activity. 6. We have considered the rival submissions as well as the relevant material on record. The assessee trust was granted registration vide order dated 21.12.2015 on the basis of the objects of the assessee trust as reproduced by the ld. CIT (Exemptions) in para 3 as under :- 03. It is pertinent to state that the trust deed of the applicant trust envisages following objects :- (a) Relief of the poor including in general the establishment, maintenance and support of institutions or funds for the relief of any form of poverty. (b) Medical relief particularly :- To grant aid for medic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... armaceutical companies. This fact is not in dispute that the assessee has been carrying out the activities of clinical trials on behalf of the various pharmaceutical companies, the details of which are as under :- The assessee has undertaken the job of clinical trial on behalf of as many as 14-15 pharmaceutical companies which are all MNCs. The assessee has not disputed that as per the terms and conditions agreed by the parties, the final product as outcome of the clinical trial would be owned by the pharmaceutical companies who sponsored the clinical trial undertaken by the assessee. As per one of the clinical trial agreement dated 29th June, 2016 between Novartis Healthcare Private Limited and other persons, we find that one M/s. Eternal Heart Care Centre Research Institute Pvt. Ltd. is the party to the said agreement and Consultant Dr. Krishna Kumar Sharma of the said M/s. Eternal Heart Care Centre Research Institute Pvt. Ltd. has also signed the said agreement as Chief Consultant, Pulmonary Sleep Medicine being an Investigator of the clinical trial. The payments of the clinical trials were made by these MNCs to various persons including the Investigator and assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as an outcome of their regular business activity. Therefore, doing such work on behalf of the said company would not be falling in the ambit of charitable activity carried out by the assessee as it is clear from the objects of the assessee that the main object of the assessee trust is to establish, maintain and support institutions or funds for relief of any form of poverty. Secondly, to grant aid for medical relief to poor persons including free distribution of drugs, medicines or support to the institution such as hospitals, dispensaries and other treatment centers which may help and alleviate human suffering. By any stretch of imagination or expanding the term charitable activity, the clinical trial carried out by the assessee on behalf of the pharmaceutical companies does not fall in the expanded meaning and term of charitable activity. There is no dispute that this activity does not fall in any of the pre-dominant object of the assessee trust. From the financial details and particularly income and expenditure account of the assessee for the years 2016-17 and 17-18 it is manifest that the entire receipt is from clinical trial activity and major expenditure incurred by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the profits of the SPONSORS, such trials cannot be termed as a charitable activity. In fact, the claim of the applicant leads to a self-contradictory proposition of contractual charity. Hon'ble Kerala High Court has disapproved of such charity in its decision in the case of CIT vs. Annadan Trust (2018) 258 Taxman 54 (Kerala), where it is held as follows :- The sub-contract of the assessee cannot be considered to be a charitable activity, especially since the supply of food is with the funds of the State Government, received by the assessee as contract amounts. The activity of the assessee confined to such sub-contracts cannot be deemed to be a charitable activity and, hence the Trust is not entitled to Registration u/s 12AA... The assessee, as rightly found, is engaged in a business and there can be no registration as a charitable institution. (2) On examination of Income Expenditure accounts of various years, it transpires that applicant trust has performed meager and insignificant activities (as envisaged in objects of the Trust Deed) in comparison to the receipts of the trust. A comparison table is mentioned hereunder :- Particulars ..... 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