M/s Devki Devi Foundation vs. DIT(E) (ITAT Delhi)

The Tribunal had to consider whether the DIT(E) was justified in canceling the registration of the assessee u/s 12A on the ground that it was not carrying out its main objects and that the objects that were being carried out were nit charitable in nature but were commercial in nature. HELD by the Tribunal upholding the cancellation:

(i) The assessee could not demonstrate before us that it has undertaken any research work as per the main object. The assessee could not even establish that it has undertaken activities in consonance with the objects incidental or ancillary to the attainment of the main object as detailed in the memorandum of association. The registration for exemption under Section 12A is granted by the DIT(E) on the basis of objects as detailed in the memorandum of association. The assessee is bound to carry on its activities in accordance with the objects. In case the assessee, at a later date, after the registration granted to it, considers it expedient to undertake some other activity which is charitable in nature, it is obliged under the law to amend its objects clause in accordance with law and to submit the same before the DIT(E). No such exercise was undertaken by the assessee of amending its main object by the assessee-society. As the assessee has not undertaken its activities in accordance with the objects, it is not entitled to the benefit of exemption under Section 12A of the Act and the exemption was rightly cancelled by the DIT(E).

(ii) On merits, the assessee has not undertaken any activity worth the name, which can be said to be charitable activity. The assessee obtained prime land in an expensive area on perpetual lease at a nominal rent on the condition of providing 10% totally free indoor treatment and 20% free OPD for the weaker sections of the society. Admittedly, the assessee could not comply with this condition and has not provided the required number of beds to the poor and weaker sections of the society. The plea of the assessee that the poor people do not come forward and avail free medical services, the assessee could not be blamed, is not sustainable. It is a matter of common knowledge that the poor patients are not given admission for treatment by private hospitals as they cater to only the elite class of the society. These private hospitals have been made in a five star style and they do not allow even the entry to the poor people in its corridors. In the government hospitals, the poor patients are lying in verandahs and in open space in wait for their turn for admission for days together and it is not believable that they will not come forward for treatment in the hospital providing all modern facilities free of cost.

(iii) Also, the assessee could not make charity to a commercial organisation, although not connected with it, by paying exorbitant amounts totalling to about Rs. 40 crores in a year and should have spent the amount in a charitable manner for the deserving sections of the society. The conduct of affairs of the assessee-society are not on charitable lines and were clearly on commercial lines. The rate schedule of its charges from the patients for diagnosis, treatment or indoor facilities including surgery etc. are exorbitant and one of the highest in the metro capital city of New Delhi. We have to see the overall conduct of the assessee and, in this case, the overall conduct of the assessee leads to the only conclusion that the assessee-society is not running its affairs in a charitable manner.