2013 (10) TMI 211 - ITAT DELHI

Object of Trust - scope of section 2(15) of the Income Tax Act – Held that:- Pre-dominent object of the trust is to alleviate extreme sufferings and cure diseases by providing practical and functional training of Astang yog, Raj yog, Dhyan Yog, Hath Yog, Ashan and Pranayam etc. as received from the ancient tradition pronounced by the rishies and munis - The various other objectives provided in the trust deed are merely independent/ancillary to the main objection which is to provide medical relief and impart education and do not in any way constitute/objectives of general public utility as contended by Revenue - Case of the appellant does not fall within the last limb of the definition of charitable purpose given u/s 2(15) of the Act – Relying upon the judgment of Hon’ble Supreme Court of India in the case of Thiagarajar Charities v. ACIT [1997 (4) TMI 7 - SUPREME Court], it has been held that ancillary activity undertaken by the assessee was to afford relief to poor falling within scope of section 2(15) of the Act and was not an object of general public utility - Business being only a means of achieving the object of the trust, exemption could not be denied - Appellant trust falls within the purview of providing 'relief to the poor' – Decided in favor of Assessee.

Sub section (4A) of section 11 also exempts income tax of a business carried on by the trust so long as the business carried on by the trust is (a) incidental to the attainment of main objects (b) feeds the charitable objects (c) separate books of accounts are maintained in respect of the same, even on fulfillment of the aforesaid conditions profit from such business are exempt u/s 11/12 of the Act – In the present case, activity of manufacturing and sale of ayurvedic preparations has been undertaken only for the purpose of effectuating the charitable objective of providing 'medical relief to the society at large on a genuine need was felt to provide superior quality ayurvedic preparations at economical prices in order to attain effective medical results. Only because the activity carried on yielded" profits a negative inference cannot drawn that the activity was undertaken with the sole intention of earning profits. It is also pertinent to note that the total donations/voluntary contributions received by the appellant trust during the assessment year under consideration amounted to ₹ 3,89,14,100/- only. Whereas the total revenue expenditure incurred by the appellant trust in the assessment year under consideration for undertaking its charitable activities amounted to ₹ 48,54,93,383/- (excluding depreciation).

In the present case, income and expenditure account for the year ending 31st March, 2009 that substantial capital expenditure has also been incurred by the appellant trust in pursuing its charitable activities - Donations/contributions received by the appellant trust constituted only a minuscule portion of the heavy outlay of expenditure incurred in pursuing the charitable activities. The meaning of expression not for purpose of profit is no longer res integra the test being what is the predominant object of the activity whether it is to carry out a charitable purpose or to earn profit ? If the predominant object is to carry out as charitable purpose and not to earn profit the organization would not lose its charitable character merely because some profits arises from the activity.

In the present case, authorities below have failed to appreciate that the business set up and held by the appellant under trust is to sub serve the predominant charitable objects of providing medical relief education and relief to poor - Separate books of accounts were maintained and the entire profits are for charitable objects, the conditions prescribed in section 11(4A) of the Act, too were fulfilled. The revenue authorities have failed to appreciate that out of total sales of ₹ 168.12 crores of Divya Pharmacy medicines of ₹ 4.2 crores only were sold from the hospital sales counter – Decided in favor of Assessee.