TMI Blog2015 (7) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... inly, be an activity towards the objects as specified. Merely because, running of an Allopathic hospital is not specifically mentioned, it does not necessarily mean that the same would be ultra vires the objects, as establishment of an Allopathic hospital does assist the Assessee in its object of improving the Ayurvedic system and taking assistance from the Allopathic system of medicine. Any activity reasonably incidental to the object would not be ultra vires the objects. As explained by the Assessee, the modern investigation techniques are equally utilized for treatment under Ayurvedic system. AO and the Tribunal erred in concluding that the Assessee’s activities were in excess of its objects. Running an integrated hospital would clearly be conducive to the objects of the Assessee. The trustees have carried out the activities of the trust bonafide and in a manner, which according to them best subserved the charitable objects and the intent of the Settlor. Thus the activities of the Assessee cannot be held to be ultra vires its objects. The AO and the Tribunal were unduly influenced by the proportion of the receipts pertaining to the Ayurvedic Research Institute and the hospita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vires its objects. Decided in favour of the Assessee. - ITA 141/2013 - - - Dated:- 27-7-2015 - S. Muralidhar And Vibhu Bakhru,JJ. For the Appellant : Mr C.S. Aggarwal, Senior Advocate with Mr Prakash Kumar and Mr Gautam Jain For the Respondent : Mr. Raghvendra Singh, Junior Standing Counsel JUDGMENT Vibhu Bakhru, J 1. The Appellant, a Charitable Trust, has preferred the present appeal under Section 260A of the Income Tax Act, 1961 (hereafter the Act ) impugning the order dated 3rd February, 2012 passed by the Income Tax Appellate Tribunal (hereafter the Tribunal ) in ITA No. 5681/DEL/2010. 2. By the impugned order, the Tribunal allowed the appeal filed by the Revenue assailing the order of the Commissioner of Income Tax (Appeals), which in turn had allowed the appeal preferred by the Assessee against the assessment order dated 30th December, 2008 passed in respect of the Assessment Year 2006-07. The Assessing Officer (hereafter AO ) had denied the exemption claimed by the Appellant (hereafter the Assessee ) under Section 11 and 12 of the Act as the AO was of the view that the activities of the Assessee were not in accordance with its objects. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hy, be segregated. 6. Insofar as the Assessee s claim for depreciation was concerned, the Tribunal held that deprecation on assets, used for providing relief through Ayurvedic system of medicine or used in education and research relating to Ayurvedic system of medicine, was allowable notwithstanding that the expenditure on purchase of the assets was exempted under Section 11(1)(a) of the Act. However, insofar as the assets purchased for providing medical relief through Allopathic system of medicine was concerned, the Tribunal held that depreciation would not be available if the expenditure incurred on purchase of the assets had been exempted under Section 11(1)(a) of the Act. 7. Aggrieved by the impugned order, the petitioner preferred the present appeal. This Court, by an order dated 15th July, 2013, framed the following questions of law for consideration:- (1) Whether, the Income Tax Appellate Tribunal was justified in law in Confirming the action of the Assessing Officer in denying the claim of exemption u/s 11 12 of the Income Tax Act, 1961, despite the fact that the assessee is a charitable institution engaged in running a hospital (both allopathic and ayurvedic), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ispensing treatment under the allopathic system of medicine. 8.3 The Assessee has been running a hospital and Ayurvedic Research Institute from the site at Lajpat Nagar-III, since 1958 and it is not disputed that there has been no significant change in the nature of the activities undertaken by the Assessee since 1958. The Assessee was granted registration under Section 12A of the Act in December 1974. 8.4 It is not disputed that the Assessee runs dedicated indoor facility and manages 40 beds where Ayurvedic treatment is provided free of cost. It is also asserted by the Assessee that it has made significant contribution in advancing Ayurvedic medicine. The Assessee further claims that the hospital run by it at Lajpat Nagar dispenses treatment and training both in Ayurvedic system of medicine as well as Allopathy, to give best results to the patients. Be that as it may, it is not disputed that treatment under the Ayurvedic system of medicine as well as Allopathic system of medicine is dispensed to the patients at the hospital run by the Assessee. However, since the setting up of the hospital/institution in 1959-60, the gross receipts pertaining to activities of the Ayurvedic R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of medicine was being rendered in the hospital and the Assessee had been endeavoring to advance the cause of Ayurveda by drawing on the Allopathic system of medicine. He also referred to a letter dated 9th December, 2008 submitted by the Assessee to the AO, which explained the activities undertaken by the Assessee in the field of Ayurvedic medicine. 12. Mr. Aggarwal further contended on behalf of the Assessee that the registration granted to the Assessee under Section 12A of the Act has not been revoked. He referred to Section 12A(3) of the Act and contended that in cases where it is found that the activities of the Assessee are not in conformity with the objects of the trust, the registration granted under Section 12A could be revoked by the Commissioner Income Tax. And, as this was not done in this case, it would not be open for the AO to go behind the registration. Mr. Aggarwal submitted that it was not open for the AO to examine the issue whether activities of the Assessee were in conformity with the object since the same had been considered by the Commissioner Income Tax at the time of granting registration under Section 12A of the Act. Mr. Aggarwal also referred to the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for charitable purposes, the exemption under Section 11 of the Act would not be available if the same had not been applied towards the objects of the Trust. He stated that in the present case, it was not disputed that the activities of the Assessee fell within the scope of charitable purposes as defined under section 2(15) of the Act, however, this was not sufficient for availing exemption under Section 11(1) of the Act. 16. Mr. Singh referred to the decision of the Supreme Court in Commissioner of Income Tax, Ujjain v. Dawoodi Bohara Jamat: (2014) 364 ITR 31 (SC) in support of his contention that the exemption under Section 11(1) of the Act would be available only if the income of the Assessee was applied for its objects. He also referred to the decision of a Division Bench of this Court in Director of Income Tax (Exemption) v. NBIE Welfare Society: (2015) 370 ITR 0490 (Delhi) in support of his contention. 17. Mr. Singh contended that the principle of consistency would not be applicable in the facts of the present case as there had been no definite determination that the hospital run by the Assessee was in accordance with the objects of the Trust. He further contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the purposes for which the property is held in Trust. Both the conditions i.e. the income should be derived from the property held in Trust for charitable or religious purposes and the condition that the income is applied for such purposes, are cumulative. 22. We are unable to accept the contention that the expression such purposes would mean any charitable or religious purpose, even if the said purpose is not the purpose for which the property is held in Trust. The contention that as long as the Assessee applies the income from a property held in Trust for charitable or religious purpose, to any charitable or religious purpose, the exemption under Section 11(1)(a) of the Act would be available, notwithstanding that the purpose for which the income is applied is not the purpose for which the property is held in Trust, cannot be sustained as the same would be contrary to the plain language of Section 11(1)(a) of the Act. In order for any income to be excluded from the scope of total income, the same must be derived from a property held in Trust for a charitable or religious purpose and must also be applied for that purpose. 23. In Dawoodi Bohara Jamat (supra), the Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , by notice in writing given to the Assessing Officer in the prescribed manner, the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed ten years; (b) the money so accumulated or set apart is invested or deposited in the forms or modes specified in sub-section (5): 25. The expression such purposes , obviously, has the same meaning as used in Section 11(1)(a) of the Act. Section 11(2) of the Act has to be read in conjunction with Section 11(1) of the Act. While Section 11(1)(a) of the Act provides for exemption for income applied during the relevant previous year, Section 11(2) of the Act provides for conditions subject to which such income could be accumulated for use in later years. 26. In the aforesaid circumstances, the Assessee would be entitled to the exemption under Section 11(1)(a) of the Act, only if the income is applied for the charitable purpose for which the properties are held in Trust. 27. We also do not find any merit in the contention that the AO is not entitled to inquire whether the income is applied towards the charitable or religious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stions of law arose from the order of the Tribunal:- (A) Whether, on the facts and circumstances of the case, the Income-Tax Appellate Tribunal was justified in law in holding that the objects of the trust restricting benefit to the members of the club would fall within the purview of the act of general public utility under section 2(15) of the Income- Tax Act constituting as a section of public and not a body of individuals? (B) Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was justified in law in holding that registration under section 12A was a fait accompli to hold the Assessing Officer back from further probe into the objects of the trust? 31. A Division Bench of the Gujarat High Court held that the questions of law raised by the Revenue were covered by its earlier decision in the case of Hiralal Bhagwati v. CIT: (2000) 246 ITR 188 and dismissed the appeal filed by the Revenue. The Revenue preferred a Special Leave Petition against the decision of the Gujarat High Court. Whilst the Supreme Court declined to entertain the SLP in respect of the first question on the ground that the same was covered by the decision in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spital, this hospital is pioneer in the field of Ayurvedic Education and improving Ayurvedic system of medicine by Ayurvedic Research. Over the past several years the hospital has developed new techniques of tendering services in the ayurvedic medicine; to name a few: 1. Scientific application of Panchkarma and medicine which includes : a. Pizhichil Treatment (Sarvang Sneh Dhara) for Deformed Rheumatoid Arthritis (Amavata) b. Kati Basil for Disc Prolarse (Katishula, Katistambha), c. Virechan Kriya : Keeping in view the values of Serum Electrolytes, Lipid Profile for Psoriasis and skin diseases. d. Shirobasti Trreatment for Insomnia, Hypertension, Alopacoa. 2. Developed Various combination of drugs like: a) Raj Rasayan for Prostate Enlargement b) Gridhrasihar Churna for Sciatica c) Mukhdushikahar Churna for acne, Hyper pigmentation d) Shwitrahar Churna for leucoderma 3. To spread awareness and educate the ayurvedic physicians, the following work has been done; a. Tenth Century granths have been translated into Hindi like Ashtang Hridya, Charak Samhita, Bhashjya Ratnawali etc. b. The following books and lit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. Rhenatold d. Psoriasis e. Bronchial asthma f. Leucoderma g. Hepatitis h. Hepatitis B i. Hypertension j. Paralysis k. CVA l. Deadddiction programme for alcohol for drugs and smoking m. Psychological problems. 6. In order to promote Ayurvedic Medicine, help is taken from Modern Medicine system and trust runs various allopathic services both in medicine and surgery such as Department of Medicine (Gastroenterology, Respiratory Pulmonology, Cardiology, Oncology and internal Medicine): Department of surgery (General Surgery, Uro Surgery, cosmetic and plastic surgery, paediatric surgery); Department of Orthopedics; Department of Anesthesia; Department of Paediatrics; Department of Neonatology, Department of Nephrology; Department of Obs Gynae; Department of Neurology; Department of Dental; Department of Ophthalmology; Department of ENT and Department of physiotherapy. This is unique hospital that integrates both Ayurvedic system of medicine and allopathic services to give best results to the patents and which helps in improving the treatment and obtain best results out of this. The Ayurvedic hospital utili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing Ayurveda and continuously improving the Ayurvedic system of medicines, patents wanting allopathic treatment are being provided Allopathic treatment as well. This is unique Hospital where in order to improve Ayurvedic system of medicines and create awareness about the Ayurvedic system of medicines are being adopted. The name of the Hospital is not Moolchnd Hospital but Moolchand Khairati Ram Hospital and Ayurvedic Research Institute. 34. The assertion made by the Assessee that it provides treatment under the Ayurvedic system at the hospital in question and is involved in the advancement of the Ayurvedic medicine is not disputed by the AO. It is also not disputed that the hospital run by the Assessee is an integrated hospital offering treatments under the Ayurvedic system of medicine as well as under the Allopathic system of medicine. The Revenue also does not dispute the Assessee s contention that the treatment under the Ayurvedic system of medicine draws significantly from investigation techniques used under modern medicine system. In the circumstances, the limited issue to be addressed is whether running of such hospitals which provides Allopathic as we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive to the objects of the Assessee. The trustees have carried out the activities of the trust bonafide and in a manner, which according to them best subserved the charitable objects and the intent of the Settlor. Thus the activities of the Assessee cannot be held to be ultra vires its objects. The AO and the Tribunal were unduly influenced by the proportion of the receipts pertaining to the Ayurvedic Research Institute and the hospital. In our view, the fact that the proportion of receipts pertaining to the Ayurvedic Research Institute is significantly lower than that pertaining to the hospital would, in the facts of the present case, not be material. Undisputedly, significant activities are carried out by the Assessee for advancement and improvement of the Ayurvedic system of medicine in the institution established by the Assessee and though the receipts from the Allopathic treatment are larger, the same does not militate against the object for which the institution has been set up and run. 39. The next issue to be addressed is whether it was open for the AO to take a view different from the one that has been accepted by the Revenue for the past several decades. It is well esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be subjected to such vagaries. Indisputably, the powers of AO are wide but its exercise cannot be undisciplined. In cases where there is a palpable mistake or the position accepted by the Revenue in earlier years is apparently erroneous, the AO would not be bound to accept the view of his predecessors. However, in cases - such as the present case - where the Assessee s claim for exemption has been accepted for several decades, it would not be open for AO to think of new grounds, which at best raise contentious issues, to cast a wider net of tax. It is trite law, that if two views are possible, the one favoring the Assessee must be adopted. This rule would apply a fortiori in cases where the Assessee s claim has been consistently accepted by the Revenue in the past. Thus, in cases where the claim of an Assessee has been accepted in earlier years, unless the claim of an Assessee is found to be devoid of any basis or plainly contrary to law, it would not be open for the AO to take a view contrary to the position which has been accepted by the Revenue in earlier years and has been permitted to sustain for a significant period of time. 43. In the facts of the present case, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
