TMI Blog2015 (9) TMI 845X X X X Extracts X X X X X X X X Extracts X X X X ..... involved, this will not change the character of activity. The Assessee has demonstrated as to how these allied manufacturing activity has assisted its key objects in the area of education and medical reliefs. The receipts from manufacturing activities have been admittedly applied towards the objects of the trust. Therefore, in our considered view, manufacturing activity allied to education and medial reliefs etc. resulting in profits is no handicap for holding the activities to be charitable in nature under section 2(15) of the Act irrespective of fact that it may involve carrying on of commercial activities provided income from such activities are utilized towards charitable purposes. This view is also fortified by the CBDT Circular no. 11/2008 dated 19/12/2008. The very definition of ‘charitable purpose’ under S. 2(15) is inclusive in nature and not mutually exclusive. The Assessee is entitled to relief in any of the sub clause dehors the relief for other activity available under other sub clause. The stand of the Assessee that the receipts from manufacturing activity has been applied for furtherance of the principle objects also remains uncontroverted. As a logical corolla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to substantiate his case. 8. The appellant prays leave to add, alter, clarify, amend and or withdraw any grounds of appeal as and when the occasion demands. 3. Briefly stated, the Assessee is a Charitable Trust registered under Bombay Public Trust Act, 1950. The trust is duly registered under section 12A w.e.f. 31.07.1975 and recognized under section 80G w.e.f. 01.04.2009 vide approval dated 10.11.2009. It also emerges that the assessee institution is established since 1924 and working towards charitable purposes for more than 80 years. The activities of the trust are run through the medium of five sections and a consolidated income expenditure account and balance sheet of the assessee (Ayurved Seva Sangh) is prepared based on the audit reports of the various sections. The details of the said sections are as under :- Section Activity Ayurved Mahavidyalaya The Education Institute is affiliated to Pune University and the Maharashtra University of Health Science and Imparts Education of Ayurved upto Post Graduate Level. Arogyashala Hospital It has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufacturing unit which is being run on commercial basis. The net profit of ₹ 27,25,450/- is of substantial nature and it is not for the purpose which include any relief of the poor, education or medical relief, etc. as contemplated in the definition of charitable purpose under section 2(15) of the Act. The assessee, on the other hand, relied upon the copy of the trust deed and submitted before the Assessing Officer that the main object of the trust is to promote Ayurveda and create awareness of Ayurveda as enshrined in ancient Shashtras and Granthas. In order to fulfill the main object, the trust is manufacturing Scientific Ayurvedic Medicines besides their other activities. So, it is to be understood that the manufacturing activity is undertaken to fulfill the object of the trust and not with the objective of carrying on any business activity/profit motive. The objects of the trust are medical relief and educational in nature and hence any activity undertaken in pursuance of these objects are in the nature of medical relief and educational in nature. Thus, the activity of manufacturing Scientific Ayurvedic Medicines falls under medical relief and educational category ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.25 TOTAL 3,63,22,866 100 7. From the above tabulated data, it is the case of the assessee that 99% of the application of funds is towards educational and medical purposes. The surplus from Aushadi Bhavan is transferred to Head Office section and therefrom it is applied for Ayurved Rugnalaya (Medical) and Ayurved Mahavidyalaya (Education) and P.G. Course (Education). In the light of the above facts, it is the case of the assessee that the objects of the assessee trust are towards relief to the poor, education and medical relief. 8. The Assessing Officer did not find merit in the contentions of the assessee. The Assessing Officer observed that making available medical help and Ayurvedic Medicines at lower cost is hollow in the absence of any documentary evidences. He relied upon the gross profit ratio and net profit ratio and also expenses towards advertisement, sales incentive scheme, etc. to support his observation that the manufacturing activity is commercial in nature. Likewise, visit of students to manufacturing unit and awareness created cannot be accepted as charitable activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. The assessee also submitted that 99% of the application of funds are towards the object of the trust, namely, education and medical purposes. The surplus from manufacturing unit i.e. Aushadi Bhavan is transferred to Head Office section and applied for its charitable objects. 11. The assessee further relied upon CBDT Circular No.11 of 2008 dated 19.12.2008 and contended that proviso to section 2(15) of the Act is not applicable to assessee trust whose object are either (i) Relief to poor; (ii) Medical relief; and, (iii) Education, even if they incidentally carry on a commercial activity subject to the following conditions (1) the business should be incidental to the attainment of the objectives of the entity. (2) separate books of account should be maintained in respect of such business . 12. On facts, separate books of account are maintained for Aushadi Bhavan section and business is incidental to the attainment of the objectives of the trust and therefore considering the charitable objects and in the light of CBDT Circular (supra) proviso to section 2(15) is not applicable to the case of the assessee trust. Therefore, the assessee trust is entitled to exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the above objects of the trust. In view of the above charitable object, the trust has been registered under the Bombay Public Trust Act, 1950 and also under section 12A of the IT Act. The CIT(A) agreed to the contention of the assessee that the manufacturing of medicines is incidental activity of the trust to attain the main objects of the medical relief and medical education, as in the absence of Ayurvedic Medicines, the objects of the trust cannot be attained. The CIT(A) further observed that the separate books of account has been maintained in respect of activity of Aushadi Bhavan. He negated the contention of the Assessing Officer in drawing similarity with the pharmaceutical companies. He observed that the object of the pharmaceutical companies is that of earning profit and distributing the same to the shareholders as dividend or bonus shares and therefore such companies are not and cannot be registered under Bombay Public Trust Act as public charitable trust. Accordingly, it will be incorrect to make comparison with the pharmaceutical companies. In the light of the facts broadly noted above, he concluded that the trust is engaged in the activity of relief to poor, educat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Assessing Officer. In furtherance, he primarily contended that the manufacturing activity carried on by one of sections of the assessee trust is clearly a manufacturing activity earning substantial profits qua the total profits and is clearly commercial in nature. The objects of the assessee trust cannot be said to be towards charitable purposes as contemplated under section 2(15) r.w. proviso thereto. His main plank of contention is that the activity of manufacturing of medicines and selling thereof is neither be termed educational nor medical relief. The Ld. Departmental Representative for the Revenue adverted attention to section 10(23C)(iiiab) and (iiiac) of the IT Act and vehemently argued that the income-tax reliefs are given to the educational institution under section (iiiab) of the Act and reliefs are given to hospital and other institutions engaged in imparting medical reliefs under section (iiiac) of the Act. He submitted that in view of separate subsections i.e. (iiiab) and (iiiac) to section 10(23C), the relief can be either taken under education or towards medical treatment and not both. In order to reflect this intention of legislature, separate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d upon the order of the CIT(A) and submitted that the Assessing Officer has misread and misconstrued the facts of the case. He submitted that the assessee is pursuing charitable objects for long and is duly registered under section 12A of the Act and is also recognized under section 80G of the Act. The Memorandum of Association of the assessee clearly reflects the object of the assessee trust which is established for education and medical reliefs, etc.. One of its sections, namely, Ayurved Mahavidyalaya is substantially added by the Government grants. The manufacturing activity being its section, namely, Aushadi Bhavan which resulted in profits is only incidental to its primary object i.e. imparting education and providing medical reliefs to the needy. The manufacturing activity is not the object of the trust per se but a conduit to achieve the primary objects. Further section 2(15) of the IT Act which defines charitable purpose also covers the activities of the assessee. As per the definition, charitable purpose includes relief of the poor, education, medical relief and advancement of any other object of general public utility, etc. The assessee trust is established for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty, etc.. However, the first proviso thereto carves out an exception to the main definition and holds that any other object of general public utility shall not be charitable purposes, if it involves carrying on any activity in the nature of trade or commerce or business, etc. irrespective of nature of use or application of income of such activity. Therefore, proviso to section 2(15) gives differential treatment to the objects namely reliefs of the poor, education and medical relief, etc. vis- -vis advancement of any other object of general public utility. It is the case of the assessee trust that its activities are in the field of education and medical relief and therefore proviso to section 2(15) of the Act does not come into play at all, whereas it is the case of the Revenue that the nature of the activity conducted by the assessee falls within the ambit of advancement of any other object of general public utility . 27. The relevant object clause of the Assessee trust as set out in its Memorandum of Association is extracted below to ascertain the main objects of the Assessee Trust 4) The aims and objects of the Ayurved Seva Sangh Nashik 4.1) To impart instruc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity to be covered by the embargo provided in the first proviso. Once the activities of the Assessee are educational and medical in nature, the considerations of element of business activity and profit motives embedded therein etc. are rendered wholly irrelevant under S. 2(15) of the Act. The Assessee trust has been granted registration u/s 12A of the Act by the revenue on the basis of the aforesaid object clauses. The activities carried out by the Assessee are not found by the Revenue to be ultra vires the objects. It is true that merely because the CIT has granted registration u/s 12A will not by itself preclude the AO from examining compliance u/s 11 of the Act. However, in the present case, no cogent case of non compliance has been made out. Merely because some manufacturing activities in the nature of alleged business activities are involved, this will not change the character of activity. The Assessee has demonstrated as to how these allied manufacturing activity has assisted its key objects in the area of education and medical reliefs. The receipts from manufacturing activities have been admittedly applied towards the objects of the trust. The relevant first proviso to S. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
