TMI Blog2016 (6) TMI 377X X X X Extracts X X X X X X X X Extracts X X X X ..... Dated:- 8-6-2016 - Shri N. V. Vasudevan, JM And Shri M. Balaganesh, AM For the Appellant : Shri D. S. Damle, FCA For the Respondent : Shri Rajat Subhra Biswas, CIT, DR ORDER Per Shri M Balaganesh, AM This appeal by assessee is arising out of order of DIT(E), Kolkata vide M. No. DIT(E)/Kol/12AA(3)/2011-12/3072-74 dated 16.01.2012, withdrawing the registration granted u/s 12AA(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. The only issue to be decided in this appeal is as to whether the Learned DIT(Exemptions) is justified in cancelling the registration granted to the assessee trust by invoking the provisions of section 12AA(3) of the Act in the facts and circumstances of the case. 3. The brief facts of this issue are that the assessee is a public charitable trust created on 22.8.1980 duly registered with Income Tax department and certificate of registration u/s 12A of the Act was granted to the assessee with effect from 25.9.1980 and approval u/s 80G was granted to the assessee from time to time and last of such approval was granted vide proceedings dated 20.5.2011 in perpetuity. The main objects for which the assessee trust w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve medical therapy treatment given to the patients. Similarly running of a AC fitness centre was meant only to supplement the medical relief activities carried out by the assessee. The Learned AR stated that the assessee collected membership fees from Asst Year 2002-03 onwards from members / patients who prefer to undergo fitness therapy and pranic healing treatment to cure their diabetes and illness. Accordingly, it claimed that the incomes derived from those activities would also enjoy exemption u/s 11 of the Act. The assessee trust has been accepted as a public charitable trust by the department and exemption u/s 11 of the Act has been granted all along. The Learned AR placed on record a copy of the assessment order for the Asst Year 2004-05 framed u/s 143(3) of the Act on 29.12.2006 (pages 14 to 15 of paper book) which was framed subsequent to the commencement of Solace . In the said assessment, the Learned AO after examining the books of accounts of the assessee from Asst Years 1999-2000 to 2004-05 accepted the activities carried out by the assessee as charitable in nature and granted exemption u/s 11 of the Act. 5. The Learned DIT stated that on perusal of the Income and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not genuine and do not conform to the objective outlined in the Trust Deed. c) For that the Ld. Director of Income Tax (Exemption) further erred in holding that the activities of the Trust cannot be categorized under the limb of medical relief' within the meaning of the provision of Section 2(15) of the Act. 3) For that the Ld. Director of Income Tax (Exemption) erred in holding that term medical relief in common parlance, means only provision of facility for diagnosis of ailments through modern scientific methods and treatment of diseases through medication or surgery for achieving recovery and cure and the term 'medical relief cannot be stretched to include provision of facilities for maintaining or promoting physical/medical fitness. a) For that the Ld. Director of Income Tax (Exemption) erred in holding that the Solace is nothing but a health club and affordable by only the well-to-do sections of the society. b) For that the Ld. Director of Income Tax (Exemption) failed to appreciate the fact that the major part of the gross income of the Trust not only comprises of membership fees but also fees from patients and realization from treatment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine Centre and Solace respectively. In Sunny Park Diabetic Endocrine Centre, the trust is treating patients by Pranic Healing techniques that utilize Prana i.e life force to cure various illnesses. This technique treats diseases in a holistic way factoring in the entire health profile of a patient. He stated that Pranic Healing has achieved tremendous progress in treating various diseases and helped in preventing further deterioration of health. To perform this technique of Pranic healing there is a requirement of peaceful environment from where the healers can do their healing to cure the patients. Initially when the trust started this activity, treatment based on pranic healing was neither well accepted nor so well known. Initially many patients who came to the centre were one who had tried out other systems of treatment and pranic healing was their last hope. The Trust is treating patients without any distinction of caste and creed in its centre. The success was achieved gradually as the trust educated more and more people about the technique of pranic Healing to heal the past trauma and depression. Rising healthcare costs have also prompted people to turn towards such al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices to trade, commerce or business as the services that are provided are at a very subsidized rate when compared with the rates prevailing in the market. The receipts of the trust are not with a profit motive but essentially only to recoup the cost of discharging services. The surplus generated is utilized for the development and promotion of the trust. By no stretch of logic, the activities of the Trust can be said to be not genuine. The Trust is admittedly pursuing the objects for which it was established When the trust is engaged in bona fide activities, with the frame work of law, to pursue its objectives, it cannot be said that the activities of the trust are not genuine and there is no legally sustainable reasons for cancelling or withdrawing Registration granted u/s. 12AA of the Act. 7. In response to this, the Learned DR argued that the assessee trust was carrying out the activities in Solace which is nothing but a Spa or Health Club and was catering only to the affordable sections of the society and does not benefit the general public at large. If the argument of the assessee that activity of Pranic Healing treatment falls under the wider ambit of medical rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same in the assessment proceedings for the purpose of granting exemption u/s 11 of the Act , but that does not entitle the Learned DIT(E) to invoke the provisions of section 12AA(3) of the Act for cancellation of registration of the trust. There may be a situation that in one year the gross receipts, if fourth limb is considered as applicable to trust, might exceed ₹ 25 lacs and accordingly the objects might not be charitable in nature, whereas in another year, the gross receipts might be less than the permissible limits and accordingly the activities would be construed as charitable in nature. Hence under these circumstances, if the registration u/s 12AA of the Act is cancelled, then the maximum eligible amount prescribed in the proviso to section 2(15) of the Act itself would become redundant and unworkable. In this regard, the reliance placed by the Learned AR on the decision of the Hon ble Madras High Court in the case of Tamil Nadu Cricket Association vs DIT(E) reported in (2014) 360 ITR 633 (Mad) is directly on the point and is favourable to the assessee, wherein it was held that :- 32. Thus, in contrast to section 12AA(1)(b) of the Income-tax Act, 1961, where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 2(15) of the Act was only to curtail institution, which under the garb of general public utility , carry on business or commercial activity only to escape the liability under the Act thereby gain unmerited exemption under section 11 of the Act. 8.1.1. We find that similar issue was addressed by the Co-ordinate Bench of Mumbai Tribunal in the case of Ghatkopar Jolly Gymkhana vs DIT(E) reported in (2013) 40 taxmann.com 207 (Mumbai-Trib) dated 23.10.2013 wherein the facts before the Mumbai Tribunal are as below:- The assessee a club was engaged in encouraging and promoting sports, pastimes and athletics and social contract amongst its member assessee was registered as a charitable trust, falling in the category of advancement of any other objects of general public utility as per the definition of charitable purpose given under section 2(15). The Director (Exemption) noticed that the assessee was carrying out activities in the nature of trade, commerce or business, etc. and gross receipts therefrom were in excess of ₹ 10 lakhs and by taking resort to the newly added proviso w.e.f. 1-4-2009 to section 2(15), he cancelled the registration of assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the specified cut-off, the activity would no longer be considered as charitable and the income of the trust/institution would not be eligible for tax exemption in that year. Thus an entity, pursuing advancement of object of general public utility, could be treated as a charitable institution in one year and not a charitable institution in the other year depending on the aggregate value of receipts from commercial activities. The position remains similar when the first and second provisos of section 2(15) get substituted by the new proviso introduced w.e.f. 1-4-2016 vide Finance Act, 2015, changing the cut-off benchmark as 20% of the total receipts instead of the fixed limit of ₹ 25,00,000/- as it existed earlier. 3. The temporary excess of receipts beyond the specified cut-off in one year may not necessarily be the outcome of alteration in the very nature of the activities of the trust or institution requiring cancellation of registration already granted to the trust or institution. Hence, section 13 of the Act has been amended vide Finance Act, 2012 by inserting a new sub-section (8) therein to provide that such organization would not get benefit of tax exemption in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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