TMI Blog2019 (7) TMI 1889X X X X Extracts X X X X X X X X Extracts X X X X ..... elf is held in trust and the income from such business is applied or accumulated for application for the charitable or religious purpose of the trust, the conditions prescribed in section 4(3)(i) and fulfilled and the income is exempt from taxation. Authorities below have grossly erred in holding that the appellant's activities in relation to production and sale of ayurvedic preparations are not incidental to its main objective as the same are commercial in nature. We thus hold that in the present case the 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. Furthermore, since 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. - Decided against revenue. - ITA NO. 779/DEL/2017 - - - Dated:- 31-7-2019 - SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER For the Department : Ms nidhi Srivastava, C.I.T. DR For the Assessee : Shri Rohti Jain, Advocate ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in purpose of the Trust was to avoid tax under the garb of charitable activities. The Assessing Officer also noted that the claim of the assessee being a charitable Trust was not accepted by the Assessing Officer in assessment years 2009- 10, 2010-11, 2011-12 and 2012-13 and such denial of exemption was upheld by the Ld. Commissioner of Income Tax (A) but the ITAT had reversed it. The Assessing Officer also noted that against the order of the ITAT, the department had approached the Hon ble High Court of Uttarakhand. Thereafter, the Assessing Officer proceeded to tax the surplus of the assessee as net profit from the business undertaking and after denying the assessee s claim of exemption u/s 11, proceeded to compute the total income of the assessee at ₹ 19,88,53,210/-. While recomputing this income, the Assessing Officer also made disallowance u/s 43B of the Act to the tune of ₹ 1,18,722/-, made addition on account of interest on TDS to the tune of ₹ 15,584/- and also made a disallowance on account of PF and ESI contribution made after due date to the tune of ₹ 3,70,331/-. 2.2 The assessee s appeal before the Ld. Commissioner of Income Tax (A) was allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal for assessment years 2009-10, 2010-11 and 2011-12. The copies of the said orders were placed on record. The Ld. AR also submitted that the revenue s appeal against the order of the ITAT in assessment year 2009-10 had been dismissed by the Hon ble High Court of Uttarakhand in ITA No. 05/2014. A copy of the said order of the Hon ble High Court of Uttarakhand was also placed on record. The Ld. AR drew our attention to the relevant paragraphs in these orders and submitted that the facts in this year were identical to the earlier assessment years 2009-10, 2010-11 and 2011-12, a fact which has been accepted by the Assessing Officer also. The Ld. AR submitted that ground no. 4 of the department s appeal was therefore covered by the aforesaid orders of the Tribunal and Uttarakhand High Court in favour of the assessee and against the revenue. 3.1 With respect to ground nos. 1, 2 and 3 raised by the revenue regarding deletion of disallowance u/s 43B of the Act, interest on TDS and disallowance pertaining to PF and ESI contribution, the Ld. AR filed copy of computation of income for the relevant assessment year and pointed out that the assessee had itself disallowed these items while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the above issue as well as submissions of the parties in this regard. The contention of the appellant remained that they are providing medical relief through yoga, naturopathy, acupressure and Ayurved for the purpose of alleviating all kinds of diseases ; they are imparting education in the field of yoga, providing relief to the poor and undertaking research and development activities in the field of yoga, ayurveda to all kinds of disease and provide medical relief. It was contended that on the basis of these objectives the appellant was granted registration u/s 12A of the Act which is in force till date. It was also contended that the appellant in accordance with the approved objectives has been consistently pursuing its charitable activities for the last 18 years including the assessment year under consideration and the appellant has always been allowed exemption u/s 11/ 12 including in various assessment completed u/s 143(3) of the Act. It was submitted that there has been no change in fact during the year under consideration. Before proceeding on the adjudication of the issue as to whether yoga as a system provide any medical relief which remained the main objection of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been set up at Haridwar and was approved and duly recognized by the Department of Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy systems of medicines(AYUSH) vide notification dated 20.7.2009. It is pertinent to mention over here that for the purpose of recognition and granting permission for establishment of medical college, the Department of AYUSH a body set up by the Ministry of Health Family Welfare, Govt, of India mandates fulfilment of certain minimum standards and requirements as prescribed under the Indian Medical Central Council Act 1970 (IMCC Act). It is only on fulfillment of these conditions prescribed in the IMCC Act permission is granted to establish and run ayurvedic medical colleges. It is pertinent to state here that one of the primary conditions laid down in the IMCC Act for the grant of recognition is the existence of a medical hospital attached to the ayurvedic college with the prescribed bed strength alongwith outdoor patient department (OPD) and Indoor patient department (IPD) facilities. Thus there is no doubt in the present case before us that on fulfillment of all the mandatory requirements the ayurvedic medical college set up by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lief can be given through yoga on the basis of above submissions made by the parties we find that in the Clinical Establishment (registration and regulation) Act 2010, the legislature has defined recognized system of medicine in Section 2 (h) of the said Act. As per this definition (h) recognized system of medicine means allopathy, yoga, naturopathy, ayurved, homeopathy, siddha and unani system of medicines or any other system of medicine as may be recognized by the Central Government . This bill was introduced by the Central Government in the year 2007 to provide for registration and regulation of all clinical establishment in the country with a view to prescribe the minimum standards of facilities and services provided by them. A copy of this Act has been made available at page Nos. 161 to 163 of the paper book. 6.4.2 A reference of the recommendation of the standing committee of Human Resources Development Department (HRD) made for making the yoga a compulsory for all school going children in the country, has also been made wherein it has been provided that the yoga is one of the core components of health and physical education. Full copy of the report has been made availa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asyap Veda Research Foundation (supra) and Rajneesh Foundation (supra). A complete information on yoga available on the website of the Ayush i.e., 'Httpp://www.Indiamedicine.nic.in' has been made available by the assessee at page Nos. 639 to 655 of the supplementary paper book No. 1 and at page No. 757 to 793 of the supplementary paper book No. 2 filed by the assessee. The Ld. AR has drawn our attention also on the following information on yoga available on the aforesaid website : Yoga The concepts and practices of Yoga originated in India about several thousand years ago. Its founders were great Saints and Sages. The great Yogis presented rational interpretation of their experiences of Yoga and brought about a practical and scientifically sound method within everyone's reach. Yoga today, is no longer restricted to hermits, saints, and sages; it has entered into our everyday lives and has aroused a worldwide awakening and acceptance in the last few decades. The science of Yoga and its techniques have now been reoriented to suit modern sociological needs and lifestyles. Experts of various branches of medicine including modern medical sciences are realising the rol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) as per which all parts of yoga (japa, karma, bhakti) have healing potential to shelter out the effects of pains. It has been further noted therein that one especially needs proper guidance from an accomplished exponent, who has already treated the same track to reach the ultimate goal. If we read these informations available on the website of Ayush in its totality we find it difficult to concur with the view of Ld. CIT(A) that yoga as a system does not fit into the definition of medical relief as mentioned in section 2(15) of the Act. The very observation of Ld. CIT(A) in this regard at page No. 16 of -the first appellate order that yoga is a discipline appears to address more the issues of spiritual well being rather than address the problems associated with the more, worldly medical relief itself suggests that the Ld. CIT(A) remained of the view that yoga as a discipline addresses the problems associated with the medical relief but it address more the issues of spiritual well being. Thus he has not completely disagreed with the submission of the assessee that yoga as a discipline addresses medical relief also. So far as the decisions relied upon by the Ld. CIT(A) to arrive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e now becoming conscious about their physical, mental and spiritual health. Not only in India, meditation and Yoga are being accepted in the Western Countries also as a great source for physical and mental health and spiritual attainment. When a large number of people feel that meditation is a great source for physical, mental and spiritual well-being, it must be held to be an activity for the advancement of general public utility (Emphasis supplied) 6.4.5 Ld. AR has also referred the survey report of US National center for complementary and alternative medicine (NCCAM) based on survey conducted in December, 2008, made available at page Nos. 193 to 196 of the paper book (assessee) as per which yoga has been recognized as a complementary and alternative medicine to prevent and treat disease. NCCAM defines CAM as a group of diverse medical and health care systems, practices and products that are not generally considered part of conventional medicines. NCCAM found that yoga was the sixth most commonly used alternative therapy in the USA during 2007, with 6.1% of the population participating. The said study states yoga has been used as supplementary therapy for diverse conditions s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich we will discuss hereunder. The contention of the Ld. AR remained that the predominant object of the appellant trust are to provide practical and theoretical training in the field of yoga, which would ultimately provide medical relief to the society at large. It was submitted that in pursuance of the said objective the appellant trust has made inter-trust donations to Patanjali Yog Peeth to support their endeavors of imparting yoga education by means of organizing yog shivirs/camps across the country on daily/weekly/monthly basis in a systemized/organized manner in order to provide medical relief to people who cannot afford modern medical method or have been subjected to ill effects of modern medicine. It was submitted that imparting of yoga training through well structured yoga shivirs/camps also falls under the category of imparting 'education' one of the charitable objects defined u/s 2(15) of the Act and accordingly the appellant's activities are not hit by the proviso inserted in the definition of charitable purpose as contained in the said section. During the course of hearing the appellant was directed to provide complete details of the Patanjali Bhartiya Ayu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that since the assessee society was teaching and promoting all forms of music and dance, western, Indian or any other and was run like any school or educational institution in a systemic manner with regular classes, the same therefore meet the requirement of an educational institution within the meaning of section 10(23C)(vi) of the Act. In the case of SRM Foundation of India (supra) the Delhi Bench of the Tribunal, where the assessee was engaged in spreading the system of transcendental meditation (TM) has held that irrespective of the fact that the assessee has its own prescribed syllabus, trained teachers, branches all over India to spread system of transcendental deep meditation among people in all walks of life, the same constituted imparting of education and the assessee was entitled to exemption u/s 10(72) of the Act. We thus come to the conclusion that any form of educational activity involving imparting of systematic training in order to develop the knowledge, skill, mind and character of students, is to be regarded as 'education' covered u/s 2(15) of the Act. In view of these decisions we hold that imparting of yoga training through well structured yoga shivir/ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blish charitable hospitals for the treatment of the helpless poor, out caste and also to distribute medicines, clothes and food articles in the tribal area. E. To furnish and equip the charitable hospital with modern medical facilities. F. To carry out conduct research on Yoga, Ayurveda and Vedic literature and also to organize scholarly seminars and competitions. G. To prepare and to sale and purchase of the Ayurvedic medicines for the charitable hospitals, hospital colleges, schools and for the social and Yoqic activities of the trust. H. To make an arrangement for the study of Veds, the Geeta, the Philosophy and Upanishads, Grammer and Yogic scriptures for character building, moral cultural upliftment and imparting education for character building and upliftment of moral values. I. To prepare missionaries and facilitate them and sensitize people for uprooting jealously, hate, evils, injustice, Tyranrty and heavenly this on earth by keeping above the communalism, castes and the feeling of sex and creed. J. To run the free educational centers and to facilitate the worthy poor helpless orphans, students by providing clothes, food, study material and lodging. K. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by clause 1(g) involved carrying on an activity for profit. On appeal the Hon'ble Supreme Court held in favour of the assessee by observing that clause 1(g) referred by the lower authorities was not an object but was really in the nature of a power. The Hon'ble Court further held that the 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. It was further held that business being only a means of achieving the object of the trust, exemption could not be denied. 6.6.3 The contention of the Ld. CIT(DR) also remained that the predominant objective of the appellant trust is to prepare and sell medical formulations, which is apparent from the sheer magnitude of business, sales counters and volume of its promotion and publication house which is not incidental to the main objective of providing medical relief. She has further alleged that appellant has established a chain of retail outlets (seva Kendra) for selling its products all over India and has also collected security deposit of ₹ 6.21 crores from these seva kendras. She alleged further that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the assessment year through medical hospital which was in addition to the price of medicine charged from patients. She alleged that the appellant was unable to produce during the appellate proceedings any documentary evidence to support the charitable activities in the form of medical relief in the hospital run by the appellant. She alleged that the appellant was unable to produce the medical practicitioner during the assessment proceedings. The rejoinder of the Ld. AR remained that there is no legal impediments in one charitable trust giving donation to inter charitable trust. It was submitted that it is a well settled position that when a charitable donation amount out of its current income is donated to inter charitable trust, the same constitute application of income u/s 11(1)(9) of the Act. A copy of certificate of registration of the donee trust u/s 12A of the Act has been placed at page 856 of the supplementary paper book -(III). The CBDT instruction No. 1132 dated 5.1.1978, extract of which has been made available at page No. 857 of the supplementary paper book-Ill has made it clear that payment of a sum by one charitable trust to another for utilization by the donee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egation that the appellant was unable to produce any record in the form of medical prescriptions to substantiate that medical relief was provided in the hospital run by the appellant, Ld. AR submitted that as a matter of practice the prescriptions made by the medical practitioners in the OPD are never retained and are always given to the patients. Nonetheless the appellant maintains a record of the patients who have been treated in house which has nowhere been disputed by the department. Against the allegation of the department that appellant was unable to produce the medical practitioners for verification during the course of remand proceedings is erroneous. The Ld. AR submitted that the appellant has produced 15 out of 71 medical practitioners whose details and permanent residential addresses were made known to the revenue. It was submitted that in their statement recorded on oath , the medical practitioners who were in the employment with the hospital run by the appellant have categorically admitted to the fact that there is no compulsion on the patients to buy medicines prepared/manufactured by the appellant only and that they also prescribed medicine manufactured by other phar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curable and incurable diseases by research on Pranayam /Yoga. - To propagate Pranayam as a free medicine for treatment of diseases round the globe, through in-depth research in accordance with the parameters of modern medical science, so that the rich and poor may avail its benefits in order to attain sound health; - To form a new integrated system of treatment, consisting mainly of the techniques of Yoga and Ayurveda, for Surgery and Emergency cases , Allopathy, Homoepathy, Unani and Acupressure to soothe patients suffering from unbearable pains and rid them of disease. - To evaluate methods of treatment of Physical Body, Etheric Body , Astral Body, Mental Body and Casual Body beyond the present incomplete system of treatment for cure of physical body alone; - Imparting Yoga and health education and to begin degree and diploma courses for students in disciplines of Yoga and Ayurveda.' As discussed above the proviso to section 2(15) of the Act applies only to trusts/institution falling in the last limb of the definition of charitable purpose ; that too, if such trust/institution carry on commercial activities in the nature of business, trade or commerce. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted further that this contention is also contrary to primary contention of the department that the appellant prescribed only medicines which are manufactured in house and made available in the sales counters managed by the appellant. We fully agree with the above submission that Ld. AR made in rejoinder that there is no substance in the allegations of Ld. CIT(DR) that there was violation of trust deed by the appellant in accepting membership fees and prescribing allopathic medicines to its patients. 6.7.1 In ground No. 10 of the appeal the appellant has taken alternative plea that the Ld. CIT(A) has erred in upholding the taxation of gross income and not directing the AO to allow deduction of 'revenue expenditure' incurred during the assessment year 2009-10 while computing the taxable income. This ground has become infructuous as the AO in its rectification order dated 3.6.2013 u/s 154 of the Act has rectified the assessment order and allowed the deduction of revenue expenditure aggregating to ₹ 52,26,88,442/-. This ground is accordingly rejected. 6.7.2 The other contention of the Ld. CIT(DR) during the course of hearing of the appeal have also been met out by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in furtherance of the contention taken before! the authorities below. Considering the above Submission we find substance in the submission of the Ld. AR and the same is accepted as such. 6.7.4 Besides, above, it is pertinent to note here that the appellant since its inception in the year 1995 has been engaged in the activity of providing medical relief through Patanjali Bhartiya Ayurvigyan Avam Anusandhan Sansthan' at Haridwar which has been consistently accepted by the revenue in the assessment years 2004-05 to 2008-09 vide various assessments framed u/s 143(3) of the Act and there is no change in the predominant objects of the appellant trust. We thus following the ratio laid down by the Hon'ble Supreme Court in the case of Radhasoami Satsang (supra) and others hold that the revenue was not justified in refusing the claimed exemption u/s 11/12 of the Act during the year. The Hon'ble Supreme Court, in the case of Radha Soami Satsang (supra) has been pleased to hold that where a fundamental aspect permitting through the different assessment years is accepted one way or the other a different view in the matter is not warranted, unless there is any material change i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided in favour of the assesee and exemption was granted u/s 10(23C)(iv) of the Act. In the case of Queen's Educational Society, (supra) decision was rendered in the context of allowability of exemption u/s 10(23C) of the Act on the facts of the case before the Hon'ble High Court. In this case profits of the assessee was considered without taking into consideration the capital expenditure incurred by the assessee for charitable purposes. This decision was subsequently been dissented from in several decisions including decision of Hon'ble Punjab Haryana High Court in the cases of Pinegrove International Charitable Trust v. UOI [2010] 327 ITR 73/188 Taxman 402 (Punj. Har.) and CIT v. Gaur Brahmin Vidya Pracharini Sabhb [2011] 203 Taxman 226/115 taxmann.com 250 (Punj. Har.); Maa Saraswati Educational Trust v. UOI [2010] 194 taxman 84 (H.P) ; DIT (Exemption) v. Lilavati Kirtilal Mehta Medical Trust ITA(L) No. 2990/2009 (Bom) etc. in the case of Sanjeevamma Hanumantha Gowda Charitable (supra) the predominant activity undertaken by the assessee was letting out of marriage halls on purely commercial basis and not in furtherance of the charitable objectivities. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its charitable character merely because some profit arises form the activity. Ld. AR has placed reliance in this regard on the following decisions including the decision of Hon'ble Supreme Court in the case of Surat Art Silk Manufacturers (supra) :- - CIT v. Andhra Pradesh State Road Transport Corpn. [1986] 159 ITR 1 (SC) - Victoria Technical Institute (supra) - Thiagarajar Charities (supra) - Aditanar Educational Institution (supra) - Bar Council of Maharashtra (supra) - American Hotel Lodging Association Education Institute (supra) - Delhi Kannada Education Society (supra) - A.L.N. Rao Charitable Trust (supra) - Pullikal Medical Foundation (P.) Ltd: (supra) - Umaid Charitable Trust (supra) - CIT v. Sivakasi Hindu Nadars [1996] 217 ITR 118/86 Taxman 290 (Mad.) - CIT v. Janakiamma Ayyanadar Charitable Trust [2013] 212 Taxman 274/29 taxmann.com 159 (Mad) - Samaj Kalyan Parishad v. ITO [2007] 105 ITD 29 (Delhi) (SB) The relevant provisions u/s 11 (4)/11(4A) of the Act are being reproduced for a ready reference :- '(4) For the purposes of this section property held under trust includes business undertaking so held, and where a cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 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). Further it is apparent from page 26 of the paper book i.e. 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. We also find that the 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 charita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n activity for profit did not make the objective non charitable. If that money was used for charitable purpose and not for the carrying on any business at a profit, then the object of the trust was charitable notwithstanding the source of the income. The Hon'ble Supreme Court again in the case of Thanthi Trust (supra) held that the trust was entitled to exemption when the business of the trust was incidental to the attainment of the objectives of the trust, namely the objectives of education and relief to the poor. Their lordships observed that after amendment of section 11(4A) in 1992, all that is required for the business income of the trust or institution to be exempt from tax is that the business should be incidental to the attainment of the objects of the trust or institution. The Hon'ble Court further held that if business whose income is utilized by the trust or the institution for the purposes of achieving its objectives is a business which is incidental to the attainment of the objectives of the trust or institution. Respectfully following the ratio laid down in the above cited decisions we come to the conclusion that the authorities below have failed to appreciate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ewise in the case of Baun Foundation Trust v. Chief CIT [2013] 33 taxmann.com 677, the Hon'ble Bombay High Court has been pleased to hold that activity of running chemist shop within the premises of the hospital was incidental or ancillary to the dominant object of running a hospital. We thus hold that in the present case the 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. Furthermore, since 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 authorities below have also 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 (sic). As so far as ground No. 10 is concerned it is rejected as having become infructuous in view of the order dated 3.6.2013 of the AO u/s 154 and the issues raised in ground Nos. 11 to 14 have become infructuous in view of our finding in favour of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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