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2017 (11) TMI 394 - HC - Income TaxFollowing questions of law arise I) Whether ld. ITAT erred in law in holding that assessee is entitled to exemption u/s 11 & 12 of the Income Tax Act, 1961? II) Whether ld. ITAT has erred in law in allowing capital expenditure though the assessee has no legal right on the land on which capital expenditure has been incurred? III) Whether ld. ITAT has erred in law and on the facts of the case in holding that the corpus donations received by the assessee in the form of immovable properties will not be liable to tax? 1The appeal is admitted, restricted to the above questions of law.
Issues Involved:
1. Whether the activities of the assessee, registered as a charitable trust, fall within the definition of "charitable purpose" under Section 2(15) of the Income Tax Act, 1961. 2. The applicability of exemption under Sections 11 and 12 of the Income Tax Act. 3. The treatment of various sums received by the assessee as income or donations. 4. The applicability of Section 115BBC regarding anonymous donations. 5. The applicability of Section 40(a)(ia) concerning TDS on certain sums. Detailed Analysis: 1. Charitable Purpose under Section 2(15): The Revenue contended that the activities of the assessee, registered as a charitable trust, should only be considered as "charitable" if they provide services of general public utility. The assessee argued that it provides medical aid through yoga camps and other modes, which was initially rejected by the AO and CIT. However, the ITAT found that yoga, as a method of medical relief, falls under the definition of "charitable purpose" under Section 2(15) of the Act. The ITAT emphasized that yoga provides relief for ailments such as asthma, migraine, hypertension, and stress, and the inclusion of yoga in the definition of "charitable purpose" from 01.04.2016 clarified its status. The court upheld this view, stating that dissemination of yoga is well within the term "medical relief." 2. Exemption under Sections 11 and 12: The ITAT held that the propagation of yoga also falls under "imparting education," which is a charitable object defined under Section 2(15) of the Act. The assessee's activities, including providing medical relief through yoga camps, conducting regular yoga classes, and promoting Ayurvedic methods, were found to be systematic and educational. The court agreed with the ITAT, noting that the activities of the assessee qualify as charitable purposes, thus making it eligible for exemption under Sections 11 and 12. 3. Treatment of Sums Received: - ?38,35,00,000/- from Divya Yog Mandir Trust: The AO and CIT treated this amount as revenue since the construction was on land owned by the assessee's trustee. However, the court found that the land was used without consideration and for an indefinite period, thus supporting the ITAT's finding that the amount should not be treated as revenue. - ?4,36,23,766/- for Disaster Relief Fund: The AO questioned the amount spent versus the amount received. The ITAT found that the sum was a corpus donation under Section 2(24)(iia) and excluded it from total income. The court upheld this finding. - ?14,76,01,036/- as Membership Fees: The Revenue objected to the character of the funding, but the court found that the provision of different facilities based on contributions did not alter the charitable nature of the activities. 4. Anonymous Donations under Section 115BBC: The Revenue argued that ?13,68,99,745/- received as anonymous donations should be taxed under Section 115BBC. The ITAT found that the assessee maintained names and addresses of donors, and the AO did not verify these details. The court upheld the ITAT's finding that the donations were not anonymous and should be accepted as claimed. 5. TDS under Section 40(a)(ia): The AO added back ?55,34,557/- under Section 40(a)(ia) for not suffering TDS. Since the court upheld the ITAT's findings on the substantive portions of the amounts received, this question did not arise. Additional Questions of Law: The court admitted the appeal on the following questions: 1. Whether the ITAT erred in holding that the assessee is entitled to exemption under Sections 11 and 12. 2. Whether the ITAT erred in allowing capital expenditure on land without legal rights. 3. Whether the ITAT erred in holding that corpus donations in the form of immovable properties are not liable to tax. Conclusion: The court upheld the ITAT's findings on the charitable nature of the assessee's activities, the treatment of various sums received, and the non-applicability of Section 115BBC for anonymous donations. The appeal was admitted on specific questions of law, and notice was issued to the respondent/assessee.
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