2018 (5) TMI 335 - AT - Income Tax

Denying exemption u/s 11 & 12 - object of trust - Trust s activities not charitable in nature - Held that - As decided in assessee s own case 2013 (10) TMI 211 - ITAT DELHI 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) - Decided in favour of assessee.

Issues Involved:

1. Denial of exemption under sections 11 and 12 of the Income Tax Act.
2. Classification of the trust’s activities as charitable.
3. Classification of the trust’s activities as providing medical relief, imparting education, or relief to the poor.
4. Application of the proviso to section 2(15) of the Income Tax Act.
5. Restoration of the Assessing Officer’s order by canceling the CIT(A)’s order.

Detailed Analysis:

1. Denial of Exemption Under Sections 11 and 12 of the Income Tax Act:

The revenue contested the CIT(A)’s decision to allow the trust’s exemption claims under sections 11 and 12, arguing that the trust’s activities were not charitable since they were conducted with a profit motive. The Assessing Officer (AO) had denied the exemption, asserting that the trust’s activities fell under the category of “other objects of general public utility,” which, when exceeding the income threshold of ?10 lakhs, lose their charitable nature as per the proviso to section 2(15).

2. Classification of the Trust’s Activities as Charitable:

The CIT(A) and the Tribunal found that the trust’s predominant objectives were indeed charitable, focusing on providing medical relief, imparting education, and relief to the poor. The Tribunal noted that the trust had been consistently pursuing its charitable activities since its inception in 1995, and these activities had been accepted by the revenue in previous assessment years.

3. Classification of the Trust’s Activities as Providing Medical Relief, Imparting Education, or Relief to the Poor:

The Tribunal elaborated on the trust’s activities:

- Medical Relief: The trust provided medical relief through yoga, naturopathy, acupressure, and Ayurveda. It operated several medical facilities, including Patanjali Hospital, which treated over 2000 patients daily, and had established an Ayurvedic medical college recognized by the Department of AYUSH.

- Imparting Education: The trust imparted education in the field of yoga and Ayurveda, including setting up an Ayurvedic college affiliated with Uttarakhand Technical University. The Tribunal cited several judicial precedents to support the view that systematic training and education in yoga constituted “imparting education” under section 2(15).

- Relief to the Poor: The trust provided free medical services to a significant number of patients across various locations. The Tribunal emphasized that the trust’s activities in providing medical relief and education also inherently provided relief to the poor.

4. Application of the Proviso to Section 2(15) of the Income Tax Act:

The Tribunal concluded that the proviso to section 2(15) did not apply to the trust, as its activities predominantly involved providing medical relief, education, and relief to the poor, rather than being commercial in nature. The Tribunal referenced the Clinical Establishment (Registration and Regulation) Act 2010, which recognized yoga as a system of medicine, and various judicial decisions that supported the view that the trust’s activities were charitable.

5. Restoration of the Assessing Officer’s Order by Canceling the CIT(A)’s Order:

The Tribunal upheld the CIT(A)’s decision, rejecting the revenue’s appeal. The Tribunal found no reason to deviate from the CIT(A)’s order, which was consistent with judicial precedents and the trust’s established charitable activities.

Other Objections of the Revenue:

The Tribunal addressed and dismissed several other objections raised by the revenue, including allegations of the trust engaging in commercial activities, charging exorbitant fees, and violating the trust deed. The Tribunal found that the trust’s activities were incidental to its charitable objectives and that the revenue had failed to provide substantial evidence to support its claims.

Conclusion:

The Tribunal dismissed the revenue’s appeal, affirming the CIT(A)’s order that allowed the trust’s exemption claims under sections 11 and 12 of the Income Tax Act. The Tribunal concluded that the trust’s activities were charitable in nature, focusing on providing medical relief, education, and relief to the poor, and that the proviso to section 2(15) did not apply.

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