2019 (5) TMI 410 - AT - Income Tax

Exemption u/s 11 - charitable activity or not? - inter-trust donation by one charitable trust to another for utilization by the donee trust towards charitable objects - as per AO activities of the trust are not of charitable in nature being not involved in providing relief to the poor, education and medical relief etc. also that at the most, the trust can be treated as advancement of other objects of general public utility and on this ground also, the assessee is not entitled for any relief because income of the trust during the year under assessment exceeds ₹ 25,00,000/-. - HELD THAT - As decided in assessee's own case 2019 (2) TMI 1616 - UTTARAKHAND HIGH COURT inter-trust donation by one charitable trust to another for utilization by the donee trust towards charitable objects is proper application of income for charitable purpose in the hands of donee trust and it will not affect the exemption claimed by the assessee u/s 11 of the Act in any manner whatsoever nor inter-trust donation can be termed as deviation from its objects as it is nowhere the case of the Department that the donee trust has not applied such sums for charitable purpose by deviating its funds, hence relief granted by ld. CIT (A) needs no interference - Decided against revenue Receiving consideration on sale of medicines, publications, CD-VCDs, etc. - whether such activities of the trust cannot be said to be charitable in nature as it is receiving consideration while carrying out its business activities which falls under the explanation of advancement of any object of any public utility under section 2(15) ? - HELD THAT - Objects of the assessee trust fall within the purview of providing medical relief, imparting education or relief to the poor and are not in the nature of general public utility, so the proviso to section 2(15) of the Act is not attracted in case of the assessee trust. So, ld. CIT (A) has rightly decided the issue in favour of the assessee by following the decision rendered by the Tribunal in assessee s own case for AY 2009-10 2019 (2) TMI 1616 - UTTARAKHAND HIGH COURT - Decided in favour of assessee.

Issues Involved:
1. Whether the CIT(A) erred in partly allowing the appeal by ignoring the major inter-trust donation activity.
2. Whether the CIT(A) erred in partly allowing the appeal by ignoring the business activities of the trust.
3. General ground for the cancellation of the CIT(A)'s order and restoration of the AO's order.

Issue-Wise Detailed Analysis:

Issue 1: Inter-Trust Donations
The first issue concerns whether the CIT(A) erred in partly allowing the appeal by ignoring the fact that the major activity of the assessee trust was its inter-trust donation of ?68.78 crores out of a total income of ?144.88 crores. The Revenue argued that this demonstrated the trust was not carrying out many of its objectives other than earning profits and stashing away its surplus to other group trusts.

The Tribunal referred to its own decision in the assessee's case for AY 2009-10, which was affirmed by the Hon’ble High Court of Uttarakhand. It was held that inter-trust donations by one charitable trust to another for utilization towards charitable objects is a proper application of income for charitable purposes under Section 11(1)(a) of the Act. The CBDT Instruction No. 1132 dated 05.01.1978 also supports this view, confirming that such donations do not affect the exemption claimed under Section 11. The Tribunal found no substance in the Revenue's contention that the donations deviated from the trust's objectives, especially since the donee trust applied the sums for charitable purposes. Thus, the relief granted by the CIT(A) was upheld.

Issue 2: Business Activities
The second issue raised by the Revenue was that the assessee trust's activities of receiving consideration on the sale of medicines, publications, CD-VCDs, etc., could not be considered charitable as they involved business activities. The Revenue argued that these activities fell under the explanation of "advancement of any other object of general public utility" under Section 2(15) of the Act.

The Tribunal again referred to its decision for AY 2009-10, confirmed by the Hon’ble jurisdictional High Court. It was concluded that the trust's predominant objectives were to provide medical relief through Ayurveda and the propagation of yoga, which falls under the definition of "medical relief." The Tribunal also found that conducting yoga classes in a systematic manner constitutes "imparting education." The trust's activities of providing free medical consultations and treatments through its hospitals and Chikitsalayas were considered as providing "relief to the poor." Therefore, the trust's activities did not fall under the last limb of the definition of charitable purpose as "advancement of any other object of general public utility," and the proviso to Section 2(15) was not applicable. The CIT(A)'s decision was thus upheld.

Issue 3: General Ground
The third ground raised by the Revenue was general in nature, seeking the cancellation of the CIT(A)'s order and the restoration of the AO's order. However, since the Tribunal found no merit in the Revenue's appeal on the specific issues, this ground required no separate adjudication.

Conclusion
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order that partly allowed the assessee's appeal. The Tribunal confirmed that inter-trust donations are a proper application of income for charitable purposes and that the trust's activities of selling medicines and other items are incidental to its main charitable objectives of providing medical relief, imparting education, and relieving the poor. The proviso to Section 2(15) was not applicable in this case.

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