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TMI Blog2013 (10) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... only a means of achieving the object of the trust, exemption could not be denied - Appellant trust falls within the purview of providing 'relief to the poor' – Decided in favor of Assessee. Sub section (4A) of section 11 also exempts income tax of a business carried on by the trust so long as the business carried on by the trust is (a) incidental to the attainment of main objects (b) feeds the charitable objects (c) separate books of accounts are maintained in respect of the same, even on fulfillment of the aforesaid conditions profit from such business are exempt u/s 11/12 of the Act – In the present case, activity of manufacturing and sale of ayurvedic preparations has been undertaken only for the purpose of effectuating the charitable objective of providing 'medical relief to the society at large on a genuine need was felt to provide superior quality ayurvedic preparations at economical prices in order to attain effective medical results. Only because the activity carried on yielded" profits a negative inference cannot drawn that the activity was undertaken with the sole intention of earning profits. It is also pertinent to note that the total donations/voluntary contribution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not charitable in nature. 2. That the Commissioner of Income-tax (Appeals) erred on facts and in law in holding that the objects of the appellant did not fall within the purview of providing' medical relief, 'imparting education' or 'relief to the poor', but was in the nature of 'object of general public utility' as contained in the definition of charitable purpose under section 2(15) of the Act. 3. That the Commissioner of Income-tax (Appeals) erred on facts and in law in failing to appreciate that the Revenue authorities have, in the past years, consistently accepted that the objects of the appellant are in the nature of providing 'medical relief, inter alia, by treating patients through ayurveda, yoga. naturopathy- acupressure, etc. 3.1 That the Commissioner of Income-tax (Appeals) erred on facts and in law in holding that propagation of yoga does not qualify as providing medical relief , on the ground that yoga unlike other medical systems is not a curative system for alleviating diseases, but is only a spiritual system having indirect salutary benefits on the health of an individual. 3.2 That the Commissioner of Income- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een set up and are not commercial in nature. 5.5 That the Commissioner of Income-tax (Appeals) erred on facts : and in law in alleging that the medical practitioners of the appellant trust were prescribing medicines which were available only in the medical sales counter managed by the appellant disregarding the findings in the remand report, wherein the medical practitioners had categorically stated that they also prescribed medicines manufactured by other pharmaceutical companies. 5.6 That the Commissioner of Income-tax (Appeals) erred on facts and in law in alleging that the appellant's activities are similar to private pharmaceutical companies in the market, who are working on commercial basis and earning profits. 6. That the Commissioner of Income-tax (Appeals) failed to appreciate the distinction between pursuing predominant charitable objectives of providing medical relief and imparting education vis-a-vis carrying on of business incidental to the main objects of the trust referred to in section 11 (4A) of the Act. 6.1 That the Commissioner of Income-tax (Appeals) erred on facts and in law in alleging that the appellant's activities in relation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) erred on facts and in law in not appreciating that tax having already been paid by the recipient of income, the amount paid by the appellant was allowable as expenditure. 12. Without prejudice, that the Commissioner of Income-tax (Appeals) further failed to appreciate that disallowance under section 40(a)(ia) of the Act. if any. should have been restricted only to the amount remaining unpaid/payable as on the last date of the previous year. 13. Without prejudice, that the Commissioner of Income-tax (Appeals) erred on facts and in law in not appreciating that in case the appellant was held to be non-charitable, then the donations received amounting to ₹ 3,99,14,400/- represented capital receipt, not liable to tax under the provisions of the Act. 14. Without prejudice, that the, Commissioner of Income-tax (Appeals) erred on facts and in law in not appreciating that in case the appellant was held to be non-charitable, then the appellant should have been allowed, deprecation on assets in accordance with the provisions of the Act. 15. That the Commissioner of Income-tax (Appeals) erred on facts and in law in confirming charging of interest under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including previous assessment completed u/s 143(3) of the Act. There has been no change in the facts during the year under consideration. 4.1 In furtherance of its charitable objectives the appellant has established the following: (i) Department of Medical Science Facilities (DOMSF) commonly known as Patanjali Hospital. He submitted that the hospital is run by the appellant trust having various departments including Dental Department, Radiology Department, Surgical Department, Ophthalmology Department etc. providing medical relief to over 2000 patients every day. Apart from primary set up in Haridwar, over 2,39,000 patients were treated during the relevant year, the hospital also has its presence in Ranchi Patna where more than 60,000 and 75,000 patients respectively are treated every year. (ii) Patanjali Bhartiya Ayurvigyan Avam Anusandhan Sansthan: Ayurvedic College has been set up, which was under construction in the year under consideration and has since started operations w.e.f. 20.07.2009, for imparting education in the field of Ayurved. (iii) R D Yoga and Ayurved: Engaged in continued research and development in the field of Yoga and Ayurved to furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the aforesaid activities of the undertakings of the appellant trust it may be appreciated that the appellant is solely committed to achieving its predominant charitable objectives of providing medical relief, imparting education and relief to the poor. The authorities below while accepting that the objects/activities of the appellant trust as being charitable in nature, in the same breadth held that it fell under the sixth limb of the definition of charitable purpose given u/s 2(15) of the Act, i.e. advancement of any other object of general public utility. It was covered under the mischief of proviso to that section. Applying the aforesaid proviso, the authorities below held the appellant's transaction to be in the nature of business and commerce, similar to private players in the market and denied exemption amounting to ₹ 103,32,76,024/- u/s 11/12 of the Act. He pointed out that the appellant, since its inception, in the year 1995, has been engaged in the activities of providing medical relief through Ayurved, Naturopathy, Yoga, Acupressure which has been consistently accepted by the revenue authorities in the assessment years 2004-05 to 2008-09 vide various assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cess or fee or any other consideration, then irrespective of the nature of use, or application or retention of income, the assessee shall not be regarded as existing for charitable purposes. Similarly if any of the objects of the assessee involves carrying on the activity of rendering services in relation to trade, commerce or business for consideration therein, then too the assessee shall seize to be regarded as carrying out any activity for charitable purpose. It is however pertinent to mention that the proviso to Section 2(15) of the Act applies only to the trusts/institutions falling in the last limb of the definition charitable purpose , that too, if such trust/institution carry out commercial activity in nature of business, trade or commerce. Thus, the aforesaid proviso does not apply to a trust/institution engaged in the charitable objects of providing relief to the poor, imparting education and providing medical relief, contended the Ld. A.R. 4.5 The Ld. A.R. submitted that the vision with which the appellant trust has been set up and which is being followed over the years are as under: To make a disease free world through a scientific approach to Yoga and Ayu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of facilities and services provided by them. As per this Act, Yoga is a recognized system of medicine and it has been defined as such u/s 2(h) of the said Act. Ld. A.R. pointed out that the US National Center for Complementary and Alternative Medicine (NCCAM) has recognized yoga as a complementary and alternative medicine (CAM) to prevent and treat diseases. NCCAM defines CAM as a group of diverse medicaland health care systems, practices, and products that are not generally considered at par of conventional medicine (also called Western or allopathic medicine). He submitted that a survey released in December 2008 by NCCAM found that yoga was the sixth most commonly used alternative therapy in the US during 2007, with 6.1 percent of the population participating. The said study also sates that Yoga has been used as supplementary therapy for diverse conditions such as cancer, diabetes, asthma and AIDS and the scope of medical issues where yoga is used as a complementary therapy continues to grow. In support he referred pages 193-196 of the paper book, i.e. copy of relevant extract of the survey conducted in December 2008 by the US National Center for Complimentary and alternative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 realizing the role of these techniques in the prevention and mitigation of diseases and promotion of health. Yoga is one of the six systems of vedic philosophy, maharishi Patanjali, rightly called the father of yoga compiled and refined various aspects of yoga systematically in his Yoga Sutras (aphorisms). He advocated the eight folds path of Yoga, popularly known as Ashtanga Yoga for all round development of human beings. They are :- Yama, Niyama, Asana, Pranayama, Pratyahara, Dharana, Dhyana and Samadhi. These steps are believed to have a potential for improvement of physical health by enhancing circulation of oxygenated blood in the body, retraining the sense organs thereby inducing tranquility and serenity of mind. The practice of Yoga prevents psychosomatic disorders and improves an individuals resistance and ability to endure stressful situations. 4.9 The Ld. A.R. referred other informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents the feedback/testimonies of various people who were suffering from various chronic diseases and have benefited from yoga. The Ld. AR pointed out further that these are various publications which clearly highlight yoga as a means to cure several ailments/diseases, including but not limited to the following :- (a) Yog for Cancer (b) Yog for Migraine Epilapsy (c) Yog for Renal Diseases (d) Yog for Psonasis (skin diseases) (e) Yog for Musculosketal Disorder (f) Yog for constipation and piles (g) Yog for Asthama (h) Yog for parkinsons and paralysis 4.11 Ld. A.R. submitted that reliance placed on the decision of Hon'ble Bombay High Court in the case of CIT v. Rajnish Foundations 280 ITR 553 (Bom.) by the CIT(A) is misplaced as the said decision was rendered prior to introduction of. the proviso to Section 2(15), when there was no dispute insofar as classification of charitable objective was covered for the purpose of claiming exemption, u/s 11/12 of the Act. This decision was rendered in the context of classifying meditation as a charitable objective for the purpose of Section 2(15) of the Act. The Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of education in particular subjects, such as art, artistic taste, the appreciation of fine arts, music, commercial education, training for industrial employment, the art and science of Government, economic and sanitary science or psychological healing is charitable. He submitted that in the case of the appellant the predominant objects of the trust are to provide practical and theoretical training in the field of yoga, which could ultimately provide medical relief to the society at large. 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 yoga shivirs/camps across the country on daily/weekly/monthly basis in a systematized/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. Such Yoga education was given in the shivirs/camps by Yoga Gurus (i.e. yoga teachers). Thus, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d business undertaking was run by the appellant as an activity incidental to attainment of the main objects of the appellant and to feed charity, which is clearly permitted u/s 1(4)/)(4A) of the Act. He submitted that it is outside law that once registration u/s 12A of the Act has been granted by CIT, the A.O. could not question the charitable character of the institution during the course of assessment proceedings. It is not open to the A.O., in the assessment proceedings, to hold that the objects of the assessee are not charitable in nature. In this regard, reliance has been placed on the following decisions: (i) ACIT v. Surat City Gymkhana: 300 ITR 214 (S.C.) (ii) Sonepat Hindu Educational and Charitable Society v. CIT 278 ITR 262 (P H) (iii) Hiralal Bhagwati v. CIT 246 ITR 188 (Guj.) (iv) Ananda Marga Pracharaka Sangha v. CIT 218 ITR 254 (Cal.) (v) ITO v. Mrs. Dwarika Prasad Trust 30 ITD 84 TM (Del.) (vi) ITO v. Trilok Tirath Vidyavati Chutani Charitable Trust 90 ITD 569 (Chd.) (vii) Gaur Brahmin Vidya Pracharini Sabha v. CIT 34 SOT 371 (del.) 4.16 The Ld. A.R. submitted that section 11 of the Act, provides exemption form tax for income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iety, and not the quantum of surplus, though such quantum may become relevant in certain circumstances. The Ld. A.R. cited following decisions in support: (i) ACIT v. Surat Art Silk Cloth Manufacturers 121 ITR 124 (ii) CIT v. Andhra Pradesh State Road Transport Corporation 159 ITR 01 (SC) (iii) Victoria Technical Institute v. CIT 188 ITR 57 (SC) (iv) Thiagarajar Charities v. Addl. CIT 225 ITR 1010, 1026 (SC) (v) Aditanar Educational Institution v. ACIT 224 ITR 310 (SC) (vi) CIT v. Bar Council of Maharashtra 130 ITR 28 (S.C.) (vii) American Hotel Lodging Association Education Institute v. CBDT 301 ITR 86 (SC) (viii) CIT v. Delhi Kannada Education Society 246 ITR 73 (Del.) (ix) ACIT v. ALN Rao Charitable Trust 102 ITR 474 (Kar) (x) CIT v. Pullikal Medical Foundation (P.) Ltd. 210 ITR 299 (Ker.) (xi) Umaid Charitable Trust v. CIT 125 ITR 55 (Raj.) etc.... 4.18 The Ld. A.R. contended that there is no bar in'the charitable trust/institution carrying on business, provided the conditions prescribed in the conditions prescribed in Section 11(4)/11(4A) of the Act are satisfied. The Hon'ble Supreme Court in the case of CIT v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical sale counter managed by the appellant and the same is vehemently denied. CIT(A) has disregarded the findings of the A.O. in remand report dated 11.10.2012 reproduced at page 12 of the order wherein the medical practitioner has categorically stated that they also prescribe medicines manufactured by other pharmaceutical companies and there was no compulsion on the patient to purchase the medicines from the appellant only. The authorities below have totally failed to appreciate that out of the total sale of ₹ 168.12 crores by Divya Pharmacy, medicines of ₹ 4.2 crores only were sold from the hospital sale counter. Even otherwise there is no bar in selling medicines from the hospital counter. The allegation of the authorities below that the assessee did not sell any medicines other than products of Divya Pharmacy is legally and factually unsustainable. The authorities below have further failed to appreciate that medicines of ₹ 41,26,217/- were purchased by various departments of the hospital; run by the appellant. In support he referred contents of page 13 of the-first appellate order. Ld. A.R. submitted further that the assessee had applied substantial amount in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g non allowance for actual application of income, Ld. A.R. submitted that without prejudice to the assessee's primary contention against denial of exemption under section 11/12 of the Act, it is further submitted that the A.O. /CIT(A) has erred in not allowing deduction for actual expenditure (both revenue and capital) incurred by the appellant in the assessment year under consideration, for pursuing its charitable activities. While denying exemption u/s 11/12 of the Act on the gross income of the assessee, the authorities below have failed to appreciate that addition/disallowance if any, could have only been restricted to the net amount/profit on which exemption was claimed under the said section and not on the entire gross income of the assessee. The appellant had incurred various revenue expenditure amounting to ₹ 52,26,81,441/- in pursuing its charitable activities, for which no allowance has been given by the A.O. It has been subsequently intimated that the application u/s 154 of the Act for rectification filed before the A.O. in this regard has now been disposed off vide order dated 03.06.2013 whereby he has rectified the assessment order and allowed deduction of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliance on the decision of Hon'ble Supreme Court in the case of State of Himachal Pradesh Associated Hotels of India Ltd. 29 SOT 474 .wherein difference between work out contract and sale contract has been distinguished. Ld. A.R. also referred CBDT Circular No.681 dated 21.02.1994 and 13.12.2006 para 7 (vi) of Circular 689 dated 08.03.1994. Taking assistance of these circulars, the Ld. A.R. submitted that goods sold are manufactured according to specifications of the buyer is not relevant in determining whether the contract is a contract of sale or works contract. What is relevant to determine is passing of property/title in the goods from the vendor to the buyer. Where title to the goods passes to the buyer at the time goods, are manufactured and transported, the contract would be one for sale of goods, notwithstanding that the goods are manufactured according to the specifications of the buyer. The Ld. A.R. submitted that the principal test to be applied to determine whether the contract is works contract of contract for sale is whether title to the goods passes to the purchaser in time anterior to the manufacture and delivery of goods to the purchaser. If the answer to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e vendor and not the appellant. All the other terms of purchase/sale between the vendor and supplier, like payment terms, period of delivery, etc., were agreed independently between the said two parties and appellant had no say in the same. The contract between the appellant and the suppliers is for acquisition of ascertained goods. The contract is thus one of sale and not contract for carrying out work. Ld. A.R. submitted further that it is settled law that income of a charitable trust claiming exemption u/s 11/12 of the Act has to be computed in accordance with the normal commercial principles and not under artificial head defined in Section 14 of the Act. In order to compute income not required to be included in the total income u/s 11 of the Act, a charitable trust/society is, required to consider the extent of application of income for charitable purpose. He placed reliance on the following decisions: (i) Rao Bahadur Calavala Cunnan Chetty Charities 135 ITR 485 (Mad) (ii) CIT v. Ishmian India Maritime P. Ltd. 113 ITR 570 (Mad) (iii) CIT v. Kotak Securities Ltd. 340 ITR 333 (Bom) 5. The contention of the Ld. CIT, D.R. who has basically placed reliance on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eed. Ld. CIT DR submitted that the main objective of the assessee is not compared to above medical formulation produced by assessee as can be seen from the sheer magnitude of business in production, sale counters opened throughout India, huge export business, voluminous trust promotion and publication house. In development to the main objective of the medical relief as claimed, the assessee has established a chain of retail outlets for its products all over India under the name of 'Patanjali Divya Yoga Trust' which is sold through Seva Kendras for which security deposits has been taken by the assessee and collected ₹ 6.21 crores from these seva kendras as security deposits. In support, she referred the contents of pages 4 to 7 of the assessment order and page No.17 to 22 of the first appellate order and pages 17 to 19 of the paper book filed on behalf of the department. 5.1 Ld. CIT DR submitted further that the assessee is also engaged in export of its products, the volume of net export being ₹ 5,15,64,050/- while the claim of charity is confined to India only due to legal restriction, the assessee is having a brisk sale of its products in India as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en during the remand proceedings when the assessee was asked to produce the doctors prescriptions given to patients, none was produced. When the matter was again remanded, the assessee could produce a list of 15 doctors only against 71 doctors. Out of these 71, only 11 doctors were produced. Surprisingly 59 doctors had quit the job in two years as claimed. In this regard, she referred the remand report II available at pages 14 and 15 of the paper book filed on behalf of the department. Ld. CIT D.R. pointed out that all the 11 doctors produced stated that patients have to pay for all services except consultation in which they suggest medicines, both classical and patent and advised patients to get admitted in assessee's hospital when required. The A.O. says in its remand report that the doctors being paid emplovees are very useful to boost the sale of the products made by their employer trust. In support she referred page nos. 15 to 17 of the paper book filed by the department and contents of page Nos. 18 and 19 of the first appellate order. She submitted that during the appellate proceedings, the appellant could not produce the record and has admitted that the doctors prescribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Aurolab Trust v. CIT 46 SOT 125 (Che) CIT v. ICAI - 321 ITR 73 (Del) CIT v. Queens' Educational Society ITA no.103 Saurashtra Educational Foundation v. CIT - 273 ITR 139 (Guj) Sanjeevamma Hanumantha Gowda Charitable Trust v. DITCE - 9 SOT 293 (Bang) Daulatram Public trust v. CIT - 244 ITR 514 (Del) Jacob v Thasildar [1989] 176 ITR 243 (Ker) Sole Trustee, Lok Shikshana Trust v. CIT - 101 ITR 234 (SC) CIT v. Jodhpur CAs Society - 258 ITR 548 (Raj) A detailed rejoinder has also been furnished by the Ld. AR, which we will discuss in our decision in the following paragraphs. 6. We find that grounds No.1-9 involve the issue as to whether the appellant is entitled to claim the exemption u/s 11/12 of the I. T. Act, 1961 for adjudication upon this issue, we will have to decide the other connected issues. These issues are as under: (a) As to whether the appellant trust did fall within the purview of providing 'medical relief', 'imparting education' or 'relief to the poor'. (b) If the above issue is decided in negative then the issue will arise as to whether the objectivity of the appellant were in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the revenue, we would like to point out over here that there is no dispute on this material fact that the appellant since its inception in the year 1995 has been engaged in the activity of providing 'medical relief' through ayurveda under the organization Patanjali Bhartiya Ayurvigyan Avam Anusandhan Sansthan at Haridwar. This fact has been consistently accepted by the revenue in the assessment years 2004-05 to 2008-09 vide various assessments framed u/s 143(3). There is also no change in the facts of this aspect of the matter. The revenue authorities are not disputing the fact that ayurvedic treatment is given by the assessee. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MCC 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 appellant has been duly recognized by the AYUSH. It is also imperative to state here that the Central Council of Indian Medicine under AYUSH conducts regular inspection of the ayurvedic colleges to verify that the prescribed minimum standards are complied with by such colleges and if the prescribed standards are not complied with by the medical colleges, the permission/recognition is either rejected or revoked by the AYUSH. All these material and undisputed facts lead us to a definite conclusion that it has been undisputed that appellant has been providing 'medical relief through ayurveda and naturopathy system of medicine in its above state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 available at page nos. 177 to 192 of the paper book and para No.9.8 at page No. 181 thereof is relevant for the purpose. It reads as under :- 9.8 The committee is of the opinion that yoga is one stream of education, which will make a permanent and positive impact on a students life. Yoga has been gaining immense popularity due to the short term as well as long term benefits that it provides. Yoga helps one to achieve all round development. Considering the immense potential of this ancient knowledge of India, the Committee recommends that yoga be made compulsory for all school going children in the country. ACTION TAKEN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 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 role of these techniques in the prevention and mitigation of diseases and promotion of health. Yoga is one of the six systems of Vedic philosophy. Maharishi Patanjali, rightly called 'The Father of Yoga compiled and refined various aspects of Yoga systematically in his Yoga Sutras (aphorisms). He advocated the eight folds path of Yoga, popularly known as Ashtanga Yoga for all-round development of human beings. They are:- Yama, Niyama, Asana, Pranayama, Pratyahara, Dharana, Dhyana and Samadhi. These components advocate certain restraints and observances, physica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(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 at a conclusion that yoga as a system does not fit into the definition of medical relief are concerned, we find that these are having distinguishable facts and issues hence are not helpful to the revenue. In the case of Kasyapa Veda Research Foundation v. CIT (supra) it has been observed by the Cochin Bench that yoga is an ancient Indian science of meditation. There is no dispute on it. But only on the basis of such observations which is one of the aspects of the yoga it cannot be arrived at a conclusion that yoga as a system does not clearly fit into the definition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ternative 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 such as cancer, diabetes, asthma and AIDS and the scope of medical issues where yoga is used as a complementary therapy continues to grow. A reference of the publication yog in synergy with medical science: written by an ayurved acharya associated with the appellant, has also been made, relevant extracts of which has been made available at page Nos. 555 to 633 of the supplementary paper book (appellant). This publication has been documented on the basis of clinical tests conducted showing the clinical effect of yoga on the participants in vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Ayurvigyan Avam Anusandhan Sansthan at Haridwar for imparting education in the field of ayurveda which started operations w.e.f. 20.7.2009. In compliance the Ld. AR submitted that during the year the appellant had applied substantial amount on construction of the ayurveda medical college which is affiliated to the Uttarakhand Technical University. It was submitted that ayurveda medical college set up by the appellant was approved and duly recognized by the Department of Ayurveda, yoga naturopathy, unani, siddha and homoeopathy (AYUSH) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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/camps also falls under the category of imparting education which is one of the charitable objects defined u/s 2(15) of the Act. The appellant's activities are thus not hit by the proviso inserted in the definition of charitable purpose in section 2(15) of the Act. Relief to the poor 6.6 So far as question of providing 'relief to the poor' by the appellant trust to bring it within the purview of the same is concerned, we find that the contention of the assessee remained that the appellant through its hospital, Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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. To establish and run stables for the poor cows to save them from victimization and killings. L. To carry out researches or agni hotra and perform scientific yajnas in order to solve the serious problems of environmental pollution of modern age. M. To give award and certificates to the trainees who undertake weekly, fortnightly, monthly, quarterly and annually Yog and Acupressure training. N. To help and co-operate the relief activities related to flood, earthquak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee is also engaged in export of its products and quantum of such exports aggregates to ₹ 5,15,64,050/- during the assessment year under consideration, which portrays that the appellant is pre dominantly engaged in undertaking commercial activities. In the rejoionder the submission of the Ld. AR remained that business undertakings were run by the appellant as an activity incidental to attainment of the main objects of the appellant and to feed cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oinder 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 trust towards its charitable objects is proper application of income for charitable purpose in the hands of the donee trust and the donor trust will not loose exemption u/s 11 of the Income Tax Act 1961. We thus do not find substance in the contention of the Ld. CIT(DR) that the-appellant has donated an amount to the donee trust to deviate from its objectives. Since it is not the case of the department that Patanjali Yog Trust, the donee has not applied s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere 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 pharmaceutical companies. These submissions of the Ld. AR have not been rebutted. 6.6.6 Considering above submissions in totality we hold that the appellant trust falls within the purview of providing 'relief to the poor'. 6.6.7 The first issue as to whether the appellant trust did fall within the purview of providing of 'medical relief 'imparting education' or 'relief to the poor' is thus decided in favour of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 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 said proviso does not apply to trust/institution engaged in the charitable object of providing relief to the poor, imparting education and providing medical relief. The last limb of the definition of charitable purpose u/s 2 (15) talks about the advancement of any other object of general public utility. The aforesaid predominant objects and the vision make it clear that the objects of the appellant are to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the Ld. AR in his rejoinder. On the issue of imparting of education the contention of the Ld. DR remained that ayurvedic medical college in the name of Patanjali Bhartiya Ayurvigyan Avam Anusandhan Sansthan at Haridwar was not in operation during the year. The submission of the Ld. AR remained that though the aforesaid medical (college was not in operation in the assessment year under consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 v. CIT (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 v. CIT (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 in facts. In the case of DIT (Exemptions) v. Guru Nanak Vidya Bhandar Trust (supra) the Hon'ble Delhi High Court has been pleased to hold that the department is expected to be consistent with its own stand which has been taken in earlier years, when there is no change in the objects of the trust during the year and such objects when found permissible for exemption in the past not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt. 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 327 ITR 73 (P H) and CIT v. Gaur Brahmin Vidya Pracharini Sabhb 203 taxman 226 (P H); Maa Saraswati Educational Trust v. UOI 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 v. DIT(E) 9 SOT 293 (Bombay) 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 the assessee had not undertaken any charitable activity in pursuance of the charitable objects provided in the trust deed. The assessee was therefore denied registration u/s 12A of the Act. In the case of Daulatram Public Trust v. CIT 244 ITR 514 (Delhi) there was no dominant charitable objective in the trust deed which the ancillary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Road Transport Corporation: 159 ITR 1 (SC) - Victoria Technical Institute v. CIT: 188 ITR 57 (SC) - Thiagarajar Charities v. Addl. CIT: 225 ITR 1010, 1026 (SC) - Aditanar Educational Institution v. ACIT: 224 ITR 310 (SC) - CIT v. Bar Council of Maharashtra: 130 ITR 28 (SC) - American Hotel Lodging Association Education Institute v. CBDT: 301 ITR 86 (SC) - CIT v. Delhi Kannada Education Society: 246 ITR 731(Delhi) - ACIT v A.L.N. Rao Charitable Trust: 102 ITR 474 (Kar) - CIT v. Pullikal Medical Foundation (P.) Ltd: 210 ITR 299 (Ker) - Umaid Charitable Trust v. CIT: 125 ITR 55 (Raj) - CIT v. Sivakasi Hindu Nadars: 217 ITR 118 (Mad) - CIT v. Janakiamma Ayyanadar Charitable Trust: ITA No. 1566 1567 of 2005 (Mad) - Samaj Kalyan Parishad v. ITO: 291 ITR(AT) 1 (Delhi) 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 claim is made that the income of any such undertaking shall not be included in the total income of the persons in receipt thereof, the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 charitable character merely because some profits arises from the activity. The Hon'ble Supreme Court in the case of ACIT v. Surat Art Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it was immaterial how money which was obtained by running of an 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 DCIT v. Thanthi Trust 247 ITR 785 (SC) 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 decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions are not incidental to its main objective as the same are commercial in nature. Likewise in the case of Baun Foundation Trust v. CCIT Anr: 251 CTR 237 (Bombay), 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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