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TMI Blog2019 (7) TMI 1889X X X X Extracts X X X X X X X X Extracts X X X X ..... O) noted that the assessee trust was allegedly engaged in the business activities through the following business undertakings:- 1. M/s Divya Pharmacy - Manufacturing Ayurvedic medicines 2. M/s Yog Sandesh - Monthly magazine dedicated to Yog and Ayurved 3. M/s Divya Yog Sadhna - CDs and audio cassettes to teach Yog and Paranayam and Vedic and patriotic songs (Trading) 4. M/s Divyaprakashan - Books related to Yog and Ayurved (Trading) 5. M/s Divya Nursery - Goark, vermin compost and ayurvedic plants (Trading) 6. Patanjali Yogpeeth Aushdhalaya - Retail trading of medicines 2.1 The Assessing Officer observed that the gross receipts from these six undertaking amounted to Rs. 3,39,80,67,065/- and the consolidated profit of these undertakings amounted to Rs. 97,82,19,889/-. The Assessing Officer also observed that besides the above, the assessee had a gross receipt of Rs. 20,71,87,624/- from its main Trust and the assessee had further claimed inter-trust donations to the tune of Rs. 68,02,67,317/- to various entities, resulting in a negative net income of Rs. 71,22,53,478/- after incurring a total expenditure of Rs. 91,94,41,102/-. The Assessing Officer also observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd was, therefore, entitled to the benefit of exemption u/s 11 and 12 of the Act. The Assessing Officer was accordingly directed to extend the exemption u/s 11 and 12 to the assessee as per the observations of the ITAT in assessee's own case as aforementioned. 2.3 Aggrieved with this finding of the Ld. Commissioner of Income Tax (A), the revenue is now in appeal before this Tribunal and has raised the following grounds of appeal:- "1. Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in allowing the appeal of the assessee and deleting the addition made by the A.O. u/s 43B of Rs. 1,18,722/-. 2. Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in allowing the appeal of the assessee on the issue of interest on TDS of Rs. 15,584 /-. 3. Ld. Commissioner of Income Tax(appeals) has erred in law and on facts in allowing the appeal of the assessee regarding PF & EST contribution after due date of Rs. 3,70,331/-. 4. Ld. Commissioner of Income Tax (Appeals) has erred in Law and on facts in allowing the appeal of the assessee on the issue of donation and other income of Rs. 13,95,69,790/-. 5. The order of the Ld. Commissioner of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded by the Tribunal. This order was upheld by the Hon'ble Uttarakhand High Court in ITA No. 05/2014 vide order dated 27th February, 2019. The relevant paragraphs of the Tribunal's order in assessment year 2009-10 reported in (2015) 153 ITR 368 (Delhi Tribunal) are reproduced here in under for a ready reference:- "6.1 We, therefore, prefer to adjudicate upon the first issue as to whether the objects and activities of the appellant trust did fall within the purview of providing 'medical relief', 'imparting education' or 'relief to the poor'. The objects of the appellant trust are available at page 1-7 of the paper book declaring that the appellant trust was set up as charitable trust with the following predominant objectives: (1) Providing medical relief through yoga, naturopathy, acupressure and Ayurveda for the purpose of alienating all kinds of diseases; (2) Imparting education in the field of yoga, (3) Providing relief to the poor and (4) Undertaking research and development activities in the field of yoga, Ayurved, vedic literature to further the cause of alienating all kinds of diseases and provide medical relief to the public at large. 6.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, (2) Patanjali Bhartiya Ayurvigyan Avam Anusandhan Sansthan (3) Patanjali Chikitsalay and (4) R & D yoga and ayurveda. (The appellant has also set up (1) Divya Nursery (dealing in cultivation, restoration and research in rare medicinal plants /herbs and selling these plants);(2) Divya Pharmacy (Ayurvedic pharmaceutical unit engaged in manufacturing of ayurvedic medicines as per tradition of sages and modern science); and (3) Divya Prakashan, etc. (it deals with publication and distribution of different types of literature relating to yoga and ayurved) Department of Medical Science and Facilities commonly known as Patanjali Hospitalrun by the appellant trust is having various departments including dental department, radiology department, surgical department, ophthalmology department etc. The claim of the appellant that in this hospital the appellant provide medical relief to over 2000 patients every day and from its primary set up in Haridwar where around 2,39,000 patients were treated during the year under consideration the hospital also has its presence in Ranchi and Patna where more than 60,000 and 75,000 patients respectively are treated every year, has not been disputed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is also remained an undisputed fact that since its inception in the year 1995 the 'medical relief provided through Patanjali Bhartiya Ayurvigyan Avam Anusandhan Sansthan' at Haridwar, has been consistently accepted by the revenue in the assessment years 2004-05 to 2008-09 as engaged in the activity of providing 'medical relief' in the assessment framed u/s 143(3) of the Act. Since there is no change in this object of the appellant trust, and the related facts during the year under consideration, we are of the view that ratio laid down by the Hon'ble Supreme Court in the case of Radhasoami Satsang (supra) and others the revenue was not justified in refusing the claimed exemption u/s 11/12 of the Act during the year. The revenue 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. In view of these discussions we are in a definite position to hold that the appellant was entitled for the exemption u/s 11/12 of the Act on the basis that the appellant was engaged in the activity of providing 'medical relief' through ayurveda, naturopathy etc. during the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore components of Health and Physical Education." 6.4.3 On the contrary the Ld. CIT(A) for the purpose of determining whether yoga can be classified as a form of medical relief has placed reliance on the determination of the term "medical" as provided in Major Law Laxicon by P Ramanatha Aiyar (2010 edition) as per which "pertaining to or having to do with the art of healing disease or the science of medicine containing medicine used in medicine". We find that the term "medical" has been defined very broadly in this definition as per which the art of healing any disease constitute a medical relief and the same need not be restricted to conventional method of treatment. Ld. CIT(A) at page 15 of the first appellant order has also selectively quoted from the website of department of Ayush (Ministry of Health and Family Welfare) to come this conclusion that yoga is a discipline appears to address more the issues of spiritual well being rather address the problems associated with the more worldly "medical relief" and exercises forming part of the yoga system would at the best have indirect salutary benefit on the health of an individual. He held that yoga is a spiritual system more tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sychosomatic disorders and improves an individuals resistance and ability to endure stressful situations." (Emphasis supplied) 6.4.4 In the above said information it has been observed that 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. It has been further observed that 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 individual's resistance and ability to endure stressful situations. Even in the extracts of the information available on the website of Ayush reproduced by the Ld. CIT(A) at page 15 of the first appellate order in the definition of yoga it has been stated that yoga is a discipline to improve or develop one's inherent power in a balanced manner. It offers the means to attain complete self-realisation. As per literal meaning of Sanskrit word "yoke" it has been noted that the yoga can be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Foundation (supra) is not relevant as the said decision was rendered prior to introduction of proviso to section 2 (15), when there used to be no dispute insofar as classification of charitable objectives was concerned for the purpose of claiming exemption u/s 11/12 of the Act. The decision was referred in the context of classifying 'meditation' as a charitable objectives for the purpose of section 2(15) of the Act. The Hon'ble High Court has adjudicated only upon the issue of classification of 'meditation', 'preaching/propagation of philosophy as a charitable object falling under the category of general public utility but has nowhere explicitly dealt with yoga except for making passing references in respect of the same. In the said decision the Hon'ble High Court has however also been pleased to observe that not only in India but in the western countries also meditation and yoga are being accepted as a great source of physical and mental health. Meaning thereby that yoga is a source for medical relief. For a ready reference the relevant extract of the said decision is being reproduced hereunder :- "Admittedly, main thrust of the respondent is on medi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsity of USA came forward to introduce yoga and ayurved subject in their university in collaboration with Swami Ramdevji in the wake of dreadful diseases being cured by Swamiji's Pranayam and his ayurved medicines. 6.4.6 In view of above discussions especially the recognition of yoga as a recognized system of medicine as per section 2 (h) of Clinical Establishment (Registration and Regulation) Act 2010 and the complete information made available by the ayush on its website we find no hesitation in coming to the conclusion that yoga can be safely accepted as a system fit into the definition of 'medical relief'. Yoga as a science is a well recognized system of medicine, which has therapeutic effects in treating various serious ailments. The predominant objective of the appellant trust as it is apparent from its objects, remained to provide medical relief through ayurveda and propagation of yoga for the purpose of treating/curing various diseases. Imparting Education' 6.5 The question now is as to whether the appellant trust falls within the purview of providing "imparting education". The grievance of the - appellant is that the authorities below have failed to app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal plant material, research and development and awareness generation about the efficacy of ayurveda, yoga and naturopathy, unani, siddha and homoeopathy systems of medicines. For the purpose of recognizing and granting permission for establishment of medical colleges, the department of AYUSH mandates fulfillment of certain minimum standard and requirements as prescribed under the Indian Medical Central Council Act 1970 (IMCC Act). 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. Ld. CIT(DR) on the other hand has placed reliance on the orders of the authorities below, as discussed above. 6.5.1 The expression 'education' has not been defined under the provisions of Income Tax Act. The Hon'ble Supreme Court in the case of Sole Trustee, Lok Shikshana Trust (supra), relied upon by the Ld. AR, has been pleased to explain the meaning of the word 'education' in the context of section 2(15) of the Act. As per this decision the education is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b, panchkarma clinic, yoga and shatkarma clinic, surgical, dental and ophthalmological clinic and provides free yogic and Ayurvedic consultancy to all its patients. It was pointed out that during the year the appellant has provided free medical services/treatment to more than 38 lacs patients through Patanjali Chikitsalaya spread all across the country. It was submitted that all records of such treatments and activities of the trust has been examined in scrutiny assessment by revenue department over so many years and have never been disputed. 6.6.1 The trust deed in clause J and N has provided the objective of appellant to impart education and provide relief to the poor. The contention of the Ld. CIT(DR) remained that 7 out of 15 objectives in the trust deed of the appellant are in a nature of general public utility. The objects of the appellant are as under :- A. "The main aim of the trust would be to impart the practical and functional training of astung yog, raj yog, hath yog, ashan and pranayam etc as received from the ancient tradition propounded by the Rishis and Munis to make an end of extreme sufferings to cure diseases and to receive a calm stage of mind and extr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of Astang yog, Raj yog, Dhyan Yog, Hath Yog, Ashan and Pranayam etc. as received from the ancient tradition pronounced by the rishies and munis. Thus to know the mission and reason of the appellant trust we have to read its objectives in totality. The various other objectives provided in the trust deed are merely independent/ancillary to the main objection which is to provide medical relief and impart education and do not in any way constitute/objectives of general public utility as contended by the Ld. CIT(DR). WE thus hold that the case of the appellant does not fall within the last limb of the definition of charitable purpose given u/s 1(15) of the Act. In the case of Thiagarajar Charities (supra) before the Hon'ble Supreme Court, the main objects of the assessee trust were education, medical relief and relief to the poor. One of the objects contemplated the trust to engage in carrying on, help, aid, assist and promote rural reconstruction work, cottage industry and all matters incidental thereto. The trustee carried on business by investing the corpus as per powers given under some clause of article of trust. The assessee claimed that the business carried on by it and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s business activities. It was submitted that the Chikitsalays were set up by the appellant all across the country for providing free medical consultations to patients suffering from various diseases. More than 1000 vaidays are giving free consultation to over 50,000 patients for curable and incurable disease in about 1000 Patanjali Chikitsalays across the country. Further that acceptance of security deposit for setting up seva Kendras does not in any way impact the charitable nature of the activities undertaken by the appellant. 6.6.4 Further allegation of Ld. CIT(DR) remained that the appellant has applied minimum amount of income for charitable purpose and diverted substantial amount to its sister concern i.e. Patanjali Yogpeeth Trust with the intention of retaining funds within its own control. It was alleged by her that the appellant was charging exhorbitant rates for accommodation fee in the name of participation fee. In alleging so the Ld. CIT(DR) has placed reliance on the statement of one Shri Balwant Singh Minnas, wherein he has alleged to have paid amount of Rs. 49,000/- as participation fee for the yoga shivir purportedly conducted by the appellant in the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivir does not arise at all. The further contention of the Ld. AR remained that reliance has been placed on the ex parte statement of Shri Balwant Singh recorded behind the back of the appellant without affording opportunity to cross examine him, which itself is in violation of settled principles of natural justice. It was submitted that an amount of Rs. 68.45 lacs represents the amount of room rent charges received by the appellant from the patients who have availed in house facilities in the hospital run by the appellant at Haridwar. The amount of room rent charges received by the appellant in the assessment year is minuscule as compared to the number of patients who have treated in the hospital run by the appellant. Ld. AR submitted further that an amount of Rs. 2 .2 crores approximately has been charged from the patients who have been treated in the hospital run by the appellant, room rent charges, diagnosis and surgical services provided by the appellant which has also been charged at nominal rates in order to meet the actual costs incurred without any element of profit imbibed therein. In this regard attention was drawn on the income and expenditure statement of appellant trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, medical relief, preservation of environment (including watersheds, forests and wildlife and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility: ** ** ** The proviso inserted in section 2(15) of the Act by the Finance Act, 2008, with effect from 1.4.2009, reads as under:- ** ** **" Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity; ** ** "(Emphasis supplied) Therefore, the aforesaid proviso does net apply to a trust/institution engaged in the charitable object of providing relief to the poor, imparting education and providing medical relief. The vision with which the applicant trust has been set up and which is being followed over the years are as under:- '- To make a disease free worl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also decided in favour of the appellant. Other objections of the revenue 6.7 Ld. CIT(DR) has also contended that the appellant has received membership fees aggregating to Rs. 283.38 lacs in the assessment year under consideration which is in violation of the trust deed. She has contended further that prescribing of allopathic medicines by one dentist Shri Kuldeep Singh in the medical hospital run by the appellant was also in violation of the objective of the trust. Rejoinder of the Ld. AR in this regard remained that clause 0 of the trust deed clearly empowers the appellant trust to accept voluntary donations. Thus there was no bar on the appellant to receive voluntary donations in the form of membership fees and thus the objection raised by tjhe department does not survive. The Ld. AR submitted further that the predominant objective of the appellant trust is to provide medical relief to the society at large. Hence there is no specific restriction stipulated in the trust deed to prevent the appellant from prescribing allopathic medicines. He referred clause A & D of the trust deed in support. He however submitted that though the appellant primarily adopts ayurved and yoga as te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted further that the R & D activities undertaken hy the appellant amounted to object of general public utility u/s 2(15) of the Act. She alleged further that comparative rate chart furnished by the appellant in the Paper Book was not filed before the authorities below hence the same constitutes additional evidence. Ld. AR has met out these contentions of the Ld. DR with this rejoinder that the notification granting recognition to the R & D Center of the appellant by the SIRO is available on the public domain and can be accessed at www.dsir.gov.in/direct/siro06.pdf. Thus the certificate does not constitute additional evidence. It was submitted further that the R & D activities undertaken by the appellant was only ancillary and incidental to the predominant objective of providing medical relief being pursued by the appellant. Hence does not fall to the objects of general public utility as defined u/s 2(15) of the Act. Regarding comparative rate chart furnished by the assesee before the Tribunal amounting to additional evidence, Ld. AR submitted that this fact was very much highlighted before the authorities below and reference of the contents of page No. 13 of the first appellate ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance on the decision of Hon'ble Supreme Court in the case of Sole Trustee, Lok Shikshana Trust (supra) held that the activities undertaken by the appellant were in the nature .of "general pubic utility" as defined u/s 2(15) of the Act and since there was no itota of evidence to substantiate the charitable activities undertaken by the assessee no exemption was granted in the given assessment year. In the case of Aurolab Trust (supra) assessee engaged in the singular activity of manufacturing and trading in ophthalimic and cardiovascular products and accessories, had not taken any charitable activity as provided in the trust deed. Even the sale price of the products sold by the assessee was higher than those available in the market. Taking into account these aspects the Tribunal held that since there was no element of chaity involved in the activities undertaken by the appellant the assessee was not entitled to claim exemption u/s 11/12 of the Act. In the case of ICAI Accounting Research Foundation (supra) the assessee was pre-dominantly engaged in undertaking R&D activities on behalf of Government and other institution and providing consultancy services. In view of the primary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s relied upon by the Ld. CIT(DR) do not advance the case of the revenue and hence not helpful to the revenue. Distinction between objects and business u/s 11 (4) /(4A) 6.7.6 The authorities below held that the activities of the appellant were merely sub serving the business of Divya Pharmacy. The contention of the appellant to it remained that the business undertaking was run by the appellant as an activity in incidental to the attainment of the main objects of the appellant and to give charity which is permitted u/s 11(4)/11(4A) of the Act. 6.7.7 Considering the submission of trie parties on these issues we are of the view that it is a trite law that once registration u/s 12A of the Act has been granted by Ld. CIT, the AO could not question the charitable character of the institution during the course of assessment proceedings. It is not open to the AO in the assessment proceedings to hold that the objects of the assessee are not charitable in nature. The contention of Ld. AR remained tha the meaning of the expression 'not for purpose of profit' in the above provisions is no longer res integra, the test being, what is the predominant object of the activity - whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Thus it is clear that the charitable trust can carry on business and utilize its profits therefrom for the charitable purposes but a charitable trust cannot have its purpose, an activity that involves the buying and selling of goods and making profits. The business undertaking of the appellant as discussed above are thus the means for effectuating a charity, but not a charitable object itself. We find that in the case of appellant before us the 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. Onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 11(4)/11(4A) of the Act are satisfied. The Hon'ble Supreme Court in the case of P. Krishna Warriers (supra) has been pleased to hold with reference to income tax Act 1922 that if the trust carried on business and the business itself 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. In that case before the Hon'ble Supreme Court business of making and selling ayurvedic medicines was settled and held in trust and 60% of income from such business was applied for charitable purpose. The AO denied exemption on the ground that part of the income from business was not applied for charitable purposes, the Hon'ble Supreme Court held that where business is held for charitable purposes the conditions prescribed in proviso (b) to section 4(3) (i) of the Income Tax Act is not applicable and the assessee was held to be eligible for exemption. The decision of Delhi High Court in the case of Hamdard Dawakhana (Waqf) (supra) though rendered in the context of the pre amended law i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for carrying out the other objects of the trust. The assessee also levied 11% service charge on the price of medicines from non-members and claimed to have utilized the amount so collected for running the dispensaries. In the preceding assessment years, benefit of section 11 was given to the assessee. The assessee claimed the benefit u/s 10(22A) which was refused by the assessing officer mainly on the basis that the dominant object of the trust was to sell medicines and derive profit therefrom. The first appellate authority rejected the assessee's appeal. The Tribunal has however given relief with this finding that the mere fact that the assessee trust has objects other than medical relief was not a condition aliunde to which the exemption u/s 10(22A) could be denied to the assessee. The surplus derived from running the dispensaries was utilised for philanthropic purposes. CBDT circular No. 194/16-17-II(A-1) makes it clear that if a surplus is used for philanthropic purposes the income of the institution will be eligible for exemption u/s 10(22A). We are thus of the view that in the present case the authorities below have grossly erred in holding that the appellant's acti ..... 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