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

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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

short Overview: In view of CBDT Instruction No. 1132, dt. 5-1-1978. inter-trust donation by one charitable trust to another for utilization by donee trust towards charitable objects was proper application of income for charitable purpose in the hands of donee trust and it would not affect exemption under section 11 as claimed by donor trust, i.e., assessee in any manner, whatsoever, especially in view of the fact that it was not the case of AO that donee had not applied such sums for charitable purposes.

Assessee, a trust registered under section 12A claimed exemption under section 11. AO denied exemption on the  inter-trust donations made to Patanjali Yogpeeth, another charitable trust for the purpose of setting up of yoga gram and other yoga related activities, did not amount to application of income charitable purpose.

it is held that In view of CBDT Instruction No. 1132, dt. 5-1-1978. inter-trust donation by one charitable trust to another for utilization by the donee trust towards charitable objects was proper application of income for charitable purpose in the hands of donee trust and it would not affect exemption under section 11 as claimed by donor trust, i.e., the assessee in any manner, whatsoever, especially in view of the fact that it was not the case of AO that donee had not applied such sums for charitable purposes.

Decision: In assessee’s favour.

Referred: CIT v. Amitabh Bachchan (2016) 384 ITR 200 (SC) : 2016 TaxPub(DT) 2291 (SC), CIT v.  Greenworld Corporation (2009) 314 ITR 81 (SC) : 2009 TaxPub(DT) 1713 (SC), CIT v.  Woodward Governor India (P) Ltd. (2009) 312 ITR 254 (SC) : 2009 TaxPub(DT) 1628 (SC),CIT v. Max India Ltd. (2007) 295 ITR 282 (SC) : 2007 TaxPub(DT) 1548 (SC), Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) : 1992 TaxPub(DT) 0858 (SC),Sutlej Cotton Mills Ltd. v. CIT (1979) 116 ITR 1 (SC) : 1979 TaxPub(DT) 0782 (SC),CIT v.  Escorts Ltd. (2011) 198 Taxman 324 (Del.-HC) : 2011 TaxPub(DT) 0894 (Del-HC), CIT v. G.R. Thangamaligai (2003) 259 ITR 129 (Mad.-HC) : 2003 TaxPub(DT) 0581 (Mad-HC), CIT v. Dr. B.A. Rajakrishnan (2000) 113 Taxman 405 (Kerala-HC) : 1997 TaxPub(DT) 0441 (Ker-HC),Dy. CIT v. Cyient Ltd. (2018) 91 taxmann.com 353 (Hyd.-Trib.) : 2018 TaxPub(DT) 1906 (Hyd-Trib), Mili Consultants & Investment (P) Ltd. v. Dy. CIT (2016) 160 ITD 72 (Mum-Trib) : 2016 TaxPub(DT) 3662 (Mum-Trib), Inventurus Knowledge Services Pvt. Ltd. v. ITO (2016) 156 ITD 727(Mum.-Trib.) : 2016 TaxPub(DT) 0552 (Mum-Trib), Asstt. CIT v. C.J. Exporters [ITA No. 2612/M/2013, dt. 16-7-2014], Reliance Industries Ltd. v. CIT [ITA No. 7223/Mum/2011, dt. 20-11-2013] and Reliance Communications Ltd. v. Asstt. CIT [ITA No. 2915/Mum/2012, dt. 5-2-2013].

IN THE ITAT, DELHI BENCH

N.K. BILLAIYA, A.M. & KULDIP SINGH, J.M.

DCIT v. Divya Yog Mandir Trust

ITA No. 5612/Del/2015

30 April, 2019

Assessee by : Rohit Jain, Advocate, Vibhu Gupta, CA

Revenue by : J.K. Mishra, CIT DR

ORDER

Kuldip Singh, J.M.

The Appellant, DCIT, Exemption Circle, Ghaziabad (hereinafter referred to as the ‘Revenue’) by filing the present appeal sought to set aside the impugned Order, dt. 22-7-2015 passed by the Commissioner (Appeals), Dehradun, qua the assessment year 2011-12 on the grounds inter alia that:–

“1. The learned Commissioner (Appeals) has erred in partly allowing the appeal of the assessee ignoring the fact that the major activity as claimed by the assessee trust is its inter-trust donation of Rs. 68.78 Cr., out of its total income of Rs. 144.88 Cr., which amply shown that the assessee is not carrying out many of its objectives other than earning profits and stashing away its surplus to other group trust.

2. That the learned Commissioner (Appeals) has erred in partly allowing the appeal of the assessee ignoring the fact that the assessee trust has itself declared that it I carrying on business through it, various business undertakings and in the process by way of trading and business, it had been receiving consideration on sale of medicines, publications, CD-VCDs etc. And therefore, in the light of amendment to clause 15 of section 2 of the Income Tax Act, such activities of the Trust cannot be said to be charitable in’ nature, as the trust is admittedly receiving considerate profit while carrying on its business activities which proves that the assessee is engaged in business activity which fall under the explanation of “advancement of any other object of general public utility.

3. The order of learned Commissioner (Appeals) be cancelled and the order of the assessing officer be restored”

2. Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessee trust being registered under section 12A(a) of the Income Tax Act, 1961 (for short ‘the Act’) claimed exemption in terms of sections 11, 12A and 12A(a) of the Act. assessing officer held the activities of the assessee trust not covered under section 2(15) of the Act and declined the exemption under section 11 of the Act. Assessing officer taxed the total income at Rs. 52,76,05,600 on the ground that the activities of the trust are not of charitable in nature being not involved in providing relief to the poor, education and medical relief etc. assessing officer also held 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 Rs. 25,00,000.

3. Assessee carried the matter by way of filing an appeal before the learned Commissioner (Appeals) who has partly allowed the relief by following the decision rendered by the Tribunal in assessee’s own case for assessment year 2009-10. Feeling aggrieved, the Revenue has come up before the Tribunal by way of filing the present appeal.

4. We have heard the learned Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.

Ground No. 1:

5. Learned AR for the assessee contended that the issue in controversy is covered in favour of the assessee in assessee’s own case vide Order, dt. 27-8-2013 of the Tribunal in ITA No. 387/Del/2013 for assessment year 2009-10 (2013) 37 taxmann.com 227 (Del-Trib) : 2013 TaxPub(DT) 2442 (Del-Trib), which has since been affirmed by the Hon’ble High Court of Uttarakhand vide Order, dt. 27-2-2019.

6. The first issue to be decided is whether the learned Commissioner (Appeals) has erred in partly allowing the claim of the assessee ignoring the fact that major activities as claimed by the assessee trust is its inter-trust donation of Rs. 68.78 crores out of the total income of Rs. 144.88 crores which shows that the assessee is not carrying out many of its objects other than earning profits and stashing away its surplus to other group trust.

7. This issue has been decided by the coordinate Bench of the Tribunal in assessee’s own case for assessment year 2009-10 in favour of the assessee (supra) by returning following findings :–

“4.21. In support of ground No. 7 regarding inter-trusts donations, the learned A.R. submitted that the authorities below have wrongly held that the intertrust donations amounting to Rs. 38.35 crores made to Patanjali Yogpeeth, another charitable trust for the purpose of setting up of yoga gram and other yoga related activities, did not amount to application of income for the purpose of ‘medical relief’ or ‘imparting education’. The legal position in this regard is well settled that when donor trust which itself is a charitable trusts, donates its income to another trust, the same constitutes application of income under section 11(1)(a) of the Act. In this regard, he drew our attention to the instructions issued by CBDT vide Instruction No. 1132 dt. 5-1-1978 reproduced hereunder:

“A question has been raised regarding the availability of exemption in the hands of charitable trusts of amounts aid as donation to other charitable trusts.

The issue has been considered by the Board and it has been decided that as the law stands at present, the 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 lose exemption under section 11 of the Income Tax Act, 1961, merely because the donee trust did not spend the donation during the year of receipt itself.

The above position may kindly be brought to the notice of all officers working in your charge.”

4.22 In support, the learned AR placed reliance on the following decisions:–

(i) CIT v. Thanthi Trust (1999) 239 ITR 502 (SC) : 1999 TaxPub(DT) 0051 (SC) 

(ii) CIT v. Trustees of Jadi Trust (1982) 133 ITR 494 (Bom.) : 1982 TaxPub(DT) 0491 (Bom-HC) 

(iii) CIT v. Hindustan Charity Trust (1983) 139 ITR 913 (Cal.) : 1983 TaxPub(DT) 0589 (Cal-HC)

(iv) CIT v. Nirmala Bakubhai Foundation (1997) 226 ITR 394 (Guj.) : 1997 TaxPub(DT) 0574 (Guj-HC) 

(v) CIT v. Shri Ram Memorial Foundation (2004) 269 ITR 35 (Del.) : 2004 TaxPub(DT) 1639 (Del-HC)

(vi) CIT v. HPS Social Welfare Foundation (2010) 235 CTR 330 (Del.) : 2010 TaxPub(DT) 1904 (Del-HC)

………………………………………………………………………..……………..

6.6.4. Further allegation of learned Commissioner (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 learned Commissioner (DR) has placed reliance on the statement of one Shri Balwant Singh Minhas, 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 year under consideration. The learned Commissioner (DR) has further alleged that appellant has collected a sum of Rs. 68.45 lacs under this head during the year. She alleged further that the assessee has charged Rs. 290.79 lacs from patients during the assessment year through medical hospital which was in addition to the price of medicine charged from patients. She alleged that the appellant was unable to produce during the appellate proceedings any documentary evidence to support the charitable activities in the form of medical relief in the hospital run by the appellant. She alleged that the appellant was unable to produce the medical practicitioner during the assessment proceedings. The rejoinder of the learned 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 under section 11(1)(9) of the Act. A copy of certificate of registration of the donee trust under section 12A of the Act has been placed at page 856 of the supplementary paper book — (III). The CBDT Instruction No. 1132 dt. 5-1-1978, extract of which has been made available at page No. 857 of the supplementary paper book-III 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 under section 11 of the Income Tax Act, 1961. We thus do not find substance in the contention of the learned Commissioner (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 such sums for charitable purposes, there is no substance in the allegation that the appellant has deviated the funds.”

8. So, following the order passed by the coordinate Bench of the Tribunal for assessment year 2009-10, we are of the considered view that 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 under section 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 learned Commissioner (Appeals) needs no interference at the ends of the Tribunal being based upon the findings of the Tribunal pertaining to assessment year 2009-10.

So, ground no.1 of the Revenue’s appeal is determined against the Revenue.

Ground No. 2:

9. Ground No.2 raised by the Revenue challenging the impugned order passed by the learned Commissioner (Appeals) is that since the assessee trust has been receiving consideration on sale of medicines, publications, CD-VCDs, etc., 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) of the Act”.

10. Again, this issue has been decided by the coordinate Bench of the Tribunal in assessee’s own case for assessment year 2009-10 in favour of the assessee (supra), which has since been confirmed by the Hon’ble jurisdictional High Court vide Order, dt. 27-2-2019 (supra). Operative part of the order passed by the Tribunal for ready perusal is as under :-

“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 appreciate that the propagation of yoga by way of conducting yoga classes on a regular basis and in a systemized manner also falls under the category of ‘imparting of education’ as provided under section 2(15) of the Act. Reliance has been placed on several decisions, which we will discuss hereunder. The contention of the learned AR remained that the predominant object of the appellant trust are to provide practical and theoretical training in the field of yoga, which would ultimately provide medical relief to the society at large. It was submitted that in pursuance of the said objective the appellant trust has made intertrust donations to Patanjali Yog Peeth to support their endeavors of imparting yoga education by means of organizing yog shivirs/camps across the country on daily/weekly/monthly basis 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 shiviirs/camps also falls under the category of imparting ‘education’ one of the charitable objects defined under section 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 with effective form 20-7-2009. In compliance the learned 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) vide notification dt. 20-7-2009, a copy thereof has been made available at page No. 805 and 806 of the supplementary paper book–II. Department of Ayush is a body set up by the Ministry of Health & Family Welfare, Govt. of India with the primary objective of regulating and upgrading the educational standards, quality control and standardization of drugs, improving the availability of medicinal 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. Learned Commissioner (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 Lok Shikshana Trust (supra), relied upon by the learned 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 the process of training and developing the knowledge, skill, mind and character of students by schooling by way of systematic instruction, schooling or training. The Hon’ble Delhi High Court in the case of Delhi Music Society v. DGIT (supra) has been pleased to hold that since the assessee society was teaching and promoting all forms of music and dance , western, Indian or any other and was run like any school or educational institution in a systemic manner with regular classes, the same therefore meet the requirement of an educational institution within the meaning of section 10(23C)(vi) of the Act.

In the case of ITO v. SRM Foundation of India (supra) the Delhi Bench of the Tribunal, where the assessee was engaged in spreading the system of Transcendental Meditation (TM) has held that irrespective 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 under section 10(22) 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 under section 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 under section 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, Patanjali hospital and Patanjali Chikitsalaya at Haridwar, Ranchi and Patna has served more than 2.25 lacs, 0.60 lacs and 0.75 lacs patients during the relevant year. The hospitals have team of doctors, nurses and paramedical staff working round the clock. It was submitted that the hospital at Haridwar is well equipped with ultra modern diagnostic facilities like OPD and IPD, pathology lab, cardiology lab, 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 learned Commissioner (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 extreme happiness.

B. To construct the building etc for boarding and lodging for those who are instructed III Y og and meditation.

C. To organize Yoga camps in the country and abroad in order to propagate the yoga, training and Vedic Dharma.

D. To open and establish charitable hospitals for the treatment of the helpless poor, out caste and also to distribute medicines, clothes and food articles in the tribal area.

E. To furnish and equip the charitable hospital with modern medical facilities.

F. To carry out conduct research on Yoga, Ayurveda and Vedic literature and also to organize scholarly seminars and competitions.

G. To prepare and to sale and purchase of the Ayurvedic medicines for the charitable hospitals, hospital colleges, schools and for the social and Yogic 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, Tyranny 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, earthquakes, epidemic, drought etc.

O. To co-operate other such institutions and organizations which match or aims and objectives, and order to fulfill these aims and objectives to accept the donating of money, land etc.”

6.6.2. We find that the predominant objective of the appellant trust has been set out in clause A of the Trust deed as per which the object is to alleviate extreme sufferings and cure diseases by providing practical and functional training 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 learned Commissioner (DR). WE thus hold that the case of the appellant does not fall within the last limb of the definition of charitable purpose given under section 1(15) of the Act. In the case of Thiagarajar Charities v. ACIT (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 from out of which it had derived income was held under trust and since the trust was for charitable purpose, the income was exempt from tax under section 11. The assessing officer rejected its claim. The Tribunal as well as Hon’ble High Court held that the object covered by clause 1(g) involved carrying on an activity for profit. On appeal the Hon’ble Supreme Court held in favour of the assessee by observing that clause I(g) referred by the lower authorities was not an object but was really in the nature of a power. The Hon’ble Court further held that the ancillary activity undertaken by the assessee was to afford relief to poor falling within scope of section 2(15) of the Act and was not an object of general public 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 learned Commissioner (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 Rs. 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 Rs. 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 rejoinder the submission of the learned 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 charity, which is permitted under section 11(4)/11(4A) of the Act. It was submitted that the ayurvedic preparations/medicines have been exported by the appellant at the request of the patients, in order to fulfill its predominant objective of making the world disease free. It was submitted that the said exports were made by the business undertaking held under the trust and there is no embargo under the provisions of the Act to restrict business undertaking from making exports in the course of undertaking its 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 learned Commissioner (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 learned Commissioner (DR) has placed reliance on the statement of one Shri Balwant Singh Minhas, 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 year under consideration. The learned Commissioner (DR) has further alleged that appellant has collected a sum of Rs. 68.45 lacs under this head during the year. She alleged further that the assessee has charged Rs. 290.79 lacs from patients during the assessment year through medical hospital which was in addition to the price of medicine charged from patients. She alleged that the appellant was unable to produce during the appellate proceedings any documentary evidence to support the charitable activities in the form of medical relief in the hospital run by the appellant. She alleged that the appellant was unable to produce the medical practicitioner during the assessment proceedings. The rejoinder of the learned 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 under section 11(1)(9) of the Act. A copy of certificate of registration of the donee trust under section 12A of the Act has been placed at page 856 of the supplementary paper book – (III). The CBDT Instruction No. 1132 dt. 5-1-1978, extract of which has been made available at page No. 857 of the supplementary paper book-III 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 under section 11 of the Income Tax Act, 1961. We thus do not find substance in the contention of the learned Commissioner (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 such sums for charitable purposes, there is no substance in the allegation that the appellant has deviated the funds.

6.6.5. Against the allegation of charging exorbitant rates for accommodation fee submission of the learned AR in rejoinder remained that the allegation is based on the statement of one Shri Balwant Singh Minhas without appreciating that the appellant did not conduct any yog shivir/camps in the assessment year under consideration, thus the question of charging exorbitant fees for conducting yoga shivir does not arise at all.

The further contention of the learned 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. learned 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 trust placed at page 379 of the paper book, wherein appellant has incurred an expenditure of Rs. 5.1 crores as against income of Rs. 2.2 crores thereby resulting in a deficit of Rs. 2.8 crores. Regarding the allegation that the appellant was unable to produce any record in the form of medical prescriptions to substantiate that medical relief was provided in the hospital run by the appellant, learned AR submitted that as a matter of practice the prescriptions made by the medical practitioners in the OPD are never retained and are always given to the patients. Nonetheless the appellant maintains a record of the patients who have been treated in house which has nowhere 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 learned 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 learned 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 appellant. In view of the above finding on first issue the second and third issue have become infructuous. In these issues the questions are as to whether the activity of the appellant were in the nature of providing general public utility or of advancement of any other object of general public utility as contained in section 2(15) of the Act. Relevant provisions under section 2(15) are reproduced as under :-

“Section 2(15) of the Act defines “charitable purpose” as under:-

(15) “charitable purpose” includes relief of the poor, education, 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;

Therefore, the aforesaid proviso does not 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 world through a scientific approach to Yoga and Ayurved and to fulfill the resolution of making a new world free from disease and medicine;

– To establish Pran as medicine for the treatment of all curable and incurable diseases by research on Pranayam/Yoga.

– To propagate Pranayam as a “free” medicine for treatment of diseases round the globe, through in-depth research in accordance with the parameters of modern medical science, so that the rich and poor may avail its benefits in order to attain sound health;

– To form a new integrated system of treatment, consisting mainly of the techniques of Yoga 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 under section 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 provide ‘medical relief’ ‘impart education’ to the society at large and ‘relief to the poor’ hence the proviso to section 2(15) does not apply in the case of the assessee/appellant.”

11. Following the aforesaid decision rendered by the coordinate Bench of the Tribunal, affirmed by the Hon’ble jurisdictional High Court, we are of the considered view 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, learned Commissioner (Appeals) has rightly decided the issue in favour of the assessee by following the decision rendered by the Tribunal in assessee’s own case for assessment year 2009-10. So, ground no. 2 of Revenue’s appeal is determined against the Revenue.

Ground No. 3:

12. Ground No.3 of Revenue’s appeal is general in nature, hence needs no adjudication.

13. In view of what has been discussed above, appeal filed by the Revenue challenging the impugned order passed by the learned Commissioner (Appeals) has no merit, hence hereby dismissed.

 

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