TaxTMI 
TaxTMI 
2011 (5) TMI 591
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...., disabled or handicapped persons and institutions of medical research and such other similar institutions as would give teaching and educating, medical and surgical treatment, care, cure, recuperation and other advantages to alleviate the sufferings of mankind. (b) To take over any existing institutions of the kind referred to above and conduct, run, maintain, develop, extend and improve the same. (c) To promote and carry on research in diseases and to promote education and research of innovation, experimental, preventive, curative and demonstrative kinds of various diseases prevalent among the people. (d) To recruit, train and provide or to assist in recruitment and training medical and other staff for any such institutions with a view to attaining and in support of the said objects. (e) To produce or manufacture or help to produce or manufacture medical equipments including ophthalmic instruments, lenses, surgical equipments and other accessories that are necessary for the treatment of patients or any product relating to the field of research and development of trust or activities of the trust and generally make them av....
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....er of Income-tax observed that the assessee is engaged in the activities of manufacturing and trading in ophthalmic and cardiovascular products and accessories and the above activities are carried on as a business venture and therefore, the activities of the assessee trust could not be considered as charitable in nature. The Commissioner examined the relevant provisions of law contained in section 11(4) and 11(4A) and stated that charitable or religious trusts can carry on business if the business is incidental to the attainment of the objects of the trust. He stated that the business income of a charitable trust or institution would be exempt if the business carried on by the trust or institution is incidental to the attainment of the objectives of the trust and carrying on the business should not be the primary object of the trust or institution. The Commissioner held that out of the seven objects pronounced in the trust deed, the assessee-company was carrying on one particular object alone which relates to manufacture and sale of medical necessaries including ophthalmic instruments, lenses, surgical equipments etc. 6. The Commissioner further perused the profit and loss accou....
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....associate concern, M/s. Aravind Medical Research Foundation. He found therefore, that the assessee trust has not carried on any charitable activities. Accordingly, he issued notice to the assessee trust proposing to cancel its registration earlier granted under section 12A. The assessee filed detailed objections against the notice issued by the Commissioner. The assessee trust contended that the products manufactured by the assessee are sold at affordable price benefiting the weaker sections of the society. The assessee contended that its activities related to medical relief, general public utility in the form of cost effective eye care products supplied to the poor and weaker sections of the society who undergo surgery in various non-profit hospitals and under various non-Governmental organization initiatives. The assessee contended that it is participating in the movement to prevent blindness. The assessee trust relied on a series of decisions including that of the Hon'ble Supreme Court in the cases of Asstt. CIT v. Surat City Gymkhana [2008] 300 ITR 214/170 Taxman 612, Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1/[1979] 2 Taxman 501. 8. After e....
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.... does not deserve exemption under section 11(1)(a) of the Act and accordingly erred in cancelling the registration granted under section 12A(a) of the Act. The order of the Commissioner of Income-tax is against the weight of evidence and documents on record. (b) The Commissioner of Income-tax ought to have seen that the appellant is a Trust constituted as early as 1992, its objects and activities have been under scrutiny, ever since the constitution of the trust has been submitting return regularly and the assessments have been completed in respect of all the assessment years upto 2007-08 accepting the claim of the Trust for exemption under section 11 and that there are no changes in facts and circumstances. Consequently there is no justification for the Commissioner to take a different view from that which was adopted in all the aforesaid previous years. (c) The Commissioner of Income-tax is wrong in his view that in so far as the appellant had spent a sum of Rs. 17,53,40,952 on purchase of raw materials and other costs and was in receipt of interest of Rs. 17,94,06,260, export incentive of Rs. 14,77,643, profit on sale of investment of Rs. 28,08,400 ....
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....tion of the Trust has to be continued. (h) The Commissioner of Income-tax is wrong in holding that the Trust is not entitled to registration on the ground that there is no element of charity and it clearly shows non-advertence to the relevant statutory provisions and legal principles that should be applied in considering the eligibility for exemption under section 11 and for registration under section 12A(a). (i) The Commissioner of Income-tax has failed to note that in the case of activity which yields profit the question to be considered is the satisfaction of the twin conditions under section 11(4A). In so far as the Commissioner has not adverted to this aspect at all and has steered clear of the said provision, which has to be considered in this case, the conclusion is vitiated by non-application of mind. (j) The Commissioner of Income-tax has repeatedly stated that the institution sells medical products in India and abroad and has promoted the products and has acted in a commercial manner. He failed to note that the Hon'ble Supreme Court has unequivocally held that where a business is held upon Trust the business has to be carried ....
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....Foundation to provide low cost eye care support to the public, especially weaker sections of the society. 12. The learned counsel contended that the assessee is distributing its products in India as well as exporting outside India to meet the demand of WHO and the sales are made at a very concessional price compared to normal commercial market rate. The assessee is earning profit in those activities and earning of profit does not mean that the assessee trust is not carrying on charitable activities. The learned counsel explained that the Commissioner of Income-tax has misconstrued the expression of business as a result of which he has made an impression that if a business is carried on by a charitable institution, running of the said business should not be run like the business run by an ordinary business man. The learned counsel explained that the proposition of the Commissioner of Income-tax is fallacious. He invited our attention to the definition "business" provided under clause (13) of section 2, according to which "business" includes any trade, commerce or manufacture or adventure or any concern in the nature of trade, commerce or manufacture. A business is universally acc....
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....e attainment of the objectives of the trust; that in any event, if there be any ambiguity, the provision must be considered in a manner that benefits the assessee. The learned counsel explained that the present case of the assessee trust is squarely covered by the above judgment of the Hon'ble Supreme Court rendered in the case of Thanthi Trust (supra) as the entire profits of the business carried on by the assessee trust is exclusively used for the purpose of the trust which are only charitable in nature. 15. Regarding the above said application of the profits of the assessee trust, the learned counsel explained that the Commissioner of Income-tax himself has stated in his order that the assessee had made donations to other charitable institutions in the course of its activities. All such donations having been made to Aravind Medical Research Foundation cannot be a disqualification against the assessee. Even though Aravind Medical Research Foundation is an associate trust of the assessee and the trustees of both the trusts are common, there is no dispute that the other trust, Aravind Medical Research Foundation is carrying on charitable activities and therefore, the donations g....
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....lab 125 Sun Pharma 150 Appasamy 135 Shah & Shah 125 2. HPMC - 2% w/v 3 ml Aurolab 60 Sun Pharma 68 Appasamy 60 Shah & Shah 65 3. Tryapan Blue 0.06% w/v 1 ml Aurolab 100 Biotech 120 4. Sodium Hyaluronate 1.4% w/v 1 ml Aurolab 750 1 ml Appasamy 900 0.8 ml Sun Pharma 950 Biotech 900 AMO 3500 5. Silicone oil 1000 cst 10 ml Aurolab 1800 DORC 2500 6. Silicone oil 5000 cst 10 ml Aurolab 3500 Howard 3800 ANTIGLAUCOMA DRUGS 7. Timolol Maleate 0.5 % w/v 5 ml Aurolab 40 Sun Pharma 49 Allergan 45 Microvision 49 8. Latanoprost 0.005 % w/v 2.5 ml Aurolab 150 Sun Pharma 295 Cipla 344 Microvision 214 Ajanta 229 Pfizer 1188 ANTIBIOTICS 9. Ofloxacin 0.3% 5 ml Aurolab 30 Allergan 33.7 Sun Pharma 38 10. Gatifloxacin 0.3% w/v 5 ml Aurolab 30 Sun Pharma 39 Allergan 42 Warren 45 Ajantha 37 ANTI ALLERGIC DROPS 11. Naphazoline HCL 0.01 % w/v 5 ml Aurolab 32 Sun Pharma 43 12....
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....hand) 3. DIT(Exemptions) v. Wellington Charitable Trust [2010] 195 Taxman 232 (Mad.) 4. DIT(Exemptions) v. Govindu Naicker Estate [2009] 315 ITR 237 (Mad.) 5. DIT(Exemptions) v. Span Foundation [2009] 178 Taxman 436 (Delhi) 6. CIT v. Jyothi Prabha Society [2009] 310 ITR 162/177 Taxman 429 (Uttarakhand) 7. DIT v. Garden City Educational Trust [2010] 191 Taxman 238 (Kar.) 8. Surat Art Silk Cloth Manufacturers Association (supra) 21. The learned counsel also contended to distinguish the facts of the present case from the decisions rendered in the cases of Sole Trustee Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC) and CIT v. P. Krishna Warrier [1972] 84 ITR 119 (Ker.). 22. The learned counsel further argued that the assessee has been recognized as a charitable institution since its inception in 1992. The assessee has been availing the benefit under section 11 for almost two decades. The activities of the assessee have been consistent through out. A number of times, the assessments were completed under section 143(3). The Assessing Authority has....
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.... of the main objects. The learned Commissioner has pointed out that in spite of the above exhaustive objects provided in its trust deed, the assessee has sought to carry on, only a single activity for all the years since its inception. That single activity carried on by the assessee trust is to manufacture and sell mainly Intra Ocular Lens along with manufacturing and trading in ophthalmic and cardiovascular suture needles and other surgical items. The products manufactured and traded by the assessee trust are related to medical field but that does not mean that the activity of manufacturing and trading in those items are charitable activities. The manufacturing and trading of the above items are mainly carried out by business undertakings and only for the reason that the products are used in medical field, it does not mean that the manufacture of those products, per se, is a charitable activity. The learned Commissioner explained that as the assessee is carrying on that activity alone and has not carried on any other charitable activities, the business carried on by the assessee in the nature of manufacturing and trading cannot be treated as a business carried on by the assessee i....
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....essment year 2010-11, almost all the profits generated out of its business activities have been converted into financial assets from time to time. 28. The learned Commissioner argued that as pointed out by the Commissioner of Income-tax I, Madurai there is no evidence on record to show that the assessee had distributed Intra Ocular Lens either free of cost to the public or at any concessional rate to the public. There is nothing available on record to show that the sales were made by the assessee at a concessional rate ultimately to be benefited by weaker sections of the society. 29. In the above facts and circumstances of the case, the learned Commissioner contended that the Commissioner of Income-tax-I, Madurai is justified in relying on the decision of the Hon'ble Supreme Court in the case of Yogiraj Charity Trust (supra) wherein it was held that in spite of all other independent objects if any of the objects cannot be treated as charitable, the claim of entire trust for exemption has to fail. He further explained that in the present case, the situation is more vulnerable in the sense that the assessee trust has not carried out any other activity other than the business ac....
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....oner contended that the Commissioner of Income-tax was not empowered in the past to cancel a registration once granted. There was no enabling provision in the Act. After the introduction of sub-section (3) to section 12AA(1A) with effect from 1-10-2004 and after the enlargement of that sub-section with effect from 1-6-2010, the law gave authority to the Commissioner of Income-tax to cancel the registration for good and valid reasons. As soon as the law provided for such enabling provision, the Commissioner of Income-tax initiated action to cancel the registration of the assessee trust. Therefore, a valid registration for the past , does not give any right to the assessee to argue that there was a consistency in the matter of registration enjoyed by the assessee society. In the past, the Department had no way to cancel the registration. Now, provision is available in the Act and it has been acted upon by the competent authority. 33. The learned Commissioner further argued that the assessing authority might have completed a number of assessments including under section 143(3) accepting the accumulation petitions filed by the assessee trust. The assessing authority might have under....
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....her accessories etc. There is no contradiction when it is stated that the only activity carried on by the assessee trust since its creation has been the sole function of manufacture and sale of Intra Ocular Lens and other surgical accessories. As a matter of fact it has to be brought on record that the manufacturing activity is the only activity carried on by the assessee trust during the entire period of its life, so far. 37. Therefore, the question to be considered if further modified is, whether the activity of manufacturing and selling of Intra Ocular Lens and other surgical accessories is charitable activity or not. As the assessee trust has not carried out any other activities in nature as provided in the trust deed, the business activity carried on by the assessee has to be evaluated independently without the company of other objects theoretically provided in its trust deed. When other objects of charity provided in the trust deed are de-linked from the company of other objects, it is to be seen as to whether the actual activity of manufacturing and trading carried on by the assessee trust is charitable in nature as construed under section 11. As that is the only activity....
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.... is not a technical concept safeguarded by legal jargons. Charity is not an edifice built on logical deliberations. Charity is a divine reflection of human civilization which finds ways and means to help the needy, to protect the helpless, to support the poor and to work for the betterment of the society and mankind. So what is necessary is actual work of charity, howsoever humble it might be. If the assessee fails in this basic test, it is not necessary to proceed further to find out how the assessee has applied its profit/disposable funds; whether it has accumulated or it has been donated. The claim of the assessee fails at the threshold itself. Where the assessee has not carried on any charitable activities but only a business and even if a part of that business income is applied for charitable purposes, still the assessee could not be treated as an institution entitled for the benefit of section 11. It is for such institution, the Act has provided the scheme under section 80G. There is a distinction between carrying on of charitable activities and donations for charitable purposes. In the first case that of charitable activities, the institution is engaged in charitable activit....