TaxTMI 
TaxTMI 
2017 (2) TMI 781
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....of the appellant and holding that the activities undertaken by the appellant did not fall within the purview of 'medical relief', 'imparting education' or 'relief to the poor', but were purely in the nature of object of general public utility under section 2(15) of the Act. 4. That the Commissioner of Income-tax (Appeals) erred on facts and in law in failing to appreciate that the Revenue authorities had, in the past years consistently accepted the activities of the appellant as being in the nature of medical relief, education and relief to the poor. 5. That the Commissioner of Income-tax (Appeals) erred on facts and in law in holding that the appellant's activities in relation to 'propagation of yoga' does not qualify as providing 'medical relief' or 'imparting education', but was purely in the nature of object of general public utility under section 2(15) of the Act. 6. That the Commissioner of Income-tax (Appeals) erred on facts and in law in relying upon erroneous findings given in the special audit report furnished under section 142(2A) of the Act, without judiciously appreciating the details/ explanation furnished by the appellant. 7. That the Commissioner of Inco....
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....donations not exigible to tax as under: (a) Donation from Divya Yog Mandir Trust (for construction of Patanjali Yogpeeth-II) Rs. 38,35,00,000 (b) Donations in relation to Disaster Relief Fund Rs. 4,36,23,766 (b) Donations in University of Patanjali Rs. 61,000 Total Rs. 42,71,84,766 10. That the Commissioner of Income-tax (Appeals) erred on facts and in law in holding that the voluntary contribution received by the appellant, including donations received through Yoga Camps and Yoga Samitis were not eligible for exemption under sections 11/12 of the Act. 11. That the Commissioner of Income-tax (Appeals) erred on facts and in law in holding that the appellant received anonymous donations aggregating to Rs. 13,68,99,745 covered under section 115-BBC of the Act. 12. That the Commissioner of Income-tax (Appeals) erred on facts and in law in upholding the addition of Rs. 6,52,493, being the value of Tata Sumo (vehicle) received as donation by the appellant. 13. That the Commissioner of Income-tax (Appeals) erred on facts and in law in holding that construction of building on land not owned/ registered in the name of the appe....
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....der section 11/12 of the Act. The ld. CIT (Appeals) has upheld the same which has resulted in the filing of the present appeal before the Tribunal. 4. At the outset of hearing, the ld. AR pointed out that issues raised in the grounds of the present appeal are almost covered by the decision of Delhi Bench of the Tribunal in the case of Divya Yog Mandir Trust Vs. JCIT in ITA. No. 387/Del./2013. 5. Ground Nos. 1 to 6 : These grounds are on the issue of non-applicability of proviso to section 2(15) of the Act. 6. In support of the above grounds the ld. AR submitted that the predominant object of the assessee are to provide medical relief through Prayanam and Yoga and also to impart education in the field of yoga. He referred page Nos. 1 to 14 of the paper book i.e. copy of the trust deed dated 2.02.2005 wherein objects of the trust have been reduced in black and white to support his argument that the assessee was set up as a charitable trust with the following predominant objectives, which have been carried out over the years : (a) providing medical relief through Yoga/Prayanam; (b) imparting education in the field of Yoga; & (c ) providing relief to the poor. On t....
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....ent year under consideration, also undertaken educational activities by setting up of Patanjali University for post graduate courses in yog and related subjects. Besides, substantial donations to educational institutions were also made by the assessee, in the assessment year under consideration. Further, to pursue the object of providing relief to the poor, the assessee undertook various relief activities, for assisting victims of the Bihar flood and Mumbai terrorist attacks in the assessment year under consideration. To sum up, the assessee was carrying out genuine charitable activities during the assessment year under consideration in the fields of medical relief, education and relief of the poor. Findings of the assessing officer/ CIT(A): The assessing officer/CIT(A), while accepting that the objects/activities of the assessee 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 under section 2(15) of the Act, i.e. 'advancement of any other object of general public utility' and was covered within the mischief of proviso to that section. Applying the aforesaid proviso, the assessi....
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.............................." (emphasis supplied) The aforesaid proviso provides that if any of the objects of the assessee involve carrying on of any activity in the nature of trade, commerce or business for cess or fee or any other consideration, then, irrespective of the nature of use or application of income, the assessee shall not be regarded as existing for charitable purpose. Similarly, if any of the objects of an assessee involve carrying on of activity of rendering service in relation to trade, commerce or business for consideration then, too, the assessee shall cease to be regarded as carrying on any activity for charitable purpose. It is, however, pertinent to mention that 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 legislative intent behind introduction of the aforesaid proviso in the definition of "charitable purpose" in section 2(15) of the Act can be gathered from the Central Board of Direct Taxes (CBDT) Circular No. 11 dated 19th December, 2008 repo....
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....hat their object is 'charitable purpose' within the meaning of section 2(15) would be well advised to eschew any activity which is in the nature of trade, commerce or business or rendering of any service in relation to any trade, commerce or business." (emphasis supplied) It would, thus, kindly be appreciated that 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. It may also be pertinent to mention here that the vision with which the assessee trust has been set up and which is being followed over the years are as under: a) 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; b) To establish Pran as medicine for the treatment of all curable and incurable diseases by research on Pranayam / Yoga; c) 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 s....
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....through Patanjali University Despite the aforesaid findings in para 3.2, assessing officer in para 6, however, held that the objects of the assessee fall within the ambit of sixth limb, i.e. "advancement of any other object of general public utility", which is reproduced hereunder: "The primary object and the core activity of the assessee trust is to provide training in Yog so as to make the society and the world free from all diseased and preserve ancient knowledge about Yog, Ayurved etc. The various objects stated in para 2.2 (supra) can only be brought under the ambit of the sixth limb of the definition of charitable purpose as defined under Section 2(15) of the Act, i.e. advancement of any other object of general public utility." On perusal of the aforesaid, it will kindly be noticed that findings of assessing officer are contrary inasmuch as assessing officer having accepted that the assessee was regularly organizing yoga camps to provide medical relief and also setting up the university for imparting education, still concluded that the objects of the assessee fall in the last limb. By organizing yoga camps, the assessee, as explained supra, achieves the twin objectiv....
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....is and unsubstantiated. In this regard, your Honours may also kindly note that at para 6 of the impugned assessment order, the assessing officer has, before concluding that the activities of the assessee fall under the last limb of the definition of 'charitable purpose' as defined under section 2(15) of the Act, given a categorical finding that the primary object of the assessee was to make the society and the world 'free from diseases'. The relevant extracts of the said observation is re-produced as under: "The primary object and the core activity of the assessee trust is to provide training in Yog so as to make the society and the world free from all diseases and preserve ancient knowledge about Yog, Ayurved etc. The various objects stated in para 2.2 (supra) can only be brought under the ambit of the sixth limb of the definition of charitable purpose as defined under Section 2(15) of the Act, i.e. advancement of any other object of general public utility" (emphasis supplied) Thus, when the predominant object of the assessee is to provide 'medical relief' by way of alleviating diseases through yog, which has also been consciously admitted by the assessing officer in more....
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....n this regard, attention is invited to the decision of the Supreme Court in the case of Radhasoami Satsang vs. CIT: 193 ITR 321, wherein it has been held that where a fundamental aspect permeating through the different assessment years is accepted one way or the other, a different view in the matter is not warranted, unless there be any material change in facts. The relevant observations at page 329 of the judgment are reproduced as under: "We are aware of the fact that, strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year."(emphasis supplied) In the case of DIT (Exemptions) vs. Guru Nanak Vidya Bhandar Trust: 272 ITR 379, the Hon'ble Delhi High Court held that the department is expected to be consistent with its own stand which has been taken in earlie....
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....were to be held that the ratio laid down by the apex Court in the case of Radhasoami Satsang (supra) would have limited application in the background of the facts of that case, it would kindly be appreciated that the Court has made the pertinent observations with respect to applicability of principle of consistency in context with allowability of exemption under sections 11/12 of the Act, which would, it is submitted, strictly apply even in the case of the assessee. Thus, even if it were to be held that the principle of consistency does not have general application, it would still have application in case of charitable trusts claiming exemption under sections 11/12 of the Act. It will also kindly be appreciated that the principle of consistently has been applied in various subsequent decisions referred supra, including jurisdictional Delhi High Court, which, too, are independently binding on the lower authorities. The CIT(A) totally misconstrued the aforesaid observation of the Supreme Court. In this regard, it is further respectfully submitted that it is trite law that once registration under section 12A of the Act has been granted by CIT, the assessing officer cannot questi....
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....ps. The said study portrays without any ambiguity that yoga camps organized by the institution, conducted under the supervision of qualified doctors and fully trained yoga instructors were held to cure physical ailments of the participants. The aforesaid publication also documents the feedback/testimonies of various people who were suffering from various chronic diseases and have benefited from yoga. (Refer pages 53 to 131 of the paperbook) It may also be mentioned here that there 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 & Epilepsy c) Yog for Renal Diseases d) Yog for Psoriasis (Skin Diseases) e) Yog for Musculoskeletal Disorders f) Yog for Constipation and Piles g) Yog for Asthma h) Yog for Parkinsons & Paralysis Further, it is imperative to mention here that Yoga is now a 'recognized system of medicine', which is now well established by the legislation of the Clinical Establishments (Registration and Regulation) Act, 2010 (Bill was introduced in the year 2007 and legislated in the year 2010). (refer pages 132 t....
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....hi. 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." (emphasis supplied) Other information downloaded from the aforesaid website, it is respectfully submitted, also makes it patently clear that Yoga is one of the recognized system/ method of providing medical relief. (Refer pages 139 to 196 of the paperbook) It may further be pertinent to note 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 medical and health care systems, practices, and products that are not generally considered part of conventional medicine (also called Western or allopathic medicine). A survey released in December 2008 by NCCAM found that yoga was the sixth most commonly used alternative therapy in the United States during 2007, wi....
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....laced by the CIT(A)'s on the judgment of the Bombay High Court in the case of Rajneesh Foundation (supra), it is respectfully submitted that the said decision was rendered prior to introduction of proviso to section 2(15), when there used to be no dispute in so far as classification of charitable objectives was concerned for the purpose of claiming exemption under sections 11/12 of the Act. Thus, this issue was never precipitated by the assessee before the Hon'ble Court. Further, the CIT(A) is totally misplaced in placing reliance on the aforesaid judgment, which was rendered in context of classifying 'meditation' as a charitable objective for the purpose of section 2(15) of the Act. The Hon'ble High Court, in the given case adjudicated only on the issue of classification of 'meditation' and '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. The pertinent finding of the Court in this regard is reproduced hereunder: "Admittedly, main thrust of the respondent is on meditation and nobody can dispute that in I....
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.... Shikshana Trust: 101 ITR 234, explained the meaning of the word `education' in the context of section 2(15) of the Act as under: "We have set out above the relevant clauses of the trust deed and the material part of the communications sent by the Sole Trustee. It would appear therefrom that though a number of objects, including the setting up of educational institutions, were mentioned in the trust deed as the objects of the trust, supplying the Kannada speaking people with an organ of educated public opinion was also one of those objects. The communication sent by the Sole Trustee to the Income-tax Officer shows that the trust at present is carrying out only the last mentioned object of the trust, namely, supplying the Kannada speaking people with an organ or organs of educated public opinion. The concentration so far of the activities of the trust only on that object is in pursuance of clause 6 of the trust deed, according to which the original trustee shall have power and authority to spend and utilise the money and the property of the trust for any of the purposes of the trust in such manner as to him may appear proper. The sense in which the word "education" has been us....
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....therefore, met the requirement of an educational institution within meaning of section 10(23C)(vi) of the Act. Reliance in this regard may also be placed on the decision of the Tribunal in the case of ITO vs S.R.M. Foundation of India: 21 ITD 598 (Del), wherein the assessee was a spiritual regeneration movement foundation of India, which was registered under section 12A and under section 80G of the Act. It was founded by Maharishi Mahesh Yogi and had prescribed syllabus, trained teachers, and branches all over India to spread the system of transcendental meditation (TM) to people in all walks of life. In the relevant assessment year, the assessee had claimed deduction under section 10(22) of the Act. The assessing officer held that the assessee was neither a university nor other educational institution recognized by a University or any State or Central Government. It was further observed that the assessee charged fee for education and received donations from the donees (course participants) for incurring expenses though the assessee had claimed that donations were made towards corpus. Thus, the assessing officer disallowed the assessee's claim for exemption. On appeal, the Co....
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....he students as part of then normal schooling. The optimistic instruction in TM was initially imparted to the trainers and then the qualified trainers imparted instructions to the trainees. The test of 'Systematic schooling' was, therefore, satisfied. There was no purpose other than the educational so far as the assessee-foundation was concerned. Therefore, the second ingredient or prerequisite of section 10(22) was also satisfied. That the assessee foundation did not exist for the purpose of profit was also clear from the objects clause. This was also clear from the balance sheet and income and expenditure account. It was clear that the assessee-foundation duly established the requirements under section 10(22) and qualified for the grant of exemption under section 10(22). The order of the Commissioner (Appeals) was, therefore, justified." (emphasis supplied) Further, according to Halsbury's Laws of England (4th Edition, Volume 5, paragraph 522) the advancement and propagation of education and learning generally are charitable purposes, even in the absence of an element of poverty in the class of beneficiaries, but the trust must be for the benefit of a sufficient section of the ....
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....h camps. In this regard, the Hon'ble Bench may also kindly note that there have been various yog camps which have been conducted in the assessment year under consideration, where no donations have been collected at all. The aforesaid facts, in our respectful submission, lead to the inescapable conclusion that the only underlying intention of the assessee was to provide 'medical relief' to the society at large and there was no quid pro quo in the matter of collecting donation and providing the benefit of yog. Besides, the live telecast of these yog camps/shivirs, it is further submitted, reaches audiences all over the nation who get the benefit of yog teaching 'free of cost'. The parallel drawn by the CIT(A) between ticket for availing certain facilities and donation coupon is, thus, it is submitted, fallacious. It may also not be out of place to mention that the assessee has also applied substantial amounts in setting up of 'Patanjali University', a deemed university set up under The University of Patanjali Act, 2006, inter alia, for having courses in MA (Yoga Science), MSC (Yoga Science), BA (Yoga Science), Post Graduate Diploma in Panchkarma, Post Graduate Diploma in Yog....
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....ed that the assessee has received certain contributions under the scheme for construction of cottages at Patanjali Yog Peeth-II known as "Vanprasth Ashram", which tantamount to providing 'services' to contributors and is in the nature of business, which is hit by proviso to section 2(15) of the Act. Your Honour's kind attention, in this regard, is invited to the fact that, apart from the aforesaid allegation that the assessee received contributions for construction of cottages under the "Vanprasth Ashram", which was held to be in the nature of business activity, the assessing officer has nowhere in the impugned assessment order, highlighted any other instance/activity which goes to prove that the activities undertaken by the assessee were commercial in nature. Further, even the "Vanprasth Ashram" scheme undertaken by the assessee could not have been held to be a commercial activity for the reasons provided hereunder: No actual service/facility provided It is, at the outset, respectfully submitted, that the assessee had, in the assessment year under consideration, not undertaken any activities in relation to the construction of cottages nor provided any kind of service/f....
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....for constructing cottages at the "Vanprasth Ashram". The assessing officer has, in this regard, failed to appreciate that people from various sections of the society from all across the country come to Haridwar for attending yoga shivirs/camps which are organized by the assessee. Such yoga shivirs/camps, as stated above, were organized by the assessee with the underlying intent of providing medical relief and imparting yoga education. For effective medical treatment, it is, at times, important for the person who come to attend yoga shivirs/camp to stay back to regularly attend such shivirs/camps for longer duration. In view of the aforesaid, in order to provide accommodation facility to persons who come to attend yoga shivirs/camps from far off places, the assessee proposed to construct cottages under the aforesaid "Vanprasth Ashram Scheme". The aforesaid cottages, it is respectfully submitted, was proposed to be constructed with a view to provide a unique, peaceful and homely atmosphere to the attendees, who come to attend yoga shivirs/ camps, for staying back at the Ashram itself. Further, it is also pertinent to note that constructed cottages at the "Vanaprasth Ashram" ....
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....ng/education, which cannot be regarded as in the nature of business. In the aforesaid circumstances, it is submitted that assessing officer erred in drawing adverse inference merely from the fact that the assessee received donations for construction of cottages and granted permission to the donors to stay in the cottages. Further, the assessing officer has grossly erred in holding that the cottages were not provided to the general public and were restricted for the use of the contributors/donors only. In this regard, it is respectfully submitted that the assessing officer has failed to appreciate that out of 340 cottages only around 109 cottages have been allotted till date to donors/contributors, which constitutes only a minuscule portion i.e. around 30% and all the remaining cottages have been utilized by the trust for providing accommodation to the general public. Further, the keys to the cottages which have been allotted, remain in the custody of the trust only and these cottages are allowed to be used by the general public, when the same are vacant and not occupied by the donors. The status of allotment of cottages under the "Vanprasth Ashram Scheme" as on date is pro....
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.... cottage facility and/ or issuance of donation coupons/ receipts was clearly in pursuance/furtherance of the charitable objectives of the assessee trust and was not a business/commercial activity with the motive of earning profits. In the above context, your Honour's kind attention is invited to the various legal precedents wherein the definition of business, trade and commerce has been explained. Construing the expression 'business', the Hon'ble Supreme Court in the case of Distributers Baroda P. Ltd.(83 ITR 377) has held that 'business' refers to real, substantial, organized course of activity for earning profits as 'profit motive' is essential requisite for conducting business. Following the above decision, the Special Bench of the Tribunal, in the case of BJP vs. DCIT : 258 ITR 1 (Del.) (AT), has held that an activity to be treated as 'business' should have a semblance of trade, an attribute of commercial activity and an expectation to earn income over a reasonable period. The Tribunal further held that the expressions 'trade' and 'commerce' are narrower in scope than the expression 'business'. The expressions 'trade' or 'commerce' signify economic/commercial activity ....
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.... such rendering of service will not have anything in common with trade, business or commerce. In the instant case, the assessee has received contributions under the "Vanprasth Ashram Scheme" with the only underlying intent of constructing cottages for the purpose of providing accommodation facilities to the participants of the yog shivirs/camps and there was no profit motive involved. Further, the contributions were made with a specific direction to be utilized for construction of cottages and the same has been applied for such purposes only. Further reliance in this regard is also placed on the view expressed by the Hon'ble Supreme Court in the landmark case of ACIT vs. Surat Art Silk Cloth Manufacturers Association: 121 ITR 1, wherein it was observed that where an activity was not pervaded by profit motive but was carried on primarily for serving the dominant charitable purposes, it would not be correct to describe it as an activity for profit. But where an activity was carried on with the predominant object of earning profit, it would be an activity for profits, though it may be carried on in the advancement of the charitable purpose of the Trust or the institution. In....
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....d that the amended proviso to Sec. 2(15) of the Act is constraint only for those assessees who attempt to defraud the Revenue in the garb of charitable purpose, but is not meant for those assessees who are really engaged in activities of charitable purpose. Accordingly the activities undertaken by the assesse were held to be in the nature of charitable activities and registration under section 80G(5) of the Act was allowed to be renewed. In view of the above, it is respectfully submitted that the proviso to section 2(15) of the Act in substance will not make a difference to the charitable character of the trust/institution. The terms used in the proviso 'in the nature of trade, commerce or business' undoubtedly mean that the proviso will hit only such cases where a charitable institution is carrying on business activities with a profit motive in the garb of charitable purpose. It will not, however, effect the cases of charitable institutions, which are genuinely carrying on the charitable activities. Accordingly, the proviso cannot be applied blindly to all cases where a charitable institution is recovering any money for rendering services. It has been correctly observed....
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....at yoga can be safely accepted as a system fit into the definition of 'medical relief'. Further, with respect to the issue of categorizing imparting of 'yoga training' as a form of 'education', it has been held 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). Thereby, imparting of yoga training through well structured yoga shivir/camps was held to fall under the category of imparting education which is one of the charitable objects defined under section 2(15). The pertinent observations of the Tribunal in this regard are reproduced 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,....
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....in section 2(15) of the Act." (emphasis supplied) The facts of the aforesaid case, being identical to the case of the appellant, it is most respectfully submitted that the activities undertaken by the appellant, being in the nature of providing medical relief through Pranayam and Yoga and also to impart education in the field of yoga, would fall under the category of providing 'medical relief' and 'imparting education' as provided under section 2(15) of the Act, meaning thereby that the proviso to section 2(15) of the Act would not apply. " 7. The ld. CIT [DR], on the other hand, placed reliance on the orders of the authorities below with further submission that under the facts of the case of the assessee it falls under the sixth limb of the definition of charitable purpose given under section 2(15) of the Act i.e. advancement of any other object of general public utility and was thus covered within the mischief to proviso of section 2(15) of the Act. The transactions indulged by the assessee are in the nature of business or commerce which are similar to private commercial concern in the market. The objectives of the assessee being propagation of Yoga does not qualified as "m....
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.... income derived from trust property is to be utilized. The ld. CIT [DR] submitted that the area of activity of the trust being India and the whole of the world and the trustees, in their discretion, having not been prohibited from applying income for charitable purpose either in India or abroad, question arises as to whether the trust is entitled to tax exemption even though income utilized outside India is not of a very significant amount. 7.2 As per the terms of clause 15(1)(i) of the trust deed annual general meeting is not convened atleast once in a year. He submitted that during the relevant year 618 accounts in the name of samitees at various places appeared in the books of accounts of the trust which were all reduced to NIL on 31.03.2009 by treating the amount of Rs. 2.1 crores receivable from them as expenditure in contravention of accounting principle. The trust had used the logo of Divya Yog Mandir Trust as its logo, which is indicative of interdependence between the two trusts. On the donation coupons issued by the trust against non-residential camps, though number of the order under section 80G was mentioned, it was found to be without date, which indicate that the a....
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....ies forming integral part of the balance sheet as on 31.03.2009 states that books of accounts are maintained on Mercantile basis. The auditor on examination found that non maintenance of books of account strictly in accordance with declared mercantile method of accounting. The method of accounting has been done on Mixed basis and accounting is complex; (iv) During the course of Special Audit, alternation in books of accounts; (v) Accounting of interest of Rs. 1084 before the date of accrual. An amount of interest of Rs. 1084/- was credited on 16.09.2009 in account No. 003002000005555 with Indian Overseas Bank, was found to be recorded in books of account already closed on 31.03.2009; (vi) Booking of expenditure of earlier year in the current year. (vii) Booking of the income of earlier year in the current year. (viii) Extra receipt found for which no entry in books of account found. (ix) Adequate evidences. mode and manner in which the accounts are finally presented confirm that books of account were not primarily and regularly maintained. (x) Instances were seen where income/donation was not found to have been recorded in book of account. (xi) Many evidence....
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....ham Vs. DIT (E) (2014) 43 Taxman.com 192 (AP); (xiii) Shri Dhakad Samaj Dharamshala Bhawan Trust Vs. CIT (2008) 302 ITR 321 (MP); (xiv) Radhasoami Satsang Vs. CIT (1992) 193 ITR 321 (SC); (xv) Distributors (Baroda) P. Ltd. Vs. Union of India & Others (1985) 155 ITR 120 (SC). 7.7 The ld. CIT [DR] submitted that the principle of res judicata is not applicable in the provisions of Income Tax Act and hence acceptance of the returns of income for earlier two years in the case of assessee does not give any right of similar acceptance to the assessee for the year under consideration. He submitted that due to insertion of proviso to section 2(15) with effect from 1.04.2009 the Revenue has adopted new approach as per the said provision. He submitted further that facts in the case of the present assessee are different from those in the case of Divya Yog Mandir Trust, decided by the cornet bench of the Tribunal earlier. The recent amendment by insertion of "Yog" with effect from 1.04.2015 makes it clear that before 1.04.2015 "'yoga was not part of section 2(15) definition. He submitted that Yog, Auverdic college etc. are not coming under the definition of "medical relief". He subm....
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....e to be examined to define its character. There is no dispute in the present case that (a) providing medical relief through Yoga / Pranayam; (b) imparting education in the field of Yoga; and (c) providing relief to the poor are pre-dominant objects of the assessee which the assessee had been carrying out over the years since it was set up in the year 2005. It is also an undisputed fact that the assessee was registered under section 12A vide order dated 14.03.2001 and approved under section 80G(5)(vi) of the Act vide order dated 27.08.2007 and during the year it was enjoying the registration and approval under the above provisions and still enjoying. Of course, principle of res judicata are not applicable in the cases under the provisions of Income Tax Act, 1961, but as per the established position of law, the Revenue is required to maintain consistency in its approach on an identical issue under similar facts of the case in the subsequent assessment years. 9.1 In earlier years under the similar set of facts the benefit of exemption under sections 11 and 12 of the Act has been undisputedly allowed to the assessee. During the year the Assessing Officer has took a different stand, ....
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....ment 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. ACTIION TAKEN The National Curriculum Framework in School Education - 2005 prepared by the National Council of Education Research and Training provides for Health and Physical Education as a compulsory subject from primary to secondary stage as an optional subject at higher secondary stage. Yoga is one of....
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....d 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, physical discipline, breath regulations, restraining the sense organs, contemplation, meditation 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 m....
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....es 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 vs. 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 of "medical" which in turn leads to the term "medical relief". The issue raised before the Cochin bench of the Tribunal in this case was as to whether assessee trust forms for propagating of Vedas was entitled to registration u/s 12A in the status of a religious and charitable trust. Likewise the decision of Hon'ble Bombay ....
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....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, asthama 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 ahs 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 various yoga camps. As discussed above the Ld. CIT (DR) has basically placed reliance on the orders of the authorities below asserting that yoga is a way of meditation rather than a way of medication to qualify for 'medical relief'. A reference of contents of page No. 638 of the paper book has also been made to support his submission that in September, 2012. the H....
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....(supra) hold that Yoga also gives 'medical relief' and thus also falls under the definition of charitable purpose. The authorities below were thus not right in denying claimed exemption under section 11/12 of the Act on the basis that propagation of yoga does not give medical relief and thus not fall under "charitable purpose" defined under section 2(15) of the Act and it falls in the residuary category of "advancement of any other object of general public utility" within the proviso to section 2(15) of the Act. 9.5 Now the question before us is as to whether propagation of yoga also falls under "imparting of education" to bring it eligible for the exemption under the definition of "charitable purpose" under section 2(15) of the Act. The coordinate bench of the Tribunal has also dealt with this issue in detail in the case of Divya Yog Mandir Trust Vs. JCIT (supra) the relevant para Nos. 6.5 and 6.5.1 are reproduced hereunder : '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 propagati....
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....nd 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 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 the process of training and developing the knowledge, skill, mind and charact....
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....hods of treatment and also to promote good health; (c) Conducting yoga classes on a regular basis and in systemized manner so as to provide medical relief and also to impart education in yoga through systematic instructions and training programmes. 9.7 Though we have discussed about the other submission of the ld. CIT [DR] on the issues raised specifically in the other grounds, which we will deal with in the succeeding paragraphs, but as per un-rebutted submission of the assessee, it is also pertinent to mention over here that the issuance of donation coupons in the domination of Rs.NIL (i.e. free), Rs. 100/-, Rs. 500/-, Rs. 1,100/- and Rs. 21,00/- to various voluntary donors who attend the yoga camps, which is nothing but small donations given by the voluntary donors, who attend the Shivir/camp. The ld. CIT (Appeals) has referred to donation coupons without appreciating that Yoga Shivir/camp is open to all and not merely restricted to persons who volunteer to donate to the charitable cause of the assessee. It may also be pointed out that the assessee has applied substantial amount in setting up of "Patanjali University", a Deemed University set up under the University of Pat....
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....of Distributors Baroda P. Ltd. (supra). The Special Bench of the Tribunal in the case of BJP Vs. DCIT (supra) has held that an activity to be treated as "business" should have a symbolance of trade, an attribute of commercial activity and an expectation to earn income over a reasonable period. The Tribunal further held that the expression "trade" and "commerce" are narrower in scope than the expression "business". The expression "trade" or "commerce" signify economic/commercial activity with the motive of earning profit. The three words viz. "trade", "commerce" and "business", connote and indicate a series of organized activities primarily undertaken on commercial lines for profit motive. We have discussed the facts of the present case in the preceding paragraphs as well as the predominant objects of the assessee in detail supported with activities done by it from which no inference can be drawn that assessee is in trade, commerce and business. The Hon'ble Supreme Court in the case of ACIT Vs. Surat Art Silk Cloth Mfg. Association 121 ITR 1 (SC) has been pleased to hold that where an activity was not pervaded by profit motive, but was carried on primarily for serving the dominant c....
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....to hold that an educational society or a trust or other similar body running an educational institution solely for educational purposes and not for purpose of profit could be regarded as "other educational institutions" coming within section 10(22) of the Act. No such issue is involved in the present case before us. In view of above findings, the ground Nos. 1 to 6 are decided in favour of the assessee appellant and in turn these grounds are allowed. Ground Nos. 7, 7.1 and 7.2 : 10. In ground Nos. 7, 7.1 and 7.2, the assessee has questioned the validity of allegations made by the authorities below while denying the claimed exemptions under sections 11/12 of the Act. 10.1 The authorities below have alleged that the assessee had violated the provisions of section 13 of the Act on several accounts like on account of services being made available to M/s. Vedic Broadcasting Ltd., on account of giving interest free loan and advance to M/s. Dynamic Buildcon Pvt. Ltd., and on account of investment in modes other than specified in section 11(5). In support of the grounds the ld. AR has made following submissions: In addition to the aforesaid contentions, the assessing officer has, ....
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.............. (2) Without prejudice to the generality of the provisions of clause (c) and clause (d) of sub-section (1), the income or the property of the trust or institution or any part of such income or property shall, for the purposes of that clause, be deemed to have been used or applied for the benefit of a person referred to in sub-section (3),- .............." (emphasis supplied) On perusal of the aforesaid provisions of section 13(1)(c) of the Act, it would kindly be appreciated that the said section bars: (a) the terms of the trust or the rules governing the institution to provide any income/part of income to enure for the direct or indirect benefit of any person referred to in subsection (3); or (b) any income or any property of the trust or the institution being actually used/ applied during the previous year for the direct or indirect benefit of any person referred to in sub-section (3). Apart from the aforesaid general prohibition, sub-section (2) of section 13 of the Act provides 8 specific instances by way of clauses (a) to (h) thereto, where income or property of the trust or the institution is deemed to be used/ applied for the direct or....
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....f sub-section (1) of section 13, tax shall be charged on the relevant income or part of relevant income at the maximum marginal rate. (3) In a case where the relevant income is derived from property held under trust in part only for charitable or religious purposes or is of the nature referred to in sub-clause (iia) of clause (24) of section 2 or is of the nature referred to in sub-section (4A) of section 11, and either the relevant income applicable to purposes other than charitable or religious purposes (or any part thereof) is not specifically receivable on behalf or for the benefit of any one person or the individual shares of the beneficiaries in the income so applicable are indeterminate or unknown, the tax chargeable on the relevant income shall be the aggregate of- (a) the tax which would be chargeable on that part of the relevant income which is applicable to charitable or religious purposes (as reduced by the income, if any, which is exempt under section 11) as if such part (or such part as so reduced) were the total income of an association of persons; and (b) the tax on that part of the relevant income which is applicable to purposes other than charitable or re....
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....y trusts at the maximum marginal rate is applicable only in the case of private trusts having profits and gains of business. So far as the public charitable and religious trusts are concerned, their business profits are not exempt from tax, except in the cases falling under clause (a) or clause (b) of section 11(4A) of the Income-tax Act. As the maximum marginal rate of tax under the new proviso to section 164(2) applies to the whole or a part of the relevant income of a charitable or religious trust which forfeits exemption by virtue of the provisions of the Income-tax Act in regard to investment pattern or use of the trust property for the benefit of the settlor, etc., contained in section 13(1)(c) and (d) of that Act, the said rate will not apply to the business profits of such trusts which are otherwise chargeable to tax. In other words, where such a trust contravenes the provisions of section 13(1)(c) or (d) of the Act, the maximum marginal rate of income-tax will apply only to that part of the income which has forfeited exemption under the said provisions." (emphasis supplied) In this regard, your Honours kind attention is invited to various judgments/decisions wherein it ....
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.... It was running schools and colleges in Faridabad and Kerala. The managing committee consisted of 7 persons as mentioned in the order of the Tribunal. Out of this, 3 persons, namely, Mr. T.I. John, Mrs A. John & Mr. Joseph John acted as managers of the society, discharging various functions as described therein. They were paid salaries from the F.Y. 2002-03 onwards. In the relevant current A.Y., i.e., A.Y. 2008-09, they were paid salary of Rs. 8,16,000, Rs. 7,20,000 & Rs. 6,60,000 p.a. respectively. The assessing officer considered that payments made to these persons who were specified persons was excessive and, accordingly, disallowed a sum of Rs. 14,64,000 under section 40A(2)(b) of the Act as against the total expenditure of Rs. 21,96,000 claimed by the society for the three persons. On appeal, the CIT(A) considered that payment of identical amounts as salary was allowed to Mr. T.I . John & Mrs. A. John during the assessment year 2003-04 to assessment year 2006-07 following the order of the Tribunal and only a small amount was treated as unreasonable and was upheld in the case of Mr. Joseph John. Further, the A.O. had allowed the similar amount in the assessment year 2007-08 ....
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.... assessment year 2007-08, Assessing Officer has allowed the total salary paid to Mr. Joseph John and the salary was @ Rs. 55,000 per month. We further find that in this year, Assessing Officer has independently not brought any evidence which can show how much salary a person having qualification equivalent to Mr. Joseph John could fetch in the open market. What are the rates of salary paid by other institution to a person who is teaching as well as managing the school. We have noticed the duties performed by Shri Joseph John. Assessing Officer is harboring upon the evidence collected by the Assessing Officer in assessment year 2003-04. He has made reference to the salary of the staff in those years. With effect from 01.01.2006, Government of India has notified the 6th Pay Commission which resulted into a handsome enhancement in the salary of the employees including the government teaching staff and the salaries have almost enhanced by 30% to 40%. If the increase in the salary of Shri Joseph John allowed to him by the ITAT in 2004-05, is being looked into with this angle also then sum of Rs. 55,000 would not be on a higher side. Considering all these aspects and the detailed order o....
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....ould not be disposed of immediately and, therefore, they continued to remain in possession of the assessee. Some of the securities were got transferred in the name of the assessee. That, however, does not mean that the assessee manifestly became owner of the shares. The shares and bonds belonged to the deceased intimates which normally would have gone to their legal heirs who were not traceable. This was the reason for non-entering the shares etc. in the books. The bonds and shares were also not saleable immediately. In these circumstances, the assessee could not be taken to be the de jure owner of the shares. Although, the word used is "held", we are of the view that this word implies ownership of the assessee to the exclusion of all others, which is not the case here. In these circumstances, we are of the view that total denial of exemption u/s 11(1)(a) on the ground that the shares were held by the assessee will be against even the language of the provision. The Ld. CIT(A) has reached more or less on the same conclusion by mentioning that infringement, if any, was technical, which should be ignored by applying the rule of purposive construction. We tend to agree with him on the ....
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....uld be brought to tax at the maximum marginal rate which could not be treated as exempt by virtue of non-fulfilment of condition of investment in specified securities as prescribed by section 11(5). There is nothing in section 11(5) which can be interpreted to mean that if a portion of the accumulated income of the trust is not invested in specified securities, the exemption under section 11 which had already been granted to the trust in earlier years would be withdrawn. Therefore, the assessee-trust could not be denied exemption under section 11 and only its income from dividend should be brought to tax at the prescribed rate because such income was not from specified securities." (emphasis supplied) Further reliance in this regard, is placed on the decision of the Third Member of the Tribunal in the case of Manockjee Cowasjee Petit Charities vs. DIT(E): 148 TTJ 181 (Mum.), wherein it was held that once registration is granted to trust or institution but later on it is found by Assessing Officer during course of assessment proceedings that income of charitable trust is applied directly or indirectly for benefit of persons referred to in section 13(3), then he has ample power....
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....instances of violation under section 13, though it is actually not so as elaborately discussed supra, still the same could not have, however, it is respectfully submitted, resulted in complete denial of exemption under sections 11/12 of the Act. The assessing officer, even in such a case, ought to have allowed exemption under sections 11/12 of the Act without considering the socalled alleged payments/benefits to the interested persons as application of income for charitable purposes. 11. The ld. CIT [DR], on the other hand, placed reliance on the orders of the authorities below. He submitted that there is apparent violation of provisions of section 13(1)(c ), 13(1)(d) and other provisions laid down under section 13 of the Act on the basis of which the authorities below were justified in denying the claimed exemption under section 11/12 of the I. T. Act to the assessee. These violations have been done by the assessee on account of services worth Rs. 96,00,000/- made available to M/s. Vedic Broadcasting Ltd. as per para No.7.5(a) of the assessment order; on account of giving interest free in direct advances of Rs. 2,40,000/- to M/s. Dynamic Buildcon Pvt. Ltd., para No.7.5(b) of th....
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....he underlying intent to spread the science of Vedic yog and to propagate the positive effects of yoga in medical treatment for curing/ alleviating various diseases. The aforesaid agreement was not entered into by the assessee. Much later, the assessee entered into an agreement dated 12.10.2006 with M/s Media Content and Communications Services (India) Private Limited for telecasting/ broadcasting yoga camps/ shivirs. The said agreement, it is pertinent to mention here, was entered into by the assessee on being approached by the latter company to grant permission for telecasting the program. In terms of the aforesaid agreement, the latter company agreed to pay to the assessee Rs. 8 lacs per month for exclusive license to shoot and telecasting the programs. The said agreement was initially entered into for a period of one year, which was subsequently extended till 31st March, 2008 vide letter dated 22nd October, 2007. (Refer 289 to 294 of the paperbook) Subsequently, Aashta Broadcasting sold its business as a going concern to Vedic Broadcasting in December, 2007 along with all subsisting agreements/ arrangements/ licenses, etc. As a necessary consequence....
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....a Samay and other channels of Sahara, Zee TV Channels, India TV, ETV Network, etc. Therefore, Assessing officer erred in treating agreement with M/s. Media Content as the basis for alleging that the assessee benefited Vedic Broadcasting. In the aforesaid circumstances, it will kindly be appreciated that no benefit, whatsoever, actually flowed to Vedic Broadcasting; on the other hand, it was, in fact, the assessee, which benefited by propagation of its yoga shivirs/ camps through Aastha channel. In view of the aforesaid, there was, it is submitted, no violation of section 13 of the Act, inasmuch as no direct/ indirect benefit was provided by the assessee to any person specified in sub-section (3) of that section. The allegation of the assessing officer that as a result of the aforesaid arrangement, services of the assessee were made available to Vedic Broadcasting without adequate remuneration is, thus, absolutely erroneous. No service, it will kindly be noticed was made available by the assessee to any person specified in section 13(3) of the Act. It may further be pertinent to note that no 'services' per se were rendered by the assessee, let alone any....
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....13604, dated 02.10.2006 to M/s United Infracon. Further, in pursuance of the said MOU, the possession of the land was handed over to the assessee on 30.11.2007. The aforesaid facts have been specifically mentioned in the said MOU and possession memo, which was produced before the assessing officer. (Refer pages 320 to 328 of the paperbook) However, the assessing officer has, without appreciating the facts in its entirety, erroneously concluded that an amount of Rs. 1.55 crores was advanced by the assessee to the M/s United Infracon, without any formal /documentary evidence to substantiate the advancement of money and has accordingly held that the said advance cannot be treated as investment made under the modes specified under section 11(5) of the Act. Further, the assessee has failed to appreciate the nexus drawn by the assessing officer between the advance paid by the assessee to M/s United Infracon and the alleged advance of Rs. 20 lakhs given by the said company to Dynamic Buildcon. Further, the allegation cast by the assessing officer that the land which was purchased by the assessee was already registered in the name of Dyanamic Buildcon, is very vague and not sup....
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....al Mehta Medical Trust: Income Tax Appeal (L) No. 2990 of 2009 (Bom. HC) - Pinegrove International Charitable Trust vs. UOI: 327 ITR 73 (P&H) - Lissie Medical Institutions v. CIT- 348 ITR 344(Ker) The assessing officer, it is respectfully submitted, failed to appreciate distinction between investment/ deposit of funds and application of income for charitable purposes while alleging that the petitioner invested money in the mode other than specified in section 11(5) of the Act. Advancing of money for acquisition of a capital asset for the sub-serving the charitable objects is, it is submitted, application of income and not investment/ deposit of funds. In this regard, it is further respectfully submitted that though the assessee had entered into agreement for purchase of land with M/s Shree Nirmaya Properties Private Ltd, subsequently substantial dispute arose, and the agreement to purchase has rescinded. Further, the amount of advance paid to M/s Shree Nirmaya Properties Private Ltd would be refunded with interest shortly. The provisions of section 13(1)(d) of the Act are thus, not violated at all. Para 7.5 (d) Refer page 20 of AO order Pur....
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....trust has no legal right/ control. The assessee, thus, violated the provisions of section 13(2)(g) of the Act. Rebuttal The assessee has denied any construction on the land owned by Swami MuktanandJi, which is duly supported by a certificate of Advocate, Sh. SatinderSaini filed before the assessing officer. Further, copy of layout map of PYP-II, wherein the plot of land belonging to Swami MuktanandJi is clearly identifiable and reflected as a vacant land on which no construction has been undertaken was also filed before the CIT(A). (Refer pages 340 of the paperbook) The assessing officer has, it is submitted, merely proceeded on conjectures and surmises to hold that the assessee violated the provisions of section 13(2)(g) of the Act. Para 7.5 (f) & (g) Refer page 21 to 22 of AO order Construction of PYP-II on the land not owned by the assessee Case of the Assessing officer/CIT(A) The assessing officer has observed that the Trust has constructed part of the building called Patanjali Yog Peth Ashram ("PYP-II") on parcels of the land belonging to the trustees, viz. Swami MuktanandJi and Acharya Balkrishnan and on part of the land received as donation from....
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....ly occupied but also used by the assessee for furthering its charitable objects. There has been no diversion of any income or property of the assessee in favour of any person specified in section 13(3), leave aside there being any such diversion during the relevant previous year, which is the condition precedent for applying section 13(2)(g) of the Act. In view of the aforesaid, it is respectfully submitted that the assessing officer grossly erred in holding that the assessee violated the conditions specified in section 13(2)(g) of the Act. Para 7.5(h) Refer page 22 to 23 of AO order Payment of Advance to DYMT Case of the Assessing officer/CIT(A) The assessing officer has observed that Rs. 14.25 lakhs is appearing as opening balance of advance payment to DYMT for purchase of land. Since the assessee has not invested money in the mode specified in section 11(5), there is violation of section 13(1)(d) of the Act. Rebuttal The conclusion of the assessing officer that there has been violation of section 11(5) appears to be legally untenable. During the course of assessment proceedings, it was pointed out by the assessee that the advance of Rs. 14.25 lakhs ....
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....the decision of Hyderabad Bench of the Tribunal in the case of DDIT (Exemption)-2, Hyderabad vs. Society for the poor and Oppressed: 125 ITD 190, wherein the president of the society had purchased a vehicle in his personal name. On this account, the assessing officer denied exemption under sections 11/12 of the Act, holding the same to be a clear cut violation under section 13 of the Act. However, the society had subsequently amended the original registration certification and registered the vehicle in the name of the society. Thus, the Tribunal held that since the original registration certification was legally amended, therefore, the ownership shall be construed in the name of the society from the date of purchase and application of section 13 of the Act shall not apply In view of the aforesaid, since the original registration certification is legally amended, and the motorcycles now stand registered in the name of the assessee trust, the ownership shall be construed in the name of the society from the date of purchase and application of section 13 of the Act shall not apply. Para 7.5(j) Refer page 24 of AO order Payment of Advances Case of the Assessing officer/CIT(A....
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....sessee has questioned the validity of finding of the ld. CIT (Appeals) that the assessee had undertaken activities outside India in violation of provisions of section 11(1)(a) of the Act. In ground Nos. 9, 9.1 and 9.2, the assessee has questioned the validity of additions of Rs. 44,25,01,268/- made on account of corpus donations received by the assessee. In ground No. 10, the finding of the ld. CIT (Appeals) that the voluntary contribution received by the assessee, including donations received through yoga camps and yoga samities were not eligible for exemption has been questioned. 13.1 In support of the above grounds, the ld. AR has furnished following submissions : Without prejudice to the primary contention that the assessee is eligible to claim exemption under sections 11/12 of the Act, it is further submitted that, in the impugned order, the assessing officer has made addition aggregating to Rs. 44,25,01,268/- on account of corpus donations received by the assessee in the assessment year under consideration, by holding that corpus donations also constitutes 'income' of the trust and accordingly were not eligible for exemption under sections 11/12 of the Act. The break-up....
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.... aforesaid, voluntary contributions received towards corpus by a trust, which is denied exemption under sections 11/12 of the Act and is treated as non-charitable, could not be regarded as "income", per se, and the same would constitute a capital receipt, not liable to tax. Your Honours kind attention in this regard is invited to the case of CIT vs. Eternal Science of Man's Society: 128 ITR 456 (Del), wherein it was held that any receipt of capital nature could not be treated as income and, hence, it was outside the purview of section 12 of the Act. In this particular case, the Hon'ble Delhi High Court held that a donation of shares made by one charitable organization to another, with a specific direction that these shares would constitute the corpus of the donee organization, could not be deemed to be income in hands of recipient society. The pertinent findings of the Court in this regard, are re-produced as under: "Normally, a gift of shares or its own capital by a charitable trust to another charitable trust would be income in the hands of the recipient trust. The recipient trust would be free to spend the money or expend the property as it liked in furtherance of its obje....
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....bay High Court held that the provisions of sub-section (2) of section 12 of the Act applied to such contributions as were referred to in sub-section (1) thereof. Sub-section (1) referred to contributions which were voluntary contributions and applicable solely to charitable or religious purposes. It was held that Donations of a capital nature might be voluntary, but could not, however, be applied to charitable or religious purposes. It is the income thereof that must be so applied. A contribution made expressly to the capital or corpus of a trust, though voluntary, does not, therefore, fall within the purview of section 12(2) of the Act. Accordingly such contributions could not be deemed to be income derived from property for the purposes of section 11 of the Act, and the provisions of the said section would not apply. Hence in this case it was held that the impugned donations did not constitute income in the assessee's hands for the purpose of exemption under section 11 of the Act. In the case of Sri Dwarkadheesh Charitable Trust vs. ITO: 98 ITR 557 (All), it was held that voluntary contributions made with a specific direction that they would form part of corpus of donee-trust and....
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....nations from consulting doctors working at hospital which donations were voluntary and towards corpus of fund, it was held that such donations could not be treated as income of assessee trust. You Honours kind attention in this regard is invited to the decision of the Bangalore Tribunal in the case of St. Ann's Home for the Aged v. ITO: 13 TTJ (Bang.) 185, wherein it was held that voluntary contributions expressly received for construction of a building were corpus donations, since they were received and utilized for a capital purpose. In the case of Mehrangarh Museum Trust vs. ACIT: 156 TTJ 425 (Jd.), it has been held that if donation is received with the specific direction of the donor to treat the donation as towards "corpus" or "for specific use", it would be treated as corpus donation and not 'income' and hence would not be includible in the total income of the assessee. Further, in the case of ITO vs. Satya Kabir Sahabani Gadi: 50 TTJ 501 (Ahd), it was held that Building Fund and Kayami Fund were corpus of the Trust and donations received towards such funds were corpus donations. In view of the aforesaid, it is respectfully submitted that even if exemption under s....
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....ribution". In simple words, corpus contribution is a contribution made with a specific direction from donor that a particular donation shall form part of corpus and that shall form part of the capital and income therefrom is used in accordance with directions. He submitted that as per the provisions of the Income Tax Act, no assessee trust or institution can claim application in respect of any corpus fund withdrawn by it. As per the scheme of section 11 an income derived from property hailed under trust is exempt when it is applied or accumulated as per the provisions of the Act. Therefore, the application has to be out of current income because provisions of section 11 to 13 only provide for exempting the current income if it is applied or accumulated as per the Rules provided in section 11. The corpus donation is exempt and is not subject to any rules of application and accumulation provided in various sub-sections and clauses of section 11 of the Income Tax Act. The corpus donation is only required to be invested as per section 11(5) and in the event of violation of section 13(1)(d) read with section 11(5), the trust would lose exemption for the relevant assessment year. Thus, v....
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.... solely to charitable or religious purposes. It was held that donations of a capital nature might be voluntary, but could not, however, be applied to charitable or religious purpose. It is the income thereof that must be so applied. A contribution made expressly to the capital or corpus of a trust, though voluntarily, does not, therefore, fall within the purview of section 12(2) of the Act. Accordingly, such contributions could not be deemed to be income derived from property for the purpose of section 11 of the Act and provisions of the said section would not apply. Again the Hon'ble Allahabad High Court in the case of Dwarka Dheesh Charitable Trust Vs. ITO (supra) has held that voluntary contributions made with a specific direction that they would form part of corpus of donee trust and accepted by donee trust as such are not voluntary contributions which constitute income within the meaning of section 12(1) of the Act and such contributions are not within the purview of sub section (2) thereto. Therefore, such donations cannot by themselves be deemed to be income from property held under trust within the meaning of section 11 of the Act. In the case of CIT Vs. Sthanakavasi Vardhm....
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.... were received by the assessee with the specific direction, to be utilized for a specific cause and was not for attaining/achieving the general object of the assessee trust. The donations in question formed part of the corpus of the trust and thus, such donations are per se capital receipt not liable to tax irrespective of the fact that whether the receiving trust is eligible for exemption or not. We concur with the contention of the ld. AR that in terms of section 2(24)(iia), voluntary donations received, inter alia, by a charitable trust/institution are by legal fiction treated as income and is thereafter, excluded from total income in accordance with the provisions of sections 11/12 of the Act. Such voluntary contributions are contributions other than for capital purposes i.e. contributions which do not form part of the corpus of the trust, whether or not such trust is eligible or not for exemption. We hold accordingly. In para No. 7.5(k) of the assessment order, the Assessing Officer has alleged that assessee had undertaken various activities outside India which was in violation of provisions of section 11(1)(c) of the Act. We, however, find that the Assessing Officer has not b....
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....ector of Income-tax (E) (supra) it has been held that according to sections 11 and 12 of the Act, the voluntary contribution made with specific direction that they shall form part of the corpus of the trust or institution, shall not be included in the total income of the previous year of the trust. In the case of DIT (E) Vs. Charanjeev Charitable Trust (supra) the view of the Assessing Officer that real motive of assessee was to advance its surplus moneys to APIL without charging any interest and since APIL was a prohibitive person within meaning of section 13(3), provisions of section 13(1)(c)(ii) were attracted with result that assessee could not be allowed exemption under section 11. As discussed above, the facts of the present case before us, do not attract denial of the claimed exemption, hence the above cited decisions by the ld. CIT [DR] are not adversely applicable in the case of the assessee. The ground Nos. 8 to 10 are thus allowed. 16. Ground No. 11 : This ground has been raised against the allegation of annoynimous donation of Rs. 13,68,99,745/- under section 115BBC of the Act. 16.1 In support of the ground, the ld. AR has made following submissions : As regard....
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.... be identified from the affidavit and also the DVDs submitted before assessing officer. Such donations aggregated to Rs. 6,61,27,782, which was received from 22 yoga camps organized during the relevant year. It was further submitted that voluntary donations were received in small denominations and therefore, the same cannot be regarded as anonymous donation in terms of section 115 BBC of the Act. Apart from the aforesaid, it was further pointed out that voluntary donations of Rs. 5,99,98,525 was received in the form of donation receipts issued in small denominations of Rs. 11, Rs. 20, Rs. 21, Rs. 25, Rs. 31, Rs. 50, Rs. 500, Rs. 1100, Rs. 2,100, Rs. 5,100 and Rs. 7,000. It was further pointed out that in the receipt issued to the donors, name and address as communicated by the donor is clearly mentioned, details of which were also submitted before the lower authorities. In certain cases donation was also received from yoga teacher who usually contributed donation of Rs. 1100. (Refer Annexure -I & II) It may further be pertinent to mention here that even on furnishing the details in the form of names and address of the donors, the assessing officer/CIT(A) has not even attempte....
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.... of the Act. It was alleged that the assessee had not maintained record consisting of name and address of the donors. The Assessing Officer observed that Rs. 6.61 crores was received through sale of coupons from 22 Yoga camps, which was organized publically as well as telecasted on TV channels. Assessing Officer further observed that Rs. 5.99 crores were received during the relevant assessment year where identity of donors was not verifiable. And the remaining Rs. 1,07,73,438/- was received from others. The Assessing Officer accordingly made addition of Rs. 13.68 crores. The explanation of the assessee remained that assessee organizes Yoga shivirs / camps for providing medical relief through Yoga and also imparting Yoga education/training. Such camps/shivirs are organized through ad-hoc committees especially set up by the assessee for organizing Yoga camps/shivirs and also through separate / independent Yoga samities spread across the country under the over-all guidance / support of the assessee. Such Yoga camps/shivirs are attended by thousand of persons across various sections of the society. Two types of camps/shivirs are normally organized viz. residential camp and non-resident....
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....ing and sustaining the treatment of receipt of Rs. 13.68 crores as annonymous donation. Undisputedly, in almost all donations name and address of the donors have been maintained and thus bonafide of the assessee cannot be doubted where such detail has remained to be maintained in some cases. Such donations worth Rs. 1,07,73,438/- has also not been alleged to spent on other than the objects of the assessee trust. We, thus, while setting aside orders of the authorities below in this regard, direct the Assessing Officer to accept the claimed receipt as donation. The ground No. 11 is thus allowed. 19. Ground Nos. 12 to 18 : In these grounds the assessee has questioned the validity of several allegations made by the authorities below to justify denial of exemption by them. The main allegation is about certain irregularities in the books of accounts maintained by the assessee. The ld. AR with the assistance of a tabular chart made available at page Nos. 66 to 73 of the written submissions has tried to meet out each and every allegation leveled by the authorities below. The ld. AR submitted that the application of income by the assessee in the form of acquisition of fixed assets and ot....
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....esaid addition the assessing officer has observed that since the assessee was not eligible to claim exemption under sections 11/12 of the Act, the actual value and not the nominal value of the vehicle is to be considered. In this regard, it is respectfully submitted that the assessing officer has failed to appreciate that the vehicle was received as voluntary donation, which constituted capital receipt not liable to tax under the provisions of the Act as elaborated supra. Further, the vehicle, being a capital asset was capitalized in the books of the assessee at a nominal value of Rs. 1/-, which clearly corroborates the fact that such donation in any case constituted a capital receipt not liable to tax. In view of the aforesaid, it is respectfully submitted that even if exemption under sections 11/12 of the Act were to be denied to the assessee, still the contributions received by the assessee in the form of capital asset, would in any case not be liable to tax, as the same constitutes capital receipt. Paras 15 to 15.5 Refer page 49 to 52 of AO order Ground No. 13: Land not owned by assessee trust In these paras, the assessing offi....
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.... assistance/donation was utilized for the charitable purpose of promoting yoga and providing medical relief. (Copies enclosed at pages 570 to 580) In view of the aforesaid, it is respectfully submitted that the assessing officer grossly erred in holding that donation/assistance given to samitis was not supported by adequate bills/vouchers. Insofar as other expenditure of Rs. 20,84,787 is concerned, it is respectfully submitted that the said expenditure was incurred on day to day activities of the assessee. Merely because the assessee does not have documentary evidence/bills to support the said expenditure, the same could not have been disallowed as application of income. Para 8.3 Refer page 28 of AO order Ground No. 16(a): Disallowance of expenditure for non-deduction of tax at source In this para, the assessing officer has alleged that since the assessee failed to deduct tax at source of certain payment aggregating to Rs. 55,34,557, such expenditure is disallowable under section 40(a)(ia), since the assessee is not eligible for benefit of provision of sections 11/12 of the Act. The aforesaid issue, it is respectfully submitted, is consequential to the deter....
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....ect of course to any adjustment for expenses extraneous to the trust. If the expression " income " is so understood, then we have to take the accounts of the assessee with reference to the receipts and deduct therefrom the expenses necessary for earning or looking after that income. The net amount that remains would be available for distribution or application for charitable purpose. In applying the income for charitable purposes, even capital expenditure may be incurred. Therefore, the nature of the expenditure in the hands of the entity which receives the money is not the criterion. So long as the assessee disburses the amount for charitable purposes, whether the amounts are utilised for capital or revenue purposes by the charity concerned, the assessee would have complied with that part of the requirement of s. 11, namely, application of the income for charitable purposes..........................." (emphasis supplied) It has been similarly held in the following cases that income for the purpose of section 11 means the income as is understood in the commercial sense/ principles to mean the surplus of receipts over expenditure/disbursements: CIT v. Sheth Man....
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....diture of not having been incurred cannot be put on the assessee. Further, the assessee had, before the assessing officer, categorically stated that the said donation was made by Swami Ramdev Ji and therefore there was no basis for the assessing officer to make addition thereof in the hands of the assessee. Para 8 (xv) Refer page 26 of AO order Ground No. 16(c) Bank Interest In this para the assessing officer has alleged that the assessee has failed to record the bank interest of Rs. 5,44,123 received by the assessee during the assessment year under consideration. In holding so, the assessing officer has failed to appreciate that though the said interest amount of Rs. 5,44,123/- was not explicitly reflected in the income and expenditure account of the assessee, however the same was inadvertently classified under the head 'donations' and the said amount was duly taken into consideration for the purpose of determining the income of the assessee for the assessment year under consideration. Further, the assessing officer has disregarded the fact that the books of the assessee were in complete reconciliation with the bank statements and thus, there was no probability t....
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....ssessee is eligible for exemption under sections 11/12 of the act for purchase of medicines, which are duly supported by appropriate bills/vouchers, there was no warrant to make addition of Rs. 1,24,80,000 while computing income of the assessee 21.1. We also agree with the submission of the assessee that application of income in the form of acquisition of fixed assets and other capital expenditure incurred solely for the purpose of fulfillment of its charitable objectives during the year should be considered as application of income for charitable purposes. Besides, the explanation of the assessee to meet out the small irregularities shown in the books of account maintained by the assessee, which are based on special audit report, cannot be out-rightly ignored especially when it is not the case of the Revenue that the out-come of it was utilized somewhere else rather than on the objects of the assessee. 21.2 We thus decide the issues raised in ground Nos. 12 to 18 questioning the validity of several allegations leveled by the authorities below and denial of exemption on those basis, in favour of the assessee. In result, the ground Nos. 12 to 18 are allowed....