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Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
Before: SH. N. K. BILLAIYA & SH. C.N. PRASAD
PER N. K. BILLAIYA, AM: and 7990/Del/2018 are appeals by the revenue preferred against separate orders of the CIT(A)-36, New Delhi dated 20.09.2018 and 24.09.2018 pertaining to A.Y. 2010-11 and 2011-12.
of the CIT(A)-40, Delhi dated 06.09.2018 and 28.09.2018 pertaining to A.Y. 2012-13 and 2013-14.
At the very outset the counsel for the assessee stated that the issues raised by the revenue in the captioned appeals are squarely covered by the decision of this Tribunal in assessee’s own case for A.Y. 2009-10. The counsel supplied a summary chart explaining each and every issue of the captioned appeals being covered by order of this Tribunal for A.Y.2009-10.
The DR fairly conceded to this.
We have carefully perused the orders of the authorities below and have also considered the decision of this Tribunal in for A.Y. 2009-10. We find force in the submissions of the counsel. We find that the issues raised by the revenue in the captioned appeals have been considered and decided by this Tribunal in ITA No.2267/Del/2013 in favour of the assessee and against the revenue.
On a careful perusal of the assessment orders of the captioned appeals we find that while deciding the issues the AO has followed the findings given in A.Y.2009-10.
For the sake of convenience we are considering the grounds taken in A.Y.2010-11.
Issues raised in grounds No.1 to 3 have been considered by this Tribunal in ITA No.2267/Del/2013. The relevant findings read as under :-
12.1 In absence of rebuttal of the above explanation made by the assessee and even on the verification of its merits, we find that allegations of violation of provisions of section 13 of the Act made by the authorities below are erroneous and legally unsustainable. The allegations are based on incorrect appreciation of the facts of the case and the position of law. On the basis of those unsustainable allegations the action of the Assessing Officer in assessing the income of the assessee treating it to be a non-charitable is not tenable in law. We find that the Id. CIT (Appeals) has also summarily concluded that the assessee has violated the provisions of section 13 of the Act without judiciously disposing off the specific objections raised by the assessee meeting out the various allegations leveled by the Assessing Officer in the assessment order. In view of these observations, we conclude that the allegations leveled by the authorities below are not tenable and hence their action of denial of exemption on the basis of violation of the provisions laid down under section 13 of the Act is held as not justified. In result, the ground Nos.7, 7.1 and 7.2 are allowed.
Respectfully following the same we decline to interfere with the findings of the CIT(A).
Issues raised vide ground No.4 to 6 have been considered by this Tribunal (supra). The relevant findings read as under :-
Having gone through the decisions relied upon by the parties, we are of the view that the ratio laid down in these decisions are applicable on the basis of the facts of the present case. In the case of CIT Vs. Eternal Science of Man's Society (supra) the Hon’ble High Court of Delhi has been pleased to hold that any receipt of capital nature could notbe treated as income and hence it was outside the purview of section 12 of the Act. It was held that 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 the hands of receipient society. In the case of Trustees of Kali Chand Dev Chand Foundation Vs. CIT (supra) the Hon’ble Bombay High Court held that the provisions of section 12(2) of the Act are applied to such contributions as were referred to in subsection (1) to section 12 of the Act. 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 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 Vardhman Vanik jain Sangh (supra) before the Hon'ble Gujarat High Court, the assessee, a public charitable trust received certain amounts towards construction towards a wardi for the caste people. The Assessing Officer held that the amount in question represented income of the assessee and added the same to the assessee’s total income. On appeal the Id. CIT (Appeals) deleted the addition on the ground that the amount had been received by the assessee with a specific direction for construction of wardi and, hence, the same should form part of the corpus of the trust. The Tribunal confirmed the first appellate order. On further appeal, the Hon'ble High Court upheld the decision of the Tribunal with this finding that on a plain reading of section 12, it is obvious that any voluntary contribution which is made with a specific direction that it shall form part of the corpus of the trust or institution would not be deemed to be the income derived from the property held under trust wholly for charitable or religious purposes. Further in the case of D1T (Exemption) Vs. Jaipur Golden Charitable Clinical Laboratory Trust (supra) where the assessee trust, running a hospital had received donation from consulting doctors working in the 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. In view of these ratios, when we examine the facts of the present case, we find that the Assessing Officer was not justified in making the additions aggregating to Rs.44,25,01,268/- on account of corpus donations received by the assessee in the assessment year under consideration by erroneously holding that the corpus donations also constitute "income” of the trust and accordingly were not eligible for exemption under sections 11/12 of the Act. The donations in questions were received from Divya Yog Mandir Trust for construction of Patanjali Yogpeeth-II, in relation to Vanaprastha Ashram, disaster relief fund and in the University of Patanjali.
15.1 Besides, the assessee had also received corpus donation in the form of immovable property which was recorded at NIL value in the books of the assessee. The Assessing Officer, however, added the amount of Rs.64,43,500/- on account of such immovable property on the basis of its estimated market value. There is no dispute that the aforesaid donations 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 Id. 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 ll(l)(c) of the Act. We, however, find that the Assessing Officer has not brought anything on record to substantiate the aforesaid allegation nor has he quantified the amount of expenditure incurred in relation to such activities undertaken outside India. The Hon'ble High Court of Delhi in the case of Nasscom (supra) relied upon by the Id. C1T (Appeals) while upholding the action of the Assessing Officer, held that amount spent outside India could not be allowed as application of income. In absence of establishing the allegation made and upheld by the authorities below, we are of the view that the Assessing Officer was not justified in denying the exemption on the basis that assessee had undertaken various activities outside India in violation of provisions of section ll(l)(c ) of the Act. We order accordingly. In view of above discussion, the denial of exemptions under sections 11/12 of the Act treating the voluntary contributions received towards corpus by the assessee as non-charitable, as the same in our view, could not be regarded as "income” and the same would constitute a capital receipt not liable to tax and the allegation that there was various activities undertaken by the assessee outside India in violation of provisions of section ll(l)(c) of the Act does not stand. The above cited decisions relied upon by the Id. CIT [DR] are not helpful to the Revenue. There is no dispute on the ratio laid down therein, the only question is as to whether those decisions are helpful to the Revenue under the facts of the present case or not. In the case of ITO Vs. Smt. Vidyawanti Labhoo Ram Foundation for Science Research & Social Welfare (supra) it has been held that a voluntary contribution would qualify to form a part of income of recipient trust. However, only exception is where such income is directed to form part of corpus of trust or institution and it is in that case, in view of specific provision of section ll(l)(d), it cannot be applied for charitable purposes and hence for claiming exemption. In the case of Little Tradition Vs. DCIT(E) (supra) it has been held that income can be applied by way of donations to other charitable institutions having similar objects. In the case of R.B. Sri Ram Religious & Charitable Trust Vs. CIT (supra) it has been held that voluntary contribution not applied for charitable purposes is not entitled to exemption under section 12 of the Act. In the case of Kanhaiya Lai Punj Charitable Trust Vs. Director 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(l)©(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 Id.
CIT [DR] are not adversely applicable in the case/of the assessee. The ground Nos. 8 to 10 are thus allowed.
Respectfully following the same we decline to interfere.
Issues raised vide ground No. 7 to 14 are similar to issue raised vide ground No.1 to 3 for our findings therein we decline to interfere.
Issues raised vide ground No.15 to 19 were considered by this Tribunal. The relevant findings read as under :-
9.8 The other allegations on the basis of which the authorities below have denied exemption are that the assessee during the year had undertaken commercial activities by receiving certain contributions under the scheme for construction of cottages at Patanjali Yogpeeth-II known as "Vanprastha Ashram" which tantamount to providing "services to contributors” and is in the nature of business hit by proviso to section 2(15) of the Act. We, however, do not find substance in the above allegation after considering the submissions made by the parties as well as material available on record. The reason being that during the year assessee had not undertaken any activities in relation to the construction of cottages nor provided any kind of service / facility under the "Vanprastha Ashram Scheme". The construction of cottages under the said scheme as per the unrebutted submission of the Id. AR, commenced only in assessment years 2010- 11 and cottages were inaugurated on 4.04.2011 in assessment year 2012-13. It remained the submission of the assessee that "Vanprastha Ashram" at Patanjali Yogpeeth-II was proposed to be constructed by the assessee in furtherance of its charitable objectives of providing medical relief through Yoga and to impart Yoga training /education. It was submitted that assessee did not charge any fee / rent from the general public for uses of such cottages constructed under Vanprastha Ashram Scheme. The cottages are allotted to general public on the basis of availability i.e. on first come first served basis and no other conditions are stipulated for uses of such cottages.
9.9 We also agree with the submission of the Id. AR that "business refers to real, substantial, organized course of activity for earning profits as "profit motive is essential requisite for conducting business. This view is fully supported by the Hon'ble Supreme Court in the case 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 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. The above view expressed by us on the basis of the fact of the prevent case is thus fully supported by the ratio laid down in this decision of the Hon’ble Supreme Court. Charging of fee to meet a part of the cost for rendering charitable services cannot make the services as business activities and accordingly, the institution will continue to be a charitable institution and it cannot be affected by the proviso to section 2(15) of the Act as wrongly held by the authorities below in the present case. The decisions relied upon by the Id. CIT [DR] in the cases of Shah Trust Vs. Director of Income-tax (Exemption) (supra); Municpal Corporation of Delhi Vs. Children Book Trust (supra); Aditanar Educational Institution Vs. ACIT (supra) etc. having distinguishable facts are not applicable in the present case and also because there is no dispute about the ratio laid down therein, but the question is whether it is applicable in the facts of the present case. In the case of Disha Trust Vs. Director of Income-tax (Exemption) (supra) the Id. Director of Income-tax (Exemption) had not 1 examined the objects of the trust for granting registration under section 12AA of the Act, but went on wrong premises that the assessee trust has not started its activities and the objects are mixed. The matter was set aside with direction that in the process the Id. Director of Income- tax (Exemption) shall analyse the objects of the assessee trust and determine whether the object would fall within the purview of section 2(15) of the Act and if so, under which limb of the provision. In the case of Municipal Corporation of Delhi Vs. Children Book Trust (supra), the Hon'ble Supreme Court has been pleased to hold that merely imparting of education will not be regarded as charitable object, but it must involve public benefit. It rather supports the case of present assessee before us as imparting of education i.e. practice of yoga involves public benefit as discussed above. Similarly in the case of Aditanar Educational Institution Vs. ACIT (supra) the Hon'ble Supreme Court has been pleased 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 hr favour of the assessee appellant and in turn these grounds are allowed.
15. Respectfully following the same we decline to interfere.
Issues raised vide ground No. 20 to 21 we find that similar issue considered by this Tribunal (supra). The relevant findings read as under :-
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.
Since all the issues raised by the revenue have been considered and decided by this Tribunal (supra) and since the CIT(A) has followed the findings of this Tribunal in A.Y. 2009-10. We do not find any error or infirmity in the findings of the CIT(A).
In the result, all the appeals by the revenue are accordingly dismissed.
Decision announced in the open court in the presence of both representatives on 20.01.2022.