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Income Tax Appellate Tribunal, “D” BENCH, CHENNAI
Before: SHRI CHANDRA POOJARI & SHRI G. PAVAN KUMAR
आदेश /O R D E R
PER G. PAVAN KUMAR, JUDICIAL MEMBER:
This appeal of the Revenue and the Cross Objection of the assessee are directed against the order of the Commissioner of Income Tax (Appeals)- - 7,
:-2-: & C.O. No. 39/Mds/2015 Chennai dated 20.12.2013 in for the assessment year 2010- 11 passed u/s. 143(2) and 250 of the Income Tax Act.
The Revenue has filed the appeal challenging the action of the CIT(A) in considering that the assessee is eligible for exemption u/s. 11 of the Act and not affected by the amendments of section 2(15) of the Act, object of "General Public Utility", irrespective of the fact that the total receipts of the assessee trust exceed the threshold limit under provisions of section 2(15) of the Act and made a distinction of activities in the nature of "Dominant Activities" and "Subservient Activities".
The Brief facts of the case that the assessee trust was registered under the provisions of section 12A(a) of the Income Tax Act vide letter No. DIT(E) No. 2(65)/94-95 dated 14.06.1994. For the assessment year 2010-11 the Return of income was filed on 28.10.2010 and was processed u/s. 143(1) of the Act on 22.09.2011. The case was selected for scrutiny and notice u/s. 143(2) was issued in response to the notice, Ld. AO appeared from time to time and filed details. The Ld. AO on perusal of information and records found that the assessee's trust was formed on 19.01.1994 with objectives referred in Assessment Order at Page 2. The assessee trust is to regulate the practice of Pranic Healing therapy and confined in establishing pranic healers throughout Tamilnadu and further to monitor the leading activities of Pranic Healers and to protect and maintain therapy and technical standards and to develop and :-3-: & C.O. No. 39/Mds/2015 organize itself as a supreme competent body to train persons in to Pranic Healing Method and issue Competency Certificate for practicing Pranic Healing. The activities are to promote Pranic Healing through Health and educational programmes of Government and other agencies and to organize conventions of pranic healers to share their experience and also to affiliate with organizations like Indian Pranic Healing Foundation or other similar organizations
The Assessing Officer on the verification of financial statements found that the assessee course fee receipts of Rs. 39,69,650/- received on conducting the Pranic Healing to enhance life, Kriya Shakti and Pre Level-II and Pre Review etc., and these courses duration for 1 or 2 days. Further, the assessee also received a royalty from trainers who conduct courses to train Pranic Healing. All the trainers who are conducting Pranic Healing courses have to pay the course fee receipts as royalty to the state level foundation and in turn the state level foundation shall pay to All India Yoga Vidya Pranic Healing Foundation and the entire process of receiving of royalty is documented and resolutions are passed and signed by the trustees in the year 1997. The assessee trust received on sale of books, CDs, Cassettes & Posters aggregating to Rs. 28 Lakhs in the said financial year. The Assessing Officer analysis the financial aspects and is of the opinion that the assessee is rendering the business activities and the books and CDs are being are sold at mark-up price and results in huge profits to trust and hence there is no charitable activity involved..
Further, the Ld. AO issued show cause notice mentioning that the activities of the :-4-: & C.O. No. 39/Mds/2015 trust are in the nature of trade, commerce or business and cannot be treated as charitable purpose. In compliance to notice, the assessee trust has emphazised that the trust activities are in the nature of educational and medical relief.
Whereas, the Ld. AO distinguished the activities and relied on the Apex Court decision and is of the opinion that the teaching, acquiring of knowledge does not fall within the meaning of education as per section 2(15) of the Act and relied on the decision of Tribunal and High Court and came to a opinion that the activities are not compared with education and the pranic healing courses are not conducted as a normal schooling. The pranic healers conduct courses at different places and pay royalties for the courses and the receipts are exceeding more than 10 Lakhs. Further. activities are in the nature of business are excluded from the object of advancement of general public utility and Ld. AO has disallowed depreciation on the asset which was claimed as application of income in the earlier years and allowed only the current year depreciation and passed order u/s. 143(3) of the Act dated 20.12.2013 with assessed income of Rs. 93,59,335/- and raised the demand.
Aggrieved by the order, the assessee filed an appeal with the CIT(A). In the appellate proceedings, the Ld. AR of the assessee argued the grounds and reiterated the submissions of the assessment proceedings and filed written submissions. The Ld. CIT(A), considered Ld. AO Reports, where the Assessing Officer expressed that activities are not charitable and distinguished the decision relied by the assessee. Where, the Ld. AR of the assessee
:-5-: & C.O. No. 39/Mds/2015 submitted that the activities fall within the ambit of "medical relief" the pranic healing as an alternative therapy and relied on the judicial decisions. The assessee trust submitted objections to the AO report through letter at 18.12.2013 dealt at Page 5 to 7 of the CIT(A) order. The Ld. CIT(A) found that the assessment was completed by the Ld. AO without verifying whether the objects fulfil the requisite purpose. The Ld. CIT(A) considered the AO's remand report and objects of the assessee, is of the opinion that the activities of the assessee are to be viewed on par with educational activities. The definition of charitable purpose is only inclusive. Further, the Ld. AO has not supported or provided proof on record with evidence that the assessee is not genuinely carrying its objects. The Ld. AO has considered only the course fee receipt, royalty received, sale of books & CDs as activities of the trust being in the nature of trade, commerce and business, but these cannot be treated as business as the pranic healing conducts certification courses within its objects. Further, the Ld. CIT(A) has identified the activities of the assessee trust into Dominant Activities which conform the objects and Subservient Activities being incidental to the dominant activities. This distinction is made considering the advancement of objects being pranic healing as main objects of the assessee trust and there is no dispute on the conduct of activities. Whereas, profits on sale of CDs, Books are arises in the course of carrying out Dominant Activities for the purpose of fulfilling the main objects of the assessee. The Ld. CIT(A) find, after amendment by the Finance Act, 2008, the pranic healing is very important source for physical, mental, spiritual well-being of Human beings and this activities are not only in India but :-6-: & C.O. No. 39/Mds/2015 conducted and accepted in Western Countries where large number of people feel that the pranic healing is a great source of spiritual well being and in the nature of activity for advancement of general public utility and relied on Supreme Court decision of the Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR (1)
(SC) and found that the objects of the assessee are charitable within the definition of section 2(15) of the Act and eligible for exemption u/s. 11 of the Act and allowed the appeal.
Aggrieved by the order of the Ld. CIT(A), the Revenue has filed an appeal to the Tribunal. The Ld. DR argued the grounds and submitted that the CIT(A) erred in allowing the assessee trust exemption u/s. 11 of the Act and the activities of the trust are not in the nature of charitable and irrespective of the fact of sale of books and CDs, the receipts exceeds the threshold limit prescribed u/s. 2(15) of the Act. The decision relied by the CIT(A) was prior to amendment and accounts are audited u/s. 44AB of the Act and prayed for set aside of the order of the CIT(A). Contra, the Ld. AR of the assessee relied on the order of the CIT(A) and supported with the judicial decisions that the activities are in the nature of charitable purpose and prayed for dismissal of the Revenue appeal.
We heard the rival submissions, perused the material on record and judicial decisions. The sole crux of arguments of the Ld. DR that the activities conducted by the pranic healing trust are in the nature of trade and business.
Whereas, the Ld. AR submits that the trust conducts courses and issue certificate
:-7-: & C.O. No. 39/Mds/2015 to the healers to pursue objects in other parts of India and supported his arguments with High Court decision of "CIT Vs St. Mary's Malankara Seminary (2014) 48 taxmann.com 387 (kerala)". The main objects of the assessee trust as investigated by the Assessing Officer is imparting pranic healing certificate courses and sale of books/ CDs and other activities and same cannot be treated as rendering of services in relation to trade commerce or business. We found the Ld. CIT(A) has considered the Assessing Officer view on the profit earning activities in conducting courses sale of books, Cassettes and Posters. Whereas, all these activities fall within incidental activities for achieving the main objects.
The activities does not fall in the ambit of commerce and business, further the main activity is not business and the transactions are incidental to Dominant Activities as the trust was established for spread of pranic healing courses in Tamilnadu. The Ld. CIT(A) has considered the elaborate aspects of the activities and the judicial decisions and finally concluded that the activities are not in the nature of business but charitable. We are of the opinion that the assessee has complied with the provisions of law and the activities are charitable in nature and the CIT(A) discussed on the explanations of the assessee and the findings of the Assessing Officer. Further, the Ld. AR submitted that the department has accepted assessee's contention in earlier assessment years and disturb the working system of the assessee's organisation for this assessment year and which has the effect on the activities and also judiciary discipline requires consistency in its proceedings. Therefore, considering the apparent facts and material on record, we inclined not to interfere
:-8-: & C.O. No. 39/Mds/2015 with the order of the CIT(A) and upheld the same. In the result, the appeal of the Revenue is dismissed.
The assessee filed the CO No. 39/Mds/2015 with the delay of 304 days and filed the affidavit. The ld. AR explained the circumstances for delay which are not deliberate. Further, ld. DR of the assessee has no serious objections for condonation of delay. After hearing the submissions, we are satisfied with the Reasonable cause explained in affidavit for filing the belatedly and the delay is condoned and CO is admitted. The Ld. AR argued to allow the allow the depreciation on the assets which was claimed as application of income in the earlier years. The co-ordinate bench of the Tribunal in the Music Academy Madras Vs. DDIT (Exemption) dated 22.04.2016 held once investment in fixed asset is claimed as application of income, depreciation cannot be allowed, and we apply the decision and dismiss the Cross Objection.
In the result, the appeal of the Revenue and the Cross Objection of the assessee are dismissed. Order pronounced on Wednesday, the 22nd day of December, 2016 at Chennai