DCIT (EXEMPTION), GHAZIABAD vs. M/S. DIVYA YOG MANDIR TRUST, HARIDWAR

PER SUDHANSHU SRIVASTAVA, JM: This appeal has been preferred by the department against

the order passed by the Ld. Commissioner of Income Tax

(Appeals), Dehradun } CIT (A)} vide order dated 26.10.2016 and

pertains to assessment year 2013-14.

2.0 Brief facts of the case are that the assessee Trust

furnished its return of income declaring Nil income after claiming

exemption u/s 11 of the Income Tax Act, 1961 (hereinafter called

'the Act'). The case was selected for scrutiny under CASS

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guidelines and statutory notices were issued to the assessee. The

assessee trust was registered u/s 12A(a) of the Act vide order

dated 27.03.1995 and since then, the assessee has been claiming

exemption in terms of section 11, 12A and 12AA of the Act.

During the course of assessment proceedings, the Assessing

Officer (AO) noted that the assessee trust was allegedly engaged

in the business activities through the following business

undertakings:-

Ayurved

Yog and Paranayam and Vedic and patriotic songs (Trading)

(Trading)

plants (Trading)

2.1 The Assessing Officer observed that the gross receipts

from these six undertaking amounted to Rs. 3,39,80,67,065/-

and the consolidated profit of these undertakings amounted to

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Rs. 97,82,19,889/-. The Assessing Officer also observed that

besides the above, the assessee had a gross receipt of Rs.

20,71,87,624/- from its main Trust and the assessee had further

claimed inter-trust donations to the tune of Rs. 68,02,67,317/- to

various entities, resulting in a negative net income of Rs.

71,22,53,478/- after incurring a total expenditure of Rs.

91,94,41,102/-. The Assessing Officer also observed that the

Trust had purchased material from its undertakings and had sold

it through the Department of Medicines. The Assessing Officer

went on to observe that the Trust was only for name sake and

that the assessee was in fact engaged in carrying out business

activities in the garb of Trust. The Assessing Officer was of the

opinion that the main purpose of the Trust was to avoid tax

under the garb of charitable activities. The Assessing Officer also

noted that the claim of the assessee being a charitable Trust was

not accepted by the Assessing Officer in assessment years 2009-

10, 2010-11, 2011-12 and 2012-13 and such denial of exemption

was upheld by the Ld. Commissioner of Income Tax (A) but the

ITAT had reversed it. The Assessing Officer also noted that

against the order of the ITAT, the department had approached the

Hon’ble High Court of Uttarakhand. Thereafter, the Assessing

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Officer proceeded to tax the surplus of the assessee as net profit

from the business undertaking and after denying the assessee’s

claim of exemption u/s 11, proceeded to compute the total

income of the assessee at Rs. 19,88,53,210/-. While recomputing

this income, the Assessing Officer also made disallowance u/s

43B of the Act to the tune of Rs. 1,18,722/-, made addition on

account of interest on TDS to the tune of Rs. 15,584/- and also

made a disallowance on account of PF and ESI contribution made

after due date to the tune of Rs. 3,70,331/-.

2.2 The assessee’s appeal before the Ld. Commissioner of

Income Tax (A) was allowed wherein the Ld. Commissioner of

Income Tax (A) duly noted that the ITAT, in order for assessment

year 2009-10 in ITA 387/Del/2013, had held that the assessee

trust was engaged in providing medical relief, imparting

education and relief to the poor and that its business

undertakings sub-served the charitable objective of providing

medical relief, education and relief to the poor. The Ld.

Commissioner of Income Tax (A) also noted that the assessee

trust was empowered vide clause (o) of its objectives to accept

voluntary donations and that donations to Patajali Yogpeeth

Trust amounted to application of income for the purpose of

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medical relief and that yoga was a system of therapeutic value.

The Ld. Commissioner of Income Tax (A) went to hold that in

view of the findings of the ITAT in assessment year 2009-10, the

assessee was not covered by the 5th limb of section 2(15) and was,

therefore, entitled to the benefit of exemption u/s 11 and 12 of

the Act. The Assessing Officer was accordingly directed to extend

the exemption u/s 11 and 12 to the assessee as per the

observations of the ITAT in assessee’s own case as

aforementioned.

2.3 Aggrieved with this finding of the Ld. Commissioner of

Income Tax (A), the revenue is now in appeal before this Tribunal

and has raised the following grounds of appeal:-

“1. Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts in allowing the appeal of the assessee and deleting the addition made by the A.O. u/s 43B of Rs. 1,18,722/-.

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assessee on the issue of donation and other income of Rs. 13,95,69,790/-.

3.0 At the outset, the Ld. AR submitted that this appeal

was covered in favour of the assessee and against the revenue by

the order of the Tribunal for assessment years 2009-10, 2010-11

and 2011-12. The copies of the said orders were placed on

record. The Ld. AR also submitted that the revenue’s appeal

against the order of the ITAT in assessment year 2009-10 had

been dismissed by the Hon’ble High Court of Uttarakhand in ITA

No. 05/2014. A copy of the said order of the Hon’ble High Court

of Uttarakhand was also placed on record. The Ld. AR drew our

attention to the relevant paragraphs in these orders and

submitted that the facts in this year were identical to the earlier

assessment years 2009-10, 2010-11 and 2011-12, a fact which

has been accepted by the Assessing Officer also. The Ld. AR

submitted that ground no. 4 of the department’s appeal was

therefore covered by the aforesaid orders of the Tribunal and

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Uttarakhand High Court in favour of the assessee and against the

revenue.

3.1 With respect to ground nos. 1, 2 and 3 raised by the

revenue regarding deletion of disallowance u/s 43B of the Act,

interest on TDS and disallowance pertaining to PF and ESI

contribution, the Ld. AR filed copy of computation of income for

the relevant assessment year and pointed out that the assessee

had itself disallowed these items while computing its income and,

therefore, the Assessing Officer had incorrectly made additions on

this account.

4.0 In response, the Ld. C.I.T. DR supported the order of

the Assessing Officer. However, the Ld. C.I.T. DR fairly accepted

that the issue as raised in ground no. 4 by the department stood

covered against the department by the order of the ITAT in

assessment years 2009-10 to 2011-12 as well as the order of the

Hon’ble Uttarakhand High Court for assessment year 2009-10.

5.0 We have heard the rival submissions and have perused

the material available on record. We agree with the contentions of

the Ld. AR that the assessee’s case is covered in its favour by the

orders of the Coordinate Benches of the Tribunal in assessee’s

own cases for three different assessment years. We would like to

ITA No. 779/Del/2017 Assessment year 2013-14 make a reference to the Tribunal’s order for assessment year

2009-10 wherein detailed findings have been recorded by the

Tribunal. This order was upheld by the Hon’ble Uttarakhand

High Court in ITA No. 05/2014 vide order dated 27th February,

2019. The relevant paragraphs of the Tribunal’s order in

assessment year 2009-10 reported in (2015) 153 ITR 368 (Delhi

Tribunal) are reproduced here in under for a ready reference:- “6.1 We, therefore, prefer to adjudicate upon the first issue as to whether the objects and activities of the appellant trust did fall within the purview of providing 'medical relief', 'imparting education' or 'relief to the poor'. The objects of the appellant trust are available at page 1-7 of the paper book declaring that the appellant trust was set up as charitable trust with the following predominant objectives: (1) Providing medical relief through yoga, naturopathy, acupressure and Ayurveda for the purpose of alienating all kinds of diseases; (2) Imparting education in the field of yoga, (3) Providing relief to the poor and (4) Undertaking research and development activities in the field of yoga, Ayurved, vedic literature to further the cause of alienating all kinds of diseases and provide medical relief to the public at large.

6.2 The first issue before us to be adjudicated upon is as to whether the appellant trust fall within the purview of providing "medical relief", "imparting education" or "relief to the poor" ? 8

ITA No. 779/Del/2017 Assessment year 2013-14 6.3 In the previous paragraphs we have discussed the approach of the authorities below on the above issue as well as submissions of the parties in this regard. The contention of the appellant remained that they are providing medical "relief through yoga, naturopathy, acupressure and Ayurved for the purpose of alleviating all kinds of diseases ; they are imparting education in the field of yoga, providing relief to the poor and undertaking research and development activities in the field of yoga, ayurveda to all kinds of disease and provide medical relief. It was contended that on the basis of these objectives the appellant was granted registration u/s 12A of the Act which is in force till date. It was also contended that the appellant in accordance with the approved objectives has been consistently pursuing its charitable activities for the last 18 years including the assessment year under consideration and the appellant has always been allowed exemption u/s 11/ 12 including in various assessment completed u/s 143(3) of the Act. It was submitted that there has been no change in fact during the year under consideration. Before proceeding on the adjudication of the issue as to whether "yoga" as a system provide any "medical relief" which remained the main objection of the revenue, we would like to point out over here that there is no dispute on this material fact that the appellant since its inception in the year 1995 has been engaged in the activity of providing 'medical relief' through ayurveda under the organization "Patanjali Bhartiya Ayurvigyan Avam Anusandhan Sansthan at Haridwar. This fact has been consistently accepted by the revenue in the assessment years 2004-05 to 2008-09 vide various assessments framed u/s 143(3). There is also no change in the facts of this aspect of the matter. The revenue authorities are not disputing the fact that ayurvedic treatment is given by the assessee. This is medical relief. Yoga in this case is used by the assessee in addition to medical relief through naturopath and ayurveda. We find 9

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that there is also no dispute that the appellant has established (a) department of medical science and facilities known as Patanjali Hospital, (2) Patanjali Bhartiya Ayurvigyan Avam Anusandhan Sansthan (3) Patanjali Chikitsalay and (4) R & D yoga and ayurveda. (The appellant has also set up (1) Divya Nursery (dealing in cultivation, restoration and research in rare medicinal plants /herbs and selling these plants);(2) Divya Pharmacy (Ayurvedic pharmaceutical unit engaged in manufacturing of ayurvedic medicines as per tradition of sages and modern science); and (3) Divya Prakashan, etc. (it deals with publication and distribution of different types of literature relating to yoga and ayurved)

Department of Medical Science and Facilities commonly known as Patanjali Hospitalrun by the appellant trust is having various departments including dental department, radiology department, surgical department, ophthalmology department etc. The claim of the appellant that in this hospital the appellant provide medical relief to over 2000 patients every day and from its primary set up in Haridwar where around 2,39,000 patients were treated during the year under consideration the hospital also has its presence in Ranchi and Patna where more than 60,000 and 75,000 patients respectively are treated every year, has not been disputed by the revenue.

Patanjali Bhartiya Ayurvigyan Avam Anusandhan Sansthan i.e. an Ayurvedic College has been set up, which was under construction in the year under consideration and it has started operations w.e.f. 20.07.2009, for imparting education in the field of Ayurved. It has been set up at Haridwar and was approved and duly recognized

ITA No. 779/Del/2017 Assessment year 2013-14 by the Department of Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy systems of medicines(AYUSH) vide notification dated 20.7.2009. It is pertinent to mention over here that for the purpose of recognition and granting permission for establishment of medical college, the Department of AYUSH a body set up by the Ministry of Health & Family Welfare, Govt, of India mandates fulfilment of certain minimum standards and requirements as prescribed under the Indian Medical Central Council Act 1970 (IMCC Act). It is only on fulfillment of these conditions prescribed in the IMCC Act permission is granted to establish and run ayurvedic medical colleges. It is pertinent to state here that 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. Thus there is no doubt in the present case before us that on fulfillment of all the mandatory requirements the ayurvedic medical college set up by the appellant has been duly recognized by the AYUSH. It is also imperative to state here that the Central Council of Indian Medicine under AYUSH conducts regular inspection of the ayurvedic colleges to verify that the prescribed minimum standards are complied with by such colleges and if the prescribed standards are not complied with by the medical colleges, the permission/recognition is either rejected or revoked by the AYUSH. All these material and undisputed facts lead us to a definite conclusion that it has been undisputed that appellant has been providing 'medical relief through ayurveda and naturopathy system of medicine in its above stated hospitals and has also set up an ayurvedic medical college (Patanjali Bhartiya Ayurvigyan Avam Anusandhan Sansthan) affiliated by Uttarakhand Technical University and recognized by AYUSH to impart education in the field of ayurveda and naturopathy etc. As 11

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discussed above it is also remained an undisputed fact that since its inception in the year 1995 the 'medical relief provided through Patanjali Bhartiya Ayurvigyan Avam Anusandhan Sansthan' at Haridwar, has been consistently accepted by the revenue in the assessment years 2004-05 to 2008-09 as engaged in the activity of providing 'medical relief' in the assessment framed u/s 143(3) of the Act. Since there is no change in this object of the appellant trust, and the related facts during the year under consideration, we are of the view that ratio laid down by the Hon'ble Supreme Court in the case of Radhasoami Satsang (supra) and others the revenue was not justified in refusing the claimed exemption u/s 11/12 of the Act during the year. The revenue is expected to be consistent with its own stand which has been taken in earlier years, when there is no change in the objects of the trust during the year. In view of these discussions we are in a definite position to hold that the appellant was entitled for the exemption u/s 11/12 of the Act on the basis that the appellant was engaged in the activity of providing 'medical relief' through ayurveda, naturopathy etc. during the year under consideration i.e. asstt. year 2009-10 and the authorities below were not justified in refusing the claimed exemption to the assessee in this regard. It is ordered accordingly.

"Medical Relief" through yoga

6.4.1 While examining the issue as to whether medical relief can be given through yoga on the basis of above submissions made by the parties we find that in the Clinical Establishment (registration and regulation) Act 2010, the legislature has defined "recognized system of

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medicine" in Section 2 (h) of the said Act. As per this definition "(h) recognized system of medicine means allopathy, yoga, naturopathy, ayurved, homeopathy, siddha and unani system of medicines or any other system of medicine as may be recognized by the Central Government". This bill was introduced by the Central Government in the year 2007 to provide for registration and regulation of all clinical establishment in the country with a view to prescribe the minimum standards of facilities and services provided by them. A copy of this Act has been made available at page Nos. 161 to 163 of the paper book.

6.4.2 A reference of the recommendation of the standing committee of Human Resources Development 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.

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ACTION 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 the core components of Health and Physical Education."

6.4.3 On the contrary the Ld. CIT(A) for the purpose of determining whether yoga can be classified as a form of medical relief has placed reliance on the determination of the term "medical" as provided in Major Law Laxicon by P Ramanatha Aiyar (2010 edition) as per which "pertaining to or having to do with the art of healing disease or the science of medicine ; containing medicine ; used in medicine". We find that the term "medical" has been defined very broadly in this definition as per which the art of healing any disease constitute a medical relief and the same need not be restricted to conventional method of treatment. Ld. CIT(A) at page 15 of the first appellant order has also selectively quoted from the website of department of Ayush (Ministry of Health and Family Welfare) to come this conclusion that yoga is a discipline appears to address more the issues of spiritual well being rather address the problems associated with the more worldly "medical relief" and exercises forming part of the yoga system would at the best have indirect salutary benefit on the health of an individual. He held that yoga is a spiritual system more than a curative system for alleviating or even curing various ailments. It is not seen as a specific remedy for physical ailment at par with medical system like

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allopathy or even ayurveda. In this regard the Ld. CIT(A) has placed reliance on the decisions in the cases of Kasyap Veda Research Foundation (supra) and Rajneesh Foundation (supra). A complete information on yoga available on the website of the Ayush i.e., 'Httpp://www.Indiamedicine.nic.in' has been made available by the assessee at page Nos. 639 to 655 of the supplementary paper book No. 1 and at page No. 757 to 793 of the supplementary paper book No. 2 filed by the assessee. The Ld. AR has drawn our attention also on the following information on yoga available on the aforesaid website :

"Yoga

The concepts and practices of Yoga originated in India about several thousand years ago. Its founders were great Saints and Sages. The great Yogis presented rational interpretation of their experiences of Yoga and brought about a practical and scientifically sound method within everyone's reach. Yoga today, is no longer restricted to hermits, saints, and sages; it has entered 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.

ITA No. 779/Del/2017 Assessment year 2013-14 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 mind. The practice of Yoga prevents psychosomatic disorders and improves an individuals resistance and ability to endure stressful situations." (Emphasis supplied)

6.4.4 In the above said information it has been observed that experts of various branches of medicine including modern medical sciences are realizing the role of these techniques in the prevention and mitigation of diseases and promotion of health. It has been further observed that 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 individual's resistance and ability to endure stressful situations. Even in the extracts of the information available on the website of Ayush reproduced by the Ld. CIT(A) at page 15 of the first appellate order in the definition of yoga it has been stated that yoga is a discipline to improve or develop one's inherent power in a 16

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balanced manner. It offers the means to attain complete self-realisation. As per literal meaning of Sanskrit word "yoke" it has been noted that the yoga can be defined as a means of uniting the individual spirit with the universal spirit of God and according to Maharishi Patanjali, yoga is the suppression of medications of the mind. The information given under the head "yoga as soul therapy" has also been extracted by the Ld. CIT(A) as per which all parts of yoga (japa, karma, bhakti) have healing potential to shelter out the effects of pains. It has been further noted therein that one especially needs proper guidance from an accomplished exponent, who has already treated the same track to reach the ultimate goal. If we read these informations available on the website of Ayush in its totality we find it difficult to concur with the view of Ld. CIT(A) that yoga as a system does not fit into the definition of medical relief as mentioned in section 2(15) of the Act. The very observation of Ld. CIT(A) in this regard at page No. 16 of -the first appellate order that yoga is a discipline appears to address more the issues of spiritual well being rather than address the problems associated with the more, worldly "medical relief" itself suggests that the Ld. CIT(A) remained of the view that yoga as a discipline addresses 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 (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 17

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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 High Court in the case of Rajneesh Foundation (supra) is not relevant as the said decision was rendered prior to introduction of proviso to section 2 (15), when there used to be no dispute insofar as classification of charitable objectives was concerned for the purpose of claiming exemption u/s 11/12 of the Act. The decision was referred in the context of classifying 'meditation' as a charitable objectives for the purpose of section 2(15) of the Act. The Hon'ble High Court has adjudicated only upon the issue of classification of 'meditation', '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. In the said decision the Hon'ble High Court has however also been pleased to observe that not only in India but in the western countries also meditation and yoga are being accepted as a great source of physical and mental health. Meaning thereby that yoga is a source for medical relief. For a ready reference the relevant extract of the said decision is being reproduced hereunder :—

"Admittedly, main thrust of the respondent is on meditation and nobody can dispute that in India meditation has been very important source for physical, mental and spiritual well-being of the human beings. Cognizance has to be taken that the meditation and Yoga I are becoming more and more popular among the Indians 18

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who are now becoming conscious about their physical, mental and spiritual health. Not only in India, meditation and Yoga are being accepted in the Western Countries also as a great source for physical and mental health and spiritual attainment. When a large number of people feel that meditation is a great source for physical, mental and spiritual well-being, it must be held to be an activity for the advancement of general public utility" (Emphasis supplied)

6.4.5 Ld. AR has also referred the survey report of US National center for complementary and alternative medicine (NCCAM) based on survey conducted in December, 2008, made available at page Nos. 193 to 196 of the paper book (assessee) as per which yoga has been recognized as a complementary and alternative medicine to prevent and treat disease. NCCAM defines CAM as a group of diverse medical and health care systems, practices and products that are not 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, asthma 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 has been made available at page Nos. 555 to 633 of the supplementary paper book (appellant). This

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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 Hariward University of USA came forward to introduce yoga and ayurved subject in their university in collaboration with Swami Ramdevji in the wake of dreadful diseases being cured by Swamiji's Pranayam and his ayurved medicines.

6.4.6 In view of above discussions especially the recognition of yoga as a recognized system of medicine as per section 2 (h) of Clinical Establishment (Registration and Regulation) Act 2010 and the complete information made available by the ayush on its website we find no hesitation in coming to the conclusion that yoga can be safely accepted as a system fit into the definition of 'medical relief'. Yoga as a science is a well recognized system of medicine, which has therapeutic effects in treating various serious ailments. The predominant objective of the appellant trust as it is apparent from its objects, remained to provide medical relief through ayurveda and propagation of yoga for the purpose of treating/curing various diseases.

' 20

ITA No. 779/Del/2017 Assessment year 2013-14 Imparting Education'

6.5 The question now is as to whether the appellant trust falls within the purview of providing "imparting education". The grievance of the - appellant is that the authorities below have failed to appreciate that the propagation of yoga by way of conducting yoga classes on a regular basis and in a systemized manner also falls under the category of 'imparting of education' as provided u/s 2(15) of the Act. Reliance has been placed on several decisions, which we will discuss hereunder. The contention of the Ld. AR remained that the predominant object of the appellant trust are to provide practical and theoretical training in the field of yoga, which would ultimately provide medical relief to the society at large. It was submitted that in pursuance of the said objective the appellant trust has made inter-trust donations to Patanjali Yog Peeth to support their endeavors of imparting yoga education by means of organizing yog shivirs/camps across the country on daily/weekly/monthly basis in a systemized/organized manner in order to provide medical relief to people who cannot afford modern medical method or have been subjected to ill effects of modern medicine. It was submitted that imparting of yoga training through well structured yoga shivirs/camps also falls under the category of imparting 'education' one of the charitable objects defined u/s 2(15) of the Act and accordingly the appellant's activities are not hit by the proviso inserted in the definition of charitable purpose as contained in the said section. During the course of hearing the appellant was directed to provide complete details of the Patanjali Bhartiya Ayurvigyan Avam Anusandhan Sansthan at Haridwar for imparting education in the field of ayurveda which started operations w.e.f. 20.7.2009. In compliance the Ld. AR submitted that during the year the appellant 21

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had applied substantial amount on construction of the ayurveda medical college which is affiliated to the Uttarakhand Technical University. It was submitted that ayurveda medical college set up by the appellant was approved and duly recognized by the Department of Ayurveda, yoga & naturopathy, unani, siddha and homoeopathy (AYUSH) vide notification dated 20.7.2009, a copy thereof has been made available at page No. 805 and 806 of the supplementary paper book -II. Department of Ayush is a body set up by the Ministry of Health & Family Welfare, Govt. of India with the primary objective of regulating and upgrading the educational standards, quality control and standardization of drugs, improving the availability of medicinal plant material, research and development and awareness generation about the efficacy of ayurveda, yoga and naturopathy, unani, siddha and homoeopathy systems of medicines. For the purpose of recognizing and granting permission for establishment of medical colleges, the department of AYUSH mandates fulfillment of certain minimum standard and requirements as prescribed under the Indian Medical Central Council Act 1970 (IMCC Act). One of the primary conditions laid down in the IMCC Act for the grant of recognition is the existence of a medical hospital attached to the ayurvedic college with the prescribed bed strength alongwith outdoor patient department (OPD) and Indoor patient department (IPD) facilities. 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 Sole Trustee, Lok Shikshana Trust (supra), relied upon by the Ld. AR, has been pleased to explain the meaning of the word 'education' in the 22

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context of section 2(15) of the Act. As per this decision the education is the process of training and developing the knowledge, skill, mind and character of students by schooling by way of systematic instruction, schooling or training. The Hon'ble Delhi High Court in the case of Delhi Music Society (supra) has been pleased to hold that since the assessee society was teaching and promoting all forms of music and dance, western, Indian or any other and was run like any school or educational institution in a systemic manner with regular classes, the same therefore meet the requirement of an educational institution within the meaning of section 10(23C)(vi) of the Act. In the case of SRM Foundation of India (supra) the Delhi Bench of the Tribunal, where the assessee was" engaged in spreading the system of transcendental meditation (TM) has held that irrespective of the fact that the assessee has its own prescribed syllabus, trained teachers, branches all over India to spread system of transcendental deep meditation among people in all walks of life, the same constituted imparting of education and the assessee was entitled to exemption u/s 10(72) of the Act. We thus come to the conclusion that any form of educational activity involving imparting of systematic training in order to develop the knowledge, skill, mind and character of students, is to be regarded as 'education' covered u/s 2(15) of the Act. In view of these decisions we hold that imparting of yoga training through well structured yoga shivir/camps also falls under the category of imparting education which is one of the charitable objects defined u/s 2(15) of the Act. The appellant's activities are thus not hit by the proviso inserted in the definition of charitable purpose in section 2(15) of the Act.

ITA No. 779/Del/2017 Assessment year 2013-14 Relief to the poor

6.6 So far as question of providing 'relief to the poor' by the appellant trust to bring it within the purview of the same is concerned, we find that the contention of the assessee remained that the appellant through its hospital, Patanjali hospital and Patanjali Chikitsalaya at Haridwar, Ranchi and Patna has served more than 2.25 lacs, 0.60 lacs and 0.75 lacs patients during the relevant year. The hospitals have team of doctors, nurses and paramedical staff working round the clock. It was submitted that the hospital at Haridwar is well equipped with ultra modern diagnostic facilities like OPD and IPD, pathology lab, cardiology lab, panchkarma clinic, yoga and shatkarma clinic, surgical, dental and ophthalmological clinic and provides free yogic and Ayurvedic consultancy to all its patients. It was pointed out that during the year the appellant has provided free medical services/treatment to more than 38 lacs patients through Patanjali Chikitsalaya spread all across the country. It was submitted that all records of such treatments and activities of the trust has been examined in scrutiny assessment by revenue department over so many years and have never been disputed.

6.6.1 The trust deed in clause J and N has provided the objective of appellant to impart education and provide relief to the poor. The contention of the Ld. CIT(DR) remained that 7 out of 15 objectives in the trust deed of the appellant are in a nature of general public utility. The objects of the appellant are as under :—

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A. "The main aim of the trust would be to impart the practical and functional training of astung yog, raj yog, hath yog, ashan and pranayam etc as received from the ancient tradition propounded by the Rishis and Munis to make an end of extreme sufferings to cure diseases and to receive a calm stage of mind and extreme happiness. B. To construct the building etc for boarding and lodging for those who are instructed III Yog and meditation. C. To organize Yoga camps in the country and abroad in order to propagate the yoga, training and Vedic Dharma. D. To open and establish charitable hospitals for the treatment of the helpless poor, out caste and also to distribute medicines, clothes and food articles in the tribal area. E. To furnish and equip the charitable hospital with modern medical facilities. F. To carry out conduct research on Yoga, Ayurveda and Vedic literature and also to organize scholarly seminars and competitions. G. To prepare and to sale and purchase of the Ayurvedic medicines for the charitable hospitals, hospital colleges, schools and for the social and Yoqic activities of the trust. H. To make an arrangement for the study of Veds, the Geeta, the Philosophy and Upanishads, Grammer and Yogic scriptures for character building, moral cultural upliftment and imparting education for character building and upliftment of moral values. I. To prepare missionaries and facilitate them and sensitize people for uprooting jealously, hate, evils, injustice, Tyranrty and heavenly this on earth by keeping above the communalism, castes and the feeling of sex and creed.

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J. To run the free educational centers and to facilitate the worthy poor helpless orphans, students by providing clothes, food, study material and lodging. K. To establish and run stables for the poor cows to save them from victimization and killings. L. To carry out researches or agni hotra and perform scientific yajnas in order to solve the serious problems of environmental pollution of modern age. M. To give award and certificates to the trainees who undertake weekly, fortnightly, monthly, quarterly and annually Yog and Acupressure training. N. To help and co-operate the relief activities related to flood, earthquakes, epidemic, drought etc. O. To co-operate other such institutions and organizations which match or aims and objectives, and order to fulfill these aims and objectives to accept the donating of money, land etc." (Emphasis supplied)

6.6.2 we find that the predominant objective of the appellant trust has been set out in clause A of the Trust deed as per which the object is to alleviate extreme sufferings and cure diseases by providing practical and functional training of Astang yog, Raj yog, Dhyan Yog, Hath Yog, Ashan and Pranayam etc. as received from the ancient tradition pronounced by the rishies and munis. Thus to know the mission and reason of the appellant trust we have to read its objectives in totality. The various other objectives provided in the trust deed are merely independent/ancillary to the main objection which is to provide medical relief and impart education and do not in any way constitute/objectives of general public utility as contended by the Ld. CIT(DR). WE thus hold that the 26

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case of the appellant does not fall within the last limb of the definition of charitable purpose given u/s 1(15) of the Act. In the case of Thiagarajar Charities (supra) before the Hon'ble Supreme Court, the main objects of the assessee trust were education, medical relief and relief to the poor. One of the objects contemplated the trust to engage in carrying on, help, aid, assist and promote rural reconstruction work, cottage industry and all matters incidental thereto. The trustee carried on business by investing the corpus as per powers given under some clause of article of trust. The assessee claimed that the business carried on by it and from out of which it had derived income was held under trust and since the trust was for charitable purpose, the income was exempt from tax u/s 11. The AO rejected its claim. The Tribunal as well as Hon'ble High Court held that the object covered by clause 1(g) involved carrying on an activity for profit. On appeal the Hon'ble Supreme Court held in favour of the assessee by observing that clause 1(g) referred by the lower authorities was not an object but was really in the nature of a power. The Hon'ble Court further held that the ancillary activity undertaken by the assessee was to afford relief to poor falling within scope of section 2(15) of the Act and was not an object of general public utility. It was further held that business being only a means of achieving the object of the trust, exemption could not be denied.

6.6.3 The contention of the Ld. CIT(DR) also remained that the predominant objective of the appellant trust is to prepare and sell medical formulations, which is apparent from the sheer magnitude of business, sales counters and volume of its promotion and publication house which is not incidental to the main objective of providing medical relief. She has further alleged that appellant has established a 27

ITA No. 779/Del/2017 Assessment year 2013-14 chain of retail outlets (seva Kendra) for selling its products all over India and has also collected security deposit of Rs. 6.21 crores from these seva kendras. She alleged further that the assessee is also engaged in export of its products and quantum of such exports aggregates to Rs. 5,15,64,050/- during the assessment year under consideration, which portrays that the appellant is pre dominantly engaged in undertaking commercial activities. In the rejoionder the submission of the Ld. AR remained that business undertakings were run by the appellant as an activity incidental to attainment of the main objects of the appellant and to feed charity, which is permitted u/s 11(4)/11(4A) of the Act. It was submitted that the ayurvedic preparations/medicines have been exported by the appellant at the request of the patients, in order to fulfill its predominant objective of making the world disease free. It was submitted that the said exports were made by the business undertaking held under the trust and there is no embargo under the provisions of the Act to restrict business undertaking from making exports in the course of undertaking its business activities. It was submitted that the Chikitsalays were set up by the appellant all across the country for providing free medical consultations to patients suffering from various diseases. More than 1000 vaidays are giving free consultation to over 50,000 patients for curable and incurable disease in about 1000 Patanjali Chikitsalays across the country. Further that acceptance of security deposit for setting up seva Kendras does not in any way impact the charitable nature of the activities undertaken by the appellant.

6.6.4 Further allegation of Ld. CIT(DR) remained that the appellant has applied minimum amount of income for charitable purpose and diverted substantial amount to its sister concern i.e. Patanjali Yogpeeth Trust with the 28

ITA No. 779/Del/2017 Assessment year 2013-14 intention of retaining funds within its own control. It was alleged by her that the appellant was charging exhorbitant rates for accommodation fee in the name of participation fee. In alleging so the Ld. CIT(DR) has placed reliance on the statement of one Shri Balwant Singh Minnas, wherein he has alleged to have paid amount of Rs. 49,000/- as participation fee for the yoga shivir purportedly conducted by the appellant in the assessment year under consideration. The Ld. CIT(DR) has further alleged that appellant has collected a sum of Rs. 68.45 lacs under this head during the year. She alleged further that the assessee has charged Rs. 290.79 lacs from patients during the assessment year through medical hospital which was in addition to the price of medicine charged from patients. She alleged that the appellant was unable to produce during the appellate proceedings any documentary evidence to support the charitable activities in the form of medical relief in the hospital run by the appellant. She alleged that the appellant was unable to produce the medical practicitioner during the assessment proceedings. The rejoinder of the Ld. AR remained that there is no legal impediments in one charitable trust giving donation to inter charitable trust. It was submitted that it is a well settled position that when a charitable donation amount out of its current income is donated to inter charitable trust, the same constitute application of income u/s 11(1)(9) of the Act. A copy of certificate of registration of the donee trust u/s 12A of the Act has been placed at page 856 of the supplementary paper book -(III). The CBDT instruction No. 1132 dated 5.1.1978, extract of which has been made available at page No. 857 of the supplementary paper book-Ill has made it clear that payment of a sum by one charitable trust to another for utilization by the donee trust towards its charitable objects is proper application of income for charitable purpose in the hands of the donee trust and the donor trust will not loose exemption u/s 11 of the Income Tax Act 1961. We 29

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thus do not find substance in the contention of the Ld. CIT(DR) that the-appellant has donated an amount to the donee trust to deviate from its objectives. Since it is not the case of the department that Patanjali Yog Trust, the donee has not applied such sums for charitable purposes, there is no substance in the allegation that the appellant has deviated the funds.

6.6.5 Against the allegation of charging exorbitant rates for accommodation fee submission of the Ld. AR in rejoinder remained that the allegation is based on the statement of one Shri Balwant Singh Minhas without appreciating that the appellant did not conduct any yog shivir/camps in the assessment year under consideration, thus the question of charging exorbitant fees for conducting yoga shivir does not arise at all. The further contention of the Ld. AR remained that reliance has been placed on the ex parte statement of Shri Balwant Singh recorded behind the back of the appellant without affording opportunity to cross examine him, which itself is in violation of settled principles of natural justice. It was submitted that an amount of Rs. 68.45 lacs represents the amount of room rent charges received by the appellant from the patients who have availed in house facilities in the hospital run by the appellant at Haridwar. The amount of room rent charges received by the appellant in the assessment year is minuscule as compared to the number of patients who have treated in the hospital run by the appellant. Ld. AR submitted further that an amount of Rs. 2 .2 crores approximately has been charged from the patients who have been treated in the hospital run by the appellant, room rent charges, diagnosis and surgical services provided by the appellant which has also been charged at nominal rates in order to meet the actual costs incurred without any element of profit imbibed therein. In 30

ITA No. 779/Del/2017 Assessment year 2013-14 this regard attention was drawn on the income and expenditure statement of appellant trust placed at page 379 of the paper book, wherein appellant has incurred an expenditure of Rs. 5.1 crores as against income of Rs. 2.2 crores thereby resulting in a deficit of Rs. 2.8 crores. Regarding the allegation that the appellant was unable to produce any record in the form of medical prescriptions to substantiate that medical relief was provided in the hospital run by the appellant, Ld. AR submitted that as a matter of practice the prescriptions made by the medical practitioners in the OPD are never retained and are always given to the patients. Nonetheless the appellant maintains a record of the patients who have been treated in house which has nowhere been disputed by the department. Against the allegation of the department that appellant was unable to produce the medical practitioners for verification during the course of remand proceedings is erroneous. The Ld. AR submitted that the appellant has produced 15 out of 71 medical practitioners whose details and permanent residential addresses were made known to the revenue. It was submitted that in their statement recorded on oath , the medical practitioners who were in the employment with the hospital run by the appellant have categorically admitted to the fact that there is no compulsion on the patients to buy medicines prepared/manufactured by the appellant only and that they also prescribed medicine manufactured by other pharmaceutical companies. These submissions of the Ld. AR have not been rebutted.

6.6.6 Considering above submissions in totality we hold that the appellant trust falls within the purview of providing 'relief to the poor'.

ITA No. 779/Del/2017 Assessment year 2013-14 6.6.7 The first issue as to whether the appellant trust did fall within the purview of providing of 'medical relief 'imparting education' or 'relief to the poor' is thus decided in favour of the appellant. In view of the above finding on first issue the second and third issue have become infructuous. In these issues the questions are as to whether the activity of the appellant were in the nature of providing general public utility or of advancement of any other object of general public utility as contained in section 2(15) of the Act. Relevant provisions u/s 2(15) are reproduced as under :—

"Section 2(15) of the Act defines "charitable purpose" as under:— "** ** **

(15) "charitable, purpose" includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility: ** ** **

The proviso inserted in section 2(15) of the Act by the Finance Act, 2008, with effect from 1.4.2009, reads as under:— ** ** **"

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Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity; ** ** "(Emphasis supplied)

Therefore, the aforesaid proviso does net apply to a trust/institution engaged in the charitable object of providing relief to the poor, imparting education and providing medical relief.

The vision with which the applicant trust has been set up and which is being followed over the years are as under:—

'- To make a disease free world through a scientific approach to Yoga and Ayurved and to fulfil the resolution of making a new world free from disease and medicine; - To establish Pran as medicine for the treatment of all curable and incurable diseases by research on Pranayam /Yoga. - To propagate Pranayam as a "free" medicine for treatment of diseases round the globe, through in-depth research in accordance with the parameters of modern medical science, so that the rich and poor may avail its benefits in order to attain sound health; - To form a new integrated system of treatment, consisting

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mainly of the techniques of Yoga and Ayurveda, for Surgery and Emergency cases , Allopathy, Homoepathy, Unani and Acupressure to soothe patients suffering from unbearable pains and rid them of disease. - To evaluate methods of treatment of Physical Body, Etheric Body , Astral Body, Mental Body and Casual Body beyond the present incomplete system of treatment for cure of physical body alone; - Imparting Yoga and health education and to begin degree and diploma courses for students in disciplines of Yoga and Ayurveda.'

As discussed above the proviso to section 2(15) of the Act applies only to trusts/institution falling in the last limb of the definition of charitable purpose ; that too, if such trust/institution carry on commercial activities in the nature of business, trade or commerce. The said proviso does not apply to trust/institution engaged in the charitable object of providing relief to the poor, imparting education and providing medical relief. The last limb of the definition of charitable purpose u/s 2 (15) talks about the advancement of any other object of general public utility. The aforesaid predominant objects and the vision make it clear that the objects of the appellant are to provide 'medical relief 'impart education' to the society at large and 'relief to the poor' hence the proviso to section 2 (15) does not apply in the case of the assessee/appellant. The forth issue as to whether donation of Rs. 38.35 crores made to Patanjali Yog Peeth for the purpose of setting up Yog Bhawan and other yoga related activities these amounts to application of money for the purpose of medical relief has also been discussed and decided while adjudicating upon the first issue under the head medical relief or relief

ITA No. 779/Del/2017 Assessment year 2013-14 to the poor, following the same the fourth issue is also decided in favour of the appellant.

Other objections of the revenue

6.7 Ld. CIT(DR) has also contended that the appellant has received membership fees aggregating to Rs. 283.38 lacs in the assessment year under consideration which is in violation of the trust deed. She has contended further that prescribing of allopathic medicines by one dentist Shri Kuldeep Singh in the medical hospital run by the appellant was also in violation of the objective of the trust. Rejoinder of the Ld. AR in this regard remained that clause 0 of the trust deed clearly empowers the appellant trust to accept voluntary donations. Thus there was no bar on the appellant to receive voluntary donations in the form of membership fees and thus the objection raised by tjhe department does not survive. The Ld. AR submitted further that the predominant objective of the appellant trust is to provide medical relief to the society at large. Hence there is no specific restriction stipulated in the trust deed to prevent the appellant from prescribing allopathic medicines. He referred clause A & D of the trust deed in support. He however submitted that though the appellant primarily adopts ayurved and yoga as techniques to cure diseases but there is no embargo in the trust deed to prevent the appellant from prescribing allopathic medicines to cure the patients of diseases. It was submitted further that this contention is also contrary to primary contention of the department that the appellant prescribed only medicines which are manufactured in house and made available in the sales counters managed by the appellant. We fully agree with the above

ITA No. 779/Del/2017 Assessment year 2013-14 submission that Ld. AR made in rejoinder that there is no substance in the allegations of Ld. CIT(DR) that there was violation of trust deed by the appellant in accepting membership fees and prescribing allopathic medicines to its patients.

6.7.1 In ground No. 10 of the appeal the appellant has taken alternative plea that the Ld. CIT(A) has erred in upholding the taxation of gross income and not directing the AO to allow deduction of 'revenue expenditure' incurred during the assessment year 2009-10 while computing the taxable income. This ground has become infructuous as the AO in its rectification order dated 3.6.2013 u/s 154 of the Act has rectified the assessment order and allowed the deduction of revenue expenditure aggregating to Rs. 52,26,88,442/-. This ground is accordingly rejected.

6.7.2 The other contention of the Ld. CIT(DR) during the course of hearing of the appeal have also been met out by the Ld. AR in his rejoinder. On the issue of imparting of education the contention of the Ld. DR remained that ayurvedic medical college in the name of Patanjali Bhartiya Ayurvigyan Avam Anusandhan Sansthan at Haridwar was not in operation during the year. The submission of the Ld. AR remained that though the aforesaid medical (college was not in operation in the assessment year under consideration but the appellant had applied substantial amount in setting up the ayurvedic college which amounts to application of income for the purpose of imparting education in the field of ayurveda. In the absence of rebuttal of this fact we do not find substance in the allegation of the Ld. CIT(DR).

ITA No. 779/Del/2017 Assessment year 2013-14 6.7.3 The further contention of the Ld. CIT(DR) remained that the certificate of recognition granted by the Medical and Industrial Research Organization (SIRO) was never filed before the lower authorities which constituted additional evidence at the second stage of appeal proceedings. In this context the Ld. CIT(DR) has objected further that the R & D activities undertaken hy the appellant amounted to object of general public utility u/s 2(15) of the Act. She alleged further that comparative rate chart furnished by the appellant in the Paper Book was not filed before the authorities below hence the same constitutes additional evidence. Ld. AR has met out these contentions of the Ld. DR with this rejoinder that the notification granting recognition to the R & D Center of the appellant by the SIRO is available on the public domain and can be accessed at www.dsir.gov.in/direct/siro06.pdf. Thus the certificate does not constitute additional evidence. It was submitted further that the R & D activities undertaken by the appellant was only ancillary and incidental to the predominant objective of providing medical relief being pursued by the appellant. Hence does not fall to the objects of general public utility as defined u/s 2(15) of the Act. Regarding comparative rate chart furnished by the assesee before the Tribunal amounting to additional evidence, Ld. AR submitted that this fact was very much highlighted before the authorities below and reference of the contents of page No. 13 of the first appellate order has been made in support. It was submitted further that the chart filed is nothing but collation of the details of prices available in public domain and has been filed merely in furtherance of the contention taken before! the authorities below. Considering the above Submission we find substance in the submission of the Ld. AR and the same is accepted as such.

ITA No. 779/Del/2017 Assessment year 2013-14 6.7.4 Besides, above, it is pertinent to note here that the appellant since its inception in the year 1995 has been engaged in the activity of providing medical relief through Patanjali Bhartiya Ayurvigyan Avam Anusandhan Sansthan' at Haridwar which has been consistently accepted by the revenue in the assessment years 2004-05 to 2008-09 vide various assessments framed u/s 143(3) of the Act and there is no change in the predominant objects of the appellant trust. We thus following the ratio laid down by the Hon'ble Supreme Court in the case of Radhasoami Satsang (supra) and others hold that the revenue was not justified in refusing the claimed exemption u/s 11/12 of the Act during the year. The Hon'ble Supreme Court, in the case of Radha Soami Satsang (supra) has been pleased to hold that where a fundamental aspect permitting through the different assessment years is accepted one way or the other a different view in the matter is not warranted, unless there is any material change in facts. In the case of Guru Nanak Vidya Bhandar Trust (supra) the Hon'ble Delhi High Court has been pleased to hold that the department is expected to be consistent with its own stand which has been taken in earlier years, when there is no change in the objects of the trust during the year and such objects when found permissible for exemption in the past notwithstanding the fact that it had many fold objects some of which are vulnerable. Similar view has been expressed by the other decisions relied upon by the Ld. AR.

6.7.5 We have also gone through the decisions relied upon by the Ld. CIT(DR) and find that the facts of those cases are distinguishable from the case of the assesee, hence these are not helpful to the revenue. In the case of Samajbadi Society (supra) the assessee was engaged in printing and publishing newspapers and periodicals on 38

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commercial lines and it claimed exemption on the ground that it was engaged in the charitable activity of "imparting education". The Tribunal by placing reliance on the decision of Hon'ble Supreme Court in the case of Sole Trustee, Lok Shikshana Trust (supra) held that the activities undertaken by the appellant were in the nature .of "general pubic utility" as defined u/s 2(15) of the Act and since there was no itota of evidence to substantiate the charitable activities undertaken by the assessee no exemption was granted in the given assessment year. In the case of Aurolab Trust (supra) assessee engaged in the singular activity of manufacturing and trading in ophthalimic and cardiovascular products and accessories, had not taken any charitable activity as provided in the trust deed. Even the sale price of the products sold by the assessee was higher than those available in the market. Taking into account these aspects the Tribunal held that since there was no element of chaity involved in the activities undertaken by the appellant the assessee was not entitled to claim exemption u/s 11/12 of the Act. In the case of ICAI Accounting Research Foundation (supra) the assessee was pre-dominantly engaged in undertaking R&D activities on behalf of Government and other institution and providing consultancy services. In view of the primary activity undertaken by the assessee it was held to be in the nature of providing 'general public utility' as defined u/s 2(15) of the Act. However the case was ultimately decided in favour of the assesee and exemption was granted u/s 10(23C)(iv) of the Act. In the case of Queen's Educational Society, (supra) decision was rendered in the context of allowability of exemption u/s 10(23C) of the Act on the facts of the case before the Hon'ble High Court. In this case profits of the assessee was considered without taking into consideration the capital expenditure incurred by the assessee for charitable purposes. This decision was subsequently been dissented from in several decisions including decision of Hon'ble 39

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Punjab & Haryana High Court in the cases of Pinegrove International Charitable Trust v. UOI [2010] 327 ITR 73/188 Taxman 402 (Punj. & Har.) and CIT v. Gaur Brahmin Vidya Pracharini Sabhb [2011] 203 Taxman 226/115 taxmann.com 250 (Punj. & Har.); Maa Saraswati Educational Trust v. UOI [2010] 194 taxman 84 (H.P) ; DIT (Exemption) v. Lilavati Kirtilal Mehta Medical Trust ITA(L) No. 2990/2009 (Bom) etc. in the case of Sanjeevamma Hanumantha Gowda Charitable (supra) the predominant activity undertaken by the assessee was letting out of marriage halls on purely commercial basis and not in furtherance of the charitable objectivities. Further the assessee had not undertaken any charitable activity in pursuance of the charitable objects provided in the trust deed. The assessee was therefore denied registration u/s 12A of the Act. In the case of Daulat Ram Public Trust (supra) there was no dominant charitable objective in the trust deed which the ancillary objects sub served. It was also observed that no amount was utilized for charitable purposes and the assessee was predominantly engaged in undertaking commercial activities for the purpose of generating profits. In the case of Jacob Thasildar (supra) decision was given in the context of the Kerala Building Tax Act 1975 wherein the scheme of that Act is completely different from the applicable provisions of the Income Tax Act. In the case of Jodhpur Chartered Accountants Society (supra) the assesee was engaged in organizing conference, seminars and workshops which was held to be in the nature of "general public utility" entitled to exemption u/s 11/12 of the Act. We thus find that these decisions relied upon by the Ld. CIT(DR) do not advance the case of the revenue and hence not helpful to the revenue.

ITA No. 779/Del/2017 Assessment year 2013-14 Distinction between objects and business u/s 11 (4) /(4A)

6.7.6 The authorities below held that the activities of the appellant were merely sub serving the business of Divya Pharmacy. The contention of the appellant to it remained that the business undertaking was run by the appellant as an activity in incidental to the attainment of the main objects of the appellant and to give charity which is permitted u/s 11(4)/11(4A) of the Act.

6.7.7 Considering the submission of trie parties on these issues we are of the view that it is a trite law that once registration u/s 12A of the Act has been granted by Ld. CIT, the AO could not question the charitable character of the institution during the course of assessment proceedings. It is not open to the AO in the assessment proceedings to hold that the objects of the assessee are not charitable in nature. The contention of Ld. AR remained tha the meaning of the expression 'not for purpose of profit' in the above provisions is no longer res integra, the test being, what is the predominant object of the activity - whether it is to carry out a charitable purpose or to earn profit" If the predominant object is to carry out a charitable purpose and not earn profit, the organization would not loose its charitable character merely because some profit arises form the activity. Ld. AR has placed reliance in this regard on the following decisions including the decision of Hon'ble Supreme Court in the case of Surat Art Silk Manufacturers (supra) :—

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CIT v. Andhra Pradesh State Road Transport Corpn. [1986] - 159 ITR 1 (SC) - Victoria Technical Institute (supra) - Thiagarajar Charities (supra) - Aditanar Educational Institution (supra) - Bar Council of Maharashtra (supra) - American Hotel Lodging Association Education Institute (supra) - Delhi Kannada Education Society (supra) - A.L.N. Rao Charitable Trust (supra) - Pullikal Medical Foundation (P.) Ltd: (supra) - Umaid Charitable Trust (supra) - CIT v. Sivakasi Hindu Nadars [1996] 217 ITR 118/86 Taxman 290 (Mad.) - CIT v. Janakiamma Ayyanadar Charitable Trust [2013] 212 Taxman 274/29 taxmann.com 159 (Mad) - Samaj Kalyan Parishad v. ITO [2007] 105 ITD 29 (Delhi) (SB)

The relevant provisions u/s 11 (4)/11(4A) of the Act are being reproduced for a ready reference :—

'(4) For the purposes of this section "property held under trust" includes business undertaking so held, and where a claim is made that the income of any such undertaking shall not be included in the total income of the persons in receipt thereof, the Assessing Officer shall have power to 42

ITA No. 779/Del/2017 Assessment year 2013-14 determine the income of such undertaking in accordance with the provisions of this Act relating to assessment; and where any income so determined is in excess of the income as shown in the accounts of the undertaking, such excess shall be deemed to be applied to purposes other than charitable or religious purposes.

(4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not apply in relation to any income of a trust or an institution, being profits gains of business, unless the business is incidental to the attainment of the objectives of the trust or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business.'

6.7.8 We find that the section deals with cases where the business itself is settled to take care of interest for a charitable purpose. Sub section (4A) of section 11 also exempts income tax of a business carried on by the trust so long as the business carried on by the trust is (a) incidental to the attainment of main objects (b) feeds the charitable objects (c) separate books of accounts are maintained in respect of the same, even on fulfillment of the aforesaid conditions profit from such business are exempt u/s 11/12 of the Act. Thus it is clear that the charitable trust can carry on business and utilize its profits therefrom for the charitable purposes but a charitable trust cannot have its purpose, an activity that involves the buying and selling of goods and making profits. The business undertaking of the appellant as discussed above are thus the means for effectuating a charity, but not a charitable object itself. We find that in the case of appellant before us the activity of

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manufacturing and sale of ayurvedic preparations has been undertaken only for the purpose of effectuating the charitable objective of providing 'medical relief to the society at large on a genuine need was felt to provide superior quality ayurvedic preparations at economical prices in order to attain effective medical results. Only because the activity carried on yielded" profits a negative inference cannot drawn that the activity was undertaken with the sole intention of earning profits. It is also pertinent to note that the total donations/voluntary contributions received by the appellant trust during the assessment year under consideration amounted to Rs. 3,89,14,100/- only. Whereas the total revenue expenditure incurred by the appellant trust in the assessment year under consideration for undertaking its charitable activities amounted to Rs. 48,54,93,383/- (excluding depreciation). Further it is apparent from page 26 of the paper book i.e. income and expenditure account for the year ending 31st March, 2009 that substantial capital expenditure has also been incurred by the appellant trust in pursuing its charitable activities. We also find that the donations/contributions received by the appellant trust constituted only a minuscule portion of the heavy outlay of expenditure incurred in pursuing the charitable activities. The meaning of expression not for purpose of profit is no longer res integra the test being what is the predominant object of the activity whether it is to carry out a charitable purpose or to earn profit ? If the predominant object is to carry out as charitable purpose and not to earn profit the organization would not lose its charitable character merely because some profits arises from the activity. The Hon'ble Supreme Court in the case of Surat Art Silk Cloth Manufacturers (supra) has been pleased to observe that the expression 'for the purpose of 'profit' implies that the predominant object should be to earn profit. Further to determine the predominant object, what is required to be examined is the objects of the 44

ITA No. 779/Del/2017 Assessment year 2013-14 society and not the quantum of surplus though such quantum may become relevant in certain circumstances. The same ratio has been laid down by the Supreme Court in the case of Andhra Pradesh State Road Transport Corpn. (supra), Victoria Technical Institute (supra), Thiagarajar Charities (supra), Aditanar Educational Institution (supra), Bar Council of Maharashtra (supra), American Hotel Lodging Association Education Institute (supra), Delhi Kannada Education Society (supra), Samaj Kalyan Parishad (supra).

6.7.9 Thus we find that there is no bar in the charitable trust/institution carrying on business provided the conditions prescribed in section 11(4)/11(4A) of the Act are satisfied. The Hon'ble Supreme Court in the case of P. Krishna Warriers (supra) has been pleased to hold with reference to income tax Act 1922 that if the trust carried on business and the business itself is held in trust and the income from such business is applied or accumulated for application for the charitable or religious purpose of the trust, the conditions prescribed in section 4(3)(i) and fulfilled and the income is exempt from taxation. In that case before the Hon'ble Supreme Court business of making and selling ayurvedic medicines was settled and held in trust and 60% of income from such business was applied for charitable purpose. The AO denied exemption on the ground that part of the income from business was not applied for charitable purposes, the Hon'ble Supreme Court held that where business is held for charitable purposes the conditions prescribed in proviso (b) to section 4(3) (i) of the Income Tax Act is not applicable and the assessee was held to be eligible for exemption. The decision of Delhi High Court in the case of Hamdard Dawakhana (Waqf) (supra) though rendered in the context of the pre amended law i.e. before insertion of section 45

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11(4A) in the 1961 Act. But the Hon'ble Court held that it was immaterial how money which was obtained by running of an activity for profit did not make the objective non charitable. If that money was used for charitable purpose and not for the carrying on any business at a profit, then the object of the trust was charitable notwithstanding the source of the income. The Hon'ble Supreme Court again in the case of Thanthi Trust (supra) held that the trust was entitled to exemption when the business of the trust was incidental to the attainment of the objectives of the trust, namely the objectives of education and relief to the poor. Their lordships observed that after amendment of section 11(4A) in 1992, all that is required for the business income of the trust or institution to be exempt from tax is that the business should be incidental to the attainment of the objects of the trust or institution. The Hon'ble Court further held that if business whose income is utilized by the trust or the institution for the purposes of achieving its objectives is a business which is incidental to the attainment of the objectives of the trust or institution. Respectfully following the ratio laid down in the above cited decisions we come to the conclusion that the authorities below have failed to appreciate that incomes from business undertaken by the appellant fulfills the aforesaid conditions in as much as (a) all the business, including the business of Divya Pharmacy, were incidental to the attainment of main objects: (b) profits from business are applied for charitable objects ; and (c) separate books of accounts are maintained. They were thus not justified in holding that the charitable objects was sub-serving the business, whereas as a matter of fact it was the other way round. We find that in the case of Bombay Keraleeya Samaj (supra) the objects of the assessee registered u/s 12A was inter alia propagation of the Kerala system of Ayurveda and for this purpose the assessee ran five dispensaries rendering free consultation by Ayurved physicians. The 46

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assessee was obtaining ayurvedic medicines from an institution (A) at a discount of 11 % which was sold to the patients at the dispensaries as per the prescription of the doctors. The amount of discount _ which the assessee received from A was being used for running the dispensaries and for carrying out the other objects of the trust. The assessee also levied 11% service charge on the price of medicines from non-members and claimed to have utilized the amount so collected for running the dispensaries. In the preceding assessment years, benefit of section 11 was given to the assessee. The assessee claimed the benefit u/s 10(22A) which was refused by the assessing officer mainly on the basis that the dominant object of the trust was to sell medicines and derive profit therefrom. The first appellate authority rejected the assessee's appeal. The Tribunal has however given relief with this finding that the mere fact that the assessee trust has objects other than medical relief was not a condition aliunde to which the exemption u/s 10(22A) could be denied to the assessee. The surplus derived from running the dispensaries was utilised for philanthropic purposes. CBDT circular No. 194/16-17-II(A-1) makes it clear that if a surplus is used for philanthropic purposes the income of the institution will be eligible for exemption u/s 10(22A). We are thus of the view that in the present case the authorities below have grossly erred in holding that the appellant's activities in relation to production and sale of ayurvedic preparations are not incidental to its main objective as the same are commercial in nature. Likewise in the case of Baun Foundation Trust v. Chief CIT [2013] 33 taxmann.com 677, the Hon'ble Bombay High Court has been pleased to hold that activity of running chemist shop within the premises of the hospital was incidental or ancillary to the dominant object of running a hospital. We thus hold that in the present case the authorities below have failed to appreciate that the business set up and held by the appellant under trust is to sub serve the 47

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predominant charitable objects of providing medical relief education and relief to poor. Furthermore, since separate books of accounts were maintained and the entire profits are for charitable objects, the conditions prescribed in section 11(4A) of the Act, too were fulfilled. The authorities below have also failed to appreciate that out of total sales.of Rs. 168.12 crores of Divya Pharmacy medicines of Rs. 4.2 crores only were sold from the hospital sales counter (sic). As so far as ground No. 10 is concerned it is rejected as having become infructuous in view of the order dated 3.6.2013 of the AO u/s 154 and the issues raised in ground Nos. 11 to 14 have become infructuous in view of our finding in favour of the appellant in ground Nos. 1 to 9 , hence do not need adjudication 10. In view of the above decision of the coordinate bench in assessees own case we do not find any reason to deviate from the same. The Ld. DR has also no shown us any reason to do so. Hence we respectfully following the order of the coordinate bench we do not find any infirmity in the order of the ld CIT (A) in allowing the exemption u/s 11 and 12 of the Act to the assessee. 11. In the result, appeal filed by the revenue is dismissed.”

5.1 Therefore, in view of the above and in the absence of

any distinguishing fact and respectfully following the order of the

Coordinate Bench, we dismiss ground no. 4 of the department’s

appeal.

5.2 As far as ground nos. 1, 2 and 3 are concerned, the Ld.

AR has demonstrated that these three items had already been

disallowed by the assessee while computing its total income and,

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therefore, there was no requirement for the Assessing Officer to

have made this disallowance. We also note that this issue has

not been adjudicated by the Ld. Commissioner of Income Tax (A)

and, therefore, the grounds raised by the department in this

regard are infructuous. These are accordingly dismissed as

infructuous.

5.3 Ground nos. 5 and 6 are general in nature and do not

require a separate adjudication.

6.0 In the result, the appeal of the department stands

dismissed.

Order pronounced in the open court on 31st July, 2019.

Sd/- Sd/-

(O.P. KANT) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 31st JULY, 2019 ‘GS’