M/S. SWAMI SATYANAND ALTERNATE THERAPY FOUNDATION,NEW DELHI vs. DIT (EXEMPTIONS), NEW DELHI

This appeal by the Revenue has been filed against the order of the Director of Income Tax (Exemptions) New Delhi order dated 13.12.2013 passed in F. No. DIT(E)/12A/2013-14/S-7241/2560/3973.

We have heard arguments of both the sides and carefully perused the relevant materials placed before us on record. The Ld Counsel of the assessee submitted that as per objects of the assessee mentioned in the trust deed placed as pages 11 to 22 of the assessee’s paper book. It is clear that the objects and purpose of the creation of the trust is purely charitable. The Ld counsel further pointed out that DIT(E) issued notice dated 17.07.2013 to the assessee asking to submit details on 17 points mentioned therein which was submitted by the assessee vide reply dated 31.07.2013. The Ld Counsel vehemently pointed out that there are no findings of the DIT(E) showing that the purpose of the applicant is not charitable. The Ld Counsel further pointed out that the natural therapy which is an alternate treatment method false within the medical relief and therefore the DIT(E) was wrong and incorrect in dismissing the application for registration under section 12A of the Income Tax Act 1961 (for short the Act). The Ld Counsel further pointed out that Ram Seva Swami Satyanand Trust which was doing similar kind of activities akin to the assessee was granted registration under section 12A of the Act on 27.05.1887 and copy of the registration is available at page 36 of the assessee’s paper book.

Replying to the above the Ld DR pointed out that while rejecting application of the assessee for grant of registration under section 12A of the Act, the DIT(E) relied on the amended of section 2(15) of the Act and found that the applicant was carrying natural therapy treatment in a commercial and profit motive manner. The Ld DR pointed out that whether the activities of the assessee are of charitable medical relief or general public utility, it was to be established by the assessee and in this regard DIT(E) in paragraph No. 4.3 of the impugned order has categorically analyzed the profit motive test which was found to be positive therefore the registration was rightly deny to the assessee. The Ld DR lastly pointed out that when the activity of the assessee false under the rider created by amendment in section 2(15) of the Act then the applicant is not eligible for registration under section 12A of the Act.

The Ld Counsel of the assessee also placed rejoinder to the above submissions of the revenue and submitted that the charitable activity of naturopathy was taken over by the assessee from the Ram Seva Swami Satyanand Trust [hereinafter ‘the earlier trust’] which was carrying out same activity and granted registration under section 12A of the Act (Supra) and when the assessee is carrying out same activity then it cannot be put out of ambit of charitable activity. The Ld counsel submitted that the assessee cannot be denied registration under section 12A of the Act because it is created for the charitable purpose on the applicant is not doing any activity in the nature of trade commerce or venture with a profitable motive therefore the impugned order may set aside and the authority may be directed to grant registration under section 12A of the Act to the applicant. The Ld Counsel has also placed reliance on the following orders of the tribunal to support the case of the assessee:

On careful consideration of rival submissions and contentions at the very outset, from the objects of the assessee mentioned in the trust deed in clause 6 we observe that there are 14 objects mentioned therein including naturopathy and yoga etc. From the carefully perusal of the impugned order we note that in Para 3, the DIT(E) has noted that the applicant trust is born out of the trust namely Ram Seva Swami Dayanand Trust and the activities being conducted by the applicant trust were earlier being conducted under the name of Ram Seva Swami Dayanand Trust and on 29.04.2013 the applicant was created as a separate entity. The CIT(E) also noted that both trust are carrying out its activities simultaneously from the premises. In this para the DIT(E) have not brought out any allegation or fact to establish that the activities being carried out by the applicant trust is not similar to the activities of its parent trust i.e. Ram Seva Swami Dayanand Trust. The only adverse observation in this para is that the system of accounting/sharing of receipt and expenditure between said two trusts has not been elaborated accept mentioning about the lease agreement. It is relevant to mention that the ld. DR could not controvert this fact that the earlier trust has been granted exemption u/s 11(1) of the Act by the AO in the orders passed u/s 143(3) of the Act for A.Y 2011-012 and 2012013 and this gain goes in favour of the applicant because if the activities of the earlier trust are being carried out by the present applicant then it cannot be held as non eligible for registration u/s 12A of the Act.

In this regard the Ld Counsel of the appellant submitted that there is no financial relation or transaction between the earlier and the applicants accept payment of rent under the lease agreement and in this situation, it was not required to furnish any other financial statement showing the system of accounting/sharing of receipt and expenditure between the two trusts and this adverse observation of the DIT(E) is not sustainable. From Para 3.1 of the impugned order we note that in the first part the DIT(E) has mentioned amounts of receipts and expenditure and in the second part, it was observed that the applicant trust has generated gross receipt of Rs. 66,96,442/- by providing services by way of alternate therapy and thus in fact the applicant appears to have taken over the already establish business/practice of earlier trust. The DIT(E) further noted that it is very unlikely that a new setup can generate a turnover of such huge amount in its nascent stage. The DIT(E) further alleged that it is not very clear as to why earlier trust handed over its practice of natural therapy to applicant trust at meager amount of Rs. 3,00,000/- Lac per month and hence the agreement between two trusts does not appear to have logic and is beyond human probabilities. Lastly, in this para the DIT(E) alleged that this indicates that the trust is not carrying out its activities in a transparent manner and thus its activities are held to be non genuine.

On carefully consider of above allegations, we note that the DIT(E) has only consider the amount of receipts but he has ignored the total amount of expenditure which was noted by him totaling to Rs. 66,53,063/- as against the total receipt of Rs. 66,96,442/- . The DIT(E) did not allege that the activities of the applicant trust are not charitable but he is mainly alleging that the arrangement between the earlier trust and the applicant trust is beyond human probabilities as it is not clear that why the earlier trust parted with the activities in favour of the applicant trust on payment of a meager amount. We may point out that the earlier trust as well as present trust are conducting its activities with charitable object and purposes therefore if earlier trust is transferring its activities to the newly created trust on some reasonable rent then it is not a business and in this situation this transactions cannot be said to be beyond human probabilities because charity is a concept which cannot be tested on the parameters and touch stone of commercial transactions. At the same time we may pointed out that if the transactions of lease between the earlier trust and applicant trust was undertaken under the normal commercial transactions then charitable purpose and object of earlier trust would be frustrated and the revenue authorities cannot below hot and cold at the same time. Finally, we are not in agreement with the conclusion and observations of the DIT(E) recorded in para 3.1 of the impugned order and when the DIT(E) himself noted the amount of receipt and expenditure as per statements submitted by the applicant then it cannot be held that the activities of the applicant trust are non genuine and this allegation of the DIT(E) has not lakes to stand.

Further, in the subsequent paras the DIT(E) considered the amended provision of section 2(15) of the Act as circulated by the CBDIT vide Circular No. 11/2008 dated 19.12.2008 and held that the applicant trust is providing nature care therapy by charging heavy fee for its services and its activities can be termed as towards advancement of any objective of general public utility and the proviso to section 2(15) of the Act is thus becomes applicable. On this allegation the Ld Counsel of the assessee has submitted that recently even the yoga has been considered as preventive medical relief activity by the Act and the alternate therapy of medical treatment & relief i.e. naturopathy is a worldwide accepted therapy which cannot be put within the ambit of general public utility services. On this contention the Ld DR could not assist us as to why the alternate medical care, treatment and relief therapy which is well accepted worldwide as naturopathy treatment which is a not only curative but also preventive cannot be treated as medical relief. At this juncture it is relevant to point out that recently by the Finance Act 2015 yoga has been included in the array of medical relief then why naturopathy was considered as general public utility by the DIT(E) and thus this conclusion cannot be held as sustainable and we have no hesitation to hold that the DIT(E) was not correct in putting the naturopathy in the ambit of general public utility.

Lastly we may pointed out that the CIT(E) noted that the mode of operation of the applicant is not different from any other commercial enterprise carrying out the business of providing nature care therefore he held that the applicant is carrying out is activities in the nature trade, business or commerce and because its gross receipts are exceed to the thrush hold limit of Rs. 25 Lac as laid down by second proviso of section 2(15) of the Act and hence the applicant is not eligible for registration of 12AA of the Act. But as we have already noted that the gross receipts and expenditure of the assessee for the first five months of its creation as noted by the CIT(E) in para 3.1 are almost equal and there is no notable surplus of receipts over the expenditure and thus we are not agree with the conclusion with the DIT(E) that the applicant is carrying out activities of trade commerce or business in nature. It is relevant to mention that when the for the similar activity the department has granted registration under section 12A of the Act for the earlier trust then for imparting same services of naturopathy the activities of the applicant trust cannot be held as profit motive which lead to a conclusion that the assessee trust is carrying out its activities akin to the commercial enterprise.

At this juncture it is relevant to mention that the Hon’ble Supreme Court in the case of Aditanar Educational Institution Vs ACIT 224 ITR 310 (SC) has held that charging of fee is not a bar for a charitable organization. It is also relevant to note that in the case of Sanjeevamma Hanumantha Gowda Charitable Trust Vs DIT(E) reported as 285 ITR 327 (Karnataka) their lordship have set out the guidelines for the purpose of grant of registration under section 12Aa of the Act and has held that the registration granting authorities have to be satisfied about the genuineness of the activities of the Trust or institution and they are required to see that how the income derived from the trust property is applied to charitable purposes. In the present case the DIT(E) has not brought out any allegation on record either showing that the purpose of the charitable trust is not charitable or the applicant trust did not use its receipts towards achieving charitable purpose or objects of the trust. Per contra, the applicant successfully establish that the activities of the applicant trust is similar to the earlier trust which enjoys registration under section 12A of the Act since 1987 and the applicant also successfully established that the activities of the trust are genuine and the applicant is using its funds/receipts towards achieving charitable objects and purpose of the applicant and there is no activity in the nature of trade business or commerce. We are also inclined to hold that the naturopathy and nature care is a preventive and curative alternate therapy of treatment which is actually guided by medical science and it is medical services and relief which cannot be tagged as general public utility. Hence, we hold that the DIT(E) was not justified in denying registration under section 12A of the Act to the applicant trust.

On the basis of forgoing discussion we hold that the DIT(E) denied registration under section 12A of the Act by considering the irrelevant facts and wrong appreciation of facts and circumstances of the case and thus we demolish the same. Consequently, we direct the DIT(E) to grant registration under section 12A of the Act to the applicant.

In the result appeal of the assessee is allowed in the manner as indicated above. Order is pronounced in the open court on 18 /03/2016.