Commissioner Of Income Tax, Chennai v. Ayur Siddha Health & Research Foundation45

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 13.02.2020 CORAM THE HON'BLE DR.JUSTICE VINEET KOTHARIANDTHE HON'BLE MR.JUSTICE R.SURESH KUMAR Tax Case (Appeal) No.332 of 2012 Commissioner of Income Tax, Chennai. ... Appellant Vs. Ayur Siddha Health & Research Foundation45/11,Konnur High Road, Chennai. ...Respondent Tax Case filed under Section 260A of the Income Tax Act1961 against the order dated 02.05.2012 passed in ITANo.1601/Mds/2011 by the Income Tax Appellate Tribunal 'D'Bench, Chennai., against the order passed by the Director of Income Tax(Exemptions), Chennai dated 29/07/2011 made in DIT(E) No.2(898)10-11. For Appellant : Mr.J.Narayaswamy, Senior Standing Counsel For Respondent :Mr.N.Devanathan J U D G M E N T (Judgment of the Court was delivered by DR.VINEETKOTHARI,J)This appeal has been filed by the Revenue underSection 260A of the Act aggrieved by the order of thelearned Income Tax Appellate Tribunal 'D' Bench, Chennai,dated 02.05.2012, whereby the learned Tribunal allowed theappeal filed by the Assessee, a Trust viz., Ayur SiddhaHealth & Research Foundation, Chennai and held that theAssessee Trust cannot be said to be engaged in any tradingor business activity so as to deny the benefit of https://hcservices.ecourts.gov.in/hcservices/ registration under Section 12AA of the Act. The learnedDirector of Income Tax (Exemptions) had rejected the saidapplication of the Assessee Trust for registration underSection 12AA of the Act vide order dated 29.07.2011 on theground that the Object Clause 3.3(e) of the Trust Deedprovides for development of new drugs or medicines, ObjectClause 3.6(g) speaks about printing, publishing and sellingjournals, periodicals, books etc., Object Clause 3.8(f)mentions about establishing financial institutions etc.,and therefore the learned Commissioner felt that theAssessee Trust might itself engage in business activitiesand therefore not entitled to registration under Section12AA of the Act. The Assessee preferred an appeal beforethe learned Income Tax Appellate Tribunal, which allowedthe appeal of the Assessee with the following observations. “9. In view of the above order of the Tribunal,we further observe that whether the assesseefoundation is contravening any provisions of theAct relating to charities is a matter to beconsidered subsequent to registration onapplication of the actual area in which theassessee is operating and the Revenue is havingenough safeguard to make such examination fromevery year to year at the time of assessment.Any contravention of the provisions in future canwell be considered in assessment proceedings.Therefore, while eligibility of the assessee forregistration u/s. 12AA of the Act is examined inthe declared objects of the assessee, we find noreason why registration should not be granted.In the light of the above judicial pronouncement,we find that the assessee foundation is entitledfor registration under Section 12AA of the Actand direct the DIT (Exemptions) to grantregistration to the assessee society u/s.12AA ofthe Act.” 2. The Revenue preferred the present appeal againstthe said order and the appeal was admitted by theCoordinate Bench of this Court on 19.10.2012 on thefollowing substantial question of law. “Whether on the facts and in the circumstances ofthe case, the Tribunal was right in holding thatthe assessee is entitled to grant of registrationunder Section 12AA of the Income Tax Act? 3. Learned Senior Standing Counsel for the RevenueMr.J.Narayanaswamy urged that the definition of 'CharitablePurposes' under Section 2(15) stood amended by the Finance https://hcservices.ecourts.gov.in/hcservices/ 2. The Revenue preferred the present appeal againstthe said order and the appeal was admitted by theCoordinate Bench of this Court on 19.10.2012 on thefollowing substantial question of law. “Whether on the facts and in the circumstances ofthe case, the Tribunal was right in holding thatthe assessee is entitled to grant of registrationunder Section 12AA of the Income Tax Act? 3. Learned Senior Standing Counsel for the RevenueMr.J.Narayanaswamy urged that the definition of 'CharitablePurposes' under Section 2(15) stood amended by the Finance https://hcservices.ecourts.gov.in/hcservices/ Act 2008 and by the insertion of Proviso therein by theFinance Act 2015 with effect from 01.04.2016, theactivities in the nature of trade, commerce or business areexcluded from the said definition of 'Charitable Purposes'and therefore, since the activities under the specifiedclauses of the Trust Deed were found to be in the nature ofbusiness, which the Assessee may engage and therefore, thelearned Commissioner of Income Tax was justified inrejecting the registration under Section 12AA of the Act.He further submitted that the Revenue authority had agenuine apprehension about the intended business activityof the applicant Trust. 4. On the other hand, the learned counsel for theAssessee supported the impugned order of the learnedTribunal and urged that the Assessee is not engaged in anybusiness activity and the Object Clause providing forResearch and Development work for new medicines is part oftheir activity, which is covered by the definition of'Charitable Purposes', which include medical relief, yogaetc., even as per the amended definition. 5. Having heard the learned counsel for the parties,we are of the opinion that a mere apprehension on the partof the Revenue authorities that the Object Clause of theTrust Deed provided for development of new drugs /publication of journals etc., cannot per se amount to anybusiness or trading activity on the part of the respondentTrust. These activities are prima facie incidental to thecharitable activity of providing good health and medicalrelief to the affected persons. The learned Tribunalhowever has made it clear in its order that it is evenotherwise open to the Revenue authorities under theprovisions of the Act to consider the factual aspects ofthe matter as to whether the Trust is engaged in anybusiness activity or not upon granting annual renewal ofsuch registration under Section 12AA of the Act andtherefore unless the Charitable Trust is found to beengaged in the business or trading activity apart from thecharitable purposes for which the Trust is incorporated,the benefit of registration under Section 12AA of the Actcannot be denied to the Trust. 6. Therefore, in our opinion, the learned Tribunal wasperfectly justified in allowing the appeal filed by theAssessee and directing the Revenue authorities to grantregistration under Section 12AA of the act to the applicant/ Assessee. The present appeal by the Revenue is therefore devoid of any merits and is liable to be dismissed and thesame is accordingly dismissed. The question of law isanswered in against the Revenue and in favour of theAssessee. No costs. Sd/- Assistant Registrar(CS VI) //True Copy// Sub Assistant Registrar To1.The Income Tax Appellate Tribunal 'D' Bench, Chennai.2.The Director of Income Tax (Exemptions), Chennai.+1cc to M/s.J.Narayanaswamy, Advocate Sr.13219T.C.A.No.332 of 2012gp[co]srg 16/03/2020