Commissioner Of Income Tax (Exemption), Kolkata v. Lotus Charitable Trust

ORDER SHEETIN THE HIGH COURT AT CALCUTTASpecial Jurisdiction (Income Tax)ORIGINAL SIDE IA NO: GA/2/2017(Old No:GA/1184/2017)I.T.A.T. No. 132 of 2017 Commissioner of Income Tax (Exemption), Kolkata.VersusLotus Charitable Trust. BEFORE: The Hon'ble JUSTICE T.S. SIVAGNANAM-And- The Hon’ble JUSTICE HIRANMAY BHATTACHARYYA Date : 21[st] January, 2022. Mr. P.K. Bhowmick withMr. Asok Bhowmick, Advs.… for the Appellant.Mr. P. Jhunjhunwala, Adv.… for the Respondent. This appeal filed by the revenue under Section 260A of the Income TaxAct, 1961 (the Act) is directed against an order dated 8[th] June, 2016passed by the Income Tax Appellate Tribunal, Kolkata, ‘A’ Bench in ITA398/Kol/2012 for the assessment year 2009-2010. The appellant/revenuehas raised the following substantial questions of law for consideration – 1)Whether registration under Section 12AA(3) of Income Tax Act, 1961 can be restored in a case of Trust foundto be engaged in activities beyond and not incidental toits objectives ?to be engaged in activities beyond and not incidental toits objectives ? 2) Whether charitable purpose as per provisions ofSection 2(15) of Income Tax Act, 1961 can be extendedto an institution running activities of purelycommercial nature and beyond and not incidental tothe objectives of the Trust?Section 2(15) of Income Tax Act, 1961 can be extendedto an institution running activities of purelycommercial nature and beyond and not incidental tothe objectives of the Trust? We have heard Mr. P.K. Bhowmick assisted by Mr. Asoke Bhowmick,learned Counsel for the appellant/revenue and Mr. PratyushJhunjhunwala, learned Counsel for the respondent/assessee. The assessee is a Trust which was granted registration under Section12AA of the Act with effect from 25[th] September, 1980. Approval underSection 80G of the Act was also granted to the assessee from time to timeand the last of such approval, at the relevant time, was on 20[th] May, 2011which was in perpetuity. The main objects of the assessee/trust was toassist, finance, support, found, establish and maintain any trust, societyor institution meant for the relief of the poor, advancement of education,medical relief or advancement of any other object of general public utility.There were other objects of the trust which have been noted by the Tribunal in paragraph 3 of the impugned order. A proposal was receivedfrom the Joint Director of Income Tax (OSD), Excemption III, Kolkata dated19[th] December, 2011 proposing to cancel the registration granted in favourof the assessee on the ground that it was engaged in running of a healthclub which is not in accordance with the object as mentioned in the Deedof Trust. The assessee contended that it was providing medical relief byimparting Pranic Healing and also providing services for mental andphysical fitness through a facility called ‘Solace’ which is incidental to themain objects of the trust. Further, the trust treats patients without anydistinction of caste and creed and the Pranic Healing is an universallyrecognised alternative method of treatment. Furthermore, it is submittedthat the membership to the facility, ‘Solace’, is not restricted and itrepresents a cross-section of the public. Therefore, the facilities can neverbe called as a ‘Spa’ or a ‘club’. The Director of Income Tax (Exemption), Kolkata [DIT(E)] consideredthe submissions made by the assessee, but rejected the same by an orderdated 16[th] January, 2012 largely on the ground that only well-to-dosections of the society can become members of the said facility and thesaid facility is nothing but a health club and it cannot be categorised asmedical relief activity within the definition of Section 2(15) of the Act. The The Director of Income Tax (Exemption), Kolkata [DIT(E)] consideredthe submissions made by the assessee, but rejected the same by an orderdated 16[th] January, 2012 largely on the ground that only well-to-dosections of the society can become members of the said facility and thesaid facility is nothing but a health club and it cannot be categorised asmedical relief activity within the definition of Section 2(15) of the Act. The DITE also held that the activities of the assessee in promoting PranicHealing and the general fitness cannot be regarded as an object of generalpublic utility. After having held so, the DIT(E) held that the assessee issquarely hit by the amended provisions of Section 2(15) of the Act andsince the gross receipts exceeds Rs.10 lac, the activity of the trust has tobe treated as in the nature of trade and commerce. With this reasoning,the registration was cancelled. The assessee carried the matter by way of appeal to the Tribunal. Theassessee pointed out and raised factual and legal issues before theTribunal. By the impugned order, the Tribunal has allowed and restored theregistration, the correctness of which is questioned before us by raisingsubstantial questions of law, as suggested by revenue, referred to above.The undisputed facts are that the assessee which is a trust, runs adiabetic centre in the name and style of ‘Sunny Park Diabetic EndocrineCentre’ which is a medical facility and the another facility has beenestablished for Pranic Healing which is called ‘Solace’. The Commissionernoted that the activities of the assessee/trust are divided into twosegments namely, Medical Relief Centre and the Health Centre. The formeris known as ‘Sunny Park Diabetic Endocrine Centre’ and the latter as‘Solace’. After giving a brief narration about what is Pranic Healing, the Tribunal went into the factual aspect of the matter and found that themembership to the facility, ‘Solace’, is as per the choice of the individualand it has got various categories of people who are members. The otheractivities of the trust were also examined, wherein medical relief has beenprovided and on facts, the Tribunal was satisfied that the activities of themembers cannot be split into two and the facility, ‘Solace’, cannot beregarded as ‘spa’ or ‘club’. More importantly, the Tribunal noted from theassessment year 2002-2003 and 2008-2009, the revenue never disputedthe charitable nature of the activities of the trust and the returns were filedby the assessee were processed. That apart, the Tribunal pointed out thatDIT(E) itself has stated that the activities would fall within the fourth limbof Section 2(15) of the Act. Thus, the issue was whether in the given facts,the registration could have been cancelled. In this regard the Tribunalrightly noted the decision of Tamil Nadu Cricket Association vs DIT(E)reported in (2014) 360 ITR 633 (Mad) and also a decision of MumbaiTribunal. Thus, the legal position has been rightly noted by the Tribunaland the relief was granted to the assessee. Thus, we find there is no error in the approach of the Tribunal nor theultimate conclusion arrived at by the Tribubal warranting interference. Forthe above reasons, the appeal fails and is dismissed and the substiantial questions are answered against the revenue. Connected applications arealso dismissed. (T.S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.) Gh/kb,