Income Tax Appellate Tribunal - Delhi
Mool Chand Kharati Ram Trust, New Delhi vs Assessee on 20 November, 2015
ITA Nos. 2850/Del/2011&2127/Del/2012;
CO No. 229/Del/2011&259/Del/2012 &
ITA Nos. 985&1962/Del/2015
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "E", NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
I.T.A. No. 2850/DEL/2011
A.Y. : 2007-08
Joint Director of Income Tax (E), (OSD), Mool Chand Kharaiti Ram
Inv., Circle-I, Room No. 311, Aayakar VS. Trust,
Bhavan, Laxmi Nagar, Lajpat Nagar-III,
Distt. Centre, Delhi - 110 092 New Delhi - 110024
(PAN: AAATM0394H)
C.O. No. 229/DEL/2011
(IN ITA NO. 2850/DEL/2011)
A.Y. : 2007-08
Mool Chand Kharaiti Ram Trust, Joint Director of Income Tax (E),
Lajpat Nagar-III, VS. (OSD), Inv., Circle-I, Room No.
New Delhi - 110024 311, Aayakar Bhavan, Laxmi
(PAN: AAATM0394H) Nagar,
Distt. Centre, Delhi - 110 092
I.T.A. No. 2127/DEL/2012
A.Y. : 2008-09
ADIT(E), Inv., Circle-I, Mool Chand Kharaiti Ram
Delhi VS. Trust, Lajpat Nagar-III,
New Delhi - 110024
(PAN: AAATM0394H)
C.O. No. 259/DEL/2012
(IN ITA NO. 2127/DEL/2012)
A.Y. : 2008-09
Mool Chand Kharaiti Ram Trust, ADIT(E),Inv., Circle-I,
Lajpat Nagar-III, VS. Delhi
New Delhi - 110024
(PAN: AAATM0394H)
I.T.A. No. 985/DEL/2015
A.Y. : 2009-10
Mool Chand Kharaiti Ram Trust, Addl. Director of Income Tax (E),
Lajpat Nagar-III, VS. Range-1, Delhi
1
ITA Nos. 2850/Del/2011&2127/Del/2012;
CO No. 229/Del/2011&259/Del/2012 &
ITA Nos. 985&1962/Del/2015
New Delhi - 110024
(PAN: AAATM0394H)
I.T.A. NO. 1962/DEL/2015
A.Y. : 2009-10
Dy. Commissioner of Income Tax (E), Mool Chand Kharaiti Ram
Circle 1(1), E-2, Block, VS. Trust,
Pratyaksh Kar Bhawan, Lajpat Nagar-III,
Dr. Shyama Prasad Mukherjee Civic New Delhi - 110024
Centre, New Delhi - 2 (PAN: AAATM0394H)
(APPELLANT) (RESPONDENT)
Assesse by : Shri Gautam Jain, Adv.
Department by : Shri Dab Jyoti Das, CIT(DR)
Date of Hearing : 18-11-2015
Date of Order : 20-11-2015
ORDER
PER BENCH Revenue & Assessee have filed these Appeals, Cross Objections and Cross Appeals aginst the separate Orders passed by the Ld. Commissioner of Income Tax (Appeals) pertaining to assessment years 2007-08 to 2009-10. Since the issue involved in these Appeals, Cross Objections and Cross Appeals is common and identical, hence, we are consolidated these Appeals/CO/Cross Appeals by this common order for the sake of convenience, by dealing with ITA No. 2850/Del/2011 (AY 2007-08).
2. The grounds raised in Revenue's Appeal No. 2850/Del/2011 (AY 2007-
08) read as under:-
1. On the facts and in the circumstance of the case, the Ld. CIT(A) has erred in accepting the assessee's claim of 2 ITA Nos. 2850/Del/2011&2127/Del/2012; CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015 exemption u/s. 11 & 12 of the I.T. Act as the assessee has not fulfilled the condition of section 12A according to which the assessee has to carry out activities in accordance with the objects of the trust.
2. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing.
2.1 The grounds raised in Assessee's C.O. No. 229/Del/2011 (AY 2007-08) read as under:-
1. That in the alternative and, without prejudice to the claim that, assessee is entitled to exemption u/s. 11 & 12 of the Act, the Ld. CIT(A) has failed to appreciate that, assessee was also entitled to exemption u/s. 10(23C)(via) of the Act.
2. That even otherwise and assuming for sake of an argument though the same was seriously disputed that the appellant was not entitled to exemption u/s. 11 & 12 and 10(23C)(via) of the Act and, was assessable as an AOP, assessee is entitled to carry forward of business loss determined at Rs.
4,53,47,744/-.
3. The grounds raised in Revenue's Appeal ITA No. 2127/Del/2012 (AY 2008-09) read as under:-
1. On the facts and in the circumstance of the case and in law, the Ld. CIT(A) has erred in accepting the assessee's claim of exemption u/s. 11 & 12 of the I.T. Act without appreciating the fact that the activities of the assessee's were not in accordance with the trust deed.3 ITA Nos. 2850/Del/2011&2127/Del/2012;
CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the Hon'ble High Court has held the cancellation of registration u/s. 12AA(3) as invalid on technical grounds and not on merits. He has also failed to take cognizance of the fact that the SLP has been filed against the said order of the High Court and the decision of the Apex Court is pending.
3. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing.
3.1 The grounds raised in Assessee's C.O. No. 259/Del/2011 (AY 2008-09) read as under:-
1. That in the alternative and, without prejudice to the claim that, assessee is entitled to exemption u/s. 11 & 12 of the Act, the Ld. CIT(A) has failed to appreciate that, assessee was also entitled to exemption u/s. 10(23C)(via) of the Act.
2. That even otherwise and assuming for sake of an argument though the same was seriously disputed that appellant was not entitled to exemption u/s. 11 & 12 and 10(23C)(via) of the Act and, was assessable as an AOP, assessee is entitled to carry forward of business loss determined at Rs. 40,21,183/-.
4. The grounds raised in Assessee's Appeal No. 985/Del/2015 (AY 2009-
10) read as under:-
1. That the learned Commissioner of Income Tax (Appeals)-40, New Delhi has erred in law and on facts in confirming the action of the learned Assessing Officer denying the claim of exemption uls 11 and 12 of the Act.4 ITA Nos. 2850/Del/2011&2127/Del/2012;
CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015
2. That in arriving at the aforesaid conclusion, the learned Commissioner of Income Tax (Appeals) has failed to appreciate that, since appellant is a charitable institution engaged in running hospitals (both allopathic and, ayurvedic), which constitutes to be a charitable activity U/S 2(15) of the Act and, therefore both in law and, on fact, the entire receipt of the appellant institution was exempt U/S 11 and 12 of the Act.
2.1 That the learned Commissioner of Income Tax (Appeals) has further not only failed to comprehend the facts of the case of the appellant but also misconstrued the statutory provisions of law and therefore, denial of claim of exemption is altogether arbitrary, illegal and therefore, unsustainable.
2.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the appellant had not been restricted to open and run allopathic hospital under the will of settlor and, also when the registration was granted under section 12A of the Act. Infact the learned Assessing Officer has overlooked that, neither the will of the settlor and, nor the learned Commissioner of Income Tax-II had restricted or prohibited the trust to run the trust with the help and, aid of allopathic medicines. Moreover, while granting registration to the trust, the accounts of the hospital had not only been placed on record but were duly considered and, it was only on consideration of such allopathic activities that, the appellant was held to be a charitable institution, which had not offended the objects of the trust so as to grant a registration certificate under section 12A of the Act.
2.3 That the learned Commissioner of Income Tax (Appeals) has also failed to 5 ITA Nos. 2850/Del/2011&2127/Del/2012; CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015 appreciate that the appellant has been carrying on allopathic activities along-with ayurvedic activities in accordance with the will of the settlor since 1958 and, according claim of exemption U/S 11 and, 12 of the Act or alternatively u/s 10(22A)/10(23)©(vi) of the Act has been claimed and, allowed as such. Hence, the conclusion of the Ld. CIT(A) to deny exemption in the year under consideration is arbitrary, unjustified, misconceived, misplaced and, not in accordance with law.
2.4 That the learned Commissioner of Income Tax (Appeals) has also erred in upholding that, despite the fact that the activities of the trust are charitable within the meaning of section 2(15) of the Act, the claim of exemption under section 11 and 12 of the Act is not tenable since activities are not in accordance with the objects of the trust.
3. That in any case and, even other-wise the learned Commissioner of Income Tax (Appeals) has failed to appreciate that, he was duty bound to grant exemption u/s 10(23C)(via) of the Act since the application made by the appellant had been impliedly accepted on the same terms and, conditions hereto before.
It is prayed it be held that, the appellant is a charitable institution carrying on charitable activities under section 2(15) of the Act in accordance with the objects of the trust and is therefore, is entitled to 6 ITA Nos. 2850/Del/2011&2127/Del/2012; CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015 exemption under section 11 and 12 of the Act and, appeal of the appellant-trust be allowed.
4.1 The grounds raised in Revenue's Appeal No. 1962/Del/2015/Del/2015 (AY 2009-10) read as under:-
1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the claim of carry forward of losses disregarding the facts that the set off and carry forward of losses are dealt with by the provisions of section 70, 71, 72, 73 & 74 of the Income Tax Act.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing the claim of carry forward of losses disregarding the facts that the provisions of the Act are not applicable in the cases who are claiming exemption u/s. 11 & 12 of the I.T. Act, 1961.
3. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing.
5. The brief facts of the case are that the assessee filed the return of income for the AY 2007-08 on 2.11.2007 declaring NIL Income. The case was selected for scrutiny and notice u/s. 143(2) was issued on 8.9.2008 fixing the case for 15.9.2008. In response to the notice, assessee's Authorised Representative alongwith its employees attended the proceedings from time to time, filed the details and produced the Books of accounts which were examined. The assessee was registered u/s. 12A(a) of the I.T. Act and also approved u/s.
7 ITA Nos. 2850/Del/2011&2127/Del/2012;CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015 80G(5)(vi) of the I.T. Act for the period 1.4.2007 to 31.3.2010. The assessee is running a Hospital in the name of Sh. Moolchand Khairati Ram Hospital and Ayurvedic Research Institute at Lajpat Nagar, New Delhi. During the course of assessment proceedings, the assessee submitted a copy of the Will of Late Lala Khairati Ram by which the Trust came into existence.
5.1 The AO observed that the claim of the assessee that the activities of the Trust are not charitable within the meaning o section 2(15) of the I.T. Act does not justify the claim of exemption in the facts and circumstances of the case. The activities of the trust may be charitable per se. But the activities are not in accordance with the objects of the trust. Thus the trust is not eligible for benefits u/s. 11 & 12 of the I.T. Act. AO also held that for the reasons discussed in detail in assessment for assessment year 2006-07, the assessee is not entitled to the benefit of u/s. 11 /12 of the I.T. Act. Further, otherwise also, since the registration u/s. 12A has since been withdrawn by the DIT(E), the assessee is not entitled to the benefit of section 11/12 of the I.T. Act, 1961.
6. Aggrieved, Assessee appealed before the Ld. CIT(A), who vide impugned order dated 11.4.2011 has partly allowed the appeal of the Assessee by holding vide para no. 3.3 at page no. 9 of the impugned order as under:-
8 ITA Nos. 2850/Del/2011&2127/Del/2012;CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015 "3.3. I have gone through the submission of the Trustee as well as reliance on various case laws. It is also a fact on record that Hon'ble Tribunal vide order dated 12.3.2010 has cancelled DIT(E) order u/s. 12AA(3). So assessee has been granted exemption u/s.
12A. So in view of my findings in the appellate order for the A.Y. 2006-07 and in view of the Hon'ble ITAT decision as mentioned above, by which assessee has been granted exemption u/s. 12A of the I.T. Act, ground no. 1 to 4 are allowed in favor of the Appellant."
7. Against the order dated 11.4.2011 passed by the Ld. First Appellate Authority, Revenue is in appeal before the Tribunal.
8. Ld. DR relied upon the order passed by the AO and reiterated the contentions raised in the grounds of appeal and requested that the order of the Assessing Officer may be upheld.
9. On the contrary, Ld. Counsel of the Assessee stated that the issue in dispute was first time raised in Assessment Year 2006-07, whereby the Assessing Officer by an order dated 31.12.2008 denied the claim. However, the Ld. CIT(A), by an order dated 15.10.2010 allowed the claim. The ITAT vide its order dated 3.2.2012 reversed the conclusion of the CIT(A). Against which the Assessee was in further appeal before the Hon'ble High Court, who set aside the order of the Tribunal vide its Judgment dated 27.7.2015 in assessee's own case title as Mool Chand Khairati Ram Trust vs. Director of Income Tax (Exemptions) reported in [2015] 59 taxmann.com 398 (Delhi) decided vide ITA No. 141 of 2013. He further stated that since the Hon'ble High Court as aforesaid, in assessee's own case has decided the issue in dispute in favor of the 9 ITA Nos. 2850/Del/2011&2127/Del/2012; CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015 assessee for the assessment year 2006-07, the same may be respectfully followed in the subsequent assessment years i.e. 2007-08 to 2009-10 and accordingly, he requested that the action of the Ld. CIT(A) may be upheld of allowing the claim in dispute by dismissing the Appeal of the Revenue. He has filed the copy of the said judgment dated 27.7.2015 for ready reference.
10. We have heard both the parties and perused the records, especially the orders passed by the Revenue Authorities alongwith the judgment dated 27.7.2015 passed by the Hon'ble Jurisdictional High Court for the asstt. Year 2006-07 in assessee's own case title as Mool Chand Khairati Ram Trust vs. Director of Income Tax (Exemptions) reported in [2015] 59 taxmann.com 398 (Delhi) decided vide ITA No. 141 of 2013. The relevant finding of the said judgment i.e. para nos. 32 to 46 is reproduced below for the sake of convenience.
" 32. The only controversy that remains to be addressed is whether the AO and the Tribunal were justified in holding that the Assessee had applied itsincome for purposes other than its objects.
33. According to the Revenue, the objects of the Trust would not permit running of a hospital where patients are treated under the Allopathic systemof medicine. The Assessee had disputed the same and had submitted a letter dated 9th December, 2008, inter alia, explaining that the institution run by the Assessee is an integrated institution, which has made significant advances in the field of Ayurvedic medicine. The Assessee further explained that the hospital in question integrates both the Ayurvedic system of medicine as well as Allopathic services, to provide the best 10 ITA Nos. 2850/Del/2011&2127/Del/2012; CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015 treatment to the patients and the Ayurvedic treatment provided by the hospital utilizes methods of investigation used under the system of modern medicine. The relevant extract of the said letter is quoted below:-
"As is evident from the name of the hospital, this hospital is pioneer in the field of Ayurvedic Education and improving Ayurvedic system of medicine by Ayurvedic Research. Over the past several years the hospital has developed new techniques of tendering services in the ayurvedic medicine; to name a few:
1. Scientific application of Panchkarma and medicine which includes a. Pizhichil Treatment (Sarvang Sneh Dhara) for Deformed Rheumatoid Arthritis (Amavata) b. Kati Basil for Disc Prolarse (Katishula, Katistambha), c. Virechan Kriya : Keeping in view the values of Serum Electrolytes, Lipid Profile for Psoriasis and skin diseases.
d. Shirobasti Trreatment for Insomnia, Hypertension, Alopacoa.
2. Developed Various combination of drugs like:
a) Raj Rasayan for Prostate Enlargement
b) Gridhrasihar Churna for Sciatica
c) Mukhdushikahar Churna for acne, Hyperpigmentation
d) Shwitrahar Churna for leucoderma 11 ITA Nos. 2850/Del/2011&2127/Del/2012; CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015
3. To spread awareness and educate the ayurvedic physicians, the following work has been done;
a. Tenth Century granths have been translated into Hindi like Ashtang Hridya, Charak Samhita, Bhashjya Ratnawali etc. b. The following books and literature has been published;
i. Dehadhatwagni Vigyanam ii. Panch Karma Chitiksa iii. Chikitsa -- Kalika iv. Compilation of Sutras from Different "Granthas".
c. The trust is engaged in the following training and education related activities for creating and spreading awareness about Ayurvedic system of medicine;
i. Interns for Ayurvedic education are taken, who are not only taught the ayurvedic medicine but also given hands on practical experience and clinical knowledge about Ayurvedic system of medicine.
ii. The Trust runs dedicated indoor facility on Ayurvedic and manages 40 beds wherein the treatment is given free.
iii. Ayurvedic medicines are dispensed and provided at nominal cost and in case of deserving patient even free.
12 ITA Nos. 2850/Del/2011&2127/Del/2012;CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015 iv. Every third Friday of the month, trust organizes Ayurvedic Sambhasha Parishad and doctors from far and wide come and attend the event.
v. Scholarships to the students of Shrimadhyanand Ved Arsh Mahavidhayala Nyas are given to encourage and promote Ayurveda.
vi. On side camps are organized at various places to promote Ayurvedic system of medicine.
vii. Our Ayurveda charyas are involved and engaged in giving talks, lecturers and holding workshops at various places like NTPC, TCIL, Reserve Bank of India and other places.
viii. Panchkarma teaching and training courses have been developed and are modified on regular basis.
d. As a part of pioneer ayurvedic institute the hospital provide state of art ayurvedic facilities as :
I Panch Karma II Stri Rog III. Shalya Shalkya IV Kaya Chikitsa.
4. Ayurvedic pharmacy through which medicines are being manufactured and dispensed caters to the needs of patients coming for Ayurvedic 13 ITA Nos. 2850/Del/2011&2127/Del/2012; CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015 treatment to the hospital. Besides this, Moolchand has developed the following important patient medicines:
a. Moolchand Chitrak Haritaki for bronchitis, allergic rhinitis, sinusitis and continuous dry cough b. Raj Rasayan for rejuvenation, prostate enlargement, urinary disorders.
c. Chyawan Prash as general rejuvenative tonic.
d. Abhrak Miasma for cardiac ailments, fever, bronchitis, chest congestion, bronchial asthma.
5. It has been clinically proven as result of continuous research that we have developed not only treatment but absolute care of:
a. Diabetes b. O.A. c. Rhenatold d. Psoriasis e. Bronchial asthma f. Leucoderma g. Hepatitis h. Hepatitis B i. Hypertension 14 ITA Nos. 2850/Del/2011&2127/Del/2012; CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015 j. Paralysis k. CVA l. Deadddiction programme for alcohol for drugs and smoking m. Psychological problems.
6. In order to promote Ayurvedic Medicine, help is taken from Modern Medicine system and trust runs various allopathic services both in medicine and surgery such as Department of Medicine (Gastroenterology, Respiratory & Pulmonology, Cardiology, Oncology and internal Medicine): Department of surgery (General Surgery, Uro Surgery, cosmetic and plastic surgery, paediatric surgery); Department of Orthopedics; Department of Anesthesia;
Department of Paediatrics; Department of Neonatology, Department of Nephrology; Department of Obs & Gynae; Department of Neurology; Department of Dental; Department of Ophthalmology; Department of ENT and Department of physiotherapy.
This is unique hospital that integrates both Ayurvedic system of medicine and allopathic services to give best results to the patents and which helps in improving the treatment and obtain best results out of this. The Ayurvedic hospital utilizes various modern medicine method of investigation such as ;
a. Blood Hematology b. Microbiology c X-ray 15 ITA Nos. 2850/Del/2011&2127/Del/2012; CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015 c. C. T. scan d. Ultrasound e. ECG f. Eco g. Angiography The trust is also engaged in running various health check clinics, diet service clinics in remote areas in order to augment health care services using Ayurvedic system of medicine.
7. In order to further - spread education, awareness and help in research in ayurvedic and Modern Medicine a fullfledged scientific library is maintain by the hospital which has :
a. More than, one thousand hooks are available in the library including all leading journals.
b. Besides various subscriptions available, the library is open for student staff physicians, traiees, interns and technicians.
8. To further spread education, hospital also provides diploma in nursing which is registered under aegis of Delhi Nursing Council and every year 30 student enroll for this course. This duration for this diploma course is 3-1/2 years. Through this course, hands on training is also provided in Ayurvedic system of medicine.
It is a matter of pride that physicians from far and wide come for Ayurvedic training to this institute. From the perusal of the above, it 16 ITA Nos. 2850/Del/2011&2127/Del/2012; CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015 may be appreciated that lot of activities is being done to improve Ayurvedic system of medicines and preaching the same. It is respectfully submitted that your contentions/observations that 'it is no where permitted to open and run Allopathic Hospital' is prima facie untenable because of the fact that Trust has opened primarily an ayurvedic Hospital and taking help from Allopathic system of medicines or any other system of medicines is not prohibited, it means that it is permitted. While promoting Ayurveda, the other system of medicine also got promoted. It serves the General good of the community while retaining its charitable nature at a all points of time. It will be appreciated that this is permissible under the provisions of the Trust Deed as well as under the provisions of the Income Tax, 1961.
It will also be appreciated that the Trust has not changed its activities/system of medicines of be it Ayurveda or be it allopathic from the very beginning. It is submitted that Trust can only open hospital but cannot compel the community to choose the system of medicines. Thus while providing Ayurveda and continuously improving the Ayurvedic system of medicines, patents wanting allopathic treatment are being provided Allopathic treatment as well.
This is unique Hospital where in order to improve Ayurvedic system of medicines and create awareness about the Ayurvedic system of medicines are being adopted.
17 ITA Nos. 2850/Del/2011&2127/Del/2012;CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015 The name of the Hospital is not Moolchnd Hospital but Moolchand Khairati Ram Hospital and Ayurvedic Research Institute."
34. The assertion made by the Assessee that it provides treatment under the Ayurvedic system at the hospital in question and is involved in the advancement of the Ayurvedic medicine is not disputed by the AO. It is also not disputed that the hospital run by the Assessee is an integrated hospital offering treatments under the Ayurvedic system of medicine as well as under the Allopathic system of medicine. The Revenue also does not dispute the Assessee's contention that the treatment under the Ayurvedic system of medicine draws significantly from investigation techniques used under modern medicine system. In the circumstances, the limited issue to be addressed is whether running of such hospitals which provides Allopathic as well as Ayurvedic treatment and includes investigation techniques of modern medicine would be contrary to the object of the Assessee Trust.
35. A plain reading of the objects indicates that it includes "devising means for imparting education and improving Ayurvedic system of medicine and preaching the same". It is also expressly clarified that the Assessee is not prohibited to take help from the English, Unani or any other system of medicine for its object. Further, it is also expressly provided that according to the need, one or more Ayurvedic hospitals may be opened. It is at once clear that the object does not prohibit running of an Allopathic hospital or drawing from any the other system of medicine for improving the Ayurvedic system of medicine. The Assessee's endeavour of running 18 ITA Nos. 2850/Del/2011&2127/Del/2012; CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015 a hospital providing modern techniques and treatment which would also be a source for improving Ayurvedic system of medicine would, plainly, be an activity towards the objects as specified. Merely because, running of an Allopathic hospital is not specifically mentioned, it does not necessarily mean that the same would be ultra vires the objects, as establishment of an Allopathic hospital does assist the Assessee in its object of improving the Ayurvedic system and taking assistance from the Allopathic system of medicine. Any activity reasonably incidental to the object would not be ultra vires the objects. As explained by the Assessee, the modern investigation techniques are equally utilized for treatment under Ayurvedic system.
36. In Lakshmanaswami Mudaliar v. Life Insurance Corporation: AIR 1963 SC 1185, the Supreme Court had observed as under:
"(13) Power to carry out an object, undoubtedly includes power to carry out what is incidental or conducive to the attainment of that object, for such extension merely permits something to be done which is connected with the objects to be attained, as being naturally conducive thereto."
37. Although the above observations were made in the context of interpretation of the Object Clause of a Memorandum of Association of a Company, the principle would also be applicable to determine whether any activity is ultra vires the purpose of a Trust.
19 ITA Nos. 2850/Del/2011&2127/Del/2012;CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015
38. Thus, in our view, the AO and the Tribunal erred in concluding that the Assessee's activities were in excess of its objects. Running an integrated hospital would clearly be conducive to the objects of the Assessee. The trustees have carried out the activities of the trust bonafide and in a manner, which according to them best subserved the charitable objects and the intent of the Settlor. Thus the activities of the Assessee cannot be held to be ultra vires its objects. The AO and the Tribunal were unduly influenced by the proportion of the receipts pertaining to the Ayurvedic Research Institute and the hospital. In our view, the fact that the proportion of receipts pertaining to the Ayurvedic Research Institute is significantly lower than that pertaining to the hospital would, in the facts of the present case, not be material. Undisputedly, significant activities are carried out by the Assessee for advancement and improvement of the Ayurvedic system of medicine in the institution established by the Assessee and though the receipts from the Allopathic treatment are larger, the same does not militate against the object for which the institution has been set up and run.
39. The next issue to be addressed is whether it was open for the AO to take a view different from the one that has been accepted by the Revenue for the past several decades. It is well established that each year is a separate assessment unit and the principles of res judicata are not applicable. However, in this case, it would be appropriate to note that the activities carried out by the Assessee have been accepted as being amenable to exemption under Section 11 of the Act for the past several decades. In the past 20 ITA Nos. 2850/Del/2011&2127/Del/2012; CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015 period, the Assessee has been granted exemption under Section 11 of the Act and also under Section 10(22)/10(22A) or Section 10(23C) of the Act. Concededly, the exemptions granted to the Assessee for past several decades would not be available if the activities of the Assessee were considered by the concerned AOs/Authorities to be ultra vires its objects.
40. In the circumstances, it would not be apposite to permit the Revenue to challenge a position that has been sustained over several decades without there being any material change. In Radhasoami Satsang (supra), the Supreme Court observed as under:-
"....each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year."
41. In Parashuram Pottery Works Co. Ltd. v. ITO: (1977) 106 ITR 1 SC, the Supreme Court reiterated the principle that if the parties have allowed a position to sustain, it would not be appropriate to change the position in a subsequent year. The said decisions have also been followed by the Supreme Court in its later decision in Excel Industries Ltd. (supra).
21 ITA Nos. 2850/Del/2011&2127/Del/2012;CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015
42. In Krishak Bharati Co-operative Ltd. (supra), a Division Bench of this Court struck a note of caution that the rule of consistency is not of a wide application and a blind adherence to this rule would lead to anomalous results. Thus, in the circumstances, where the views are mistaken and apparently erroneous, it would not be apposite to compel the Revenue to follow the same on the principle of estoppel or of consistency. However, in cases, where two views are plausible, it would be, plainly, whimsical to frame an assessment contrary to the position accepted in earlier years. This would render the exercise of assessment highly subjective; clearly, an Assessee cannot be subjected to such vagaries. Indisputably, the powers of AO are wide but its exercise cannot be undisciplined. In cases where there is a palpable mistake or the position accepted by the Revenue in earlier years is apparently erroneous, the AO would not be bound to accept the view of his predecessors. However, in cases - such as the present case - where the Assessee's claim for exemption has been accepted for several decades, it would not be open for AO to think of new grounds, which at best raise contentious issues, to cast a wider net of tax. It is trite law, that if two views are possible, the one favoring the Assessee must be adopted. This rule would apply a fortiori in cases where the Assessee's claim has been consistently accepted by the Revenue in the past. Thus, in cases where the claim of an Assessee has been accepted in earlier years, unless the claim of an Assessee is found to be devoid of any basis or plainly contrary to law, it would not be open for the AO to take a view contrary to the position which has 22 ITA Nos. 2850/Del/2011&2127/Del/2012; CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015 been accepted by the Revenue in earlier years and has been permitted to sustain for a significant period of time.
43. In the facts of the present case, it is not possible to accept that grant of exemption to the Assessee for the past several decades was palpably erroneous and successive AOs were wrong in accepting that the activities of the Assessee were in furtherance of its charitable objects, entitling the Assessee to escape the levy of income tax.
44. In view of the above, the second question is answered in affirmative and Assessee would not be entitled to exemption under Section 11 of the Act if its activities are outside the scope of its objects, even if its activities are charitable in nature. However, the first question is answered in the negative and in favour of the Assessee and in our view, the Tribunal was not justified in allowing the Revenue's appeal and denying the Assessee's claim under Section 11 of the Act.
45. Insofar as the issue regarding depreciation on assets used for providing Allopathic systems of medicine is concerned, the learned counsel for the Revenue did not dispute that the depreciation would 23 ITA Nos. 2850/Del/2011&2127/Del/2012; CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015 be allowable if the activities of the Assessee were considered to be within the scope of its objects. The Tribunal had denied the claim of depreciation, in respect of assets used for providing medical relief through Allopathic system of medicine, only on the basis that the Assessee's activity for running the hospital was ultra vires its objects. In the circumstances, the third question is to be answered in the negative and in favour of the Assessee.
46. In view of the aforesaid, the impugned order of the Tribunal is set aside. The appeal is disposed of. No order as to costs."
10.1 After going through the aforesaid judgment of the Hon'ble High Court as well as the impugned order passed by the Ld. First Appellate Authority, we are of the considered view that Ld. CIT(A) has rightly decided the issue in dispute in favor of the assessee. We further find that the Hon'ble Jurisdictional High Court vide its judgment dated 27.7.2015 passed in the assessee's own case for the asstt. Year 2006-07 in favour of the assessee, as referred above and therefore, in our considered view, following the same ratio is binding precedent in respect of the subsequent assessment years i.e. asstt. Years 2007-08 to 2008-09 and accordingly, the assessee is entitled for the exemption/claim u/s.
11 & 12 of the I.T. Act, 1961 in these assessment years. In view of the above, we do not find any infirmity in the order of the Ld. CIT(A), hence, we uphold the 24 ITA Nos. 2850/Del/2011&2127/Del/2012; CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015 impugned order on the issue in dispute and dismiss the Appeal filed by the Revenue relevant to assessment year 2007-08. As regards assessment year 2008-09 is concerned, following the consistent view, the Appeal for the asstt.
Year 2008-09 filed by the Revenue shall also stand dismissed.
11. As we have already dismissed both the Appeals for the asstt. Years 2007-08 to 2008-09 filed by the Revenue, as aforesaid, the Assessee's Cross Objections for the asstt. Year 2007-08 to 2008-09 have become infructuous and dismissed as such.
12. As regards the Assessee's Appeal No. 985/Del/2015 (AY 2009-10) is concerned, since we have respectfully followed the decision of the Hon'ble Jurisdictional High Court in assessee's own case for the asstt. Year 2006-07 in the Revenue Appeals for the asstt. Year 2007-08 & 2008-09 and accordingly, the Revenue appeals for these two years were dismissed, as aforesaid, respectfully following the consistent view, the Assessee is entitled for the claim of exemption in dispute raised in the Appeal in dispute and accordingly, the Appeal of the Assessee relevant to assessment year 2009-10 being ITA No. 985/Del/2015 stands Allowed. Consequently, the Appeal No. 1962/Del/2015 filed by the Revenue for the assessment year 2009-10 stands dismissed.
25 ITA Nos. 2850/Del/2011&2127/Del/2012;CO No. 229/Del/2011&259/Del/2012 & ITA Nos. 985&1962/Del/2015
13. In the result, all the Appeals filed by the Revenue for the asstt. Years 2007-08 to 2009-10, in the aforesaid manner stands dismissed and both the Cross Objection for the asstt year 2007-08 to 2008-09 stand dismissed as infructuous and the Appeal filed by the Assessee relevant to assessment year 2009-10 stand allowed.
Order pronounced in the Open Court on 20/11/2015.
Sd/- Sd / -
[PRASHANT MAHARISHI]
MAHARISHI] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date: 20-11-
11-2015
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant 2. Respondent 3. CIT 4. CIT (A) 5. DR, ITAT
TRUE COPY By Order,
Assistant Registrar
26