Income Tax Appellate Tribunal - Delhi
Yakult India Microbiota And Probiotic ... vs Assessee on 19 December, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'H', NEW DELHI
Before Sh. N. K. Saini, AM And Sh. C. M. Garg, JM
ITA No. 5031/Del/2013 : Asstt. Year:
ITA No. 5032/Del/2013 : Asstt. Year:
Yakult India Microbiota and Vs DIT(Exemption)
Probiotic Science Foundation, 52, New Delhi
Okhla Industrial Estate, Phase-III,
New Delhi-110020
(APPELLANT) (RESPONDENT)
PAN No. AAAAY2127R
Assessee by : Ms. Heena Khurana, CA
Revenue by : Sh. Gunjan Prasad, CIT DR
Date of Hearing : 16.12.2014 Date of Pronouncement : 19.12.2014
ORDER
Per N. K. Saini, AM:
These two appeals by the assessee are directed against the common order dated 31.07.2013 of ld. DIT(Exemption), Delhi.
2. Firstly we will deal with ITA No. 5031/Del/2013. In this appeal the grievance of the assessee relates to the rejection of application moved by the assessee for registration u/s 12A of the I.T. Act, 1961 (hereinafter referred to as 'Act' in short).
3. Facts of the case in brief are that the assessee society filed an application on 29.01.2013 in Form No. 10A for seeking registration u/s 12A of the Act. The ld. DIT(Exemption) after perusing the details filed by the assessee had noted the following points:
2 ITA No. 5031 & 5032/Del/2013Yakult India Microbiota and Probiotic Science
i) Yakult India Microbiota and Probiotic Science Foundation has been formed on 09.11.2011, primarily for providing a thrust to the field of probiotics in the country. It is stated that the foundation will channelize international knowledge and expertise in the field of probiotics and will promote collaborative research in the development of probiotics as well as foster and maintain research links with scientists of similar interest.
The foundation aims to provide a common scientific platform for basic scientists and clinicians to share and exchange knowledge and views and delve into newer areas of probiotic research.
ii) The foundation has organized two symposiums since the date of its formation;
First - In December, 2011 in Mumbai; and the second - In December, 2012 in Bengaluru
iii) As per the Income & Expenditure account as on 31.03.2013 filed by the society it does not have any source of income except the membership fee received at Rs. 25000/- (NIL during the year 31/03/2013) and interest income of Rs. 43,420/- (Rs. 41,291/- during the year ending 31.03.3013). Thus, the society had gross receipts of Rs. 68,420/- in 2011-12 and Rs. 41,291/- in 2012-13. Against this income the society has incurred total expenses of Rs. 70,24,707/- as on 31.03.2012 and Rs. 1,07,08,978/- as on 31.03.2013.
On a query as to from where these expenses have been met, it was informed that the expenses have been incurred by taking a CC limit from ICICI Bank. It was further stated that the loan taken by the society to arrange the imparting of education and advancement of the information regarding the object by way of conducting seminars etc. has been advanced by the ICICI Bank on the basis of FDRs of the company M/s Yakult Danone India (P) Ltd. Whenever the registration and exemption are given, the society will raise the funds and clear the loans. The FDR of the mother company has been given by the company to the society 3 ITA No. 5031 & 5032/Del/2013 Yakult India Microbiota and Probiotic Science which is foreign based and has set up their business in India. These FDRs have been given as security for the time being.
iv) A perusal of the details of expenditure further reveals that the applicant has incurred these expenditure mainly to organize the seminars and to pay honorarium, perdiem expenses to the participants and travelling, boarding and lodging expenses to the faculty space/speakers. It is also noted that the founder members and governing council members also have been paid honorarium and travelling expenses for attending the governing body meeting and participating in these seminars.
v) It is also noted that Dr. Neeraj Hajela, who is the secretary and treasurer of the society is in fact the employee Head - Science of Yakult Danone India (P) Ltd. Further, the foundation has paid Rs. 1,00,000/- on a/c of reimbursement of manpower (Dr. Neeraj Hajela and Mr. Satish) and Rs. 1.5 lacs for ending the office space from April 12 to January, 2013 to Yakult Danone India (P) Ltd.
vi) It is seen that the registered office of the foundation is residential address of Dr. Neeraj Hajela who is Head-Science of Yakult Danone India (P) Ltd.
vii) It is also noted that the representative from Yakult Danone attended both the seminars. Dr. Koji Nomoto, Associate Director of Yakult Central Institute for Microbiological Research, Tokyo and Dr. Masanobu Nanno, Associate Director of Yakult Central Institute for Microbiological Research, Tokyo attended the seminar held at Mumbai in December, 2011 and Mr. Jean Michel Antoine, Director Nutrition, Danone Research, France, attended the seminar held at Bengaluru in December, 2012."
4. The ld. DIT(Exemption) also pointed out that the assessee foundation is named after Yakult and it is conducting its affairs out of funding drawn from CC limit granted by Yakult Danone India (P) Ltd. by way of pledging its FDRs. She pointed out that as per Wikipedia - Yakult is a probiotic 4 ITA No. 5031 & 5032/Del/2013 Yakult India Microbiota and Probiotic Science milk-like product made by fermenting a mixture with special strain of the bacterium.
5. The ld. DIT(Exemption) asked the assessee to explain as to why the foundation be not treated as carrying out research for Yakult Danone India (P) Ltd. and its activities should not be treated as 'not charitable' within the meaning of Section 2(15) of the I.T Act. In response the assessee explained as under:
"1. That under the head honorarium paid to members of the Governing Body/Founder Members - the amount reflected in the income and expenditure account is nothing but the reimbursement of the expenses incurred by those members for attending the meeting/symposiums organized by the society. No honorarium has been paid on regular basis as fixed honorarium, therefore, there is no violation of utilization of funds for members of the Governing Body or Founder Members.
2. The clarification of money received from the bank against the guarantee given by Yakult Danone India Pvt. Ltd. is clarified that the society will repay the money taken as loan from the bank from the money that will be received by the society at a later date.
3. In response to your query that the Foundation may not be treated as paid research organization of the company who has advanced and stood surety by way of their FDR it is clarified that the research on probiotics is not done only in India but research is being world over and disseminated at various conferences and symposia where this society has taken a lead role to impart education and advancement of this subject to various health care professionals/students. The presentations of the symposiums are published as books and distributed to health care professionals and libraries for further education. Therefore, this society is not a paid research organization of Yakult Danone India Pvt. Ltd."5 ITA No. 5031 & 5032/Del/2013
Yakult India Microbiota and Probiotic Science
6. The ld. DIT(Exemption), however, did not find merit in the above explanation of the assessee and was of the view that the activities of the assessee did not fall within the ambit of charitable organization in terms of Section 2(15) of the Act. She further observed that the objects and activities of the assessee society were in fact in the nature of sponsored research by an interested group i.e. Yakult Danone India (P) Ltd., which is commercial organization. She also observed that there is a lot of research which is being funded by the interested corporate sector and such research cannot be termed as an activity of charitable nature in view of Section 2(15) of the Act, as targeted beneficiary is the organization which is funding the research. The ld. DIT(Exemption), ultimately without going into question whether the assessee foundation is doing any research work at all, concluded that the activity being carried out by the assessee society is in the vested interest of the commercial body/company Yakult Danone India (P) Ltd. She, therefore, rejected the application for registration u/s 12A of the Act.
7. Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the ld. DIT(Exemption) and further submitted that the assessee society is engaged in the research activity for the benefit of public at large and published many research papers like Probiotics in Prevention of Lifestyle Disorders (copy of the same was furnished). It was further stated that the registration has been granted to many other similar foundations doing the same activity like Ranbaxy 6 ITA No. 5031 & 5032/Del/2013 Yakult India Microbiota and Probiotic Science Science Foundation etc. It was further stated that the probiotics literally means "for life", the assessee is engaged in research relating to the probiotics, therefore, the activities of the assessee are charitable in nature. It was stated that the assessee organized seminars & symposia etc. and distributed the books in the libraries, publishing the literature & newsletters for the benefit of the public-in-large, therefore, the purpose of the assessee is to give relief to the poor, medical relief etc. which is charitable in nature as per the provisions contained in Section 2(15) of the Act. It was further stated that the ld. DIT while considering the application of the assessee for the registration u/s 12A of the Act was required to see the objects of the assessee but without considering the said objects which are charitable in nature, the ld. DIT rejected the application moved by the assessee, in an arbitrary manner. The reliance was placed on the following cases was:
Ø PIMS Medical & Education Charitable Society Vs CIT-II, Chandigarh Ø Kasyapa Veda Research Foundation Vs CIT, Calicut Ø Social Pedia Knowledge Foundation Vs DIT(Exemptions) Ø CIT Vs Jodhpur Chartered Accountants Society Ø ITO(E), Trust Ward-II, Delhi Vs Society for Essential Health Action & Training Ø Smt. Vidyawanti Laburam Foundation for Science Research & Social Welfare Vs ITO, Ward-2, Sriganganagar Ø Heart Care Management Vs DIT(Exemption), New Delhi Ø Sikkim Manipal University of Health, Medical & Technological Sciences Vs CIT, Siliguri 7 ITA No. 5031 & 5032/Del/2013 Yakult India Microbiota and Probiotic Science Ø DIT Vs Foundation of Ophthalmic & Optometry Research Education Centre Ø Shree Vile Parle Vardhman Sthanakvasi Jain Foundation Vs DIT(Exemption) Ø ITO, Ward-1, New Delhi Vs Science Olympaid Foundation
8. In his rival submissions the CIT DR strongly supported the order of the ld. DIT(Exemption) and further stated that the documents in the form of book on Probiotics Prevention of Lifestyle Disorders and the newsletters \& literatures etc. which is claimed to have been distributed were not produced before the ld. DIT, therefore, these are the new documents furnished first time before the ITAT so these should not be considered. It was submitted that the activities undertaken by the assessee society were funded by a commercial organization and the research undertaken, if any, by the assessee society was sponsored research by an interested group, therefore, the ld. DIT(Exemption) rightly rejected the application for registration u/s 12A of the Act. He also stated that the cases relied by the ld. Counsel for the assessee are distinguishable on facts.
9. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case it appears that the details of the seminars and symposium etc. organized by the assessee society and the literature, newsletters and books on probiotics etc. were not furnished earlier so these were not available to the DIT(Exemption) for her examination and consideration. The claim of the assessee society for getting the registration u/s 12Aof the Act is based on 8 ITA No. 5031 & 5032/Del/2013 Yakult India Microbiota and Probiotic Science these documents. We, therefore, to meet the ends of justice deem it appropriate to remand this issue back to the file of the ld. DIT(Exemption) to be decided afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee society and by considering all the documents which are furnished first time before the ITAT. The ld. DIT(Exemption) shall decide the issue expeditiously.
10. As regards to the appeal in ITA No. 5032/Del/2013 relating to the rejection of application for approval u/s 80G of the Act is concerned. It was the common contention of both the parties that it is co-related with the appeal in ITA No. 5031/Del/2013 relating to the registration u/s 12A of the Act. Since we have remanded back the issue relating to the registration u/s 12A of the Act, therefore, this issue relating to the approval of registration us/ 80G of the Act is also remanded back to the ld. DIT(Exemption) to be decided alongwith the issue relating to the registration u/s 12A of the Act.
11. In the result, both the appeals are allowed for statistical purposes.
(Order pronounced in the open Court on 19/12/2014).
Sd/- Sd/- (C. M. Garg) (N. K. Saini) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 19/12/2014 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5.DR: ITAT