Income Tax Appellate Tribunal - Delhi
Assistant Commissioner Of Income Tax vs Kalyan Mitra Trust on 16 October, 2006
Equivalent citations: (2007)106TTJ(DELHI)241
ORDER
R.C. Sharma, A.M.
1. This is an appeal filed by the Revenue against the order of the CIT(A), dt. 13th Jan., 2006 for the asst. yr. 2002-03, in the matter of order passed under Section 143(3) of the IT Act, 1961 wherein following grounds have been raised by the Revenue:
1. That the learned CIT(A) has erred in law and on facts in deleting the additions holding that the trust is existing for charitable purposes but the fact is that the assessee who was receiving fee for letting out the wedding hall in the garb of donation/corpus donation and wherein the persons who were the alleged donors to the corpus themselves also do not know for what purposes they have been giving fee as corpus, other than the fact that they have utilized the services of the hall of the assessee for their celebration purposes.
2. The order of the CIT(A) be set aside and that of the AO be restored.
2. Rival contentions have been heard and record perused.
3. The brief facts of the case are that the assessee is a charitable trust and carrying on charitable activities in the shape of meditation, running a free homeopathy and allopathic dispensary, organizing eye camps besides providing the use of Celebration Hall to the general public for marriages and other social functions for which the trust accepts the donations and those donations are utilized for the various charity activities being organized by the trust. The learned Asstt. CIT has disallowed the exemptions as provided in Sections 11 and 12 of the IT Act, 1961. In this case, the return in the status of trust was filed on 28th Oct., 1992 claiming exemption under Section 11 of the Act. Survey under Section 133A was carried out on 22nd Dec., 2002 and it was found that the trust was running a wedding point at 111-Rajpur Road, Dehradun and receipts from the wedding point were shown by the assessee as donation. According to AO, no record was also kept to show that medicines have actually been dispensed to the persons. The AO, therefore, came to the conclusion that trust was carrying on business and declaring receipts in the form of donation. He, therefore, disallowed exemption under Section 11 and computed the income of the trust at Rs. 4,18,861.
4. The AO has mentioned in the assessment order that the assessee has stated to carry on the following activities:
(1) Daily morning and evening meditation happened in Buddha Hall round the year.
(2) Organized two meditation camps in September, 2001 and March, 2002, in Celebration Hall.
(3) Offered Celebration Hall for marriages and other social functions and provided necessary help.
(4) Provided regular medical aid to needy through homeopathy and allopathic treatment through their regular doctors.
(5) Organized eye camps at Disha Hospital for about 100 patients.
5. By the impugned order, CIT(A) allowed assessee's claim for exemption as well as deleted the addition holding that trust is existing for charitable purposes, after having the following observations:
I have gone through the order of the AO and the submissions of the Authorised Representative very carefully. In this case a trust was created on 26th Aug., 1996 by Shri Satish Sondhi. The aims and objects of the trust are as per para 2,1 of the reply dt. 26th Sept., 2005 reproduced on p. 3 of this order. If one peruses the aims and objects, there is no doubt whatsoever that as per these aims and objects the trust exists for charitable purposes. Coming to the actual activities of the trust, there was a survey on the premises of the trust where the survey party came to the conclusion that trust was exploiting the property for commercial use by letting it out for marriages, receptions and birthday parties, etc. Accordingly, it was concluded that trust was carrying on business and therefore, did not exist for charitable purposes, that the business receipts were being camouflaged as donation. This confusion has arisen because in addition to the trust activities of the trust, namely, Kalyan Mitra Trust, number of other activities have been undertaken by the main trustee, his wife and another lady namely, Ninu Sethi. Mr. Satish Sondhi, the managing trustee of the trust is also running a hotel since 1991 in the same campus by the name and style of Osho Resorts, having about 18 rooms. Mrs. Sulekha Sondhi, wife of the managing trustee is running a business of selling of Osho books and cassettes from 1994 and Mrs. Ninu Sethi is running a restaurant since 1997 under the name and style of Heavens Garden. The income from these three activities has been declared separately by these people by filing their IT returns for the last many years. Photocopies of the returns filed by Mr. Satish Sondhi, proprietor Osho Resorts, Mrs. Sulekha Sondhi, proprietor Osho Resorts Meditation Centre and Mrs. Ninu Sethi have been placed on record. A chart showing the income in the last two years is reproduced as under:
Name of person Name of the Nature of Date of filing Asst. yr. Income
business concern business the return
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Satish Sondhi Osho Resorts Running a hotel 6.9.2001 2001-02 2,62,630
24.3.2003 2002-03 5,36,454
Sulekha Sondhi Osho Resorts Sale of Osho 6.11.2001 2001-02 56,160
Meditation Centre books & cassettes
24.3.2003 2002-03 45,106
Ninu Sethi Heavens Garden Running of 30.10.2001 2001-02 61,660
restaurant
24.3.2003 2002-03 35,360
The other big confusion has arisen on account of use of Buddha Hall and Celebration Hall for social functions such as marriages, birthday parties, etc. The fact is that there are 2 halls in the campus. The first one namely, Buddha Hall is having carpet area of about 3,000 sq.ft., out of this, area of about 450 sq.ft. is owned by Smt. Sulekha Sondhi, wife of Shri Satish Sondhi, the managing trustee of the trust. This portion of the hall has been taken on rent by the trust on a monthly rent of Rs. 200 per month. The another hall namely, Celebration Hall having carpet area of about 4,400 sq.ft. is also owned by Smt. Sulekha Sondhi and this has also been taken on rent by the trust on a monthly rent of Rs. 5,000 per month. Copy of the lease deeds has been filed before the AO. Both these properties have been declared by the owners in their IT returns and the rents from both these properties have also been duly declared as income from property. Buddha Hall is being used by the trust for morning and evening meditation. The Celebration Hall is, many a times, made available to the general public for functions such as marriages and birthdays, etc. The practice followed by the trust is that as and when anybody approaches the trustee for use of the Celebration Hall, he is told that as the property is being used by the trust, it will not charge any pre-fixed sum for the use of the hall and the users of the hall are free to donate whatever amount they wish for the aims and objects of the charitable trust. Out of the total donations of Rs. 5,34,755 received during the year, the donations received for the use of the hall are Rs. 3,06,703 and the datewise details of these receipts have been submitted by the appellant before me.
As can be seen from these details, sometimes amount received is as low as Rs. 500 on 11th Aug., 2001 as against maximum amount received of Rs. 31,000 on 26th Jan., 2002. This clearly shows that the trust has not charged the money for use of the Celebration Hall from the point of view of a businessman.
I have gone through the statements recorded by the AO in the case of Shri P.K. Sharma and Shri M.S. Bist. As per answer to question No. 5, Mr. Sharma has clearly stated that he did not pay any amount for booking of hall and he has only confirmed the fact that the trust was receiving the money for the facilities extended in the form of donation. So long as a donation received is utilized for the aims and objects of the trust and not for the private benefit of any trustee, in my opinion, there is nothing wrong in charging the amount from the person using the assets of the trust.
Similarly, Mr. M.S. Bist in response to question No. 4 has also confirmed the fact that trust asked for only donation for the use of the Celebration Hall. In fact, he further confirmed that other wedding halls were charging very high rate while in the case of the Celebration Hall, he had a choice to pay whatever he could afford. The second objection of the AO that amount received by the assessee was in lieu of certain services and therefore, cannot be termed as donation, also does not go against the appellant trust because there is no bar for charging an amount in view of any service provided by the trust.
The next objection of the AO is that appellant trust is providing ancillary services such as flower and electric decoration, D.J. Sets and catering, etc. and the AO has not brought any material on record which could prove that appellant was indeed providing such services. Regarding service-tax, the appellant has clarified that the trust has got itself registered under the service tax but during the year no service tax has either been collected or paid to the Excise Department. Even if the service tax is collected and paid, that does not take away the charitable nature of the trust so long as the money received is utilized for the aims and objects of the trust. The next objection of the AO that the businessman activities are being carried out from the premises has amply been clarified above. M/s Osho Resorts Meditation Centre belongs to Mrs. Sulekha Sondhi. Similarly, Mr. Satish Sondhi is owning "Osho Resorts" in his individual capacity and Mrs. Ninu Sethi has made an arrangement with M/s Osho Resorts as per which she is sharing the receipts from the restaurant business in lieu of rent for the use of the premises of M/s Osho Resorts. Thus, the activities are quite independent of the activities of the trust although these are in the same campus. The trust has nothing to do with the activities mentioned by the AO. Even if it is assumed for argument sake that the trust was carrying business then also receipts of the business have been used for the objects of the trust and in such cases trust is entitled to exemption, the activity being ancillary or incidental to the primary and dominant purpose of the trust CIT v. Krishna Tent House and Yograj Chanty Trust v. CIT . Regarding the diary impounded during the course of survey, the advances received in some cases have been noted down. According to Authorised Representative, the diary does not belong to the appellant trust but belongs to Hotel Osho Resorts and was being maintained by the hotel staff. It is quite possible that any person wanting to make use of the Celebration Hall will approach the hotel staff and the entries were made by the hotel staff so as to avoid another visit of the user. The other observation of the AO that organizing meditation camps regularly is the activity of Osho Meditation Centre and not of the appellant is also not true. Smt. Sulekha Sondhi is selling video/audio cassettes and literature of Osho. She wanted to keep enough stock of the material during the days biannual meditation Shivirs are held and therefore, she wanted the trust to inform her about the dates of meditation camp. She herself is not conducting any meditation camps. Regarding Patanjali Yoga Kendra, one Dr. Giri Raj is using part of the Buddha Hall for giving instructions on Yoga from time to time and for this he has paid donations to the trust which are duly reflected in the receipts of the trust. Thus, no adverse view can be taken on account of use of the hall by Patanjali Yoga Kendra. Regarding honorarium paid to the visiting doctor, learned Authorised Representative has clarified that appellant trust has made arrangement for attending to the patients and for this purpose one doctor namely Mr. S.K. Jain has been paid honorarium @ Rs. 18,000 per annum. The other allopathic doctor, R.K. Negi is providing his services free of cost. For this purpose, total medicines worth Rs. 98,139 have been purchased. The learned Authorised Representative has submitted copy of the ledger account on account of medical expenses running into 6 pages which shows that medicines have been purchased on day to day basis and the observation of the AO that there is only one bill of Rs. 98,139 is not correct. Regarding travelling and conveyance expenses include the amount incurred by Mr. Satish Sondhi and Mrs. Ninu Sethi for travelling to Bhuj. The two trustees went to Bhuj for imparting the techniques of meditation which is fully covered by the aims and objects of the trust.
6. Learned Departmental Representative supported the order of the AO and drew our attention to the observations made by the AO to the effect that no donation was given by the customers and that the assessee has categorized the amount received by it as donation. The learned Departmental Representative further submitted that the amount received by the assessee trust was in lieu of certain services/facilities which cannot be termed as donation and that assessee was charging service-tax from the customers for the services provided by it. As per learned Departmental Representative, the assessee trust was not carrying on charitable activities but was doing business, therefore, CIT(A) was not justified at all in observing that trust is existing for charitable purposes.
7. On the other hand, learned senior Authorised Representative, Shri O.P. Sapra strongly supported the order of the CIT(A) and the detailed finding recorded by him with respect to the activities being carried on by the assessee trust. He has drawn our attention to the observation of the CIT(A) wherein each and every observation of the AO has been controverted by logical end.
8. We have considered the rival contentions carefully, gone through the orders of the authorities below. As per our considered view for allowing exemption under Section 11, it is not the income earned but the application of income which has to be closely examined to see whether income has been utilized for charitable purposes. In this case, undisputedly the income has been utilized for charitable purposes. The trust is registered under Section 12A of the IT Act, 1961 and has been allowed exemption under Section 80G upto 31st March, 2004. This proves the charitable character of the trust. In the instant case, the AO in his order has accepted that free meditation is being organized but was not justified in drawing an inference that this activity of organizing meditation camps is the activity of Osho Resorts Meditation Centre and not of the appellant trust. The Celebration Hall belongs to Mrs. Sulekha Sondhi, proprietor Osho Resorts Meditation Centre which runs a library for meditation books and cassettes. Since this Celebration Hall is not used by them, the same has been given on lease by her to the assessee trust.
9. In view of the above, we do not find any infirmity in the order of the CIT(A) and dismiss the appeal filed by the Revenue.
10. In the result, the appeal of the Revenue is dismissed.