Case Law Details

Case Name : JDIT Vs Mool Chand Kharaiti Ram Trust (ITAT Delhi)
Appeal Number : Income tax (Appeal) no. 2850 of 2011 and Cross appeal no. 229 of 2011 & others
Date of Judgement/Order : 20/11/2015
Related Assessment Year :
Courts : All ITAT (4421) ITAT Delhi (982)

Brief of the Case

ITAT Delhi held In the case of JDIT vs. Mool Chand Kharaiti Ram Trust that 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.

Facts of the Case

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. The assessee was registered u/s. 12A (a) and also approved u/s. 80G (5)(vi) 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.

The AO observed that the claim of the assessee that the activities of the Trust are not charitable within the meaning of section 2(15) 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. 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. Further, otherwise also, since the registration u/s. 12A has since been withdrawn by the DIT (E), the assessee is not entitled to the benefit of section 11/12.

Contention of the Assessee

The ld counsel of the assessee submitted 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 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 theassessee 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

Contention of the Revenue

The ld counsel of the revenue relied upon the orders of the AO.

Held by CIT (A)

CIT (A) partly allowed the appeal of the assessee. It was held that 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, by which assessee has been granted exemption u/s. 12A , this ground is allowed in favor of the Appellant.

Held by ITAT

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. In this case, It was held that 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 runninga 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. 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. Also it was held that 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.

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 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. 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 in these assessment years.

Accordingly appeal of the revenue dismissed.

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Category : Income Tax (25488)
Type : Judiciary (10239)
Tags : CA Deepak Aggarwal (390) ITAT Judgments (4601) section 11 (100)

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